Q3 2025 Lam Research Corp Earnings Call
Good afternoon, and welcome to the Lam Research March 2025 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing star key followed by zero.
Unknown Executive: Good afternoon, and welcome to the Lam Research March 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.
After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded.
Ram Ganesh: I would now like to turn the conference over to Ram Ganesh, Vice President, Investor Relations. Please go ahead. Thank you and good afternoon everyone.
Speaker Change: I would now like to turn the conference over to Ram Ganesh Vice President Investor Relations. Please go ahead.
Speaker Change: Thank you and good afternoon, everyone welcome to the land lease search quarterly earnings Conference call with me today are Tim Archer, President and Chief Executive Officer, and that's been danger Executive Vice President and Chief Financial Officer.
Ram Ganesh: Welcome to the Lam Research Quarterly Earnings Conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment and we'll review our financial results for the March 2025 quarter and our outlook for the June 2025 quarter. The press release detailing our financial results was distributed a little after 1 p.m. Pacific time. The release can be found on the investor relations section of the company's website, along with the presentation slides that accompany today's call.
Speaker Change: During today's call, we will chat our overview on the business environment and review our financial results for the March 2025 quarter and our outlook for the June 2025 quarter.
Speaker Change: The press release detailing our financial results was distributed a little after one PM Pacific time.
Speaker Change: These can be found on the Investor Relations section of the company's website, along with the presentation slides that accompany today's call.
Ram Ganesh: Today's presentation and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC Public File. Please see accompanying slides in the presentation for additional information. Today's discussion of a financial resource will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP resource can be found in the accompanying slides in the presentation. This call is scheduled to last until 3 p.m. pacific time. A replay of this call will be made available later this afternoon on our website.
Speaker Change: Today's presentation and Q&A include forward looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings.
Speaker Change: Please see accompanying slides in the presentation for additional information.
Speaker Change: Today's discussion of our financials, a little be presented on a non-GAAP financial basis, unless otherwise specified.
Speaker Change: A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying slides in the presentation.
This call is scheduled to last until three P M Pacific time.
Speaker Change: A replay of this call will be made available later this afternoon on our website.
Timothy Archer: And with that, I'll hand the call over to Tim. Great. Thank you, Ram, and thank you all for joining the call today. Lam's March quarter results reflect continued strong execution across the company with revenues, gross margin, operating margin and EPS all exceeding the midpoint of our guidance. We delivered a record quarter for foundry revenue. Demonstrating our solid product momentum in leading-edge technology inflection. Gross margin percentage was also a record for the company since the Novellus merger as the investments we have made over the past several years in our manufacturing and supply chain operations are contributing positively as we scale the business.
Speaker Change: With that I'll hand, the call over to Tim Great. Thank you, Rob and thank you all for joining the call today Lam March quarter results reflect continued strong execution across the company with revenues gross margin operating margin and EPS all exceeding the midpoint of our guidance we.
Speaker Change: We delivered a record quarter for foundry revenues.
Speaker Change: Demonstrating our solid product momentum in leading edge technology inflections gross margin percentage was also a record for the company since novellus merger as the investments we've made over the past several years and our manufacturing and supply chain operations are contributing positively as we scale the business.
Timothy Archer: As our guidance indicates, gross margins are set to expand again in the June quarter. On our January earnings call, we laid out what we saw as the fundamental drivers of WFP spending in the year ahead. To date, these have played out largely as expected, with strength in leading-edge Foundry logic, technology-driven conversions in NAND, and a focus on high-bandwidth memory in DDR5 and VRAM. From an overall industry perspective, we continue to forecast calendar year 2025 WFP spending in the $100 billion range. We recognize that the current tariff and global economic environment is dynamic, but thus far we have not seen any meaningful changes for our customers' plans.
Speaker Change: As our guidance indicates gross margins are set to expand again in the June quarter.
Speaker Change: On our January earnings call, we laid out what we saw as the fundamental drivers of WP spending in the year ahead to date. These have played out largely as expected with strength in leading edge foundry logic.
Speaker Change: Technology, driven conversions and NAND and our focus on high bandwidth memory and DDR five in DRAM.
Speaker Change: From an overall industry perspective, we continue to forecast calendar year 2025, WP spending in the $100 billion range.
Speaker Change: We recognize that the current tariff and global economic environment is dynamic, but thus far we have not seen any meaningful changes to our customer's plans. We are closely monitoring the situation alongside our customers and ecosystem partners. We believe that the agile manufacturing and supply chain capability that we've developed in <unk>.
Timothy Archer: We are closely monitoring the situation alongside our customers and ecosystem partners. We believe that the agile manufacturing and supply chain capability that we have developed in recent years provides us with the flexibility to lessen the direct impact of tariffs.
Speaker Change: Years provides us with the flexibility to lessen the direct impact of tariffs.
Timothy Archer: Our strategic focus in this environment remains on delivering the new products, advanced services, and digital transformation initiatives required to achieve the growth and profitability outperformance goals we described at our Investor Day in February. As a reminder, we identified three key drivers that underpin our ability to outperform overall WFP growth over the next several years. First, we expect to expand our SERV market, or SAM, faster than WFE, as deposition and etch intensity rises due to greater semiconductor device complexity. Second, we expect to gain share with the strongest product portfolio in the company's history, targeted at billion-dollar-plus technology inflections such as gate-all-around, backside power distribution, advanced packaging, and dry EUV photoresist processing.
Speaker Change: Our strategic focus in this environment remains on delivering the new products advanced services and digital transformation initiatives required to achieve the growth and profitability outperformance schools. We described at our Investor day in February.
Speaker Change: As a reminder, we identified three key drivers that underpin our ability to outperform overall WP growth over the next several years.
Speaker Change: First we expect to expand our served market or Sam faster than WP as deposition and etch intensity rises due to greater semiconductor device complexity.
Speaker Change: Second we expect to gain share with the strongest product portfolio in the company's history targeted at $1 billion plus technology inflections, such as gate, all around backside power distribution advanced packaging and dry <unk> photoresist processing.
Timothy Archer: And third, we expect to grow our CSBG revenue faster than our installed base as customers look to LAM's upgrade, automation, and equipment intelligence offerings to enhance productivity and execution as they expand their global fab operations. Year-to-date, we are already witnessing incredible momentum in these areas. In deposition, LAM's Atomic Layer Deposition, or ALD, products are making strong gains. Our Stryker Spark ALD tool delivers the industry's densest conformal low-k carbide dielectric films. Leveraging this capability, we have secured multiple key wins for spacer applications and a leading-edge foundry. Our Altus Halo system enables barrierless atomic layer deposition of molybdenum.
Speaker Change: Third we expect to grow our CSP G revenue faster than our installed base as customers look to lambs upgrade automation and equipment intelligence offerings to enhance productivity and execution as they expand their global fab operations.
Speaker Change: Year to date, we are already witnessing incredible momentum in these areas in deposition lamb's atomic layer deposition or <unk> products are making strong gains our stryker spark ALG tool delivers the industry's densest conformal locate carbide dielectric films led.
Speaker Change: Emerging this capability, we have secured multiple key wins for spacer applications at a leading edge foundry.
Speaker Change: Our oldest halo system enables barrier list atomic layer deposition of molybdenum.
Timothy Archer: reducing the resistance of critical contact and interconnect layers by 50% compared to legacy technologies. In the case of 3D NAND, this reduction is critical to achieving the superior IO performance needed for AI applications. As a result, LAM's Halo molybdenum process is seeing increased adoption across our leading 3D NAND customers. In Edge, our new Acara system has gotten off to a great start, rapidly solidifying and expanding our market leading position in Conductor Edge. Featuring a proprietary, industry-first innovation for ultra-fast plasma control, ACARA delivers previously unachievable levels of performance in edge selectivity and profile patterning precision. We have previously announced leading-edge FoundryLogic Momentum with this tool, and just since our Investor Day, Acara has also won multiple critical-edge applications at a major DRAM manufacturer.
Speaker Change: Reducing the resistance of critical contact and interconnect layers by 50% compared to legacy technologies in the case of <unk> NAND. This reduction is critical to achieving the superior Io performance needed for AI applications as a result lamps halo molybdenum process, you're seeing inquiry.
Speaker Change: <unk> adoption across our leading <unk> NAND customers.
Speaker Change: And edge, our new <unk> system has gotten off to a great start rapidly solidifying and expanding our market leading position in conductor etch.
Speaker Change: Featuring our proprietary industry first innovation for ultrafast plasma control a carra delivers previously unachievable levels of performance in etch selectivity and profile patterning precision.
Speaker Change: We have previously announced leading edge foundry logic momentum with this tool and just since our Investor Day. A car has also won multiple critical etch applications at a major DRAM manufacturer.
Timothy Archer: By enabling current DRAM and logic roadmaps with Acara, we are setting the stage for LAM to make further gains as the industry looks to implement even more challenging device architectures like 3D DRAM and CFET over the next decade. Turning to CSBG, we saw record revenues in our upgrades business. While the growth in upgrades was primarily driven by NAND technology conversions, as forecasted at our investor day, key DRAM and FoundryLogic customers are also more actively upgrading and repurposing existing tools for new applications to optimize capital spending. Looking forward, we see the upgradable architecture of our systems being a growing point of differentiation for LAM.
Speaker Change: By enabling current DRAM and logic Roadmaps with the Cora we are setting the stage for Lam to make further gains as the industry looks to implement even more challenging device architectures like <unk> DRAM and <unk> over the next decade.
Speaker Change: Turning to <unk>, we saw record revenues in our upgrades business.
Speaker Change: While the growth in upgrades was primarily driven by NAND technology conversions as forecasted at our Investor Day key DRAM and foundry logic customers are also more actively upgrading and repurposing existing tools for new applications to optimize capital spending looking.
Speaker Change: Looking forward, we see the Upgradable architecture of our systems being a growing point of differentiation for Lam, we are enabling our customers to cost effectively scale technology on the equipment, they already own while creating revenue and share gain opportunities for us.
Timothy Archer: We are enabling our customers to cost-effectively scale technology on the equipment they already own, while creating revenue and share gain opportunities for us. Our collaboration with customers on operating cost optimization extends across the entirety of our installed based business and over a longer time horizon. For example, in the March quarter, we signed a new multi-year spares agreement with a large memory customer for the latest technology node. This enables us to deliver value to the customer through assured component quality, cost, and availability.
Speaker Change: Our collaboration with customers on operating cost optimization extends across the entirety of our installed base business and over a longer time horizon. For example in the March quarter, we signed a new multiyear spares agreement with a large memory customer for their latest technology node. This enables us to deliver value to the <unk>.
Speaker Change: <unk> through assured component quality cost and availability.
Timothy Archer: Finally, in specialty technologies, we achieved a couple of key milestones recently. First, we displaced a competitor and shipped multiple 200-millimeter PCVD tools for silicon carbide-based wideband gap power device fabrication. Second, our PULSE laser deposition solutions are being extended into more use cases, and we will be shipping our latest tool this year for an advanced memory application. As customers look to accelerate R&D and scale manufacturing globally, we're finding new ways to add value. We've talked in the past about our SEMIVERSE solutions capabilities, which apply advanced modeling, simulation, data science, machine learning, and artificial intelligence to enhance equipment performance and shorten the time required for process optimization.
Finally in specialty technologies, we achieved a couple of key milestones recently first we displaced a competitor and shipped multiple 200 millimeter P. CVD tools for Silicon carbide based wideband gap power device fabrication second our pulse laser deposition solutions are being extended into more.
Speaker Change: Use cases, and we will be shipping our latest tool this year for an advanced memory applications.
Speaker Change: As customers look to accelerate R&D and scaled manufacturing globally, we're finding new ways to add value.
Speaker Change: We've talked in the past about our semi versus solutions capabilities, which apply advanced modeling simulation data science machine learning and artificial intelligence to enhance equipment performance.
Speaker Change: And shorten the time required for process optimization.
Timothy Archer: I am pleased to report that recently we signed new licensing agreements with three large customers for our virtual fabrication platform, Simulator 3D. For both its cost and performance benefits, we see virtual fabrication fast becoming a required discipline in advanced technology development, and Lam is leading the industry in this evolution.
Speaker Change: I am pleased to report that recently, we signed new licensing agreements with three large customers for our virtual fabrication platform simulator <unk>.
Speaker Change: For both its cost and performance benefits, we see virtual fabrication fast, becoming a required discipline and advanced technology development and Lam is leading the industry in this evolution.
Timothy Archer: So to wrap up, when I look at our solid March quarter results and strong June quarter guide, I see Lam executing at a high level on all aspects of the outperformance strategy we described at our February investor day. This includes new product momentum and key customer wins, value creation from the installed base business, and innovation in equipment intelligence and virtual process development. Near term, we're taking steps to lessen the direct impact of tariffs and closely monitoring for longer term indicators of demand changes. Our priority is to continue delivering the technological innovations and world-class support that uniquely enable our customers to scale semiconductor manufacturing faster, more productively, and more cost-effectively.
Speaker Change: So to wrap up when I look at our solid March quarter results and strong June quarter Guide I see Lam executing at a high level on all aspects of the outperformance strategy. We described at our February Investor Day.
Speaker Change: This includes new product momentum in key customer wins value creation from the installed base business and innovation and equipment intelligence and virtual process development.
Speaker Change: <unk> term, we're taking steps to lessen the direct impact of tariffs.
Speaker Change: Mostly monitoring for longer term indicators of demand changes.
Speaker Change: Our priority is to continue delivering the technological innovations and world class support that uniquely enable our customers to scale semiconductor manufacturing faster more productively and more cost effectively.
Timothy Archer: Simply put, our competitive differentiation is enabling our customers' competitive advantage. For this reason, we remain highly confident that LAM is in an excellent position to outperform overall semiconductor industry growth in the years to come.
Speaker Change: Simply put our competitive differentiation is enabling our customers competitive advantage for this reason we remain highly confident that Lam is in an excellent position to outperform overall semiconductor industry growth in the years to come thank.
Douglas Bettinger: Thank you, and I'll now pass this on to Doug. Right. Thank you, Tim.
Doug: Thank you and I'll now pass it on to Doug.
Doug: Great. Thank you Tim good afternoon, everyone and thank you for joining our call today.
Douglas Bettinger: Good afternoon, everyone. And thank you for joining our call today. Lam is off to a strong start in 2025. The March quarter's performance exceeded the midpoint of all of our guidance ranges that we gave on the last earnings call. I was pleased with the company's continued solid execution. We've reached the highest quarterly gross margin percentage since Lam merged with Novellas in 2012. We achieve this by proactively delivering on our operational efficiencies via our manufacturing strategy of being close to our customers.
Speaker Change: <unk> is off to a strong start in 2025.
Speaker Change: The March quarter's performance exceeded the midpoint of all of our guidance ranges that we gave on our last earnings call.
Speaker Change: I was pleased with the Companys continued solid execution.
Speaker Change: We reached the highest quarterly gross margin percentage since lamp merged with novellus in 2012.
Speaker Change: We achieved this by proactively delivering on our operational efficiencies via our manufacturing strategy of being close to our customers.
Douglas Bettinger: Let's look at the details of our March quarter financial results. Revenue for the March quarter was $4.72 billion, which was an increase of 8% from the prior quarter. Our deferred revenue balance at quarter end was $2 billion, which was essentially flat from the December quarter. Within this number though, advanced payments trended lower, while other components of the deferred balance trended higher. As we sit here today, I believe our deferred revenue balance will move lower by the end of calendar year 2025. From a market segment perspective, March quarter systems revenue and memory was 43%, a decrease from 50% in the prior quarter.
Let's look at the details of our March quarter financial results.
Speaker Change: Revenue for the March quarter was $4 72 billion.
Speaker Change: Which was an increase of 8% from the prior quarter.
Speaker Change: Our deferred revenue balance at quarter end was $2 billion, which was essentially flat from the December quarter.
Speaker Change: Within this number though advanced payments trended lower all other components of the deferred balance trended higher.
Speaker Change: As we sit here today I believe our deferred revenue balance will move lower by the end of calendar year 2025.
Speaker Change: From a market segment perspective March quarter systems revenue and memory was 43%.
Speaker Change: A decrease from 50% in the prior quarter.
Douglas Bettinger: Within memory, non-volatile memory accounted for 20% of our system's revenue, down from 24% in the prior quarter. And just a reminder, this segment includes a domestic China customer that we classified as a non-volatile memory producer, and that we are currently limited from shipping to. On a dollar basis, man saw growth from non-China based customers consistent with our expectations from earlier in the year. The non-volatile memory segment is being driven by customer spending on technology conversions from 1xx layer to 256 layer class devices. We currently expect this segment to represent the biggest percentage growth in systems revenue for LAM in the June quarter.
Speaker Change: Within memory Nonvolatile memory accounted for 20% of our systems revenue down from 24% in the prior quarter.
Speaker Change: And just a reminder, this segment includes a domestic China customer that we classified as non volatile memory producer and that we are currently limited from shipping to.
Speaker Change: On a dollar basis man saw growth from non China based customers consistent with our expectations from earlier in the year.
Speaker Change: The non volatile memory segment is being driven by customer spending on technology conversions from one X X layer, two 256 layer class devices.
Speaker Change: We currently expect this segment to represent the biggest percentage growth in systems revenue for Lam in the June quarter.
Speaker Change: DRAM represented 23% of systems revenue compared with 26% in the December quarter.
Douglas Bettinger: D-RAM represented 23% of systems revenue compared with 26% in the December quarter. URIM spending was focused on technology upgrades across 1α, 1β, and 1γ nodes to enable DDR5, LPDDR5, and high bandwidth memory. Foundry represented 48% of our system's revenue, up from the percentage concentration in the December quarter of 35%. This level represents a new record in dollar terms for LAM. Shipments for gate all-around nodes and advanced packaging were strong. We also benefited from mature note spending with domestic Chinese customers. I'd just like to point out that the last time we were at these revenue levels, back in late 2022, Foundry represented a concentration in the low to mid 30% range.
Speaker Change: DRAM spending was focused on technology upgrades across one alpha one beta and one gamma nodes to enable DDR five <unk> five and high bandwidth memory.
Speaker Change: Foundry represented 48% of our systems revenue up from the percentage concentration in the December quarter of 35%.
Speaker Change: This level represents a new record in dollar terms for Lam.
Speaker Change: Shipments for good all around nodes and advanced packaging were strong.
Speaker Change: We also benefited from mature node spending with domestic Chinese customers.
Speaker Change: I'd just like to point out that the last time, we were at these revenue levels back in late 2022.
Speaker Change: Foundry represented a concentration in the low to mid 30% range.
Douglas Bettinger: We have clearly broadened and diversified our business since then. And finally, Logic and others were 9% of our systems revenue in the March quarter, down from the prior quarter's level of 15%. The decrease was primarily driven by reduced leading-edge spending.
Speaker Change: We have clearly broadened and diversified our business since then.
Speaker Change: And finally logic and other were 9% of our systems revenue in the March quarter down from the prior quarter's level of 15%.
Speaker Change: The decrease was primarily driven by reduced leading edge spending.
Speaker Change: Now I'll discuss the original composition of our total revenue the China region accounted for 31%.
Douglas Bettinger: Now I'll discuss the regional composition of our total revenue. The China region accounted for 31% flat from the prior quarter. Most of our revenue from China continued to come from domestic Chinese customers. Our next largest geographic concentrations were Taiwan and Korea at 24% of revenue each in the March quarter. Taiwan represented a new record level for us in dollar. The Customer Support Business Group generated approximately $1.7 billion in revenue for the March quarter, down a little bit from the December quarter, however, 21% higher than the same period in 2024. Sequentially, the decline was attributable to lower reliance systems revenue, partly offset by record upgrade revenue.
Speaker Change: <unk> from the prior quarter.
Speaker Change: Most of our revenue from China continued to come from domestic Chinese customers.
Speaker Change: Our next largest geographic concentrations were Taiwan, and Korea at 24% of revenue each in the March quarter.
Speaker Change: By one represented a new record level for us in dollar terms.
Speaker Change: The customer support business group generated approximately $1 $7 billion in revenue for the March quarter down a little bit from the December quarter, However, 21% higher than the same period in 2024.
Speaker Change: Sequentially the decline was attributable to lower reliant systems revenue.
Speaker Change: Partly offset by record upgrade revenue.
Speaker Change: Turning to the gross margin performance the March quarter came in at 49% at the high end of our guidance range and improving from the December quarter level of 47, 5%.
Douglas Bettinger: Turning to the gross margin performance, the March quarter came in at 49% at the high end of our guidance range and improving from the December quarter level of 47 and a half percent. The increase reflects a stronger mix. as well as the efficiencies we're delivering from our close to customer manufacturing strategy. Operating expenses in March were $763 million, up from the prior quarter level of $735 million. The increase was due to growth in R&D activities associated with our ongoing roadmap differentiation. R&D accounted for 70% of the total operating expenses. Operating margin in the March quarter was 32.8 percent, above the December quarter level of 30.7 percent, and near the high end of our guidance range, primarily because of the higher revenue and the stronger gross margin performance.
Speaker Change: The increase reflects a stronger mix.
Speaker Change: As well as the efficiencies we are delivering from our close to customer manufacturing strategy.
Speaker Change: Operating expenses in March were $763 million up from the prior quarter level of $735 million.
Speaker Change: The increase was due to growth in R&D activities associated with our ongoing roadmap differentiation.
Speaker Change: R&D economy for 70% of the total operating expenses.
Speaker Change: Okay.
Speaker Change: Operating margin in the March quarter was 32, 8% above the December quarter level of 37% and near the high end of our guidance range, primarily because of the higher revenue and the stronger gross margin performance.
Speaker Change: Our non-GAAP tax rate for the quarter was 13, 3% in line with our expectations.
Douglas Bettinger: Our non-GAAP tax rate for the quarter was 13.3% in line with our expectations. Our estimate for the June 2025 quarter is for the tax rate to be in the single-digit range due to an anticipated tax reserve release tied to a statute of limitations expiration . Beyond the June quarter, we continue to believe the tax rate will be in the low to mid-teens for the remainder of the calendar year. Other income expense for the March quarter came in at $7 million in expense compared with $11 million in income in the December quarter. The change in OI&E was due to lower gains in our equity investments and lower interest income.
Speaker Change: Our estimate for the June 2025 quarter as for the tax rate to be in the single digit range due to an anticipated tax reserve release tied to a statute of limitations exploration.
Speaker Change: Beyond the June quarter, we continue to believe the tax rate will be in the low to mid teens for the remainder of the calendar year.
Speaker Change: Other income expense for the March quarter came in at $7 million in expense compared with $11 million in income in the December quarter.
Speaker Change: The change in <unk> was due to lower gains on our equity investments and lower interest income.
Speaker Change: <unk> will continue to be susceptible to market related fluctuations that will cause some level of volatility each quarter.
Douglas Bettinger: OI&E will continue to be susceptible to market-related fluctuations that will cause some level of volatility each quarter. I do believe OI&E will have a slight negative bias in the June quarter.
Speaker Change: I do believe <unk> will have a slight negative bias in the June quarter.
Speaker Change: On the capital return side of things, we allocated approximately $347 million to open market share repurchases.
Douglas Bettinger: On the capital return side of things, we allocated approximately $347 million to open market share repurchases, and we paid $296 million in dividends in the March quarter. As I indicated on the last earnings call, in the quarter we retired $500 million of unsecured notes that reached maturity using cash from our balance sheet. We return 63% of free cash flow in the quarter. This was a little lower than normal due to that cash that we allocated for the debt retirement. For the March quarter, diluted earnings per share came in at $1.04. The diluted share count was roughly 1.29 billion shares, about flat for the December quarter.
Speaker Change: And we paid $296 million in dividends in the March quarter.
Speaker Change: As I indicated on the last earnings call in the quarter, we retired $500 million of unsecured notes that reach maturity using cash from our balance sheet.
Speaker Change: We returned 63% of free cash flow in the quarter.
Speaker Change: This was a little lower than normal due to that cash that we allocated for the debt retirement.
Speaker Change: For the March quarter diluted earnings per share came in at $1 <unk> with.
Speaker Change: The diluted share count was roughly 129 billion shares about flat with the December quarter.
Speaker Change: We have $8 $8 billion remaining on our board authorized share repurchase program.
Douglas Bettinger: We have $8.8 billion remaining on our board-authorized share repurchase program.
Speaker Change: Let me pivot to the balance sheet.
Douglas Bettinger: Let me pivot to the balance sheet. Our cash and short-term investments totaled $5.5 billion at the end of the March quarter, down slightly from $5.7 billion at the end of the December quarter. The primary factors behind the cash decrease were the repayment of those notes. Our capital spending as well as our capital return activities. Total debt on the balance sheet obviously declined by that $500 million to $4.5 billion at quarter end. Day sales outstanding were 62 days in the March quarter, which was a decrease from 69 days in the December quarter. Inventory at March quarter end totaled $4.5 billion, a slight increase from the December quarter as we prepare for higher revenue levels in the June quarter.
Speaker Change: Our cash and short term investments totaled $5 5 billion at the end of the March quarter down slightly from $5 7 billion at the end of the December quarter.
Speaker Change: The primary factors behind the cash decrease for the repayment of those notes.
Speaker Change: Our capital spending as well as our capital return activities.
Speaker Change: Total debt on the balance sheet, obviously declined by that $500 million to $4 5 billion at quarter end.
Speaker Change: Days sales outstanding were 62 days in the March quarter, which was a decrease from 69 days in the December quarter.
Speaker Change: Inventory at March quarter end totaled $4 5 billion, a slight increase from the December quarter as we prepare for higher revenue levels in the June quarter.
Speaker Change: Inventory turns were two two times compared with $2 one times in the previous quarter.
Douglas Bettinger: Inventory turns were 2.2 times compared with 2.1 times in the previous quarter. We will continue to manage inventory levels to align with customer demand. Our non-cash expenses for the March quarter included approximately $87 million in equity compensation, $83 million in depreciation, and $14 million in amortization. Capital expenditures in the March quarter were $288 million, up $100 million from the December quarter. A major driver of this increase was a purchase of land in India to enable our planned lab expansions there. Our capital spending otherwise was focused on lab investments in the United States. and Global Growth in Manufacturing.
Speaker Change: We will continue to manage inventory levels to align with customer demand.
Speaker Change: Our noncash expenses for the March quarter included approximately $87 million and equity compensation $83 million in depreciation and $14 million in amortization.
Capital expenditures in the March quarter were $288 million up a $100 million from the December quarter.
Speaker Change: A major driver of this increase was a purchase of land in India to enable our planned lab expansions there.
Speaker Change: Our capital spending otherwise was focused on lab investments in the United States.
Speaker Change: And global growth in manufacturing.
Speaker Change: We ended the March quarter with approximately 18600 regular full time employees, which was an increase of approximately 300 people from the prior quarter.
Douglas Bettinger: We ended the March quarter with approximately 18,600 regular full-time employees, which was an increase of approximately 300 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installation, as well as growing manufacturing activity. We also saw headcount increases within R&D to support that long-term product roadmap.
Speaker Change: We had head count growth, primarily in the factory and field organizations to support increased tool installation as well as growing manufacturing activities.
Speaker Change: We also saw head count increases within R&D to support that long term product roadmap.
Speaker Change: Now, let's turn to our non-GAAP guidance for the June 2025 quarter.
Douglas Bettinger: Now let's turn to our non-GAAP guidance for the June 2025 quarter. We're expecting revenue of $5 billion, plus or minus $300 million. We expect systems revenue in Foundry and NAND to be up in the June quarter. This business level is consistent with our expectations from the beginning of the year. I want to specifically point out that we don't see anything being pulled in from future quarters. We're expecting gross margin of 49.5% plus or minus one percentage point. This guidance includes our current assessment of the direct impacts of tariffs on our business. Operating margin of 33.5%, plus or minus 1 percentage point.
Speaker Change: We're expecting revenue of $5 billion.
Speaker Change: Plus or minus $300 million.
Speaker Change: We expect system revenue in foundry and NAND to be up in the June quarter.
Speaker Change: This business level is consistent with our expectations from the beginning of the year.
Speaker Change: I want to specifically point out that we don't see anything being pulled in from future quarters.
Speaker Change: We're expecting gross margin of 49, 5% plus or minus one percentage point.
Speaker Change: This guidance includes our current assessment of the direct impact of tariffs on our business.
Speaker Change: Operating margin of 33, 5% plus or minus one percentage point and finally earnings per share of $1 20, plus or minus 10 based on a share count of approximately $1 2 billion shares.
Douglas Bettinger: And finally, earnings per share of $1.20, plus or minus $0.10, based on a share count of approximately 1.28 billion shares. This guidance for gross margin and operating margin percentage would represent record levels since our joining of LAM and Novella. I would also just point out that this would be the highest operating margin percentage that LAM has delivered since the late 1990s. These earnings would obviously represent an all-time record level of profitability.
Speaker Change: This guidance for gross margin and operating margin percentage would represent record levels since our joining of Lam and novellus.
Speaker Change: I would also just point out that this would be the highest operating margin percentage that Lam has delivered since the late 19 nineties.
These earnings would obviously represent an all time record level of profitability.
Douglas Bettinger: Let me wrap up. We're off to a strong start in 2025. We're executing well on our critical operational and financial objectives. While the tariff-related macro uncertainty is keeping the environment dynamic, customers are continuing to invest consistently with their planned technology roadmap. At Lam we're laser focused on driving innovation and delivering new product and service capabilities while at the same time enhancing operational efficiency and managing our profitability goals. We believe we're well set up to outperform overall WFE growth in 2025, as well as in the years ahead.
Speaker Change: Only wrap up we're off to a strong start in 2025.
Speaker Change: We're executing well on our critical operational and financial objectives.
Speaker Change: While the tariff related macro uncertainty is keeping the environment dynamic <unk>.
Speaker Change: Customers are continuing to invest consistently with their planned technology roadmaps.
Speaker Change: That land, we're laser focused on driving innovation and delivering new product and service capabilities, while at the same time enhancing operational efficiency and managing our profitability goals.
We believe we are well set up to outperform overall <unk> growth in 2025 as well as in the years ahead.
Unknown Executive: Operator, that concludes our prepared remarks. Tim and I would now like to open up the call for questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2.
Speaker Change: Operator that concludes our prepared remarks, Tim and I would now like to open up the call for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
C.J. Muse: Our first question today comes from C.J. Muse with Cantor Fitzgerald. Please go ahead. Yeah, good afternoon. Thank you for taking the question.
C.J. Muse: Our first question today comes from C. J Muse with Cantor Fitzgerald. Please go ahead.
C.J. Muse: Yes. Good afternoon. Thank you for taking the question I guess first question I was hoping to hit on the NAND upgrade cycle that Youre seeing you talked about that being the biggest growth driver into the June quarter would love to hear you.
Timothy Archer: I guess first question was hoping to hit on the NAND upgrade cycle that you're seeing. You talked about that being the biggest growth driver into the June quarter. I would love to hear, you know, your thoughts around the sustainability of that beyond June. Are you anticipating a broadening of spending beyond just the one or two customers that you're seeing in the first half of the year? And as you think about the growth there, I guess, how much of that will come through tools versus CSBG upgrades?
C.J. Muse: Your thoughts around the sustainability of that beyond June are you anticipating a broadening of spending.
C.J. Muse: Beyond just the one or two customers in the first that you are seeing in the first half of the year and as you think about.
C.J. Muse: The growth there.
C.J. Muse: Yes, how much of that will come through tools versus CSP G upgrades.
Timothy Archer: As well as, is there a way to think about your share of wallet with the industry focusing so greatly on upgrades where, you know, it would appear that, you know, you're going from 30% to maybe 40% to 50%?
C.J. Muse: As well as is there a way to think about your share of wallet with the industry focusing.
C.J. Muse: So greatly upgrades, where it appear that youre going from 30% to maybe 40% to 50%.
Timothy Archer: Yeah, CJ, this is Tim. I'll go ahead and start on this. It's, you know, As we talked a couple of times on earnings calls recently, a significant portion, we said two-thirds of the industry's bits are still at around the 128 level, that's the 1xx generation. So we see a tremendous number of bits that ultimately have to get upgraded to 2xx+. And so we don't know exactly what the rate and pace of that is. Right now we see a strong move in that direction, and obviously we're watching for that. But Lam is in an incredibly good position on two fronts.
C.J. Muse: Yes C. J. This is Tim ill go ahead and start on this.
C.J. Muse: Yes.
C.J. Muse: As we as we talked in a couple of times on earnings calls recently, a significant portion. We said two thirds of the industry's bits are still at around 128 level that the one X X generation. So we see tremendous number of bits that ultimately have to get upgraded to two X X plus.
C.J. Muse: And so we don't know exactly what the rate and pace of that is right now we see it.
C.J. Muse: Strong move in that direction, and obviously, we are watching for that but Lam is in an incredibly good position on two fronts. One is the fact that we are the ones who upgrade our own tools and so we capture a tremendous amount of.
Timothy Archer: One is the fact that we are the ones who upgrade our own tools, and so we capture a tremendous amount of the wallet, the spend associated with upgrading the tools that are in place. At the same time, as we described at our investor day, as you extend beyond the 2xx to the 3xx and 4xx layers, you begin to need additional new tooling to enable that stacking. We talked about the sacrificial carbon gap fill that helps enable tier stacking. We talked about the backside deposition tool that helps with wafer stress as we move beyond 200 layers.
C.J. Muse: The wallet the spend associated with upgrading the tools that are in place at the same time as we described at our Investor day as you.
C.J. Muse: Extend beyond the two <unk> two <unk> layers, you begin to need additional new tooling to enable that stacking we talked about the sacrificial carbon gap fill that helps enable tier stacking, we talked about the backside deposition tool that helps with wafer stress.
C.J. Muse: Beyond 200 layers, we talked about the need to do to change the means a gap fill two in AMD gap fill.
Timothy Archer: We talked about the need to change the means of gap fill to an ALD gap fill. These are things that are new tools, so I think you're going to see a mix. You're going to see existing tools like our etchers, some of the mold and stack depth tools be upgraded, but I think then you'll see new tools being added. And one of those most significant new tools from a technology perspective is what I talked about in my script, which is the Halo MOLLE, and we're seeing strong momentum there. And eventually, because of the improvement it makes in terms of resistance and that impact on device performance, we think that ultimately broadens out and is adopted across all.
C.J. Muse: These are things that are new tools, so I think youre going to see a mix youre going to see existing tools like our <unk> some of the mold.
C.J. Muse: In stack depth, who will be upgraded but I think that youll see new tools being added and one of those most significant new tools from a technology perspective is what I talked about in my script, which is the.
Speaker Change: Halo, Molly and we're seeing strong strong momentum there and eventually because of the improvement that makes in terms of our resistance and that impact on device performance, we think that ultimately broadens out news adopted across all customers.
C.J. Muse: Very helpful.
Speaker Change: Very helpful. I guess as my follow up.
C.J. Muse: I guess as my follow up, your Taiwan revenues in the quarter were spectacular. I think the highest level that I can see over the last decade or more.
Speaker Change: Your Taiwan revenues in the quarter.
Speaker Change: Were spectacular I think the highest level that I can tell you over the last decade or more and I guess I'm curious.
Timothy Archer: And I guess, you know, curious on kind of two fronts. One, you know, how sustainable, you know, is that contribution to LAM? And then how does that inform your thinking about what second half tool shipments could look like versus first half?
Speaker Change: Kind of twofold one.
Speaker Change: How sustainable is it.
Speaker Change: Is that contribution to land and then how does that inform your thinking about what second half tool shipments could look like versus first half. Thanks. So much.
Timothy Archer: Thanks so much.
C.J. Muse: Actually, CJ, let me just start from the standpoint of, you know, the comments we've made around leading edge foundry logic strength. You know, it's been our stated strategy for the last several years to invest in new tooling to increase our exposure to leading edge foundry logic. And so I don't think it should come as any surprise. We talk about record foundry revenues, we talk about strength in places like Taiwan. A lot of that is coming because, you know, we've been executing on the new product roadmaps. And, you know, I talked about the ACARA conductor tool off to a strong start.
Speaker Change: The extra C. J, let me let me just start from the standpoint of.
Speaker Change: The comments, we've made around leading edge foundry logic strength.
Speaker Change: Ben Our stated strategy for the last several years to invest in new tooling to increase our exposure to leading edge foundry logic and so I don't think it should come as any surprise when you talked about record foundry revenues, we talked about strength in places like Taiwan, a lot of that is coming because we have been executing on the new product Roadmaps and talked.
Speaker Change: About the the carra conductor etch tool off to a strong start we've talked about spark <unk> in my prepared remarks, I mean, it goes well beyond that.
Timothy Archer: We talked about Spark ALD in my prepared remarks. I mean, it goes well beyond that. Obviously, advanced packaging, a big portion of that as well. You know, LAM is really well situated in the technology inflections that are coming in leading edge foundry logic. And I think that accounts for a lot of the strength.
Speaker Change: Obviously advanced packaging, a big portion of that as well Lam is really well situated in the technology inflections that are coming in leading edge foundry logic and I think that it comes from our strength and I'll, let Doug answer kind of second part of it yes, Tim covered it is sustainable so it's not going away and it's all about the gate all around.
Douglas Bettinger: And I'll let Doug answer kind of the second part of that. Yeah, I mean, Tim covered it. It's sustainable, CJ. It's not going away. It's all about the get all around node. It's all about advanced packaging. It's all the stuff we've been talking about.
Speaker Change: No. It's all about advanced packaging, it's all of the stuff we've been talking about so not much to add from Tim's comments.
Douglas Bettinger: So not much to add from Tim's comments.
C.J. Muse: Thanks so much. Thanks, CJ. Sure.
Speaker Change: Thanks, so much.
Speaker Change: Thanks JJ.
Timothy Arcuri: The next question is from Timothy Arcuri with UBS. Please go ahead. Thanks a lot.
Speaker Change: The next question is from Timothy Arcuri with UBS. Please go ahead.
Timothy Arcuri: Thanks, a lot.
Timothy Archer: Tim, you made a comment on the call that you're I think you said, quote, taking steps to Can you talk about that? You do have a free trade zone in Fremont, and then when you make the tools in Malaysia, the country of origin is Malaysia, so you should be fine there too. But you did say taking steps to limit the impact, so can you kind of go into some details on that? Well, I don't know that I can go into a lot of details on, you know, as far as the specific steps. But what I can say is that, you know, we've worked hard over the last several years to build a very flexible manufacturing supply chain operation that's, you know, centered around our U.S.
Speaker Change: Tim you made a comment on the call that your I think you said taking steps to limit the impact of cats can.
Speaker Change: Can you talk about that I guess, you do have a free trade zone.
Speaker Change: Fremont and then when you make the chosen Malaysia. The country of origin is Malaysia. So you should be fine there too so, but you did say taking steps to limit the impact. So can you kind of go into some details on that.
Speaker Change: Well I don't know that I that I.
Speaker Change: Can go into a lot of details on as far as the specific steps, but what I can say is that we've heard hard over the last several years to build a very flexible manufacturing and supply chain operation.
Speaker Change: Centered around our U S operations operations in Asia has done said close to our customers close to the supply chain and so when I say, taking steps it's no different than what we're always doing we look at at the environment. We look at the customers and then we optimize that capability that we have that exists in many different places in the world.
Timothy Archer: operations, operations in Asia, as Doug said, close to our customers, close to the supply chain. And so when I say taking steps, it's no different than what we're always doing. We look at the environment, we look at the customers, and then we optimize that capability that we have that exists in many different places in the world to deliver our tools most efficiently and most effectively to our customers. And so it's kind of what we're always doing. And I think that that's a result. I mean, that flexibility is, again, part of the strategy we executed when we saw disruptions like COVID and other things over the past years to really broaden out the global capability of our supply chain and manufacturing operations.
Speaker Change: To deliver our tools, most efficiently and most effectively to our customers and so it's kind of what we're always doing and I think that thats.
Speaker Change: That is a result of that flexibility is again part of the strategy. We executed when we saw disruptions like COVID-19 and other things over the past years to really broaden out the.
Speaker Change: The global capability of our supply chain.
And manufacturing operations.
Douglas Bettinger: And Tim, I just remind you, it's Doug. You know, we've got factories all over the world, right? We've got factories in the United States, factories in Austria, factories in Malaysia, factories in Taiwan, factories in Korea. And we've been talking about this for a while. The fact that we have that broad footprint enables us to have some level of flexibility.
Tim Great: Tim I'd, just remind you to start.
Speaker Change: We've got factories all over the World, Brian We've got factories in the United States factories in Austria factories in Malaysia factories in Taiwan and factories in Korea, and we've been talking about this for a while.
Speaker Change: The fact that we have that broad footprint enables us to have some level of flexibility and I guess I'll just leave it there.
Douglas Bettinger: And I guess I just leave it there. Cool. Okay, Doug.
Speaker Change: Okay, and then I have a question for you. So it sounds like NAND upgrades, you think should continue but if we look at Tsmc's capex. It looks like it does kind of flatten off as you get to the back half of the I know that you don't.
Douglas Bettinger: And then I have a question for you. So sounds like NAND upgrades you think should continue. But if we look at CSMC's CapEx, it looks like it does kind of flatten off as you get to the back half of the year. I know that you that you don't track, you know, your Transcripts provided by Transcription Outsourcing, LLC. Yeah, Tim, you're exactly right. You remember exactly what we what we intimated last call on that's still the right way to think about it. It's a little bit of a first half waited year. And you'll remember we talked last quarter about the fact that we lost some of those Chinese customers that were, as we looked into the year would have been second half waited.
Speaker Change: Our track record in that area.
Speaker Change: Yeah.
Speaker Change: Business doesn't.
Speaker Change: Track to their capex, but but I think the feeling was that your revenue bias would be a little bit lower in the back half of the year is that still the case. If you can give us some sort of puts and takes into the back half of the year that'd be great. Thanks.
Yes, Tim you're exactly right you remember exactly what we what we intimated last call and Thats still the right way to think about it it's a little bit of a first half weighted year.
Speaker Change: You'll remember we talked last quarter about the fact that we lost some of those Chinese customers that we're as we look into the year would've been second half weighted we talked about a number of approximately $700 million of business that.
Douglas Bettinger: We talked about a number of approximately $700 million of business that We had planned on being there, that is no longer there. So thinking about it a little bit first half way to just tell the right way to have it, Tim. Thank you, Doug. Thanks. Thanks, Tim.
Speaker Change: We had planned on being there that is no longer there so thinking about it a little bit first half weighted is still the right way to have it Tim.
Doug: Okay Doug.
Doug: Thanks, Tim.
Harlan Sur: The next question is from Harlan Sur with J.P. Morgan. Please go ahead. Yeah, good afternoon. Thanks for taking my question. Maybe, maybe to follow up on Tim's question. So on the reciprocal tariffs that were levied on many countries, including Malaysia and Taiwan, obviously, there's a 90 day reprieve through early July.
Speaker Change: The next question is from Harlan sur with Jpmorgan. Please go ahead.
Harlan Sur: Yes. Good afternoon. Thanks for taking my question, maybe maybe to follow up on <unk> question. So on the with typical tariffs that were levied on many countries, including Malaysia, and Taiwan. Obviously, there is a 90 day retail too early July, but let's assume that somehow this doesn't get resolved or you still have some residual tariffs.
Timothy Archer: But let's assume that somehow this doesn't get resolved, or you still have some residual tariffs, even post resolution, like, does the LAM team have enough manufacturing capability in the US to service your leading edge customers that are going to be aggressively building out plants here in the US? I know, before your manufacturing consolidation initiative, you did have manufacturing in Oregon and in California, but not sure how that footprint has changed as you brought on your Malaysia factory. Yeah, so I would go back to what, it's a good question, but go back to Doug's comment about You know, our longstanding strategy of putting our capabilities close to our customers.
Speaker Change: Post resolution.
Speaker Change: Since launching we have enough manufacturing capability in the U S to service their leading edge customers that are going to be aggressively building our plants here in the U S. I know before Youre manufacturing consolidation initiative, you did have manufacturing in Oregon, and in California, but not sure how that footprint has changed.
Speaker Change: As you brought on in Malaysia factory.
Speaker Change: Yes, So I would go back to what it's a good question that go back to is does come and develop.
Speaker Change: Our long standing strategy of putting our capabilities close to our customers and so you referred to this as as we see customers expanding aggressively in the U S. Obviously that will occur over a period of time in which we have already shown an ability to be agile within our manufacturing and supply chain.
Timothy Archer: And so, you know, you you referred to this as as we see customers expanding aggressively in the US. Obviously, that will occur over a period of time in which we've already shown an ability to to be agile within our manufacturing and supply chain. Like I mentioned, in response to Covid, where we moved things to regions where we could meet our customers needs more effectively. I think that if we continue to see more investment in the US, we still have operations, significant manufacturing capabilities and footprint in the US. And obviously, as each region grows, we reassess what local manufacturing we need to support that that capability.
Speaker Change: I mentioned in response to Covid, where we moved things to regions, where we could.
Speaker Change: Meet our customers needs more effectively.
I think that if we continue to see more investment in the U S. We still have operations significant manufacturing capabilities and footprint in the U S. Obviously is.
Speaker Change: Each region grows we reassess what local manufacturing we need to support that.
Speaker Change: That capability.
Douglas Bettinger: Harlan and Doug, I just add, you know, we can't instantaneously change things, but given enough lead time, once you know what the rules are, you can adjust certain things with a period of time. So just think about that. It might take a little bit of time depending on what shows up, but we have an ability to be flexible.
Speaker Change: Heartlands, Doug I'd, just add we can't instant taste instantaneously change things, but given enough lead time. Once you know what the rules are you can adjust certain things with a period of time. So just think about that it might take a little bit of time, depending on what shows up but we have an ability to be flexible.
Speaker Change: Great. Thank you for that.
Harlan Sur: Okay, thank you for that. And I'm good to see the very strong performance in the gross margins. I assume near term, you have spares and subsystems inventories that, you know, were there before tariffs were put in place.
Speaker Change: Good to see the very strong performance in our gross margins.
Speaker Change: As seen in near term youll have stairs and subsystems inventories.
Speaker Change: Was there before tariffs are put in place just wondering if there are some basic materials that you or your sub system partners sourced from China, which could potentially be.
Harlan Sur: Just wondering if there are some basic materials that you or your subsystem partners sourced from China, which could potentially be a cost headwind for the team, maybe beyond the June quarter, either, you know, on spare parts or subsystem side of the business that could impact product costs if the tariff headwinds remain? Harlan Sur, Ram Ganesh, Seshasayee Varadarajan, Lam Research Corp Harlan Sur, Ram Ganesh, Seshasayee Varadarajan, Lam Research Corp Okay. Thanks, Tim. Thanks, Doug. Thanks, Harlan.
Cost headwind for the team maybe beyond the June quarter either.
Speaker Change: Spare parts or a subsystem side of the business that could impact product cost of the tariff headwinds for me.
Harlan Sur: Listen Harlan I don't want to get into everything like what do you have where in which country. We've got a global supply chain footprint. We've got a global manufacturing footprint, we have an ability to respond to different things depending on what the rules are and how they change.
Harlan Sur: I guess I'd just leave it at that.
Speaker Change: Okay. Thanks, Tim Thanks, Doug.
Ron: Thanks, Ron.
Stacy Rasgon: The next question is from Stacy Rasgon with Bernstein Research. Please go ahead. Hi guys, thanks for taking my questions. First, it does sound to me like you're based on your comments that you still expect China revenues to be a mix to be down. in the second half versus the first half. So I guess, can you just confirm that that is correct? And if that is true. Does that have any implications for the sustainability of gross margins at these levels, given that China's business has tended to have higher gross margins? Like, how do we think about the gross margin sustainability into the back half of these levels?
Speaker Change: The next question is from Stacy <unk> with Bernstein Research. Please go ahead.
Stacy: Hi, guys. Thanks for taking my questions.
Ron: First.
Speaker Change: It does sound to me like you're based on your comments that you still expect China revenues to be in mix to be down.
Speaker Change: In the second half versus the first one so I guess can you just confirm that that is correct and if that is true.
Speaker Change: That have any implications for the sustainability of gross margins at these levels given the China business has tended to have higher gross margins like how do we think about the gross margin sustainability into the back half of these levels given those dynamics.
Douglas Bettinger: Yeah, Stacy, I'm not going to give details on the next quarter by quarter. I still would tell you, what we said last quarter was we expect the China concentration year over year to be down. That's still absolutely what we expect. Quarter by quarter, you know, things might bounce around a little bit. But I'm not going to give you specific details on the quarter by quarter amount. But you're right, you know, gross margin will go up and down depending on customer mix, product mix, overall revenue levels. It's a very complicated calculus when you look at all the things that move it around.
Speaker Change: Yes, actually I'm not going to give details on next quarter by quarter.
Speaker Change: Still would tell you what we said last quarter was we expect the China concentration year over year to be down that's still absolutely what we expect quarter by quarter things might bounce around a little bit.
Speaker Change: But I'm not going to give you specific details on the quarter by quarter month, but youre right.
Speaker Change: Margin will go up and down depending on.
Speaker Change: Customer mix product mix overall revenue levels.
Speaker Change: It's a very complicated calculus, when you look at all the things that move it around so there will be variability there.
Douglas Bettinger: So there will be variability there. I guess so then should I not be thinking about gross margins sustainable at these levels into the back half then or are you talking about variability around the current level or what? Yeah, there will be variability around the current level Stacy, it won't go up every quarter, it'll bounce around a little bit. Okay. I mean, should I be thinking about it going down? Like, just to be direct? Yeah, variability means it'll go up sometimes, it'll go down sometimes. Okay, okay.
Speaker Change: I guess, so then should I not be thinking about gross margin sustainable at these levels into the back half are you talking about variability around the current level or what.
Speaker Change: Yes, there'll be variability around the current level Stacy it won't go up every quarter it'll bounce around a little bit.
Speaker Change: Okay. So I mean should I be thinking about it going down.
Mike: Mike just to be direct.
Mike: Yeah variability means it will go up sometimes typically will go down sometimes.
Mike: Okay. Okay.
Stacy Rasgon: So my follow up is very quickly, I think last quarter, you said you thought services at CSBG revenues would probably be flat year over year in the calendar year. Is that still your Yeah, flat is just how I would describe it. Reliant will have some headwinds, offset by the tailwinds that the upgraded part of the business has, Stacy. That's helpful. Thank you. Yep.
Speaker Change: For my follow up just very quickly I think last quarter. You said you thought services that CPG revenues would probably be flat year over year in the calendar year or is that still your expectation.
Speaker Change: Yes, flattish is how I would describe it reliant will have some headwinds offset by the tailwind that the upgrade part of the business that Stacy.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Yep.
Krish Sankar: The next question is from Krish Sankar with T.D. Cowan and Company. Please go ahead.
Speaker Change: The next question is from Krish Shankar with TD Cowen <unk> Company. Please go ahead.
Douglas Bettinger: I have two questions. One is just to double check on this overseas manufacturing. Doug, can you meet all of your non-U.S. customer demand from your non-U.S. manufacturing sites like Malaysia and Taiwan? I'm not gonna get into the exact details, right? We don't build every single tool at every single factory. But with enough lead time, we can adjust depending on what is where. And like I said earlier on the call, depending on, you know, what the rules end up being, we can move things around as necessary. Not instantaneously, though. Got it, got it.
Speaker Change: Two questions one is just to double.
Double check on this overseas manufacturing Doug can you meet all of your non U S customer demand from your non U S manufacturing cyclic militia in Taiwan.
Speaker Change: Yes Im.
Speaker Change: Sorry, Chris I am not going to get into the exact details right. We don't build every single tool at every single factory.
Speaker Change: But with enough lead time, we can adjust depending on what is where and like I said earlier on the call depending on what the rules end up being we can move things around as necessary.
Speaker Change: Not instantaneously, though.
Speaker Change: Got it got it and then a question on China do I understand many of your Chinese customers are probably not.
Timothy Archer: And then a question on China too. I understand many of your Chinese customers are probably not, don't have much long tenure, but I'm curious, what is the visibility into China? Because when you look at the last three years, it seemed like China surprised to the upside for WFE and demand. Do you think a similar scenario could play out this year or the calculus different this time around? I don't know that it's really all that different. Every customer, Chris, whether they're new or they've been around for decades, communicates plans on what they intend to do, where they intend to go.
Speaker Change: Don't have much long tenure, but I'm curious what is the visibility into China, because when you look at the last three years, it seems like China surprised to the upside for <unk> in demand.
Speaker Change: Do you think are some listen audio could play out this year the calculus different this time around.
Speaker Change: Yeah, I don't know that it's really all that different every customer.
Speaker Change: Chris whether they're new or they've been around for decades communicated plans on what they intend to do where they intend to go. They all have roadmap say I'll tell you what they want to do it is no different.
Timothy Archer: They all have roadmaps. They all tell you what they want to do. It's no different in a region like China or Korea or Taiwan, frankly. Got it, got it, thanks Douglas. Okay, Krish.
Speaker Change: In a region like China, or Korea, or Taiwan frankly.
Deb: Got it got it thanks Deb.
Chris: Okay Chris.
Srinivas Pajjuri: The next question is from Srinivas Pajjuri with Raymond James. Please go ahead. Thank you. Question on the Foundry logic. I know you get a lot of questions on NAND. You know, it's up 60% sequentially, and I think you're guiding for growth again. You know, first, you know, we all know that advanced logic spending is coming back here. But if you could maybe parse it out to what extent this is just the spending coming back You know, you talked about GAA being a driver and backside power being a driver. And also you talked about share gains in the past.
Speaker Change: The next question is from Sri for jewelry with Raymond James. Please go ahead.
Speaker Change: Thank you a.
Speaker Change: Question on the foundry logic I know you've got a lot of questions on <unk>.
Speaker Change: It's up 60% sequentially and I think youre guiding for growth again.
Speaker Change: First.
Speaker Change: We all know that advanced logic spending is coming back here, but if you could maybe parse it out to what extent is it just the spending coming back versus <unk>.
You've talked about GAA being a driver and backside power being a driver and also you talked about share gains in the past if you could kind of help us understand what's driving that sequential strength and.
Timothy Archer: If you could kind of help us understand what's driving that sequential strength and, you know, continuous. Yeah, no, we obviously are like talking about the Foundry logic story because you just highlighted a couple of really big drivers for us. We're talking about as billion-dollar-plus technology inflections. You left out a couple, though. So, of course, we talked about gate all-around nodes and how, you know, we're really putting a lot of new tools in to support that transition. Backside power obviously plays well for an etch and deposition company where you're looking at more metallization interconnect layers going on to the backside and those being thicker and generally requiring more tooling.
Speaker Change: Strength into the June quarter.
Speaker Change: Yes, we are.
Speaker Change: Obviously, our like talking about the foundry logic story, because you just highlighted a couple of really big drivers for US we're talking about it as a $1 billion plus technology inflections you left out a couple though so of course, we talked about gate all around nodes and how we're really putting a lot of new tools into support that transition backstop.
Speaker Change: Backside power, obviously plays well for an etch and deposition company, where you're looking at more metallization interconnect layers going onto the back side and those being thicker and generally requiring more tooling.
Timothy Archer: What you left out was the advanced packaging and the important role that it's playing and the role that LAM has in really a very significant leadership position in steps like TSV etch, copper plating, many of the dielectric deposition films that are required for advanced packaging. And that's an area where from both a served market as percent of total WFE spending, you know, we've kind of reset the mark for us relative to Foundry logic. And so, advanced packaging is big. And then the one that's still small but coming is progress we're making on dry UV resist processing, which, you know, when you look out and you think about continued shrinking on the Foundry logic roadmap and the challenges with lithography, we think it has a big role to play.
Speaker Change: Whats your left out was the <unk>.
Speaker Change: Advanced packaging and the important role that it's playing in the role that Lam has.
Speaker Change: Really a very significant leadership position in.
Speaker Change: Steps like TSV etch copper plating, many of the dielectric deposition films that are required for advanced packaging and that's an area where from both a served market as a percent of total <unk> spending we've kind of reset the mark for us relative to foundry logic and advanced packaging is big.
Speaker Change: And then the one that's still small but coming is the progress we're making on dry <unk> resists processing, which when you look out and you think about continued shrinking on the foundry logic roadmap.
Speaker Change: The challenges with lithography, we think it has a big role to play and we are making progress there bolt on.
Timothy Archer: And we are making progress there both on the DRAM side, which we previously announced at our investor day, but also making progress with advanced customers on the Foundry logic side as So it's just a lot of technology opportunity for a company like Lam.
Speaker Change: The DRAM side, which we previously announced in our Investor day, but also making progress with advanced customers on the foundry logic side as well.
Speaker Change: So it's.
Just a lot of technical a lot of technology opportunity for companies like Lam.
Timothy Archer: Yeah, that's helpful. Thanks, Tim. And then at a high level, Tim, I know you guide Mid-single-digit WFE growth, and you're kind of maintaining that. But if I look at your first quarter results and Transcripts provided by Transcription Outsourcing, LLC. Yeah, I don't think we're ready to quantify that number specifically, but we have talked about outperformance of WFE overall. Obviously, the mix and where the spending is occurring, how much of that spending is on those advanced technologies where Lam's served market has stepped up and we've got new tools going in, that comes into play as well.
Tim Great: Yeah. That's helpful. Thanks, Tim and then.
Tim Great: At a high level, Tim I know you guided for mid single digit <unk> growth and youre kind of maintaining that but if I look at your first quarter in Brazil, and also your second quarter outlook.
Speaker Change: North of 20%.
Is this the level of outperformance that you expect for I guess for the rest of the year I mean, how should we think about it if the Wi Fi growth, 5%, how should we kind of think about your level of outperformance expectation going forward.
Speaker Change: Yes, I don't think we're ready to quantify that that number specifically, but we have talked about outperformance of Wi Fi overall, obviously, the mix and where the spending is occurring how much of that spending is on those advanced technologies were lambs served market has stepped up and we've got new tools going in.
Speaker Change: But that comes into play as well, but overall.
Timothy Archer: But overall, I think I finished my prepared remarks with a comment about being highly confident in our ability to outgrow, and I think that's where we'll probably leave it. Thanks, Rene.
Speaker Change: I finished my prepared remarks of the.
Speaker Change: Comment about being highly confident in our ability to outgrow and I think that's that's where we'll probably leave it.
Jamie: Thanks, Jamie.
Jamie: Thanks Barry.
Atif Malik: The next question is from Atif Malik with Citi. Please go ahead. Hi, thank you for taking my questions.
Speaker Change: The next question is from <unk> Malik with Citi. Please go ahead.
Speaker Change: Hi, Thank you for taking my questions and the first question is on <unk> I understand you guys had in maintaining the 100 billion range.
Atif Malik: The first question is on WFE. I understand you guys are maintaining the $100 billion range. It's still early and there's no meaningful change in customer plans.
Speaker Change: It's still early and there is no meaningful change in customer plans now let.
Timothy Archer: One of your North American customers is going through some major restructuring and we get asked from investors if you guys have baked in kind of like a net neutral spending scenario for the larger customers in an event that customer tends to abandon the boundary plans or change its direction. Atif, I guess what I would say, and you know, I won't talk about any one specific customer. I mean, generally speaking, you guys hear about something, we've known about it well in advance of whatever you're hearing, right? Because they got to tell us what they're doing. If we're going to have people there, we're going to have spare parts there to do installation and whatnot.
Speaker Change: One of your North American customer is going through some major restructuring and we get asked from investors.
Speaker Change: If you guys have baked in.
Speaker Change: Kind of like a net neutral spending scenario for the logic customers in an event.
Speaker Change: That customer tends to abandon the foundry plans or change its direction.
Speaker Change: Octave I guess, what I would say and I won't talk about any one specific customer I mean generally speaking can you guys hear about something we've known about it well in advance of whatever youre hearing right because they've got to tell us what theyre doing if we were going to have people. There we're going to have spare parts or to do installation and whatnot. So yes.
Douglas Bettinger: So yet, to the best of our ability, we've contemplated everything we've seen in the totality of the market.
Speaker Change: To the best of our ability we've contemplated everything we've seen in the totality of the market.
Douglas Bettinger: Doug, I have a follow-up for you. In your prepared remarks, you mentioned that your outlook for June quarter, you do not see any pull-ins from future quarter. I'm just curious, is that comment based on the fact that the lead times are super long for your tools or your customer pipeline has not changed much from what you were seeing 90 days ago? If you could expand on what is that comment based on? Atif, it's based on plans that we've known these customers have had in place well in advance of even 90 days ago, right? And if I think back to late last year, the outlook that we had for the current quarter that we just guided has not changed.
Speaker Change: Totally understand Doug I have a follow up for you in your prepared remarks, you mentioned that your outlook for June quarter.
Speaker Change: You do not see any pull ins from future quarter. So I'm just curious.
Speaker Change: Is that comment based on the fact that the lead time, the Super long for your tools or.
Speaker Change: Customer.
Speaker Change: Pipeline.
Speaker Change: It has not changed much from what you were seeing 90 days ago. So you can expand on.
And what is that comment based on.
Speaker Change: But if it's based on plans that we've known this customers have had in place well in advance of even 90 days ago, Ryan If I think back to late last year.
Speaker Change: Outlook that we had for the current quarter that we just guided has not changed.
Douglas Bettinger: Frankly, Atif, the whole year hasn't changed.
Speaker Change: Frankly.
Whole year Hasnt changed no I don't want you to communicate I don't want to communicate hey could something change of course anything can change, but we're not seeing anything change in the environment.
Douglas Bettinger: Now, I don't want you to communicate, or I don't want to communicate, hey, could something change? Of course, anything can change, but we're not seeing anything change in the environment. We're staying very diligent on, you know, contemplating, okay, tariffs are out there, might that have a macro impact? Might the economy get softer? Of course, we're aware of those things. Could that negatively impact things at some point? It could. We're not seeing anything now.
Speaker Change: We're staying very diligent on contemplating okay tariffs are out there and might that have a macro impact might be economy get softer of course, we're aware of those things could that negatively impact things at some point it could we're not seeing anything else. So I wanted to be very specific about saying that to you guys. So you.
Atif Malik: So I wanted to be very specific about saying that to you guys, so you understand, nothing's changing that we can see. Thank you. Yep. Thanks, Atif.
Speaker Change: Understand nothing's changing that we can see.
Speaker Change: Thank you.
Speaker Change: Yep. Thanks.
Vivek Arya: The next question is from Vivek Arya with Bank of America. Please go ahead. Thanks for taking my question. For the first one, if all China restrictions are already captured in your March results and June guide, why can't your second half sales be at or above first half levels? I guess my real question is, what non-restricted customer or end market could drop in the second half versus Vivek, it's just the brutality of the market, right? Nothing grows every single quarter, and when we look at everything that we see going on relative to customers' plans and timing of things, it's a little bit first half-weighted.
Speaker Change: The next question is from Vivek Arya with Bank of America. Please go ahead.
Vivek Arya: Thanks for taking my question. So the first one if all China restrictions are already captured in your March designs in June guide like onto your second half say that the act on above first half levels like I guess my real question is what non restricted customer or end market could drop in the second half versus the.
Speaker Change: First half.
Speaker Change: The consistent hotel in the market right nothing grows every single quarter and when we look at everything that we see going on relative to customers' plans and timing of things, it's a little bit first half weighted it's not one customer or even one or two customers. It's just.
Timothy Archer: It's not one customer or even one or two customers. It's just how the plans of our customers are laying out in total. Yeah. We've talked about it in the past. I mean, some of these projects are quite lumpy, and there's periods of large shipments, and then we spend a lot of time installing, and the customer ramps those tools, and then the next phase of the expansion comes in, and I think that's especially true when you talk about upgrades that are occurring in some of these fabs, where they may not all be occurring over a very short period of time.
Speaker Change: All of the plans of our customers are laying out in total yes, we've talked about it in the past I mean, some of these projects are quite lumpy and there's periods of of <unk>.
Speaker Change: Large shipments and then we spend a lot of time installing in the customer ramps those tools and then the next phase of the expansion comes in and I think that's especially true when you talk about upgrades.
Speaker Change: They are occurring in some of these fabs where.
May not all be occurring over a very short period of time there'll be spread out and they might be lumpy in particular quarters.
Timothy Archer: They'll be spread out, and they might be lumpy in particular quarters. I guess what I'm trying to ask is, is this second half, right, is that impacted in any way from China restrictions? Because, I mean, you should not be shipping to any restricted customers already. So what they do in the second half does not matter. And is it just conservatism about the non-restricted customers or lumpiness in the backup? I'm just trying Vivek, you're overly focused on China. What we did describe is, hey, if you go back to early December, there were some customers we were shipping to last year that all of a sudden became restricted.
Speaker Change: I guess, what I'm trying to ask is the second half.
Speaker Change: Mike is that impacted in any way from China restrictions, because I mean, you should not be shipping to any of the affected customers already so what they do in the second half should not matter.
Speaker Change: And is it just conservatism about the non detected customers aren't lumpiness in the back half I'm, just trying to understand how second half vivek could look.
Speaker Change: Vivek youre overly focused on China.
Speaker Change: What we did describe is hey, if you go back to early December there were some customers. We were shipping through last year that all of a sudden became restricted the plans those customers had were second half weighted so that kind of went away from what were.
Timothy Archer: The plans those customers had were second half weighted. So that kind of went away from what we're looking at. So if not for that, right, we were describing a second half that's different in profile than what we see right now. I don't know if we're confusing you or if I'm confusing you with that Vivek. No, not at all. I just wanted to clarify.
Speaker Change: Looking at so if not for that right. We were describing a second half that's different in profile than than what we see right now.
Speaker Change: I don't know if were confusing you or if I'm confusing you with that Vivek.
Speaker Change: No not at all I just wanted to clarify for the second one on the gross margin upside.
Douglas Bettinger: For the second one, on the gross margin of How much of benefit, Doug, could you get from just the CSBG being down in terms of mix, so kind of that being a headwind, you know, versus the benefit from, you know, perhaps shipping more from Malaysia? So is there a point at which CSBG starts to grow and that becomes a headwind to growth margins? So I guess back to the, can growth margins sort of sustain at these levels? What are the positives and negatives? And then it's 50% line of sight for you. Listen, CSBG moving around really doesn't do a whole lot relative to the variability and gross margin right now.
Speaker Change: A material benefit.
Speaker Change: Doug could you get from the <unk> being down in terms of mix, so kind of that being a headwind versus the benefit from perhaps shipping more from Malaysia. So is there a point at which <unk> starts to grow and that becomes a headwind to gross margin. So it gets back to the gross margin sort of sustain at these levels.
Speaker Change: Positive or negative and then it's 50% line of sight for you right now.
Speaker Change: But <unk> move it around really doesn't do a whole lot relative to the variability in gross margin right. Now is that that's not kind of when I go through the reconciliation anything I'm seeing frankly, here's an interesting observation I had as I was prepping for earnings might be interesting for you guys to think about too.
Douglas Bettinger: That's not kind of when I go through the reconciliation, anything I'm seeing.
Douglas Bettinger: Frankly, here's an interesting observation I had as I was prepping for earnings that might be interesting for you guys to think about too. If you go back to late 2022, and that was kind of the last time we're at these revenue levels. Gross margin was 45 to 46% and now we're 49%. At that period of time, the overall geographic mix was fairly similar to what we're seeing today. And so if you think about it, over that timeframe, what's changed? Well, what's changed is our close-to-customer strategy, right? That's uplifted gross margin. Frankly, if you normalize for everything, I don't know, 200 basis points, maybe even a little bit more.
Speaker Change: If you go back to late 2022, and that was kind of the last time, we're at these revenue levels.
Speaker Change: Gross margin was $45 to 46% and our 48, 49%.
Speaker Change: At that period of time, the overall geographic mix was fairly similar to what we're seeing today.
Speaker Change: And so if you think about it over that timeframe, what's changed what's changed is our close to customer.
Speaker Change: <unk> strategy right.
Speaker Change: Uplift the gross margin frankly, if you normalize for everything I don't know 200 basis points, maybe even a little bit more.
Douglas Bettinger: It's come from what we've done with the company, frankly. So I think Tim and I feel really good about that. That's the strategy we executed. It's benefiting customers too, because we're closer, we can turn things more quickly. And frankly, we can do it more affordably. So that's that's the big reason over the last several years that gross margin has performed the way it has. That's the most important thing to be thinking about from my point of view.
Speaker Change: It's come from what we've done with the company frankly.
Tim Great: So I think Tim and I feel really good about that that's the strategy, we executed its benefiting customers too because we're closer we can turn things more quickly and frankly, we can do it more affordably so.
Tim Great: That's the big reason over the last several years at gross margin has performed the way. It has that's the most important thing to be thinking about from my point of view.
Tim Great: Thank you.
Blayne Curtis: The next question is from Blayne Curtis with Jefferies. Please go ahead. Hey guys, thanks for taking my question. I actually want to ask you, I know, I probably already know the answer. You said things hadn't really changed since the tariff. I'm just kind of curious your conversation with Costco. There's some sense people think hey, they'll pull in ahead of tariffs. The other sense is demand destruction and maybe they'll rethink their capacity for the second half. So can we walk through what your conversations have been? I know you said, overall, nothing changed, but I'm just kind of curious how customers I'll take a shot at it.
Tim Great: Yes. Thank you.
Speaker Change: The next question is from Blayne Curtis with Jefferies. Please go ahead.
Blayne Curtis: Hey, guys. Thanks for taking my question actually wanted to ask I know I, probably already know the answer you said things haven't really changed since the tariffs I'm just kind of curious your conversations with customers. I mean, there is some sense people think hey, they'll pull in ahead of tariffs the other senses demand disruption and maybe it will rethink their capacity for the second half. So can you maybe walk through what your conversations about I know you said.
Speaker Change: Overall, nothing changed but I'm just kind of curious how customers are thinking about this.
Speaker Change: Sure I'll take a shot at it.
Timothy Archer: Obviously, as I mentioned in my my comments, we've been having a lot of conversation with customers to check in for changes. I think over the timeframe, though, in which we've been operating, which is essentially kind of two, two months, less than two months with this discussion around tariffs, customers really are not haven't haven't thought about These are all really what they would be looking for, for the demand changes. Those are going to occur over a longer period of time. These projects are multi-year investments. They've thought through them. In many cases, they're technology investments to ensure that they have the right products.
Speaker Change: Honestly as I mentioned in my comments, we've been having a lot of conversations with customers two decades for changes.
Speaker Change: Over the timeframe in which we've been operating which is essentially kind of two two months in less than two months with this discussion around tariffs customers really are not havent havent thought about.
Speaker Change: Really what they would be looking for for the demand changes those are going to occur over a longer period of time. These projects are our multi year investments they sort through them.
Speaker Change: In many cases their technology investments to ensure that they have the right products.
Timothy Archer: We spent a lot of time in our library yesterday talking about the debate around NAND bits and the need. And I think we were trying to make the case at that point of independent of end demand, you need a higher quality, more capable bit to compete for the types of applications that are needed in AI. I think you say the same thing on Foundry Logic. You see the same thing for the investments being made in advanced packaging. And so maybe there's a little bit of a disconnect between a true end demand discussion and a technology positioning.
Speaker Change: A lot of time or.
Speaker Change: <unk> Investor day talking about.
The debate around NAND bits and the need and I think we were trying to make the case at that point of.
Independent of end demand.
Speaker Change: You need a higher quality more capable bit to compete for the types of applications that are needed and AI I think you'd say the same thing on foundry logic you'd see the same thing.
Speaker Change: For the investments being made in advanced packaging and so maybe there's a little bit of a disconnect between our true end demand discussion.
Speaker Change: Technology positioning and a fair bit of the momentum that we're talking about for our business is really coming from engaging customers at the leading edge, where I think strategically they feel they don't have as much of a choice but to continue to invest in those areas to make sure. There is competitive as it can be and that's a broad statement. It may vary customer by customer.
Timothy Archer: And a fair bit of the momentum that we're talking about for our business is really coming from engaging customers at the leading edge, where I think strategically they feel they don't have as much of a choice, but to continue to invest in those areas to make sure they're as competitive as they can be. And that's a broad statement. It may vary customer by customer. But it's how we are engaged with our customers to make sure that however this plays out, they are competitive in their markets. And LAM is positioned with the tools that we've been investing for years to place in those labs to help them.
Speaker Change: But it is how we are engaged with our customers to make sure that however, this plays out they are they are competitive in their markets and Lam is.
Speaker Change: <unk> the tools that we've been investing for years.
Speaker Change: Based on those fabs to help them.
Blayne Curtis: Thanks for that.
Speaker Change: Thanks for that and then from if I can I just wanted to ask Doug in terms of the guidance on the gross margin is there any impact from tariffs, it's a little bit confusing. There is some minimum tariffs I know we have the 90 day appropriate, but just kind of curious if you've factored in it.
Douglas Bettinger: And then for my second, I just wanted to ask Doug, in terms of the guidance on the gross margin, is there any impact from tariffs? It's a little bit confusing. There's a minimum tariff. I know we have the 90 day reprieve, but I'm just kind of curious if you could talk Yeah, Blayne, there absolutely is an impact, but it's contemplating, based on everything we know and everything we understand, it's contemplated in that guidance of 40, 49 and a half percent. But I don't want to communicate there's not an impact. There is absolutely an impact. Okay, but is there any way to quantify it or?
Doug I'd: Yes, Blayne, there absolutely has an impact but it's contemplated based.
Doug I'd: Based on everything we know and then everything we understand it's contemplated in the guidance.
Doug I'd: Guidance of 40 to 49, 5%, but I don't want to communicate there is not an impact there is absolutely an impact.
Speaker Change: Okay, but is there any way to quantify it or you don't want to go there.
Douglas Bettinger: I'm not going to go there. Okay. Appreciate it. Thank you. Yep, you're welcome.
Doug I'd: I'm not going to go there.
Speaker Change: Okay. Appreciate it thank you.
Doug I'd: Youre welcome.
Mehdi Hosseini: The next question is from Mehdi Hosseini with SIG, please go ahead. Yes, thanks for taking my question. Two follow-ups.
Speaker Change: The next question is from Mehdi Hosseini with <unk>. Please go ahead.
Mehdi Hosseini: Yes, thanks for taking my question.
Mehdi Hosseini: Is there any way we could think about WFP in terms of a strategic investment versus technology upgrade, which could also be a strategic versus maintenance, and then separately highlighting wafer capacity addition? And I'm asking you this question because if you think about all the questions that have been asked, put to you over the past half an hour, it either has to do with China or sensitivity of the 100 billion WFP to macro picture. And I'm trying to understand how we could better think about a downside risk, which could be mostly related to wafer capacity add.
Mehdi Hosseini: Two follow ups is there any way we could think about double your fee in terms of the strategic investment versus technology upgrades, which could also be a strategic.
Mehdi Hosseini: <unk> made tenants and then separately highlighting wafer capacity addition, and I'm asking this question because if you think about all the questions that have been as put to you over the past half an hour.
Mehdi Hosseini: Either has to do with China or sensitivity of the 100 billion <unk> two macro picture and I'm trying to understand how we could better think about the downside risk, which could be mostly related to wafer capacity add any color would be great and I have a follow up.
Timothy Archer: Any color would be great.
Timothy Archer: And I have a follow-up. Mr. Mehdi, I think, you know, I acknowledge what you're saying, most of the questions that come in this area. But, you know, if you look at what where I focused most of my prepared remarks, it's on LAM's long term outperformance, and even outperformance in this year. And that's simply because what really matters, you know, from from our company perspective, and both the short term and long term is product alignment to custom to the key technology roadmaps of our customers in the industry, how we enable that how we get those products out.
Speaker Change: There are many I think.
Speaker Change: I acknowledged what youre, saying, but we think most of the questions have come in this area but.
Speaker Change: If you look at what where I focused most of my prepared remarks, it's on lambs.
Speaker Change: Long term outperformance and even outperformance in this year and thats simply because what really matters.
Speaker Change: From from our company perspective in both the short term and long term as product alignment to two key technology roadmaps of our customers in the industry, how we enable that how we get those products out.
Timothy Archer: You know, we're only two months removed from our investor day, where we described an opportunity to significantly outperform the industry in terms of serve market expansion is deposition and edge intensity grows, and also to gain share, because we have a unique opportunity to increase our serve market faster in some of the key markets like Foundry Logic. And so, you know, when we look at this year, and I think both Doug and I said, we're pleased with the execution of the company, I think a lot of it, of course, is around the financial performance, but even more so, it's around the seeds were planting for future outperformance in the latest R&D fabs, the latest strategic investments.
Speaker Change: We're only two months removed from our Investor Day, we described an opportunity significantly outperformed the industry in terms of.
Speaker Change: Served market expansion is deposition and etch intensity grows and also to gain share because we have a unique opportunity to increase our served market faster in some of the key markets like foundry logic and so when we look at this year and I think both Doug and I said, we're pleased with the execution of the company I think a lot of.
Speaker Change: It of course is around the financial performance, but even more so it's around the seeds, we're planting for future outperformance.
Speaker Change: In the latest R&D, the latest strategic investments and I think that is.
Timothy Archer: And I think that is, that's ultimately what is more important to LAM's future, regardless of where WFP happens to be in any given year.
Speaker Change: That's ultimately what is more important to lambs future, regardless of where WP happens to be in any given year. So.
Timothy Archer: And so I like your question. And it's like, it's what we tried to address with our with our scripted remarks.
Speaker Change: I'll answer your question, it's like it's what we've tried to address with our with our scripted remarks.
Mehdi Hosseini: Thank you.
Speaker Change: Okay. Thank you and the follow up for Doug.
Douglas Bettinger: And a follow up for Doug. If I just take the midpoint of the June quarter guide, it seems to me that the operating drop through margin of like almost 90% is reflecting all the investment of the past couple of years. And now there is limited increase in limited incremental increase in operating margin. And this is how you're going to scale incremental increase in revenue. Is that the right way to think about sustainability of the margin? I guess what I'd point out is that we're growing R&D. We're growing R&D because we see these amazingly Unique opportunities for us to continue to outperform, right?
Speaker Change: If I just take the midpoint of the June quarter Guide it seems to me that.
Speaker Change: Operating.
Speaker Change: Drop through margin of like almost 90% is reflecting all the investment over the past couple of years and now there is limited.
Speaker Change: And limited incremental increase in operating margin.
Speaker Change: And this is how you are going to scale incremental increasing.
Speaker Change: <unk> revenue is that the right way to think about sustainability of the margin.
Speaker Change: I guess, maybe what I'd point out is.
Speaker Change: And we're growing R&D or grown R&D, because we see these amazingly.
Speaker Change: <unk>.
Speaker Change: Unique opportunities for us to continue to outperform the intensity of etch and deposition is growing and so we're putting our foot on the gas a little bit relative to grow on R&D, because we see an opportunity to continue to.
Douglas Bettinger: The intensity of etch and deposition is growing. And so we're putting our foot on the gas a little bit relative to growing R&D because we see an opportunity to continue to expand the addressable market as well as gain share. Absolutely not apologizing for this, because as I pointed out, this is an all time record level of operating margin for this company. I think Kevin, I feel extraordinarily good about what we're delivering right now. So and we want to keep doing that. And so we're investing to make that happen. Yeah, and that captures the incremental drop through that you're capturing.
Speaker Change: Expand the addressable market as well as gain share.
Speaker Change: Absolutely not apologizing for this because as I pointed out. This is an all time record level of operating margin for this company.
Speaker Change: Right I think Tim and I feel extraordinarily good about what we're delivering right now so and we wanted to keep doing that and so we're investing to make that happen.
Speaker Change: Yes that captures the incremental drop through that you're capturing here.
Douglas Bettinger: It's part of it, yes.
Speaker Change: It's part of it yes, yes, okay. Thank you.
Douglas Bettinger: Okay, thank you.
Joe Moore: Thanks, Mehdi.
Speaker Change: Thanks Mani.
Douglas Bettinger: The next question is from Joe Moore with Morgan Stanley, please go ahead. Yeah, thank you. I wonder if I could ask a little bit more on CSBG kind of flat for the year. You said Reliant is a headwind. Can you just give us a sense for the rank order of the sub segments within CSBG? How big is Reliant now? And is there also a headwind on the service and spares from some of the restrictions in China? Yeah, of course, there's those customers that all of a sudden became restricted, we can no longer provide service and spare.
Speaker Change: The next question is from Joe Moore with Morgan Stanley. Please go ahead.
Joe Moore: Yes. Thank you.
Speaker Change: If I could.
Speaker Change: Ask a little bit more on <unk> kind of flat for the year, you said reliant as a headwind can you just give us a sense for the rank order of the sub segments within C. SPG, how big is reliant now and is there also a headwind on the service and spares from some of the restrictions in China.
Speaker Change: Yes of course, there is those customers that all of a sudden became restricted we can no longer provide service and spares.
Douglas Bettinger: So that factors into this too. But I mean, what you have going on is we described the point of view that China's down as a percent of total year over year. So that's, that's a reliant statement, right? A lot of the tools going in China are reliant. And then we have this amazing upgrade business right now that's showing up, especially in NAND, right? Not just NAND, but it's quite strong in NAND. And so when you think about those two things kind of offsetting each other, overall utilization year over year is stronger. So that's beneficial for for spares and service.
Speaker Change: That factors into this too.
But I mean, what you have going on as we described the point of view that China is down as a percent of total year over year. So that's that's the reliance statement right a lot of the tools going in China Airlines.
Speaker Change: And then we have this amazing upgrade business right now thats showing up.
Speaker Change: Especially in.
Speaker Change: In NAND right, not just NAND, but it's quite strong in NAND and so when you think about those two things kind of offsetting each other.
Speaker Change: Overall utilization year over year stronger so that's beneficial for per spares and service. There is a lot of moving pieces in here.
Douglas Bettinger: There's a lot of moving pieces in here. Spares continues to be the biggest individual component of CSBG. And then, you know, upgrades are growing a bunch this year and reliance is down.
Speaker Change: Spares continues to be the biggest individual component of <unk> and then.
Upgrades are grown a bunch this year in reliance is down yes.
Speaker Change: The only thing the only thing I would add is again.
Speaker Change: Just like for many years, we were viewed as strong in NAND and we've certainly made investments to broaden our portfolio quite successfully in foundry logic and DRAM in the services side as well we've talked a lot about reliant we've talked a lot about upgrades, but we're starting to hear us talk a lot more about intelligence.
Speaker Change: <unk> equipment.
Speaker Change: Equipment intelligence co bots, the types of capabilities that our customers are going to need, especially as they think about.
Douglas Bettinger: to need, especially as they think about expanding their global manufacturing presence, where there might not be as many people who are skilled at at bringing up and ramping a advanced manufacturing fab. And so we think things like cobots, equipment intelligence, the use of AI to make sure our engineers are equipped to troubleshoot and repair those tools faster. Those are things that are going to allow us to then perhaps grow our services business to be even a larger portion of that total CSBG. And that's a that's a real focus for us. So it's still all new tools.
Speaker Change: Expanding their global manufacturing presence where.
Speaker Change: Where there might not be as many people who are skilled at bringing up and ramping.
Speaker Change: Advanced manufacturing fab and so we think things like cobalt equipment intelligence the use of AI to make sure. Our engineers are equipped to troubleshoot repair those tools faster those are things that are going to allow us to then perhaps grow our services business to be even a larger portion of that total CSD and thats a real focus for us.
Speaker Change: <unk>.
Speaker Change: That's helpful. Thank you and within reliant.
Speaker Change: That used to be kind of a refurbished tools business and then for a while everything was so tight and we're in.
Speaker Change: No refurbished so as all new tools like can you just is there anything changing in that business is that how much of that is kind of.
Speaker Change: New tools and are you seeing the refurbishment kind of come back into the picture there in reliant.
Joe Moore: Joe It's still all new tools, there's really not any refurbishment in the industry today and not really.
Timothy Archer: There's really not any refurbishment in the industry today. Not really. That's right. And in fact, I mean, this is the, you know, we refer a lot more to specialty technologies as well, which, you know, sometimes is the use of these tools for really new applications in those more mature fabs.
Speaker Change: All right.
Speaker Change: That's helpful.
Speaker Change: And in fact I mean this is the we refer a lot more to specialty technologies as well, which sometimes is the use of these tools for really new applications in those more mature fabs.
Timothy Archer: Okay, thank you.
Speaker Change: Okay. Thank you.
Timothy Archer: Thanks, y'all.
Joe Moore: Thanks, Joe.
Tom O'malley: The next question is from Tom O'Malley with Barclays, please go ahead. Hey guys, thanks for taking my question. I had a broader one. So I think you guys said at the end, I'll say that if you The upgrades of existing equipment, you thought it was about a $40 billion WFE opportunity. Obviously, if you look at the NAND industry, like the backdrop here is that you may have some impacts. to consumer spend, etc. And when you look at like that handoff, how long do you think that you can continue to grow on the man front before you start to get some some greenfield kick in or some new equipment kick in versus the replacements?
Speaker Change: The next question is from Tom O'malley with Barclays. Please go ahead.
Joe Moore: Yes.
Tom O'malley: Hey, guys. Thanks for taking my question on a broader one so I think you guys said at the analyst day that if you look at.
Tom O'malley: The upgrades of existing equipment and you thought it was about a $40 billion WP opportunity.
Tom O'malley: Obviously, if you look at the NAND industry like the backdrop here is that you may have some impacts to consumer sand et cetera, and when you look at like that Handoffs. How long do you think that you can continue to grow on the NAND front before you start to get some some greenfield kitchen, where some new equipment kick in versus the.
Timothy Archer: Any context around that? Oh, boy, that's a little bit of a difficult question. I thought you were going in the direction of how long will it take us to get through that $40 billion of upgrades, which at the analyst day, we gave a range, I think we said it could be anywhere from a few years to more than that. But, you know, I think, again, some of these things are in market dependent. And we've talked in the past about the importance of getting the NAND technology up to a point where it can play a significant role in the AI data center and some of the enterprise SSD.
Tom O'malley: Replacement any context around that would be super helpful.
Tom O'malley: Oh boy, that's a little bit of a difficult question I thought you were going in the direction of how long will it take us to get through that $40 billion of upgrades.
Tom O'malley: Which at the Analyst day, we network.
Tom O'malley: We gave a range I think we said it could be anywhere from a few years to more than that but.
Tom O'malley: I think again some of these things are and market dependent and we've talked in the past about the importance of getting the NAND technology up to a point, where it can play a significant role in the AI data center and some of the enterprise SSD. That's one of the areas, where there is more and more demand it seems.
Timothy Archer: That's one of the areas where there is more demand, it seems, and more investment. So, you know, I think that it's a little too early for us to say, like, say, we're two months beyond that view of $40 billion. And we think it still plays out over the next three, four, five years over that period of time. And I think that, you know, it's, we're moving. I think the most important for LAM is it's not just upgrades, but as we've talked, it's also a lot of the new tools that are needed to enable those higher layer counts.
Tom O'malley: More investment.
Tom O'malley: So I.
Tom O'malley: I think it's a little too early for us to say like I say, we're two months beyond that view of $40 $40 billion and we think it still plays out over.
Tom O'malley: The next 345 years over that period of time.
Tom O'malley: And I think that.
Tom O'malley: We're moving I think the most important for Lam is it's not just upgrades, but as we've talked it's also a lot of the new tools that are needed to enable those higher layer counts and that's really I think means we see both upgrades, but also really Sam expansion and share gain opportunities as a result of those technology investments.
Timothy Archer: And that's really, I think, means we see both upgrades, but also really SAM expansion and share gain opportunities as a result of those technologies.
Timothy Archer: Maybe just a tangent off of that question is... Maybe as demand declines, you'll see increases to capacity coming offline, so more underutilization. In your conversations with customers, is that a linear relationship with how much capacity is taken offline and the desire to do more upgrades, aka, like, if you see more underutilization from your customers, do you think that they will be more inclined to do more upgrades, or is the amount of upgrades that you're expecting kind of not going to change depending on Well, we've said that in the past, and I think in most instances, it has been true.
Tom O'malley: Maybe just a tangent off of that question is maybe as demand declines youll see increases to capacity coming offline. So more underutilization in your conversations with customers is that a linear relationship with how much capacity is taken offline and the desire to do more.
Tom O'malley: Upgrades.
Tom O'malley: If you see more under utilization from your customers do you think that they will be more inclined to do more upgrades or is this the amount of inquiries that you are expecting kind of.
Tom O'malley: I'm not going to change dependent on utilization.
Tom O'malley: Well, we've said that in the past and I think in most.
Tom O'malley: Instances it has been true obviously that.
Timothy Archer: Obviously, when customers have the tools offline, that is the most ideal time before they start those back up to perform the upgrades. Obviously, the last NAND down cycle was so severe that I think we saw the tools stay offline longer than we might have expected. But I do believe that generally those things kind of act kind of counter cyclical to each other. When you see utilization fall, the next up cycle will usually come up at a different technology node, which means upgrades will have occurred, and LAM will have captured some of that revenue. Thanks, Tom.
Tom O'malley: And that when customers have the tools offline that has the most ideal time before they start those back up to perform the upgrades obviously the last down NAND downcycle was so severe that I think.
Tom O'malley: We saw the tools to offline longer than we might have expected, but I do believe that generally those those things kind of are.
Tom O'malley: Kind of counter cyclical to each other when you see utilization fall. The next the next up cycle, we usually come up.
Tom O'malley: Different technology node, which means upgrades will have occurred in landfill.
Tom O'malley: Captured some of that revenue.
Tom O'malley: Thanks, Tom operator, we're going to take one more.
Unknown Executive: Operator, we're going to take one more.
Tim Scholz-Malander: Questioner. And that question will come from Tim Scholz-Malander with Redburn Atlantic. Please go ahead. Yeah, hi, thank you so much for taking my questions. Maybe the first one just on CSBG, you've talked about upgrades up, reliance down, maybe you could just Spares are doing well. Chamber Con grew last year, so the incremental opportunity to sell more spares is up. Utilization is trending favorably, so that drives spares to be doing reasonably well. Yeah, I think that as time progresses, I think you'll see, you know, it become more balanced. I mean, as we said, it's a combination of upgrades to the existing tools that are already there to be able to accomplish higher layer counts.
Tom O'malley: Questioner.
Speaker Change: And that question will come from Tim Michelle's Millender with Redburn Atlantic. Please go ahead.
Speaker Change: Yes, hi, Thank you so much for taking my questions maybe.
Speaker Change: Maybe the first one just on <unk>, you've talked about upgrades up relying down maybe you could just give us a little bit of color on the spares.
Speaker Change: Kind of how that was tracking sequentially.
Speaker Change: Any color you have on the utilization rates of your fleet and then I have a quick follow up.
Speaker Change: Oh listen spares are doing well Brian.
Chamber Count grew last year, so the incremental opportunity to sell more spares was up utilization is trending favorably so that drives spares to be.
Speaker Change: Doing reasonably well.
Speaker Change: Okay. That's great and then maybe just on the NAND upgrade opportunity.
Speaker Change: Just as you look out maybe over a longer term, maybe one or two years can you just maybe kind of break that up for us just kind of how does that split between upgrades.
Speaker Change: <unk> in OE sales is it pretty equal or is it skewed one way or the other over the next couple of years. Thank you.
Speaker Change: Yes, I think that as time progresses, I think youll see.
Speaker Change: <unk>.
Speaker Change: It becomes more balanced I mean, as we said, it's a combination of upgrades to the existing tools that are already there to be able to accomplish higher layer counts.
Timothy Archer: And immediately, you need to also add additional tools to provide the types of technologies that are needed to deliver higher layer counts. And so already, it's a mix. But I think as you move forward, and I think one of the previous questions is, eventually customers might even start developing new sites as they get better line of sight to stronger demand in the future, then the new equipment sales would kick in as well. So it's already a mix. And I think it will continue to be a mix for the next several years when we work through that $40 billion upgrade.
Speaker Change: And immediately you need to also add additional tools to provide the types of technologies that are needed to deliver higher layer counts and so already it's a mix, but I think as you move forward and I think one of the previous questions eventually customers might even start developing new sites as they.
Speaker Change: Get better line of sight to stronger demand in the future.
Speaker Change: Then the new equipment sales would kick in as well so it's already a mix and I think it will it will continue to be a mix kind of for the next several years when we work through that $40 billion upgrade opportunity.
Unknown Executive: Very helpful, thank you. Okay, thanks, Tim.
Speaker Change: But it's very helpful. Thank you.
Speaker Change: Okay. Thanks, Tim up operator with that we're going to complete the call. Thank you everybody for joining us today and I'm sure. We'll see a lot of you guys during.
Unknown Executive: Operator, with that, we're going to complete the call. Thank you, everybody, for joining us today, and I'm sure we'll see a lot of you guys during the remainder of the quarter.
Speaker Change: The remainder of the quarter.
Unknown Executive: This conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [noise].