Lam Research Corp ((LRCX)) has held its Q3 earnings call. Read on for the main highlights of the call.
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High conviction LRCX bulls now have this Tradr ETFLam Research’s latest earnings call painted a broadly upbeat picture, with management highlighting record revenue, record earnings per share and upgraded industry spending expectations. Executives framed the demand surge as structurally tied to AI and advanced memory, while acknowledging manageable risks from regional mix shifts, softer customer prepayments, higher spending and supply constraints that could test execution in coming quarters.
Record Revenue Quarter
Lam reported March-quarter revenue of $5.84 billion, climbing 9% sequentially and 24% year over year as the company notched its third straight record. Management stressed that growth was broad-based across key device segments, reinforcing the narrative that Lam is riding a durable, technology-led spending cycle rather than a short-lived rebound.
Customer Support Business Group Milestone
The Customer Support Business Group crossed a major threshold with its first $2 billion-plus quarter, generating $2.1 billion in revenue, up 6% sequentially and 25% from a year earlier. Services delivered mid-teens sequential growth, underscoring how installed-base support, spares and upgrades are becoming an increasingly important, recurring earnings engine.
Strong Profitability and EPS Outperformance
Profitability metrics were equally robust, with gross margin at 49.9% and operating margin at 35%, both landing at the high end of guidance ranges. That translated into record diluted EPS of $1.47, comfortably above the top end of management’s outlook and signaling strong operating leverage even as the company invests heavily.
Raised Industry WFE Outlook
Lam boosted its full-year wafer fab equipment outlook from roughly $135 billion to $140 billion and said the bias remains to the upside as customers step up spending. Management highlighted strength across device types, pointing to broad industry confidence in long-term demand for AI, high-bandwidth memory and leading-edge logic.
Expanding SAM and Technology Leadership
The company expects its served available market, measured as a share of overall WFE, to rise to slightly above the mid-30s percent by 2026 and reiterated a long-term aim toward the high-30s. Lam emphasized continued leadership in etch and deposition tools for 3D NAND, DRAM and logic, arguing that its process expertise keeps it well positioned for next-generation nodes.
NAND and DRAM Tailwinds
Management forecast that around $40 billion of NAND conversion spending will be pulled forward, with most of it occurring before the end of 2027 as customers migrate to higher-layer devices. In DRAM, Lam expects its dielectric deposition market and overall DRAM exposure to grow more than 20% as the industry shifts to 1C generation products, framing memory as a key growth driver.
Foundry/Logic and Advanced Packaging Momentum
On the foundry and logic side, Lam secured key dielectric etch wins at a major customer, reinforcing its footprint in advanced logic nodes. The company also sees advanced packaging as a notable growth vector, projecting that revenue from this area will expand by more than 50% in calendar 2026 as chipmakers adopt new packaging architectures.
Robotics and Equipment Intelligence Gains
Lam is leaning into automation, expanding its Dextro collaborative robot coverage to eight tool types from six and introducing a next-generation Dextro platform with ten times the compute power. The firm also signed new Equipment Intelligence agreements with large customers, aiming to accelerate production ramps and boost tool uptime through data and analytics.
Capital Returns and Balance Sheet Actions
Shareholders saw aggressive capital returns as Lam deployed about $800 million on buybacks, including a $200 million accelerated repurchase, at an average price near $211. The company also retired $750 million of notes and paid $326 million in dividends, returning 139% of free cash flow in the quarter while keeping $4.3 billion of repurchase authorization in reserve.
Positive June Quarter Guidance
For the June quarter, Lam guided non-GAAP revenue to $6.6 billion plus or minus $400 million, implying a range of $6.2 billion to $7.0 billion. The company expects gross margin around 50.5% and operating margin near 36.5%, with another record EPS forecast at $1.65, plus or minus $0.15, suggesting continued margin expansion.
China Revenue and Down Payment Dynamics
China accounted for 34% of revenue, a slight step down from 35%, and Lam expects that share to decline in the June quarter as mix shifts. Management also noted that customer down payments fell by about $300 million to their lowest level in nearly four years, limiting upfront visibility particularly with smaller customers even as overall demand stays strong.
Cash and OI&E Headwinds
Cash and equivalents slipped to about $4.8 billion from $6.2 billion, a drop driven largely by heavy buybacks, dividends and debt reduction rather than operating weakness. Other income and expense swung to an $8 million expense from $10 million income in the prior quarter, reflecting small venture investment losses and reduced interest income that added some earnings noise.
Supply Constraints and Lead Time Stretch
Despite surging demand, Lam is grappling with clean-room and capacity constraints that limit how quickly customers can take tools, stretching lead times. To address this bottleneck, the company is building a second Malaysia facility slated to ramp in the second half, which should help alleviate pressure and support future growth.
Receivables and Inventory Metrics
Working capital metrics showed some movement, with days sales outstanding rising to 64 days from 59 days sequentially, suggesting slower collections. Inventory turns improved to 2.9 times from 2.7 times, but management signaled this remains an area to monitor as the company balances supply readiness against demand uncertainty.
Reliant and Mature Node Weakness
Not all segments were firing equally, as parts of the Reliant business tied to mature-node spending softened and partially offset CSBG momentum. That weakness moderated some services and upgrade contributions, highlighting that legacy-node demand can still fluctuate even amid a strong overall spending environment.
Rising Operating Expenses and Planned Increases
Operating expenses climbed to $866 million from $827 million as headcount rose to about 20,600 employees, an increase of roughly 900 in the quarter. Management signaled that OpEx and R&D spending will continue to rise through the year, meaning Lam will need sustained revenue growth to keep margins at current elevated levels.
Gross Margin Mix Headwind Risk
While gross margin expanded, executives flagged slight headwinds tied to customer mix, implying sensitivity to who is buying and at what price. This mix effect could pressure margins if regional or customer spending patterns shift, even as Lam benefits from stronger volume and richer technology content.
Uncertainty in Certain Financial Details
The company declined to provide longer-term numeric targets for gross margin or specific lead-time figures and acknowledged variability in other income and tax benefits. That restraint leaves some forecasting uncertainty for investors, who must rely more on qualitative commentary and broader industry trends to model Lam’s earnings path.
Forward-Looking Guidance and Outlook
Beyond the June quarter, Lam reiterated capital expenditures of about 4% to 5% of revenue and a non-GAAP tax rate expected below the mid-teens for calendar 2026. Management expects second-half 2026 revenue to outpace the first half and raised its 2026 WFE view to $140 billion with upside potential, projecting its SAM to edge above the mid-30s while highlighting ongoing strength in CSBG and continued cash returns.
Lam’s earnings call underscored a company riding structural AI and memory tailwinds, translating into record sales, expanding margins and robust guidance. Investors will be watching whether Lam can navigate regional mix shifts, rising costs and capacity constraints without denting its profitability, but for now the momentum and tone remain firmly in the bulls’ favor.