Lam Research Corporation Q2 FY2026 earnings call

Key Points

• Ended 2025 on a strong note with December quarter revenues ahead of guidance midpoint, and gross margins, operating margins, and EPS exceeding high ends of ranges.
• Launched new products and advanced services targeted at DRAM, leading-edge foundry logic, and NAND. Invested in expanding manufacturing and R&D footprint.
• 2025 saw record revenues over $20 billion, expanded SAM share of WFE into mid-thirties percent range, ship share of WFE grew over one percentage point year on year, and CSBG business had installed base topping 100,000 chambers with revenue growing faster than installed base units.
• AI transformation driving industry spending higher, WFE expected to be $135 billion in 2026, weighted to second half with growth in all device segments led by DRAM and leading-edge foundry logic.
• New products like Aqara conductor etch system saw doubled installed base, with wins in EUV and high aspect ratio etch applications. Dextro cobots expanding to cover six LAM tool types. Velocity Labs and digital twin capabilities enhancing R&D.

In the December 2025 quarter, Foundry accounted for 59% of systems revenue, Memory was 34% (with DRAM at 23% of systems revenue and NAND at 11% of systems revenue), and the remaining 7% was other. For 2025, CSBG revenue reached a record of $7.2 billion. Revenue for the December 2025 quarter was a record $5.34 billion, marking the tenth consecutive quarter of revenue growth. Deferred revenue balance at quarter end was $2.25 billion, down sequentially due to a reduction in customer advanced down payments.

March 2026 Quarter Guidance

• Revenue expected at $5.7 billion ± $300 million.
• Gross margin expected at 49% ± one percentage point, with slight headwinds from customer mix.
• Operating margin expected at 34% ± one percentage point, noting normal seasonal uptick in operating expenses.
• Earnings per share expected at $1.35 ± $0.10 based on share count of approximately 1.26 billion shares.

2026 Outlook

• WFE expected to be in the $135 billion range, weighted to second half, with robust growth in investments across device segments led by DRAM and leading-edge foundry logic.

• Constraints due to shortage of available clean room space, which is constraining WFE growth and affecting industry plans.
• Uncertainty in the fluid nature of fab readiness and clean room space availability, impacting precise forecasting of WFE and company performance.

Q: Tim Arcuri asked about WFE constraints and if Lam could put a number on the cost of constraints. Doug Bettinger declined to put a number, stating plans are fluid, and Tim Archer added that fab announcements are for future capacity.

Q: Tim Arcuri followed up on gross margin decline related to China mix. Doug Bettinger said it's customer mix, not a fixed cost business, and mix component is important.

Q: C.J. Muse asked about supply chain work in Malaysia and gross margin. Doug Bettinger said CapEx is focused on expanding manufacturing capability, and mix component is more important than volume ramping in near term.

Q: C.J. Muse asked about CSBG strength sustaining. Tim Archer said CSBG growth is driven by equipment intelligence for predictive maintenance and Dextro cobots, with positive margin impact. Doug Bettinger added CSBG growth is consistent with Investor Day projections, with strong December due to Reliant Systems but lumpy.

Q: Atif Malik asked Tim Archer about DRAM volume adoption of 4F from 6F2 and SAM share. Tim Archer said timing is uncertain but Acara is suited for 4F squared and other transitions. Doug Bettinger talked about NAND dynamics, noting NAND played out as expected in 2025 and will be a growth year in 2026 with DRAM prioritized but NAND capacity additions coming.

Q: Vivek Arya asked about WFE share gain and China contribution. Tim Archer said Lam plans to increase share in WFE with technology transitions and new products, and China is expected to be flattish year on year.

Q: Srini Pajjuri asked about op margin fall through and OpEx modeling. Doug Bettinger said they're ahead of the model, will update longer-term model later, and focus on delivering leverage.

Q: Jim Schneider asked about NAND pivot from upgrades to greenfield capacity and growth rate rank order. Tim Archer said greenfield will come eventually with clean room space availability, and Doug Bettinger said everything is growing in 2026 but rank order not clear yet.

Q: Krish Sankar asked about global manufacturing footprint and margin implications. Doug Bettinger said they have global manufacturing facilities with flexibility, but currently feel good about setup. Tim Archer talked about traction in ALD Moly and tool position.

Q: Harlan Sur asked about supply chain impact of stronger demand and advanced packaging growth. Tim Archer said they improved supply chain post-COVID, not a constraint now. Doug Bettinger said advanced packaging grew nicely in 2025 and expects strong growth in 2026.

Q: Stacy Rasgon asked about shape of 2026 year and China contribution. Doug Bettinger said second half weighted but growth steady quarter by quarter. Doug Bettinger also said China is flattish year on year, affecting percentage of total revenue.

Q: Blayne Curtis asked about Reliant demand and NAND shape. Tim Archer said it was multinational and China, and Doug Bettinger said NAND is a bit second half weighted.

Q: Melissa Weathers asked about NAND data center applications and inventory. Tim Archer said new use case expands NAND growth. Doug Bettinger said they'll need to build inventory as business grows but focus on asset utilization.

Q: Joe Quatrochi asked about supply chain shortages and China impact. Tim Archer said no significant supply chain problems currently. Doug Bettinger said China's flatness is a mosaic of factors.

Q: Vijay Rakesh asked about Foundry road map and DRAM HBM4. Tim Archer talked about Foundry road map and DRAM HBM4 requiring more clean room space and tooling.