Lam Research Corp ((LRCX)) has held its Q3 earnings call. Read on for the main highlights of the call.
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New trading tool for LRCX bullsLam Research’s latest earnings call struck an upbeat tone, with management celebrating record revenue, record earnings per share and a higher outlook for wafer‑fab equipment spending. Executives framed the current cycle as structurally different, driven by accelerating AI demand and Lam’s expanding role in critical etch and deposition steps, while acknowledging manageable risks in regional mix, cash trends and rising costs.
Record Revenue and Profitability Surge
Lam posted March‑quarter revenue of $5.84 billion, up 9% sequentially and 24% year over year, marking its third straight record quarter. Profitability kept pace, with gross margin at 49.9%, operating margin at 35% and diluted EPS hitting a record $1.47, all at or above the high end of guidance.
CSBG Crosses $2 Billion Milestone
The Customer Support Business Group delivered its first $2 billion‑plus quarter at $2.1 billion, rising 6% sequentially and 25% year over year. Services revenue grew in the mid‑teens sequentially, underscoring the strength of Lam’s installed base even as some mature‑node Reliant activity showed signs of softness.
Raised WFE Outlook and Expanding SAM
Management lifted its full‑year wafer‑fab equipment outlook from about $135 billion to $140 billion, with commentary suggesting the risk remains skewed to the upside. Lam expects its served available market as a share of WFE to rise to slightly above the mid‑30s percent by 2026 and is targeting the high‑30s over time, anchored by leadership in etch and deposition.
NAND and DRAM Spending Tailwinds
Lam highlighted powerful memory tailwinds as manufacturers race to support AI and data‑centric workloads. The company expects roughly $40 billion of NAND conversion spending to be pulled forward with most completed before the end of 2027, while its DRAM dielectric deposition SAM and DRAM exposure are projected to grow more than 20% as the industry migrates to 1C nodes.
Foundry, Logic and Advanced Packaging Momentum
Beyond memory, Lam is gaining traction at leading‑edge foundry and logic customers, securing key dielectric etch wins that support next‑generation process nodes. Advanced packaging is another bright spot, with the company projecting revenue in this segment to grow more than 50% in calendar 2026 as chipmakers stack and connect dies for AI and high‑performance computing.
Robotics and Equipment Intelligence Advances
On the factory‑automation front, Lam expanded its Dextro collaborative‑robot platform to cover eight tool types, up from six, and rolled out a new version with 10 times the compute power. The company also signed new Equipment Intelligence agreements with major customers, aiming to shorten tool ramps, boost uptime and deepen data‑driven service relationships.
Capital Returns and Balance Sheet Moves
Lam continued to aggressively return cash, deploying about $800 million on share repurchases, including a $200 million accelerated program, at an average price near $211 per share. The company also retired $750 million of notes and paid $326 million in dividends, returning roughly 139% of free cash flow in the quarter while leaving $4.3 billion authorized for future buybacks.
China Exposure and Down Payment Shifts
China accounted for 34% of revenue, down slightly from 35% in the prior quarter, and management expects that percentage to decline in the June period as demand tilts elsewhere. Customer down payments dropped by around $300 million to the lowest level in nearly four years, particularly from smaller customers, trimming some upfront visibility despite the strong demand backdrop.
Cash, OI&E and Working‑Capital Trends
Cash and equivalents fell to about $4.8 billion from $6.2 billion, largely due to the robust capital‑return program and debt reduction. Other income and expense swung to an $8 million expense from a $10 million income, driven by small venture losses and lower interest income, while days sales outstanding rose to 64 and inventory turns improved modestly to 2.9 times.
Capacity Constraints and Lead‑Time Stretch
Lam noted that clean‑room and manufacturing capacity remain bottlenecks for customers, contributing to extended lead times for tools amid intense AI‑related demand. To address this, the company is building a second facility in Malaysia that is expected to ramp in the second half of the year, supporting higher output and better delivery performance.
Rising OpEx and Margin Mix Risks
Operating expenses climbed to $866 million from $827 million as headcount reached roughly 20,600 employees, up about 900, and management signaled further investments in operating and R&D spending. While overall gross margin expanded, executives flagged slight headwinds from customer and product mix and declined to set longer‑term numeric margin targets, underscoring some sensitivity to mix shifts and tax or OI&E variability.
Guidance and Outlook
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 and another potential record. The company forecast gross margin around 50.5% and operating margin near 36.5%, with EPS expected between $1.50 and $1.80, and reiterated relatively modest capital spending and a tax rate trending below the mid‑teens for calendar 2026 while indicating second‑half 2026 revenue should exceed the first half and WFE and SAM should continue to expand.
In sum, Lam Research delivered a standout quarter that reinforced its positioning at the heart of the AI‑driven semiconductor upcycle. Record results, a higher WFE bar, strong CSBG performance and robust guidance outweighed concerns about China mix, lower down payments, heavy cash returns and higher spending, leaving investors with a broadly optimistic long‑term narrative anchored in technology leadership and capacity expansion.