Lam Research Corporation Q1 FY2026 earnings call

Key Points

• Lam delivered a solid September quarter with record revenues of $5.3 billion, a gross margin of 50.6%, and a record operating margin of 35%.
• The December quarter guidance contemplates a ~$200 million revenue impact from the 50% affiliate rule restricting shipments to certain domestic China customers, with an expected ~$600 million impact on 2026 revenues.
• WFE spending in 2025 is slightly better than prior views due to HBM-related investments, and 2026 is forecasted to have robust equipment spending driven by AI-related demand in leading-edge foundry logic, DRAM, and NAND.
• In NAND, customers are upgrading existing fabs, and Lam is well-positioned with its large installed base and innovative products like Lam Cryo 3.0 dielectric etch technology. ALD products are in strong demand, including key wins in NAND and metal applications.
• In foundry logic and DRAM, Lam's Ether Dry Resist EUV patterning solution and low K ALD films are driving growth, with partnerships like with JSR Corporation to enhance capabilities.
• Advanced packaging is seeing healthy growth, with Lam's SABER 3D plating and Cindian etch systems leading, and investment in panel-level packaging opportunities.

In the September quarter, Lam Research achieved record revenues of $5.3 billion. From a market segment perspective, foundry accounted for 60% of systems revenue, up from 52% in the June quarter. Memory was 34% of systems revenue, with nonvolatile memory contributing 18% and DRAM 16%. The customer support business group (CSBG) generated approximately $1.8 billion in revenue for the quarter. Regionally, China came in at 43% of total revenue, Taiwan at 19%, and Korea at 15%.

Q4 2025 Guidance

• Revenue expected to be $5.2 billion, plus or minus $300 million.
• Gross margin expected to be 48.5%, plus or minus one percentage point.
• Operating margin expected to be 33%, plus or minus one percentage point.
• EPS expected to be $1.15, plus or minus $0.10.

2026 Outlook

• China region is expected to represent less than 30% of overall revenues.
• WFE spending in 2026 is robust, driven by AI-related demand in leading-edge segments, though domestic China-related investments are expected to decline.

• Impact of the 50% affiliate rule restricting shipments to certain domestic China customers, expected to impact 2026 revenues by ~$600 million.
• Tariffs could continue to impact gross margin, with an expected increase in Q4 2025.
• Clean room space limitations could limit the pace of NAND supply growth.

Q: C.J. Muse asks about conversations with customers translating to business visibility.

A: Tim Archer responds that near-term equipment needs are tied to enterprise SSDs and NAND upgrades, with longer-term announcements from data center investments providing future opportunities, and Lam's products are well-positioned across leading-edge segments.

Q: Tim Arcuri inquires about the $400 million difference in Q4 guidance and China impact.

A: Doug Bettinger states that WFE and HBM spending are stronger than expected, and without the China restrictions, the guidance would be higher, with 2026 expected to be a growth year.

Q: Vivek Arya asks about WFE intensity in AI data centers and Lam's opportunity.

A: Tim Archer explains that the $8 billion in WFE for $100 billion in data center investment represents Lam's target opportunity, with SAM as a percent of WFE increasing across leading-edge technology nodes.

Q: Jim Schneider asks about NAND market and growth in 2026.

A: Tim Archer states that NAND upgrade demand is accelerated with higher bit demand, and the upgrade business will remain strong in 2026, with potential transition to capacity additions once upgrade needs are met.

Q: Melissa Weathers asks about new products introduced at Analyst Day and backside power contributions.

A: Tim Archer mentions progress with Aqara and Halo products in conductor etch and 3D NAND applications, and backside power is important for addressing compute device performance challenges as nodes ramp.