Lam Research LRCX Q2 2026 Earnings Call Transcript

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Date

Wednesday, January 28, 2026 at 5:00 p.m. ET

Call participants

• President & Chief Executive Officer — Tim Archer
• Executive Vice President & Chief Financial Officer — Doug Bettinger

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Takeaways

• Revenue -- $20.6 billion for the year, up 27% year over year, with December quarter revenue at $5.34 billion, marking ten consecutive quarters of growth.
• Gross margin -- 49.9% for the year and 49.7% in December, both exceeding the high end of guided ranges.
• Operating margin -- 34.1% for the year, 34.3% in December, both exceeding the guidance high end.
• Diluted earnings per share -- $4.89 for the year, up 49% year over year; $1.27 in December, above guidance.
• CSBG revenue -- $7.2 billion for the year, with December at approximately $2 billion, up 12% sequentially and 14% year over year.
• WFE (Wafer Fab Equipment) market -- $110 billion in 2025 with guidance for $135 billion in 2026, described as being second‑half weighted.
• Served available market (SAM) share -- Mid-thirties percent range in 2025 WFE, progressing toward a high‑thirties target.
• WFE ship share -- Grew by well over one percentage point year over year.
• Installed base -- CSBG installed base surpassed 100,000 chambers, with revenue growth outpacing the increase in installed base units.
• Systems revenue mix -- Foundry represented 59%, memory 34% (including record DRAM revenue at 23%, up from 16%), and nonvolatile memory at 11% (down from 18%) for December.
• China revenue -- Accounted for 35% of total December revenue, down from 43% prior quarter; Taiwan and Korea each contributed 20%.
• Deferred revenue -- $2.25 billion at quarter-end, down sequentially due to a $500 million decrease in advanced down payments.
• Share repurchases -- $1.4 billion in December at an average price of $154 per share, with 39 million shares repurchased in 2025 at an average price of $104 per share.
• Dividends -- $328 million paid in December.
• Free cash flow return -- 85% of free cash flow was returned to shareholders during 2025.
• Cash and cash equivalents -- $6.2 billion at quarter-end, decreasing from $6.7 billion in September due to capital returns and CapEx.
• Capital expenditures -- $261 million in December, up $76 million sequentially, driven by manufacturing, R&D, and a new Arizona facility.
• Headcount -- 19,700 full-time employees, up 300 sequentially, primarily in field and R&D roles.
• Inventory turns -- Improved to 2.7 times from 2.6 sequentially, and up from 1.5 two years prior.
• Guidance for March 2026 quarter -- Revenue of $5.7 billion (plus or minus $300 million), gross margin of 49% (plus or minus one percentage point), operating margin of 34% (plus or minus one percentage point), and diluted EPS of $1.35 (plus or minus $0.10) on a share count of approximately 1.26 billion.
• Advanced packaging -- Business expected to grow more than 40% in 2026, outpacing WFE growth in this area.
• Technology leadership -- Aqara conductor etch system doubled installed base year over year, with production tool of record wins for EUV and high aspect ratio etch in advanced DRAM and logic.
• Manufacturing footprint -- Capacity nearly doubled in four years; state‑of‑the‑art automated warehouses launched in 2025.
• Buyback authorization -- $5.1 billion remains available under the current program.
• Operating expenses -- $827 million in December, flat sequentially with R&D comprising 68%.

Summary

Management signaled an accelerating demand environment led by AI, with foundry and DRAM driving WFE investment and Lam Research (NASDAQ:LRCX) aiming to increase market share at each technology node. Guidance indicates a second-half weighted year as clean room space shortages constrain overall industry output, creating pent‑up demand for the company’s deposition and etch solutions. Lam Research’s technology differentiation, product wins in advanced packaging and HBM, and continued expansion of its global production network were underscored as key enablers of ongoing revenue and margin growth.

• Tim Archer said, "Our ship share of WFE grew by well over one percentage point, year on year," and identified mid-thirties percent WFE SAM share as measurable progress toward the company's high-thirties objective.
• Doug Bettinger guided for "gross margin of 49%, plus or minus one percentage point" and an expected "slight headwinds from customer mix" in March.
• Customer demand for Lam Research’s new products is translating to faster product cycles and growing installed base, particularly for advanced DRAM and NAND technology transitions.
• Lam Research’s share of revenue from China is expected to decrease as other regions outpace flat China WFE spending in 2026.
• The company highlighted ongoing investments in supply chain automation and manufacturing capacity to support rapid growth forecasts, while acknowledging near-term business will remain constrained by customer clean room readiness.

Industry glossary

• WFE (Wafer Fab Equipment): Capital equipment used for semiconductor fabrication, including etch, deposition, and related process tools.
• SAM (Served Available Market): Portion of the total market opportunity that is addressable by the company's products and services.
• CSBG (Customer Support Business Group): Lam Research’s post-sale business unit, supporting installed base with services, upgrades, and parts.
• Reliant systems: Lam Research’s product line targeting mature technologies and specialty device markets.
• DRAM: Dynamic Random-Access Memory, a key semiconductor memory technology used in computing.
• HBM (High Bandwidth Memory): Advanced memory technology used in high-performance computing and AI accelerators.
• ALD (Atomic Layer Deposition): A thin-film deposition technique enabling precise control at the atomic scale for semiconductor device fabrication.
• Moly: Lam Research’s product branding for molybdenum-based ALD systems.

Full Conference Call Transcript

Tim Archer: Thank you, Ram, and good afternoon, everyone. We ended calendar year 2025 on a strong note, delivering December quarter revenues ahead of the midpoint of our guidance. Gross margins, operating margins, and EPS all exceeded the high end of the range. Our performance demonstrates continued strong execution in an accelerating semiconductor demand environment. At our Investor Day event last year, we outlined our tremendous opportunity to expand our market and gain share at every successive technology node. Vertical scaling of device and packaging architectures is driving higher deposition and etch intensity and moving the market to our strengths. The vision we shared was to more than double Lam's revenue and profit over the next five years.

Today, we are well on our way. With the industry ramping capacity and adopting new technologies to meet the demands of the AI transformation, Lam's deposition and etch capabilities are proving to be key enablers in the transition to gate-all-around transistors, backside power deposition, high-performance materials, and 3D advanced packaging. We prepared for this moment by launching an array of new products and advanced services targeted at broadening our exposure across DRAM, leading-edge foundry logic, and NAND. We've also invested in expanding our manufacturing and R&D footprint to increase operational velocity in response to strong customer demand.

In 2025, we achieved record revenues of more than $20 billion and expanded our served available market or SAM share of WFE into the mid-thirties percent range. This marks solid progress for our multiyear goal of being in the high thirties. Our ship share of WFE grew by well over one percentage point, year on year. And our CSBG business hit key milestones with the size of our installed base topping 100,000 chambers and revenue growing faster than the increase in installed base units. We are proud of these accomplishments, but there's even more to come. The AI transformation is driving industry spending higher. In 2025, WFE came in close to $110 billion.

Our initial 2026 view is for WFE to be in the $135 billion range. With the growth in spending remaining constrained by a shortage of available clean room space. Chipmakers have been public about their efforts to alleviate constraints, but they've also commented on sold-out conditions persisting, indicating the magnitude of the challenge. We expect WFE this year to be weighted to the second half with robust growth in investments across all three device segments, led by DRAM and leading-edge foundry logic. All indications are we are still in the early stages of the AI build-out. End markets are signaling a strong appetite for greater compute and storage capabilities at both the device and package level.

In foundry logic, customers are accelerating migration to nodes employing gate-all-around. If you recall, we previously said that the transition to gate-all-around equates to roughly $1 billion in incremental Lam SAM for every 100,000 wafer starts per month of capacity. Given the 3D nature of gate-all-around structures, we are well-positioned with our deposition and etch portfolio to gain share within this segment. In addition, customers are integrating more functionality with advanced packaging. We previously estimated advanced packaging would make up a mid-single-digit percentage of overall foundry logic equipment spend. As additional devices, including those for mobile applications, adopt more complex packaging schemes, we see this number moving higher.

In high bandwidth memory or HBM, advanced packaging is critical for the transition to HBM4 and 4E, and stacking of up to 16 layers. Lam is in an excellent position given our market leadership in electroplating and TSC etch. We expect our overall advanced packaging business to grow more than 40% in 2026, outperforming our view of WFE growth in this space. Finally, in NAND, demand is growing faster than previously expected. As new use cases for high-capacity SSDs emerge, non-volatile context memory layers enable large-scale AI inference have the potential to add incremental growth in NAND bit demand. For every two to three million accelerators sold, we estimate an incremental one-point increase in overall NAND bit demand growth.

Lam has the industry's largest installed base of NAND systems and is well-positioned to outperform as the NAND market inflects higher. Against this backdrop of strong semiconductor demand and accelerated technology transitions, we are seeing increased momentum for our newly launched products. Aqara, our latest generation conductor etch system, has doubled its installed base over the past year. With production tool of record wins for EUV and high aspect ratio etch applications in advanced DRAM and foundry logic. Critical dimensions in foundry logic are shrinking by roughly 10 to 20% node to node.

Similarly, in DRAM, aspect ratios are increasing with each node, and process complexity is set to grow even more with future moves to 4F squared and 3D DRAM. Consequently, multiple customers have chosen Aqara for its unmatched ability to etch the smallest dimensions and very high aspect ratios while maintaining profile control and reducing variability across the wafer. This is achieved through new innovations including our direct drive solid-state power delivery hardware and tempo plasma pulsing. In next-generation gate-all-around devices, we expect the number of applications using Aqara to grow by roughly two times, including wins for critical front-end silicon etch applications.

In DRAM, we already have wins with Aqara for the 1C node that are set to ramp this year and expect growing momentum as the applications using Aqara expand nearly three times in a subsequent 1D node. As we look out over a multiyear period, the unprecedented AI ramp demands greater speed and agility across the ecosystem. Our customers are moving faster at every stage of process development and manufacturing, so we have increased the velocity of our execution across the board. We are strengthening our supply base, automating logistics, and ramping high-volume manufacturing. Over the last four years, we have nearly doubled our overall manufacturing capacity. And in 2025, we launched state-of-the-art automated warehouses that enable greater production efficiency.

These investments have proved critical in a fast-ramping market environment, and we're set to expand our footprint further to meet the demand we see over the next several years. Our product sales and support teams are also executing to the accelerated pace of customer demand. Over the course of 2025, Lam was recognized with nearly 40 supplier awards, highlighting in many cases our fast tool installations and outstanding production ramp support. Looking forward, we see Lam's equipment intelligence solutions and Dextro cobots leading the way to the autonomous fab, with predictive and automated maintenance and precise global fleet matching. Dextro continued to gain momentum in 2025, expanding to cover six different Lam tool types.

And finally, in an environment where inflections are more complex and innovation timelines are compressing, we have transformed our R&D capabilities to help us stay ahead. We are utilizing Velocity Labs, located close to our customers, to screen new materials, new hardware, and new process regimes at a rate not previously possible. We are also leveraging Lam's digital twin capabilities to shorten product development cycles and converge on next-generation tool and process solutions with greater efficiency. Wrapping up, the growth we envisioned for Lam at our investor event one year ago is materializing faster than we anticipated. We are making progress against our SAM expansion, share gains, and profitability objectives.

And with the demand environment continuing to accelerate, we are elevating our focus on scaling the company, delivering for customers, and outperforming in the AI era. Thank you. And here's Doug.

Doug Bettinger: Great. Thank you, Tim. Good afternoon, everyone. Thank you for joining our call today during what I know is a super busy earnings season. Before I get into the details, I'd like to say that we were quite pleased with the strong execution across the company in calendar year 2025, which translated into record top and bottom-line financial performance. In calendar year 2025, revenue was a record coming in at $20.6 billion, which is up 27% year over year. CSBG revenue also reached a record of $7.2 billion. Gross margin was 49.9%, the highest result as a combined company for the full year since the Novelis merger back in 2012. Gross profit increased 31% year over year to $10.3 billion.

We also had a record operating margin of 34.1% and operating profit dollars of $7 billion, which was up 41% year over year. Diluted earnings per share were $4.89, which was up 49% year over year. Looking at it, we delivered leverage from the top to the bottom of the P&L in 2025. Let me turn to the December results. Our revenue was above the midpoint of guidance, while gross margin, operating margin, and earnings per share all exceeded the high end of our guided range. Revenue for December was a record coming in at $5.34 billion. This marked our tenth consecutive quarter of revenue growth.

The deferred revenue balance at quarter-end came in at $2.25 billion, down sequentially due to an approximately $500 million reduction in those customer advanced down payments. From a market segment perspective, Foundry accounted for 59% of our systems revenue in December, slightly down sequentially but up from 35% in December 2024. This underscores the success of our strategic focus and execution in foundry. Foundry strength came from investments at the leading edge, in addition to mature node spending that we saw in China. Memory was 34% of systems revenue, in line with the prior quarter. Within memory, we generated record DRAM revenue, for 23% of systems revenue, which was up from 16% in September.

Investments in high bandwidth memory continued 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. Nonvolatile memory contributed 11% of our systems revenue, down from 18% in September. This trajectory was in line with our expectations of customer plans coming into the year. Despite the quarterly decline, NAND revenues grew strongly for Lam in what was a first-half weighted calendar year 2025. As we enter 2026, we see solid end-market demand as customers prepare for the next stage of AI-driven growth in NAND. And finally, the 7% of systems revenue in December was slightly up sequentially.

Let's turn to the regional breakdown of our total revenue. China came in at 35%, which was a decrease from the prior quarter level of 43% but slightly higher than our original expectations. This was due to updates in the affiliate rule and the resulting timing of shipments from that. The next largest geographic concentrations were Taiwan coming in at 20%, up sequentially from 19%, and Korea at 20%, up sequentially from 15%. Customer support business group generated approximately $2 billion in revenue for December, up 12% sequentially on an increase in Reliant systems. We were 14% higher than the same period in 2024, primarily on growth in spares.

CSPG obviously remains a key part of our growth strategy with our expanding installed base and innovation in advanced services. NAND spending enabled record upgrade revenue in 2025, up more than 90% year over year. In the thirteen years since we brought Lam and Novelis together, I'd like to remind everybody that CSBG has grown every year except for one. Let's look at profitability. Gross margin in December was 49.7%, which exceeded the high end of our guided range on better-than-expected customer mix. Sequentially, gross margin was about one percentage point lower, reflecting a customer mix that was less favorable than what we saw in September. Operating expenses for December came in at $827 million, which was roughly flat sequentially.

R&D accounted for 68% of the total operating expenses. We continue investing to maintain our leadership with a differentiated product portfolio for our customers with innovations like Bantex, Acara, Halo, and Dextro. The December operating margin was 34.3%, exceeding the high end of our guidance. The non-GAAP tax rate for the quarter came in at 13.2%, generally in line with our expectations. We continue to see the tax rate in the low to mid-teens for calendar 2026. Other income and expense for December was approximately $10 million in income, compared with $8 million in income in September. Slight fluctuation in OI and E was primarily the result of gains in our venture portfolios partly offset by lower interest income.

As we've talked about in the past, you should expect to see variability in OI and E quarter to quarter. The capital return in December, we allocated approximately $1.4 billion towards share buybacks through open market share repurchases. Our average buyback price in the quarter was approximately $154 per share. In calendar year 2025, we repurchased approximately 39 million shares at an average price of $104 per share. We also paid $328 million in dividends in the quarter. In calendar year 2025, we returned 85% of our free cash flow. Our plans remain to return at least 85% of free cash flow to our shareholders over time.

The December diluted earnings per share were $1.27, which came in above the guidance range. The diluted share count was 1.26 billion shares, a reduction from September and consistent with our guidance. We have $5.1 billion remaining on our Board authorized share repurchase plan. Let me pivot to the balance sheet. Cash and cash equivalents totaled $6.2 billion at the end of December, a decrease from $6.7 billion at the end of September. The reduction of cash is attributed to capital return as well as CapEx spending. As we look ahead, our strong cash position and continued free cash flow enable us flexibility to potentially simply repay the $750 million March 2026 notes when they mature.

Day sales outstanding was fifty-nine days in December, a decrease from sixty-two days in September. Inventory turns improved to 2.7 times from 2.6 times in the prior quarter and up from 1.5 times a little over two years ago. As a company, we remain focused on utilization, and we were pleased by the sustained progress we continue to make. Our noncash expenses in December included approximately $89 million for equity compensation, $91 million for depreciation, and $13 million in amortization. Capital expenditures for December were $261 million, which was up $76 million from September. Spending was driven by investments in manufacturing capacity, R&D, and lab infrastructure that supports our technology roadmap and customer needs.

We also purchased a new building in Arizona to support the growing industry footprint there. This capital spending remains consistent with our global strategy of expanding capabilities close to where our customers are. Looking forward, we continue to expect capital expenditure to be in the 4% to 5% of revenue range. We ended December with approximately 19,700 regular full-time employees, which was an increase of approximately 300 people from the prior quarter. Headcount increases were primarily within the field organization to support customer growth, as well as in R&D to support our long-term product roadmap. Let's turn to our non-GAAP guidance for the March 2026 quarter. We're expecting revenue of $5.7 billion, plus or minus $300 million.

We're expecting a gross margin of 49%, plus or minus one percentage point. We're expecting to see slight headwinds from customer mix. For forecasting, operating margins of 34%, plus or minus one percentage point. See the normal seasonal uptick in operating expenses in March. And finally, we're forecasting earnings per share of $1.35, plus or minus $0.10, based on a share count of approximately 1.26 billion shares. So let me wrap up. We delivered a record year in 2025, reflecting strong and broad-based strength across our product portfolio. As we look into 2026, we expect meaningful year-over-year growth, supported by sustained demand in AI-driven markets and continued investment in capacity.

We agree with the prevailing view that much of the market will be undersupplied in 2026 due to clean room space constraints. In line with that, we see 2026 as a second-half weighted year. With our strong balance sheet, expanding installed base, and the strength of our product portfolio, we remain confident in Lam's ability to continue to outperform and deliver long-term value for our customers and shareholders. Operator, that concludes our prepared remarks. Tim and I would now like to open up the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. As a reminder, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our first question. Our first question comes from Tim Arcuri with UBS. Please go ahead.

Tim Arcuri: Thanks a lot. Doug, I had a question about WFE this year. So you said we're gonna be constrained because of this fab, you know, readiness. Is it possible to say how much? I know you're guiding, you know, WFE to a $135 billion this year. I mean, if we use semiconductor revenue and you assume sort of a normal WFE number, it seems like it could get to, like, a $150 billion. So maybe the constraints are costing the industry, like, $15 billion. Is it possible to give a number in terms of how much the constraints are kind of costing in terms of, you know, WFE this year so we can kind of pro forma that out?

Doug Bettinger: Tim, I knew somebody was gonna ask that question. I should have anticipated it was gonna be you. Listen. It's hard for us to put a number on it, and I'm gonna decline to do that as we sit here right now. And the reason, Tim, is plans are somewhat fluid, if we're honest. Meaning, people are trying to figure out how to get a little more clean room space, how to bring facilities online and bump things up a little bit. So I'm not we're not gonna put a number on it. But I think it's safe to say, and Tim can comment on this, as well. Yeah.

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's 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.

Tim Archer: Yeah. I don't have much to add, Tim, other than to say that clearly, you've seen a large number of fab announcements. I mean, those fab announcements are capacity in '27, '28, and beyond. And so I think there's a view that the constraints this year are gonna continue even out until many of those new fabs open up. And so I think we've given you a view that we think WFE is, as Doug said, you know, we're working on productivity improvements to get a little extra output for customers. That's how we support them. But fundamentally, it's a pretty big challenge. Thanks a lot, Doug. And then you're guiding gross margin down a bit on up revenue.

Sounds like it's predominantly related to China. So China was thirty-five percent in December. Is it gonna come down? Like, is that the reason why the gross market is coming down? And if so, like, what mix do you think China will be for March?

Doug Bettinger: Yeah. I'm not gonna give you a hard number, Tim. But, yes, it's customer mix. It's going to be less rich in the March quarter. And I'll also remind that this isn't the fixed cost business for us. So as volume goes up and down, the component that just benefits from revenue growing isn't that big. The mix component of both product as well as customer is an important item. So you're latched onto the right thing, Tim.

Tim Arcuri: Okay. Thank you.

Operator: The next question comes from C.J. Muse with Cantor Fitzgerald. Please go ahead.

C.J. Muse: Yeah. Good afternoon. Thank you for taking the question. I guess to follow-up on that last question, Doug, could you speak a bit about the work you're doing with the supply chain, bringing on ramping Malaysia, and how we should think about that in the context of gross margins as revenues ramp in '26 and beyond?

Doug Bettinger: Yeah. C.J., I mean, we've been talking for a while about CapEx growing as a result of expanding manufacturing capability. Tim specifically talked about it doubling over the last four, five years. So it's been an item that we've been clearly very focused on. We're ramping globally, and you're right that Malaysia location is our biggest location as we sit here today, and we're trying to get more out of that in addition to everywhere that we are. But the mix component, C.J., is gonna be more important than any at least in the near term, less than just volume ramping.

C.J. Muse: Great. Thanks. And then maybe a follow-up question. On CSBG. I would think your customers are trying to get every bit that they can out. And so the uplift that you saw in December, and I assume continued strength into March, is that something that will sustain throughout the whole calendar year? And should drive, you know, better than kind of that 12% growth CAGR? Or does that take a pause at some point as to transition focus on greenfield investments?

Tim Archer: Yes, C.J. I'll let Doug speak to the specific numbers. But I think that what you should keep in mind is the CSBG, a lot of our growth, of course, is driven by customers' near-term actions and what we need to do to help them get the maximum amount of output from the tools they have. A lot of the growth really is we're transforming our service business to be much more oriented towards the use of equipment intelligence for predictive maintenance, as a way of getting more output from tools. And also implementation of Dextro cobots for our automated maintenance.

And both of those things, not only will drive top-line growth, but also margin profitability improvement just given the efficiency with which we deliver those services. And so I think there's a number of moving pieces that are all positive for CSBG.

Doug Bettinger: Yeah. And I would just add, C.J. You know, we were pleased to see the chamber account number up. Obviously, we knew that was coming, and we're happy to share it with you. So that's a mass aspect of what we're continuing to take advantage of going forward. It's very consistent, though, with what we articulated at that Investor Day back I guess, almost a year ago. And so I would still want you thinking about CSBG growing the same way we described it back then, which is kinda high single digit, maybe low double digit. We had a very strong December. It was primarily the result of Reliant Systems. That piece might be a little bit lumpy.

It always is. But, again, CSPG is gonna just gonna keep chugging along.

C.J. Muse: Thank you.

Doug Bettinger: Thanks, C.J.

Operator: The next question comes from Atif Malik with Citi. Please go ahead.

Atif Malik: Hi. Thank you for taking my question. The first one for Tim. Tim, on the DRAM market, when do you see the volume adoption of 4F from 6F2? And can you talk about your SAM market share when you move to four F squared? I know you called out Akara in your prepared remarks.

Tim Archer: Yeah. So I think 4F, I mean, obviously, there's still some questions as to exact timing and, you know, customers have talked about it being something towards the end of the decade, probably for full volume production. But, clearly, we're engaged today with customers looking at the technical needs. You know, we called out Acara, Aqara is very well suited to the types of high aspect ratio, very small features that exist in 4F squared as well as, you know, other devices we've talked about, whether it's a future gate-all-around or even as foundry logic moves to CFET.

And so you know, Aqara is a sort of a foundational tool for us in terms of capabilities that are gonna be important for all of these transitions. But really should think about, you know, those kinds of technology transitions occurring after probably after this next big wave of fab openings. But, again, back to the constraint question, you know, in some ways, if this turns out to be, as we believe, a multiyear build-out of fabs, the fabs that come towards the end of that will be the fabs that benefit from the SAM expansion and share gain that we're gonna see coming from these new products that we've talked about.

So, anyway, I think 4F squared is probably on the back end of that. But there's a lot in between that will also drive our business.

Atif Malik: Great. And then, Doug, on the NAND, I know the memory dynamics were in line with your expectations in December, but NAND was down sequentially and DRAM up. You see the NAND makers slowing down technology migrations as they focus more on in terms of like minting money given how the supply shortages are materializing. And when do you see NAND new capacity additions coming on?

Doug Bettinger: Gotcha. No. Listen. NAND played out exactly as we saw it as the year began in 2025. And as we sit here looking in 2026, it will be a growth year for NAND. There's no question about that in our minds. I think what I observed the memory doing, at least to the extent that they have both NAND and DRAM right now anyway, is prioritizing DRAM over NAND a little bit because profitability there is somewhat better. I think y'all understand that and know that. But that doesn't mean that people aren't focused on demand. In fact, one of our largest customers announced a new fab that's gonna be dedicated pretty well, not dedicated, but heavily emphasizing NAND capacity.

And so that's on the come line. We see that happening, as we get into '26 growth. That is happening. We're still sticking by. We think upgrades happen before real capacity additions, but you're gonna see a combination of both. And that $40 billion that we've been talking about likely happens quicker than what we originally expected a year ago. So, anyway, we feel quite good about where NAND is trying to go.

Atif Malik: Thank you.

Doug Bettinger: Thanks, Atif.

Operator: The next question comes from Vivek Arya with Bank of America Securities. Please go ahead.

Vivek Arya: Thanks for taking my questions. So you're guiding WFE up 23%. I think last year you said you gained a point of share. Do you expect to maintain or gain share this year, Tim? What are kind of the puts and takes around the different markets? And then specifically, what are you assuming for China contribution overall for WFE and what that means for Lam? In calendar '26.

Tim Archer: Yeah. Let me take the first part of it. I mean, I think what's important to remember from the longer-term plan we laid out at last year's Investor Day and things I said on the call today, we expect to gain share and expand our SAM at every successive technology node. And so to your point, do we plan to sustain or increase share? The answer is we plan to increase our share of WFE again this year. And what needs to take place is technology transitions need to keep occurring. And what we're seeing in the environment today is those are accelerating.

That's a way for customers to get more output and more output of the types of devices that are strongly demanded by the AI environment. At the same time, those technology transitions are driving higher deposition and etch intensity, which is pretty much our entire business. And so, from that perspective, that's a real positive for us. And then we've talked about the success of our new products. I mean, we have refreshed our conductor etch product line. We've previously refreshed our dielectric etch line. It's launched Moly. Dry resistance is gaining traction. We're strong in advanced packaging. Backside power is still to come, and it's gonna be a driver for us.

And so I think we have confidence that whatever the WFE is, if it's technology-driven as it looks like it will be, we will continue to expand SAM, create gain share of the WFE. Now as far as China goes, I think that we are looking at China being more kind of flattish year on year. And therefore, as the rest of the technology-driven part of the business grows, becoming a smaller percentage of our overall revenue.

Vivek Arya: Got it. And for my follow-up, I think in the past, you have given this $40 billion or so addressable opportunity to upgrade the installed base to higher layer counts. I'm curious, where are we now at, you know, versus that $40 billion number? How much more to go? And given this emerging role of NAND or this enhanced role of NAND, I should say, in AI inference, is there a new number versus that $40 billion number that you had before? Thank you.

Tim Archer: Yeah. I think we might wait until a little later in the year to refresh that number, but you know, we've said a few times now, the specific wording we used at Investor Day was $40 billion over several years. We've now I think almost every earnings call said, that seems to be happening faster than expected. And today, I reiterated that, which was, you know, NAND is moving faster than we expected on the upgrade path. And I think we'll come out and look. As Doug just mentioned, we're starting to see more interest in investing in NAND capacity. But it trades off.

I mean, when you have clean room space, everybody has to make a decision as to where to use that today. But I think that as we move forward, and we see the growth from AI inference and other use cases, NAND is gonna take its place in the AI data infrastructure and memory infrastructure, and I think you'll see growth there. So executing to the customer demand today faster than we had previously expected. And anticipate more to come.

Vivek Arya: Thank you, Tim.

Tim Archer: Thanks, Vivek.

Operator: The next question comes from Srini Pajjuri with RBC Capital. Please go ahead.

Srini Pajjuri: Thank you. Tim, I wanna go back to the previous question. The one point of WFE share that you gained, maybe if you could help us understand if it is coming primarily in foundry and logic or if you're seeing that across the board. Because foundry and logic is where you I think, made the most progress in the last couple of years. And then Doug said you expect year on year growth to be meaningful this year. Just given your WFE expectation for 22% growth, should I guess, should we model 22% plus growth on the top line? For the year?

Tim Archer: Yes. So let me take the first one. Share gains came from a combination of both NAND and foundry logic. And, again, it's, you might think already we have a very high share of NAND, but as technology transition occurs and layer count increases, we have an opportunity still to gain share of some of the new applications required to enable those higher layer counts. And so, we gain share in NAND. A lot of our focus we talked about over the last number of years has been to launch products that allow us to gain share at the gate-all-around nodes, more advanced foundry logic, and the transitions that are coming there.

And, also, in advanced DRAM, we saw this year, some of those foundry logic share gains coming through in the numbers that you can see. So I'd say those primarily NAND and foundry logic this year. And then sorry, the second question can you just repeat the second question?

Srini Pajjuri: Yeah. So I guess my second question was about, you know, your expectation for the current year. I know you said it's going to be second-half weighted. Yeah.

Tim Archer: Yeah. No. No. We, you know, your comment was basically, will we out WFE that we just talked about? I guess that's the message we're trying to deliver is we're gonna expand SAM, gain share, and we're gonna outperform WFE this year as our current view.

Srini Pajjuri: Okay. Got it. Thanks for that. And then one quickly on the op margin, Doug, I think at the Analyst Day, you gave us the guidance for 34% to 35% at roughly $25 to $27 billion and you're already there. I think you're, you know, around $23 billion run rate if I look at your March guidance. So I guess my question is, as we go through the next few quarters, how should we think about the op margin fall through? I know you're guiding OpEx a little bit a little bit of growth here, but just want to understand how we should model OpEx going forward.

Doug Bettinger: Yes, Srini, thanks for the question. Yes. No, we're pretty pleased with how we performed. Clearly, we're ahead of the model. Right? I mean, that model had, you know, is a 28 kind of model, and we're run rating at least on a percentage basis what the model suggests we're gonna be able to do. Ram and I and Tim were debating a little bit. We probably later in the year need to come out and give you an update on that model and I think we'll do that. Lots have changed in the last year or so. So, stay tuned for that.

I think as we think about this year, frankly, this is a management team that prides itself on being able to deliver leverage through to the bottom line. We really did a great job with it last year, which is why I went through all the kind of demonstration of what we did last year. We will be focused on delivering leverage as we go through this year as well. And like I said, we'll give you an update to that longer-term model probably later in the year.

Tim Archer: Thanks, Srini.

Doug Bettinger: Thanks, Srini.

Operator: The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Jim Schneider: Relative to your prior comments on NAND, I understand there's a little bit more prioritization toward DRAM right now. But when do you expect that your customers are gonna sort of pivot from NAND upgrades to more greenfield NAND capacity additions? We saw some announcements from at least one of your customers recently on that. So I'm curious about when you expect to sort of see that upgrade business turn into greenfield business. Could that be before the end of 2026, or is it more of a 2027 event or maybe even later? Thank you.

Tim Archer: Yeah. It's a great question. I think that what we're the way we view it right now is that because of the clean room space constraints, it's probably again, part of that multiyear build-out 27-28. When clean room space is sufficiently available, such that they can invest in additional NAND capacity in a big way. So that's probably our view right now. In the meantime, we talked about the acceleration of the technology transitions. You do get big growth. You get more capacity of the higher performing bits that are in strong demand at AI.

And so I think that those are the decisions that people are making today is move ahead as quickly as possible with many of the key technology transitions. And so we're busy doing upgrades, and that's where our focus is right now. But greenfield will come eventually, and you've seen some of those initial announcements. I think that's encouraging for all of us.

Jim Schneider: That's very clear. Thanks. And then maybe just as a follow-on, I think we all can see the trends by foundry, DRAM, and NAND. They're in play right now. And in terms of level of growth rate, but as we head into 2027 or the 2026, do you see, you know, the potential rank order of those growth rates sort of changing amongst those categories?

Doug Bettinger: Oh, man. Jim, that's a great question going into '27. We just, for the first time, give you a '26 number. You're asking '27. Listen. In '26, we're confident everything is growing. It's unequivocal. And we're also very clear when we look. Everything is constrained, frankly. Right? You're hearing it from every one of our customers when they talk about things, and they're talking about these multiyear agreements. Deliver the visibility into next year. Foundry and Logic has grown a lot this year. DRAM's grown a lot this year. NAND is growing a little bit less, but still growing, pretty well this year.

The end of the day, though, when you look at these system architectures, all this stuff needs to fit together. And you saw one of the big accelerator guys talking about this at CES, like, hey. You know, we need this NAND stuff showing up. That's happening, clearly. So into '27, I think we're gonna see another year where everything is growing. I'm not to rank order it quite yet, Jim, though.

Tim Archer: I think as we move through this year, though, we already know, I would say, have better visibility into the following year than I think I can ever remember. And that's simply because, you know, customers know that they're building these fabs. They're announcing them. They're signaling to their customers they're gonna have that capacity available. And so, clearly, we're having discussions at this point on what tools are gonna be needed, what technology nodes are gonna be running in those fabs, and they wanna make sure that they can secure the capacity so that fab can be started up and producing as quickly as possible. And so those discussions on those fabs are clearly out into 2027.

But I think in terms of exactly how those decisions get made through this year and, you know, once you have clean room space, it, you know, in some cases can, as we just talked about, they can trade off sometimes a little bit of clean room space to use for DRAM or for NAND or for what we've seen in a few cases is for advanced packaging. You know, I talked about the tremendous growth in advanced packaging and the importance that it's the role that it's playing. And so, you know, we've been seeing that.

So I guess we'd have to see the year continue to evolve and how the market's kind of where the demand is the shortest. But we would anticipate, as we said, robust investment across all device segments. And I think that continues on into 2027 across all three segments.

Jim Schneider: Thank you.

Doug Bettinger: Thanks, Jim.

Operator: The next question comes from Krish Sankar with Cowen and Company. Please go ahead.

Krish Sankar: Yes. Hi, thanks for taking my question and congrats on the good results and guide. Doug, my first question is, I understand that you spoke about the global manufacturing footprint. Doubled over the last four years. Just wondering, as your customers ramp up more onshore manufacturing, would it lead to you increasing shipments from your US specialties in California and Oregon rather than Malaysia some of your products. If so, what would be the margin implications?

Doug Bettinger: Yeah. Krish, listen. We have a global manufacturing footprint. Right? We've got factories in Oregon, California, Ohio, Malaysia, Taiwan, Korea, Austria. I think I didn't miss anything there. We have some level of flexibility given enough time to move things around if we really need to do that. And as customers tell us what they need and where they need it, we may adjust things. Right now, I think we feel pretty good about how we've got things set up, though.

Krish Sankar: Got it. Got it. Thanks for that. And then, Tim, I just had a follow-up for you, like, a technical question. Master, you had really good traction in ALD Moly. Are customers moving away from single wafer ALD to batch ALD for Moly? And if so, how would that impact Lam?

Tim Archer: No. I mean, well, at this point, if we look we had said previously that in kind of the order of adoption, NAND would be first to adopt Moly, and we're seeing that. Followed by foundry logic and then ultimately by DRAM. What we can say right now is that the customers that have committed to production of Moly using Moly in NAND have gone with Lam's tools. We have a very strong position there. And I think the value of that is we talked in the past is means that throughout this first production ramps with ALD, Moly, we are building an installed base. We're maturing the tool. We're getting process learning. You know, competitors aren't gonna give up.

This is an it's an incredibly important market and a big inflection that we've talked about. We feel really good about our single, you know, we call it single wafer Moly, but, if you look at the tool itself, it has multiple stations inside of one chamber in order to give ourselves high productivity. So you know, that's a production tool of choice today for the industry. And we intend to continue to keep it that way.

Krish Sankar: Got it. Thanks a lot, Tim.

Doug Bettinger: Thanks, Krish.

Operator: The next question comes from Harlan Sur with JPMorgan. Please go ahead.

Harlan Sur: Good afternoon and great job on the quarterly execution. You know, just as many of your customers have been surprised by the sudden rise in compute and storage demand, and therefore, requirements for more GPUs, XPUs, CPUs, and the associated memory and storage they obviously got caught somewhat flat-footed in terms of sort of near to midterm capacity to support that demand curve, right, as you guys outlined. Is the stronger velocity of demand having a similar impact to your manufacturing capability and ability to procure the necessary components and subsystems and any bottlenecks that you have in your supply chain?

Tim Archer: Well, it isn't without a lot of hard work. But, you know, one good news is you know, we did a lot of fact-finding post the COVID pandemic and supply shortages that occurred, you know, in our own systems at that time. And we made a lot of improvements. And Doug just talked about the global nature of our manufacturing facilities. Spanning from the US and Europe and all through Asia. And we looked at the same thing with respect to our supply chain. And I would say today, compared to when we had those shortages, we have built a much stronger, broader, deeper supply chain.

And so, you know, I don't wanna sell short the hard work of our supply chain guys today to meet all these expedited pull-in requests from customers. It's very hard work. But today, I would say we're not the big constraint for any of the devices. Compared to clean room space being a constraint to the industry. And so as the industry continues to go, we need to keep working to, again, expand our capacity, as I said, make our own operations faster. That's why we've done things like automating our warehouses to make the rate at which we can feed those parts from the time they're received from the supplier into the manufacturing that much quicker and more efficient.

And so we're just continually working on what I would do is our operational velocity. And so that we're not the constraint.

Harlan Sur: I appreciate that. Then for my second question, you know, one of the significant obviously, and incremental drivers of your business among many, has been advanced packaging and HBM. You guys did about a billion dollars plus in advanced revenues. I think it was in calendar '24. You're anticipating strong 40% -plus growth this year. But can you guys quantify how much advanced packaging grew for the team in calendar '25? And then of that 40% growth this year, is that being more driven by 2.5 gs three and a half d advanced packaging or HBM?

Doug Bettinger: Yeah, Harlan. We didn't quantify 2025 in packaging except to tell you it grew nicely and I think we're going to kind of leave it at that. Tim gave you the 40% this year. So we're super excited about what's going on there. And I'll let Tim talk about the technology.

Tim Archer: Yeah. It's we've lumped it together. I mean, it is strength in HBM. Clearly, there's strong demand there. But, also, I talked about more complex packaging schemes across advanced foundry logic. And that's an important driver for us as well. Now the great thing about our advanced packaging capabilities is they are used in the advanced packaging of all device types. And so, you know, it's things like copper plating. It's things like etch. Dielectric gap fills. And so really fundamental technologies to the success. So we see that as a really important business, and we've talked about the fact that we continue to invest in new technologies in that space. Thank you.

Doug Bettinger: Thanks, Harlan.

Operator: The next question comes from Stacy Rasgon with Bernstein Research. Please go ahead.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. For my first one, Doug, you clearly said it's a second-half loaded year, which is fine. What does that imply for the first half of the calendar year? Like, is March quarter the trough? Do you think things are kinda flattish at the March level until we get that second-half inflection? Just how are you thinking about the shape of the year?

Doug Bettinger: Yeah. Stacy, it's a great question. Frankly, as I sit here right now, I think we're gonna see growth every quarter from the previous quarter. I'm not gonna give you a precise number. We feel good about that March quarter. I think June probably grows from that. September from that. And it ends up being a second-half weighted year both from a WFE standpoint and from our revenue.

Stacy Rasgon: I guess to get there, would you need an inflection in that growth rate in the second half? I guess some of it compares, which makes it easier. But are you thinking there's an inflection? Do you think the growth is steady? Or

Doug Bettinger: I think it's reasonably steady. I mean, part of this is gonna get modulated by, okay, how much cleaner space is available at each customer? And I think that, you know, 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.

Tim Archer: Stacy, I guess the only thing I would add is I was just gonna add that, you know, my comment about basically every customer is asking for pull-ins, and so there's some element of, you know, whether or not we can accelerate some small portion in, you know, into the first half of the year. We would still see growth in the second because, obviously, that probably means things start pulling in from the first half of next year as well. We're in an accelerating environment of both demand and also timing requests. You know?

And so, you know, I think that back to the question that was asked about constraints, I think we need to see through the year how those play out as to, you know, kind of how much we can do.

Stacy Rasgon: Got it. Thank you. That's helpful. And for my second question, I wanted to ask about China. So, Doug, I think you said you expected China to be flattish year over year. Was that a market statement, or was that a Lam revenue statement? And the percentage should go down. I guess it was, I don't know, what it was, 36% or something in calendar '25. You had talked previously about, like, a 30% threshold. Do you think it gets to that 30%, or you think it's just down but doesn't quite get there?

Doug Bettinger: Yeah, Stacy. The comment, in fact, we made it was we think WFE in China is flattish. 25 to 26, and everything else is gonna grow. So as a percent of the total, it's gonna be down. We didn't give a precise number. Whether it's in the low thirties or high twenties, that's plus or minus probably where it is. And part of it will be modulated by how much growth comes from outside of China. It's a numerator, denominator thing as well, obviously.

Stacy Rasgon: Yeah. I got it. I got it. Thank you so much. Appreciate it.

Doug Bettinger: Thanks, Stacy.

Operator: The next question comes from Blayne Curtis with Jefferies. Please go ahead.

Blayne Curtis: Hey, guys. Thanks for squeezing me in. A couple of questions. Maybe just, Doug, I wanted to just understand the strength in Reliant, you know, with China down. Is that multinational? I just feel just curious where you're seeing that demand. I know you said it's lumpy. I just was curious why it was up so much.

Tim Archer: It was multinational and it was China. It was a little bit of both of them, Blayne.

Blayne Curtis: Got you. Thanks. And then just on the NAND front, you know, you obviously, the demand is very strong. You talked about the upgrades happening earlier. Does that fit in the camp of also second-half weighted? I mean, it's not waiting for clean room space. I'm just kinda curious about the shape of NAND with here.

Doug Bettinger: Probably, it's a little bit second-half weighted, Blayne.

Blayne Curtis: Okay. Thank you.

Doug Bettinger: Thanks, Blayne.

Operator: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Melissa Weathers: Hi. Thank you. I wanted to go back to the NAND side and touch on something that Tim mentioned in his prepared remarks on the expanding applications for NAND in the data center. And, Doug, you kind of alluded to some of the CES announcements as well. So the right interpretation that those applications in the data center have expanded versus what you guys had been thinking? Because you guys have been talking about NAND in the data center for several quarters now. Is that the right way to think about it? And then what could this mean for, like, your Moly ALD, your 300-layer type devices and expanding share you could get there?

Tim Archer: Yeah. Sure. I think we characterize it as a new use case. So I don't think we saw this particular use case coming, which is, you know, related to the AI inference and kind of the expansion of TD cache and such. I think our previous estimates have been more kind of on more traditional storage for using enterprise SSDs. And so yeah, this is an expansion and kind of presents a bit longer-term growth opportunity for NAND. And so therefore, it would be beyond the kind of projections that we would have given back at Investor Day a year ago. For the outlook for NAND long term.

Melissa Weathers: Great. Thank you. And then a quick question on the inventory side of things. Doug, I just wanted to check in and see how you're thinking about parts availability and your ability to scale production in line with demand. Can you help us with a framework to think about how you're thinking about inventories on a days or dollars basis?

Doug Bettinger: Yeah, Melissa. No. It's a great question. Listen. If we're right about how things play out here, it's very likely that we're gonna need to build some inventory in total dollar terms as we go through the year, right? When business grows, you got to have stuff ready for that growing business. So I think that's clearly going to happen. We will remain focused on asset utilization and efficiencies and hopefully be able to drive turns up a little bit from here. But we definitely are gonna need to build some inventory in advance of a growing top line. So we'll be working on all of that and listen.

Melissa Weathers: Thank you.

Doug Bettinger: Thanks, Melissa.

Operator: The next question comes from Joe Quatrochi with Wells Fargo. Please go ahead.

Joe Quatrochi: Hey. Thanks for taking the questions. Maybe just a follow-up on that. Is there any area of your supply chain where you're pushing suppliers maybe that could be a potential area of shortage? Or do you feel like there's available capacity to continue to kind of support the growth you're talking about?

Tim Archer: Well, I think that we don't have any line of sight to significant problems at this point. I made the comment a couple of times. It's clearly a lot of work given the accelerated nature of the demand and the high levels of demand. And customer requests for pull-ins, you know, well within our normal lead times. But at this point, you know, we're working across our global supply chain to ensure that we can meet the demand.

Joe Quatrochi: Okay. And maybe as a follow-up, China now expects to be flattish. Is that a reflection of just the affiliate rule impacts reentering kind of WFE across, you know, the company base or in terms of just your peers? Or is there, like, a change in the underlying demand that you're seeing as well in China?

Doug Bettinger: Probably a little bit of affiliate rule. But frankly, there's a broad-based set of customers, I think it's Joe, spending in China that have nothing to do with the affiliate rule. So it's the mosaic of everything that's going on there. It's very broad.

Tim Archer: Thank you.

Doug Bettinger: Thanks, Joe. Operator, we will do one more question.

Operator: Okay. Our next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Vijay Rakesh: Oh, thanks. Thanks for speaking in. Hi, Tim and Doug. Just a quick question on the Foundry side. And I think China was down, I guess. You mentioned the affiliate rule, but your Foundry is growing almost 100% plus year on year. Just wondering as you look at 26-27 with some of the leading-edge foundries accelerating, how you see that roadmap?

Tim Archer: Yeah. Well, I guess, speaking to what it would look like from a roadmap perspective is, you know, each technology node, we said the opportunity for Lam from an etch and depth intensity perspective and how our tools, you know, like the Aqara and others fit into that. Our opportunities get bigger. As you move forward, you start seeing things that again, we'd anticipate, you know, future nodes is stuck twenty-seven, twenty-eight. You know, introduction of things like backside power. Again, more use of advanced packaging across more of the leading-edge foundry space. All of those things are good for us from both the SAM and the share perspective.

So that's a from a product perspective, it's a very good picture for us.

Vijay Rakesh: Got it. And then on the DRAM side, I know you mentioned briefly HBM4 with 16 layers. Obviously, that's a nice step up from where HBM is now. Can you talk to what that does for your, you know, WFE the content and the growth there on the DRAM HBM side?

Tim Archer: Thanks. Yeah. I mean, just in general terms, I mean, what happens is you end up going to next-generation HBM dies become bigger. And that's generally what is creating the majority of the problem relative to when we talk about clean room space constraints, you get you need more clean room space and more tooling per fit that comes out of the fab. So, therefore, that was what we're trying to communicate is obviously, the performance improves. But the space required and the equipment required increases.

Doug Bettinger: Yeah. Appreciate everybody's questions today. That concludes our call for today. We'll look forward to seeing everybody as we do the conference circuit and get out on the road. So thank you for your time today.

Operator: Thank you, everyone. The conference has now concluded. You may now disconnect.

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