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    LRCX
    Earnings call· Dec 2025(Q2 FY26)

    LAM RESEARCH CORP LRCX

    Jan 28, 2026 Source

    Executive summary

    Lam Research Q2 FY26 — Record Performance Driven by AI Demand and Technology Transitions

    Lam Research delivered strong Q2 FY26 results, exceeding guidance across key financial metrics, capping a record calendar year 2025. The company is capitalizing on accelerating AI-driven demand and technology transitions, particularly in gate-all-around transistors, advanced packaging, and HBM. Despite WFE growth being constrained by clean room space, Lam anticipates outperforming the market by expanding its served available market and gaining share, with a focus on operational velocity and R&D innovation.

    Highlights

    5

    • December quarter revenues were ahead of the midpoint of guidance, with gross margins, operating margins, and EPS all exceeding the high end of the range.

    • Achieved record calendar year 2025 revenues of over $20 billion, up 27% year-over-year, including record CSBG revenue of $7.2 billion.

    • WFE is expected to be in the $135 billion range for calendar year 2026, up from $110 billion in 2025, driven by the AI transformation.

    • Advanced packaging business is expected to grow more than 40% in 2026, outperforming the company's view of WFE growth in this space.

    • CSBG revenue grew 12% sequentially in the December quarter and was 14% higher than the same period in 2024, with the installed base topping 100,000 chambers.

    Concerns

    3

    • WFE growth in 2026 is expected to be constrained by a shortage of available clean room space, indicating sold-out conditions persisting.

    • Gross margin for the March 2026 quarter is guided to be 49% (down from 49.7% in December quarter) due to a less favorable customer mix.

    • The deferred revenue balance decreased sequentially by approximately $500 million due to a reduction in customer advanced down payments.

    Guidance & targets

    14
    CategoryTargetConfidence
    WFE Outlook
    $135 billion range
    high materiality
    High
    Revenue
    $5.7 billion, plus or minus $300 million
    high materiality
    High
    Gross Margin
    49%, plus or minus 1 percentage point
    high materiality
    High
    Operating Margin
    34%, plus or minus 1 percentage point
    high materiality
    High
    Non-GAAP EPS
    $1.35, plus or minus $0.10
    high materiality
    High
    Diluted Share Count
    approximately 1.26 billion shares
    medium materiality
    High
    Non-GAAP Tax Rate
    low to mid-teens
    medium materiality
    High
    Capital Expenditure as % of Revenue
    4% to 5% of revenue range
    medium materiality
    High
    Advanced Packaging Business Growth
    more than 40%
    high materiality
    High
    CSBG Revenue Growth
    high single digit, maybe low double digit
    medium materiality
    High
    WFE Share
    increase our share of WFE again this year
    high materiality
    High
    Outperformance vs. WFE
    outperform WFE this year
    high materiality
    High
    China WFE Outlook
    flattish year-on-year
    medium materiality
    High
    Quarterly Revenue Growth
    growth every quarter from the previous quarter
    high materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Foundry (Systems Revenue)
    Foundry strength came from investments at the leading edge in addition to mature node spending that we saw in China.
    		59%up from 35% in the December 2024 periodslightly down sequentially—
    Memory (Systems Revenue)
    		34%—in line with the prior quarter—
    DRAM (Systems Revenue)
    Investments in high-bandwidth memory continue to remain strong, driven by movement to HBM3E and 4. We also saw traditional node migrations to the 1B and 1C nodes, enabling the transition to DDR5.
    		23%—up from 16% in the September quarter—
    Nonvolatile memory (NAND) (Systems Revenue)
    This trajectory was in line with our expectations for customer plans coming into the year. Despite the quarterly decline, NAND revenues grew strongly for Lam in what was the first half weighted calendar year 2025. As we enter 2026, we see solid end market demand as customers prepare for their next stage of AI-driven growth in NAND.
    		11%—down from 18% in September quarter—
    Logic and Other (Systems Revenue)
    		7%—slightly up sequentially—
    China (Total Revenue)
    Decrease due to updates in the affiliate rule and the resulting timing of shipments.
    		35%—decrease from the prior quarter level of 43%—
    Taiwan (Total Revenue)
    		20%—up sequentially from 19%—
    Korea (Total Revenue)
    		20%—up sequentially from 15%—
    Customer Support Business Group (CSBG)
    Primarily on growth in spares and an increase in Reliant Systems. CSBG has grown every year except for one since the Novellus merger in 2012.
    		$2 billion14% higher than the same period in 2024up 12% sequentially—

    Operational metrics

    25
    Revenue
    $20.6 billionup 27% year-over-year
    CY25

    Record revenue for calendar year 2025.

    CSBG revenue
    $7.2 billion
    CY25

    Record CSBG revenue for calendar year 2025.

    Gross margin
    49.9%
    CY25

    Highest result as a combined company for the full year since the Novellus merger in 2012.

    Operating margin
    34.1%
    CY25

    Record operating margin for calendar year 2025.

    Operating profit growth
    41%year-over-year
    CY25

    Growth in operating profit dollars to $7 billion.

    Diluted EPS
    $4.89up 49% year-over-year
    CY25

    Diluted earnings per share for calendar year 2025.

    Deferred revenue balance
    $2.25 billiondown sequentially
    Q2 FY26

    Balance at quarter end, with a sequential decrease due to reduction in customer advanced down payments.

    NAND upgrade revenue growth
    more than 90%year-over-year
    CY25

    Record upgrade revenue enabled by NAND spending.

    Gross margin
    49.7%about 1 percentage point lower sequentially
    Q2 FY26

    Exceeded the high end of guided range on better-than-expected customer mix.

    Operating expenses
    $827 millionroughly flat sequentially
    Q2 FY26

    For the December quarter.

    R&D as % of operating expenses
    68%
    Q2 FY26

    R&D accounted for 68% of total operating expenses in the December quarter.

    Operating margin
    34.3%
    Q2 FY26

    Exceeded the high end of guidance for the December quarter.

    Non-GAAP tax rate
    13.2%
    Q2 FY26

    For the December quarter, generally in line with expectations.

    Share buybacks executed
    $1.4 billion
    Q2 FY26

    Allocated towards share buybacks through open market repurchases in the December quarter.

    Shares repurchased
    39 million shares
    CY25

    Repurchased in calendar year 2025.

    Dividends paid
    $328 million
    Q2 FY26

    Paid in the December quarter.

    Remaining share repurchase authorization
    $5.1 billion
    Q2 FY26

    Remaining on Board-authorized share repurchase plan.

    Cash and cash equivalents
    $6.2 billiondecrease from $6.7 billion at the end of the September quarter
    Q2 FY26

    Balance at the end of the December quarter, attributed to capital return and CapEx spending.

    Days sales outstanding (DSO)
    59 daysdecrease from 62 days in the September quarter
    Q2 FY26

    For the December quarter.

    Capital expenditures
    $261 millionup $76 million from the September quarter
    Q2 FY26

    For the December quarter, driven by investments in manufacturing capacity, R&D, lab infrastructure, and purchase of a new building in Arizona.

    Equity compensation
    $89 million
    Q2 FY26

    Noncash expense in the December quarter.

    Amortization
    $13 million
    Q2 FY26

    Noncash expense in the December quarter.

    Headcount
    19,700increase of approximately 300 people from the prior quarter
    Q2 FY26

    Regular full-time employees, primarily in field organization and R&D.

    Manufacturing capacity growth
    nearly doubled
    Last 4 years

    Overall manufacturing capacity has nearly doubled.

    NAND bit demand growth from AI inference
    1 point increase
    Ongoing

    Estimate for incremental overall NAND bit demand growth.

    Industry KPIs

    6
    MetricValueDetails
    Services installed base100,000 chambersunits
    Fab capacity utilizationconstrained
    Wfe industry spend outlook$135 billion rangeUSD
    Design wins socket pipelineproduction tool of record wins
    Inventory channel inventory2.7xturns
    Node platform ramp scheduleaccelerating migration

    Product announcements

    2
    ProductTypeDetails
    Akaralaunch
    Dextro cobotsexpansion

    Risks & headwinds

    3
    Clean Room Space ConstraintsCY26, persisting into CY27/28

    WFE growth in 2026 expected to be in the $135 billion range, constrained by shortage of available clean room space, indicating sold-out conditions.

    Mitigation: Lam is working on productivity improvements and expanding manufacturing capacity; customers are trying to alleviate constraints, but new fabs will take years to come online.

    Customer Mix HeadwindsQ3 FY26 (March 2026 quarter)

    March 2026 gross margin guided to 49% (down from 49.7% in Dec Q) due to a less favorable customer mix.

    Mitigation: Management acknowledges it's a mix issue, implying it's a factor to manage rather than a specific mitigation strategy stated.

    Deferred Revenue ReductionQ2 FY26 (December quarter)

    Deferred revenue balance decreased sequentially by approximately $500 million due to a reduction in customer advanced down payments.

    Mitigation: Not explicitly stated as a mitigation; it's a point-in-time balance change.

    What to watch in Q3 FY26

    5

    Quarterly Revenue Growth

    next quarter
    CurrentQ2 FY26 revenue $5.34B; Q3 FY26 guidance $5.7B
    TargetContinued sequential growth in Q4 FY26 (June quarter)

    Why it matters

    Verifies the "second half weighted⚖️" and "growth every quarter" outlook for CY26, indicating sustained demand.

    I think it's reasonably steady. I mean part of this is going to be modulated by, okay, how much space is available at each customer. And I think that they're trying to figure out still and so are we, which is why I'm not giving you more specificity. It will be second half weighted⚖️. But like I said, I think you'll see growth quarter-by-quarter as we go through '26.

    Q&A highlights

    5

    How much are clean room constraints costing the industry in WFE for 2026, potentially $15 billion, and what does this imply for 2027?

    Management declined to quantify the exact cost of constraints but confirmed that sold-out conditions persist and that the situation sets up 2027 to also be a strong year, as new fabs announced will come online in 2027-2028.

    “I think it's safe to say, and Tim can comment on this as well, I think it sets up for '27 to also be a pretty good year as we think through this. I mean the industry seems to be sold out for most of what it's supplying. Everybody is talking about these multiyear agreements that they're working on. And I think that's largely a reflection of the fact that demand is very strong, and there's just not enough clean room out there.”

    asked by Timothy Arcuri · answered by Douglas Bettinger

    2 min read6 chapters

    Detailed Narrative

    01

    AI Transformation and Technology Nodes

    The AI transformation is significantly driving industry spending, with WFE projected to reach $135 billion in 2026. Lam Research is strategically positioned to benefit from this trend, as vertical scaling and advanced packaging architectures necessitate higher deposition and etch intensity, areas where the company holds strong capabilities. This includes transitions to gate-all-around transistors, backside power deposition, and high-performance materials, all of which expand Lam's served available market.

    02

    Market Share Expansion and Product Innovation

    Lam achieved record revenues of over $20 billion in 2025 and expanded its SAM share of WFE into the mid-30s percent range, with a multi-year goal of reaching the high 30s. New products like Akara, the latest generation conductor etch system, are gaining traction, having doubled its installed base and securing production wins for advanced DRAM and foundry/logic applications due to its ability to etch small dimensions at high aspect ratios. Other innovations like Vantex, Halo, and Dextro cobots are also contributing to market leadership.

    03

    Operational Velocity and Manufacturing Capacity

    To meet accelerating customer demand and ensure it is not a constraint, Lam has nearly doubled its manufacturing capacity over the last four years. In 2025, the company launched state-of-the-art automated warehouses to enhance production efficiency and is set to expand its footprint further. These investments are critical in a fast-ramping market environment, supporting the company's global strategy of expanding capabilities close to customers.

    04

    Customer Support Business Group (CSBG) Growth

    CSBG revenue reached a record $7.2 billion in 2025 and grew 12% sequentially in Q2 FY26, driven by an expanding installed base of over 100,000 chambers and innovation in advanced services like Equipment Intelligence and Dextro cobots. The company expects CSBG to continue growing at a high single-digit to low double-digit rate, contributing to both top-line growth and margin improvement, with NAND spending enabling record upgrade revenue in 2025, up more than 90% year-over-year.

    05

    NAND Market Inflection

    Demand for NAND is growing faster than previously expected, fueled by new use cases for high-capacity SSDs and non-volatile context memory layers for large-scale AI inference. Lam, with its large installed base of NAND systems, is well-positioned to outperform as the NAND market inflects higher. While upgrades are expected before significant greenfield capacity additions, the $40 billion upgrade opportunity is happening quicker than originally anticipated, with new fab announcements for NAND on the horizon for 2026.

    06

    Capital Return and Financial Performance

    Lam delivered record financial performance in 2025, with revenue up 27% YoY, gross margin at 49.9%, and operating margin at 34.1%. The company returned 85% of its free cash flow to shareholders in 2025, including approximately $1.4 billion in share buybacks and $328 million in dividends in Q2 FY26. Lam plans to continue returning at least 85% of free cash flow to shareholders over time⏳, supported by a strong balance sheet and continued free cash flow generation.

    AI-generated summary of the company’s earnings call. Not investment advice.