Q3 2026 Lam Research Corp Earnings Call

April 22, 2026

Operator: Good day, and welcome to the Lam Research Corporation's March 2026 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations. Please go ahead.

Operator: Good day, and welcome to the Lam Research Corporation's March 2026 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations. Please go ahead.

Speaker #1: Good day and welcome to the Lam Research Corporation's March 2026 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 0.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on the touchtone phone.

Speaker #1: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations. Please go ahead.

Ram Ganesh: Thank you, and good afternoon, everyone. Welcome to 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 Q1 2026 and our outlook for the Q2 2026. The press release detailing our financial results was distributed a little after 1:00 PM Pacific Time. The release and the accompanying presentation slides for today's call can also be found on the Investors section of the company's website. 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. Actual results could differ materially from those expressed in such forward-looking statements. Please see the accompanying presentation slides for additional information.

Ram Ganesh: Thank you, and good afternoon, everyone. Welcome to 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 2026 and our outlook for the June 2026. The press release detailing our financial results was distributed a little after 1:00 PM Pacific Time. The release and the accompanying presentation slides for today's call can also be found on the Investors section of the company's website. 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. Actual results could differ materially from those expressed in such forward-looking statements. Please see the accompanying presentation slides for additional information.

Speaker #2: Thank you and good afternoon, everyone. Welcome to 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.

Speaker #2: During today's call, we will share our overview of the business environment, and we'll review our financial results for the March 2026 quarter and our outlook for the June 2026 quarter.

Speaker #2: The press release detailing our financial results was distributed a little after 1:00 PM Pacific Time. The release and the accompanying presentation slides for today's call can also be found on the Investor section of the company's website.

Speaker #2: 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 #2: Actual results could materially differ from those expressed in such forward-looking statements. Please see the accompanying presentation slides for additional information. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified.

Ram Ganesh: Today's discussion of our financial results will be presented on a non-GAAP financial basis, unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying presentation slides. This call is scheduled to last until 3:00PM Pacific Time. A replay of this call will be made available later this afternoon on our website. With that, I'll hand the call over to Tim.

Speaker #2: A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying presentation slides. This call is scheduled to last until 3:00 p.m. Pacific Time.

Speaker #2: A replay of this call will be made available later this afternoon on our website. And with that, I'll hand the call over to Tim.

Timothy Archer: Thank you, Ram, and good afternoon, everyone. Lam is off to a solid start in calendar year 2026, with revenues and profitability in the March quarter at the upper end of our guidance ranges, and earnings per share exceeding the top end of our guided range. Revenues were at record levels, highlighted by the first $2 billion quarter from our Customer Support Business Group. Our guidance for the June quarter points to Lam's strong momentum in an accelerating AI-driven semiconductor demand environment. In January, we shared our outlook for 2026 WFE in the $135 billion range. Since then, spending projections from customers have moved higher across all device segments. We now expect WFE of $140 billion with a bias to the upside as the industry continues to work through various constraints. We believe this sets the stage for another year of compelling WFE growth in 2027.

Tim Archer: Thank you, Ram, and good afternoon, everyone. Lam is off to a solid start in calendar year 2026, with revenues and profitability in the March quarter at the upper end of our guidance ranges, and earnings per share exceeding the top end of our guided range. Revenues were at record levels, highlighted by the first $2 billion quarter from our Customer Support Business Group. Our guidance for the June quarter points to Lam's strong momentum in an accelerating AI-driven semiconductor demand environment. In January, we shared our outlook for 2026 WFE in the $135 billion range. Since then, spending projections from customers have moved higher across all device segments. We now expect WFE of $140 billion with a bias to the upside as the industry continues to work through various constraints. We believe this sets the stage for another year of compelling WFE growth in 2027.

Speaker #3: Thank you, Ram, and good afternoon, everyone. Lam is off to a solid start in calendar year 2026 with revenues and profitability in the March quarter at the upper end of our guidance ranges and earnings per share exceeding the top end of our guided range.

Speaker #3: Revenues were at record levels, highlighted by the first $2 billion quarter from our Customer Support Business Group. Our guidance for the June quarter points to Lam's strong momentum in an accelerating AI-driven semiconductor demand environment.

Speaker #3: In January, we shared our outlook for 2026 WFE in the $135 billion range. Since then, spending projections from customers have moved higher across all device segments.

Speaker #3: We now expect WFE of $140 billion, with a bias to the upside as the industry continues to work through various constraints. We believe this sets the stage for another year of compelling WFE growth in 2027.

Timothy Archer: For Lam, the AI-driven demand environment is creating an ideal setup for continued outperformance. Semiconductor technology inflections required to meet escalating AI compute needs are driving higher deposition and etch intensity. In 2026, we see Lam's served available market, or SAM, percent of WFE expanding to slightly more than the mid-30s % level, well on track toward our stated goal of high 30s % over the next few years. Lam is prepared for this moment by transforming how we innovate, build, and support the semiconductor manufacturing equipment needed to address the industry's most critical challenges. Our commitment to R&D and the velocity with which we have scaled our development capabilities have enabled us to create the broadest, most competitive product and services portfolio in the company's history. This is fueling our current outperformance and puts us in an excellent position to deliver on our future growth ambitions.

Tim Archer: For Lam, the AI-driven demand environment is creating an ideal setup for continued outperformance. Semiconductor technology inflections required to meet escalating AI compute needs are driving higher deposition and etch intensity. In 2026, we see Lam's served available market, or SAM, percent of WFE expanding to slightly more than the mid-30s % level, well on track toward our stated goal of high 30s % over the next few years. Lam is prepared for this moment by transforming how we innovate, build, and support the semiconductor manufacturing equipment needed to address the industry's most critical challenges. Our commitment to R&D and the velocity with which we have scaled our development capabilities have enabled us to create the broadest, most competitive product and services portfolio in the company's history. This is fueling our current outperformance and puts us in an excellent position to deliver on our future growth ambitions.

Speaker #3: For Lam, the AI-driven demand environment is creating an ideal setup for continued outperformance. Semiconductor technology inflections required to meet escalating AI compute needs are driving higher deposition and etch intensity.

Speaker #3: In 2026, we see Lam's served available market, or SAM, percent of WFE expanding to slightly more than the mid-30s percent level. Well on track toward our stated goal of high-30s percent over the next few years.

Speaker #3: Lam has prepared for this moment by transforming how we innovate, build, and support the semiconductor manufacturing equipment needed to address the industry's most critical challenges.

Speaker #3: Our commitment to R&D and the velocity with which we have scaled our development capabilities have enabled us to create the broadest most competitive product and services portfolio in the company's history.

Speaker #3: This is fueling our current outperformance and puts us in an excellent position to deliver on our future growth ambitions. Across all device segments, we are seeing greater opportunity for Lam.

Timothy Archer: Across all device segments, we are seeing greater opportunity for Lam. In NAND, AI transformation is moving beyond compute and into the storage layer. Token economics are driving changes to the memory hierarchy used in AI data centers, including rising adoption of higher layer count QLC-based NAND devices for SSDs. We expect total data center bits this year to be greater than both PC and mobile segments combined, with continuing growth in data center mix into the future. The growing device performance requirements of AI data centers are driving an acceleration of NAND technology upgrades. As you may recall, we said in early 2025 that roughly $40 billion in conversion spending would be required over several years to enable existing NAND-installed wafer capacity to produce devices with more than 200 layers.

Tim Archer: Across all device segments, we are seeing greater opportunity for Lam. In NAND, AI transformation is moving beyond compute and into the storage layer. Token economics are driving changes to the memory hierarchy used in AI data centers, including rising adoption of higher layer count QLC-based NAND devices for SSDs. We expect total data center bits this year to be greater than both PC and mobile segments combined, with continuing growth in data center mix into the future. The growing device performance requirements of AI data centers are driving an acceleration of NAND technology upgrades. As you may recall, we said in early 2025 that roughly $40 billion in conversion spending would be required over several years to enable existing NAND-installed wafer capacity to produce devices with more than 200 layers.

Speaker #3: In NAND, AI transformation is moving beyond compute and into the storage layer. Token economics are driving changes to the memory hierarchy used in AI data centers, including rising adoption of higher layer count QLC-based NAND devices for SSDs.

Speaker #3: We expect total data center bits this year to be greater than both PC and mobile segments combined, with growing continuing growth in data center mix into the future.

Speaker #3: The growing device performance requirements of AI data centers are driving an acceleration of NAND technology upgrades. As you may recall, we said in early 2025 that roughly $40 billion in conversion spending would be required over several years to enable existing NAND installed wafer capacity to produce devices with more than 200 layers.

Timothy Archer: We now anticipate that this conversion will be pulled forward, with the majority of spending occurring before the end of calendar year 2027. In parallel, we expect growth in bit demand will drive greenfield capacity investment, especially considering that overall industry installed wafer capacity is expected to decline more than 20% from prior highs by the end of this year. Looking further ahead, we see continued adoption of NAND in the AI memory stack driving even higher layer count NAND devices. With the largest install base of tools for 3D NAND, Lam is uniquely positioned to benefit from this trend. As manufacturing complexity scales with layer count, we see an expanding set of deposition and etch opportunities, all rooted in our established leadership in high aspect ratio cryo etch, dielectric stack deposition, word line metallization, backside stress management, and gap fill technologies.

Tim Archer: We now anticipate that this conversion will be pulled forward, with the majority of spending occurring before the end of calendar year 2027. In parallel, we expect growth in bit demand will drive greenfield capacity investment, especially considering that overall industry installed wafer capacity is expected to decline more than 20% from prior highs by the end of this year. Looking further ahead, we see continued adoption of NAND in the AI memory stack driving even higher layer count NAND devices. With the largest install base of tools for 3D NAND, Lam is uniquely positioned to benefit from this trend. As manufacturing complexity scales with layer count, we see an expanding set of deposition and etch opportunities, all rooted in our established leadership in high aspect ratio cryo etch, dielectric stack deposition, word line metallization, backside stress management, and gap fill technologies.

Speaker #3: We now anticipate that this conversion will be pulled forward, with the majority of spending occurring before the end of calendar year 2027. In parallel, we expect growth in bit demand will drive greenfield capacity investment, especially considering that overall industry installed wafer capacity is expected to decline more than 20% from prior highs by the end of this year.

Speaker #3: Looking further ahead, we see continued adoption of NAND in the AI memory stack driving even higher layer count NAND devices. With the largest installed base of tools for 3D NAND, Lam is uniquely positioned to benefit from this trend.

Speaker #3: As manufacturing complexity scales with layer count, we see an expanding set of deposition and etch opportunities, all rooted in our established leadership in high-aspect ratio cryo etch, dielectric stack deposition, wordline metalization, backside stress management, and gap fill technologies.

Timothy Archer: In dielectric etch, our Vantex and Flex tool sets deliver the industry's highest power density and productivity for dielectric channel hole etch applications, where we have a market-leading position. In conductor etch, we are also seeing momentum for our Kiyo systems as customers collaborate with us to maximize device yield in a constrained capacity environment. In a recent win, a customer switched to Kiyo in the middle of their production ramp due to superior defect performance and better yield. In deposition, we are seeing the transition to higher layer count NAND also drive greater demand for our Strata, ALTUS Halo ALD, and VECTOR DT products. Altogether, we believe the production-proven strength of our portfolio puts Lam in a great position to outperform overall NAND WFE growth as AI demand accelerates over the next few years.

Tim Archer: In dielectric etch, our Vantex and Flex tool sets deliver the industry's highest power density and productivity for dielectric channel hole etch applications, where we have a market-leading position. In conductor etch, we are also seeing momentum for our Kiyo systems as customers collaborate with us to maximize device yield in a constrained capacity environment. In a recent win, a customer switched to Kiyo in the middle of their production ramp due to superior defect performance and better yield. In deposition, we are seeing the transition to higher layer count NAND also drive greater demand for our Strata, ALTUS Halo ALD, and VECTOR DT products. Altogether, we believe the production-proven strength of our portfolio puts Lam in a great position to outperform overall NAND WFE growth as AI demand accelerates over the next few years.

Speaker #3: In dielectric etch, our VanTechs and Flex tool sets deliver the industry's highest power density and productivity for dielectric channel hole etch applications. Where we have a market-leading position.

Speaker #3: In conductor etch, we are also seeing momentum for our Clio systems as customers collaborate with us to maximize device yield in a constrained capacity environment.

Speaker #3: In a recent win, a customer switched to Clio in the middle of their production ramp due to superior defect performance and better yield. In Deposition, we are seeing the transition to higher layer count NAND also drive greater demand for our Strata, Altus, Halo ALD, and Vector DT products.

Speaker #3: Altogether, we believe the production-proven strength of our portfolio puts Lam in a great position to outperform overall NAND WFE growth as AI demand accelerates over the next few years.

Timothy Archer: In DRAM, AI's power and efficiency requirements are driving an industry transition to 1C generation devices. As feature dimensions shrink, the industry is shifting from traditional silicon nitride-based dielectric films deposited using furnace to more advanced ALD silicon carbide low-K layers to achieve bitline capacitance reduction. Studies have shown that re-architected device structures, combined with low-K bitline spacers, can reduce capacitance by over 60%. Lam's Striker carbide solution, with its unique plasma source, enables capacitance scaling by depositing dense, conformal, and tunable low-K dielectric films with high productivity. As a result, our Striker-based solutions are the tools of record at all leading memory makers for bitline spacer applications. As the industry moves to 1C nodes, we see our total dielectric deposition SAM in DRAM growing more than 20%. With innovations like Striker ALD, we believe Lam is well-positioned to gain share within this expanding opportunity.

Tim Archer: In DRAM, AI's power and efficiency requirements are driving an industry transition to 1C generation devices. As feature dimensions shrink, the industry is shifting from traditional silicon nitride-based dielectric films deposited using furnace to more advanced ALD silicon carbide low-K layers to achieve bitline capacitance reduction. Studies have shown that re-architected device structures, combined with low-K bitline spacers, can reduce capacitance by over 60%. Lam's Striker carbide solution, with its unique plasma source, enables capacitance scaling by depositing dense, conformal, and tunable low-K dielectric films with high productivity. As a result, our Striker-based solutions are the tools of record at all leading memory makers for bitline spacer applications. As the industry moves to 1C nodes, we see our total dielectric deposition SAM in DRAM growing more than 20%. With innovations like Striker ALD, we believe Lam is well-positioned to gain share within this expanding opportunity.

Speaker #3: In DRAM, AI's power and efficiency requirements are driving an industry transition to 1C generation devices. As feature dimensions shrink, the industry is shifting from traditional silicon nitride-based dielectric films deposited using a furnace to more advanced ALD silicon carbide low-k layers to achieve bitline capacitance reduction.

Speaker #3: Studies have shown that re-architected device structures combined with low-k bitline spacers can reduce capacitance by over 60%. Lam's Stryker carbide solution, with its unique plasma source, enables capacitance scaling by depositing dense, conformal, and tunable low-k dielectric films with high productivity.

Speaker #3: As a result, our Stryker-based solutions are the tools of record at all leading memory makers for bitline spacer applications. As the industry moves to 1C nodes, we see our total dielectric deposition SAM in DRAM growing more than 20%.

Speaker #3: With innovations like Stryker ALD, we believe Lam is well positioned to gain share within this expanding opportunity. In foundry logic, calendar 2025 was a record year for Lam.

Timothy Archer: In foundry logic, calendar 2025 was a record year for Lam. We are carrying that momentum into 2026 as we capture more opportunities from inflections at the leading edge. Most notably this quarter, we achieved both dielectric etch wins at a key foundry logic manufacturer, our first dielectric etch wins at this customer. Finally, we see growing demand for our advanced packaging solutions, where we bring unmatched experience in equipment design and process technology for copper plating and TSV etch. Lam's advanced packaging revenue growth is expected to exceed 50% in calendar year 2026. Turning to our Customer Support Business Group, we delivered our first $2 billion+ revenue quarter. Demand was strong across spares, upgrades, and services. As customers look to improve fab output in a space-constrained environment, more opportunities are being created for CSBG to deliver innovations that increase productivity and enhance yield for our customers.

Tim Archer: In foundry logic, calendar 2025 was a record year for Lam. We are carrying that momentum into 2026 as we capture more opportunities from inflections at the leading edge. Most notably this quarter, we achieved both dielectric etch wins at a key foundry logic manufacturer, our first dielectric etch wins at this customer. Finally, we see growing demand for our advanced packaging solutions, where we bring unmatched experience in equipment design and process technology for copper plating and TSV etch. Lam's advanced packaging revenue growth is expected to exceed 50% in calendar year 2026. Turning to our Customer Support Business Group, we delivered our first $2 billion+ revenue quarter. Demand was strong across spares, upgrades, and services. As customers look to improve fab output in a space-constrained environment, more opportunities are being created for CSBG to deliver innovations that increase productivity and enhance yield for our customers.

Speaker #3: We are carrying that momentum into 2026 as we capture more opportunities from inflections at the leading edge. Most notably, this quarter, we achieved full dielectric etch wins at a key foundry logic manufacturer.

Speaker #3: Our first dielectric etch wins at this customer. And finally, we see growing demand for advanced packaging solutions, where we bring unmatched experience in equipment design and process technology for copper plating and TSE etch.

Speaker #3: Lam's advanced packaging revenue growth is expected to exceed 50% in calendar year 2026. Turning to our Customer Support Business Group, we delivered our first $2 billion-plus revenue quarter.

Speaker #3: Demand was strong across spares, upgrades, and services. As customers look to improve fab output in a space-constrained environment, more opportunities are being created for CSBG to deliver innovations that increase productivity and enhance yield for our customers.

Timothy Archer: Our services business posted mid-teens growth over the December quarter. Highlights included a new agreement with a leading foundry logic customer to deploy our Equipment Intelligence services for critical deposition applications. A top memory customer is also set to utilize our Equipment Intelligence capabilities in R&D to enable faster ramps of new nodes for NAND and DRAM production. We are also gaining momentum with our Dextro cobots, which deliver an unprecedented level of automated tool maintenance precision and repeatability. Customers using Dextro in production are benefiting from higher output, and in some cases, improved yield from existing capacity. In the March quarter, we expanded Dextro coverage to eight Lam tool types, up from six last quarter. We also introduced the next generation of Dextro, which packs 10 times more compute power than the first generation into a smaller footprint.

Tim Archer: Our services business posted mid-teens growth over the December quarter. Highlights included a new agreement with a leading foundry logic customer to deploy our Equipment Intelligence services for critical deposition applications. A top memory customer is also set to utilize our Equipment Intelligence capabilities in R&D to enable faster ramps of new nodes for NAND and DRAM production. We are also gaining momentum with our Dextro cobots, which deliver an unprecedented level of automated tool maintenance precision and repeatability. Customers using Dextro in production are benefiting from higher output, and in some cases, improved yield from existing capacity. In the March quarter, we expanded Dextro coverage to eight Lam tool types, up from six last quarter. We also introduced the next generation of Dextro, which packs 10 times more compute power than the first generation into a smaller footprint.

Speaker #3: Our services business posted mid-teens growth over the December quarter. Highlights included a new agreement with a leading foundry logic customer to deploy our equipment intelligence services for critical deposition applications.

Speaker #3: A top memory customer is also set to utilize our equipment intelligence capabilities in R&D to enable faster ramps of new nodes for NAND and DRAM production.

Speaker #3: We are also gaining momentum with our Dextre cobots, which deliver an unprecedented level of automated tool maintenance precision and repeatability. Customers using Dextre in production are benefiting from higher output and, in some cases, improved yield from existing capacity.

Speaker #3: In the March quarter, we expanded Dextre coverage to eight Lam tool types, up from six last quarter. We also introduced the next generation of Dextre, which packs 10 times more compute power than the first generation into a smaller footprint.

Timothy Archer: This quarter, we will ship our first Dextro cobot for a deposition product, further increasing our ability to create value from our overall installed base, more than 100,000 chambers. It's an exciting time for the semiconductor industry and for Lam. In an accelerating demand environment, we see rising deposition and etch intensity, creating a multi-year outperformance setup for Lam. We have made strategic investments across the company to capitalize on this opportunity, increasing the velocity of both our technology development and our operational execution. Our progress can be seen in our strong March quarter results, our higher June quarter outlook, and our expectation that H2 calendar year revenues will exceed the H1. In short, we are delivering on the tremendous opportunity in front of us with more to come. Thank you, and here's Doug.

Tim Archer: This quarter, we will ship our first Dextro cobot for a deposition product, further increasing our ability to create value from our overall installed base, more than 100,000 chambers. It's an exciting time for the semiconductor industry and for Lam. In an accelerating demand environment, we see rising deposition and etch intensity, creating a multi-year outperformance setup for Lam. We have made strategic investments across the company to capitalize on this opportunity, increasing the velocity of both our technology development and our operational execution. Our progress can be seen in our strong March quarter results, our higher June quarter outlook, and our expectation that H2 calendar year revenues will exceed the H1. In short, we are delivering on the tremendous opportunity in front of us with more to come. Thank you, and here's Doug.

Speaker #3: This quarter, we will ship our first Dextre cobot for a deposition product. Further increasing our ability to create value from our overall installed base.

Speaker #3: More than 100,000 chambers. It's an exciting time for the semiconductor industry and for Lam. In an accelerating demand environment, we see rising deposition and etch intensity creating a multi-year outperformance setup for Lam.

Speaker #3: We have made strategic investments across the company to capitalize on this opportunity. Increasing the velocity of both our technology development and our operational execution.

Speaker #3: Our progress can be seen in our strong March quarter results, our higher June quarter outlook, and our expectation that second-half calendar year revenues will exceed the first half.

Speaker #3: In short, we are delivering on the tremendous opportunity in front of us with more to come. Thank you, and here's Doug.

Douglas Bettinger: Excellent. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today during what I know is a very busy earnings season. Lam's off to a solid start in 2026, building on the momentum we delivered across 2025. In the Q1, revenue, gross margin, and operating margin came in above the midpoint of our guidance ranges, while earnings per share actually exceeded the high end of the range. We also achieved our third consecutive record revenue quarter. Q1 revenue came in at $5.84 billion, which was up 9% sequentially and up 24% from the same period in 2025. The deferred revenue balance at quarter end came in at $2.22 billion, which was flat sequentially. Within this balance, however, customer down payments came down by roughly $300 million, while the other line items increased with the growing business levels.

Doug Bettinger: Excellent. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today during what I know is a very busy earnings season. Lam's off to a solid start in 2026, building on the momentum we delivered across 2025. In the Q1, revenue, gross margin, and operating margin came in above the midpoint of our guidance ranges, while earnings per share actually exceeded the high end of the range. We also achieved our third consecutive record revenue quarter. Q1 revenue came in at $5.84 billion, which was up 9% sequentially and up 24% from the same period in 2025. The deferred revenue balance at quarter end came in at $2.22 billion, which was flat sequentially. Within this balance, however, customer down payments came down by roughly $300 million, while the other line items increased with the growing business levels.

Speaker #1: Excellent. Thank you, Tim. Good afternoon, everyone. And thank you for joining our call today during what I know is a very busy earnings season.

Speaker #1: Lam's off to a solid start in 2026, building on the momentum we delivered across 2025. In the March quarter, revenue, gross margin, and operating margin came in above the midpoint of our guidance ranges, while earnings per share actually exceeded the high end of the range.

Speaker #1: We also achieved our third consecutive record revenue quarter. March quarter revenue came in at $5.84 billion, which was up 9% sequentially and up 24% from the same period in 2025.

Speaker #1: The deferred revenue balance at quarter-end came in at $2.22 billion, which was flat sequentially. Within this balance, however, customer down payments came down by roughly $300 million while the other line items increased with the growing business levels.

Douglas Bettinger: I just mentioned that down payments are now at the lowest level we've seen in nearly four years. From a market segment perspective, Foundry accounted for 54% of our systems revenue in Q1, which was down from 59% in Q4. Revenue in dollar terms was approximately flat sequentially, and it was up 35% year-over-year. Foundry saw strength in investments at the leading edge, as well as ongoing mature node spending. Advanced packaging within Foundry continues to be an area of solid growth for us. Memory was 39% of systems revenue, up from 34% in Q4. Within memory, we delivered record DRAM revenue, accounting for 27% of systems revenue, which was up from 23% in Q4. High bandwidth memory investments remained strong.

Doug Bettinger: I just mentioned that down payments are now at the lowest level we've seen in nearly four years. From a market segment perspective, Foundry accounted for 54% of our systems revenue in Q1, which was down from 59% in Q4. Revenue in dollar terms was approximately flat sequentially, and it was up 35% year-over-year. Foundry saw strength in investments at the leading edge, as well as ongoing mature node spending. Advanced packaging within Foundry continues to be an area of solid growth for us. Memory was 39% of systems revenue, up from 34% in Q4. Within memory, we delivered record DRAM revenue, accounting for 27% of systems revenue, which was up from 23% in Q4. High bandwidth memory investments remained strong.

Speaker #1: I just mentioned that down payments are now at the lowest level we've seen in nearly four years. From a market segment perspective, foundry accounted for 54% of our systems revenue in the March quarter, which was down from 59% in the December quarter.

Speaker #1: Revenue and dollar terms was approximately flat sequentially and it was up 35% year over year. Foundry saw strength in investments at the leading edge, as well as ongoing mature node spending.

Speaker #1: Advanced packaging within foundry continues to be an area of solid growth for us. Memory was 39% of systems revenue, up from 34% in the December quarter.

Speaker #1: Within memory, we delivered record DRAM revenue accounting for 27% of systems revenue which was up from 23% in the December quarter. High bandwidth memory investments remained strong.

Douglas Bettinger: The profile of spending is also gravitating towards the 1C node and beyond, enabling the ramp of DDR5 and LPDDR5. Non-volatile memory contributed 12% of our systems revenue, up slightly from 11% in the December quarter. As Tim outlined, AI workloads are accelerating demand for higher capacity NAND, and LAM continues to benefit from strong leadership within this segment. We expect to see growth in NAND investments throughout the remainder of the year as the industry converts to 256 layer and above class devices. Finally, the logic and other segment came in at 7% of systems revenue in March quarter, in line with prior quarter. Let's turn to the regional breakdown of our total revenue. China came in at 34%, which was a slight decrease from the prior quarter level of 35%. We expect that China revenue in the June quarter will decline from these levels.

Doug Bettinger: The profile of spending is also gravitating towards the 1C node and beyond, enabling the ramp of DDR5 and LPDDR5. Non-volatile memory contributed 12% of our systems revenue, up slightly from 11% in the December quarter. As Tim outlined, AI workloads are accelerating demand for higher capacity NAND, and LAM continues to benefit from strong leadership within this segment. We expect to see growth in NAND investments throughout the remainder of the year as the industry converts to 256 layer and above class devices. Finally, the logic and other segment came in at 7% of systems revenue in March quarter, in line with prior quarter. Let's turn to the regional breakdown of our total revenue. China came in at 34%, which was a slight decrease from the prior quarter level of 35%. We expect that China revenue in the June quarter will decline from these levels.

Speaker #1: The profile of spending is also gravitating towards the 1C node and beyond, enabling the ramp of DDR5 and LPDDR5. Non-volatile memory contributed 12% of our systems revenue, up slightly from 11% in the December quarter.

Speaker #1: As Tim outlined, AI workloads are accelerating demand for higher capacity NAND, and Lam continues to benefit from strong leadership within this segment. We expect to see growth in NAND investments throughout the remainder of the year as the industry converts to 256-layer and above class devices.

Speaker #1: And finally, the logic and other segment came in at 7% of systems revenue in the March quarter, in line with the prior quarter. Let's turn to the regional breakdown of our total revenue.

Speaker #1: China came in at 34%, which was a slight decrease from the prior quarter level of 35%. We expect that China revenue in the June quarter will decline from these levels.

Douglas Bettinger: Korea and Taiwan each came in at 23%, which was both up from 20% in the prior quarter. Both the Korea and Taiwan regions represent record revenue level in dollar terms in March. I just mentioned that this regional mix was generally in line with our expectations from the beginning of the quarter. Customer Support Business Group generated a record $2.1 billion in revenue in the March quarter, which was up 6% sequentially and up 25% from the same period in 2025. Sequential growth was driven by a large and expanding installed base and the continued expansion across our spares, upgrades, and services business, partly offset by Reliant. Growth in spares and service is benefiting from strong factory utilization across the industry. Let's take a look at profitability.

Doug Bettinger: Korea and Taiwan each came in at 23%, which was both up from 20% in the prior quarter. Both the Korea and Taiwan regions represent record revenue level in dollar terms in March. I just mentioned that this regional mix was generally in line with our expectations from the beginning of the quarter. Customer Support Business Group generated a record $2.1 billion in revenue in the March quarter, which was up 6% sequentially and up 25% from the same period in 2025. Sequential growth was driven by a large and expanding installed base and the continued expansion across our spares, upgrades, and services business, partly offset by Reliant. Growth in spares and service is benefiting from strong factory utilization across the industry. Let's take a look at profitability.

Speaker #1: Korea and Taiwan each came in at 23%, which was both up from 20% in the prior quarter. Both the Korea and Taiwan regions represent record revenue level in dollar terms in March.

Speaker #1: And I just mentioned that this regional mix was generally in line with our expectations from the beginning of the quarter. Customer Support Business Group generated a record $2.1 billion in revenue in the March quarter, which was up 6% sequentially and up 25% from the same period in 2025.

Speaker #1: Sequential growth was driven by our large and expanding installed base, and the continued expansion across our spares, upgrades, and services business, partly offset by Reliant.

Speaker #1: Growth in spares and service is benefiting from strong factory utilization across the industry. Let's take a look at profitability. Gross margin in the March quarter was 49.9%, which was at the high end of the guidance range driven by multiple factors, including favorable customer and product mix, as well as improved factory efficiencies.

Douglas Bettinger: Gross margin in Q1 was 49.9%, which was at the high end of the guidance range, driven by multiple factors, including favorable customer product mix as well as improved factory efficiencies. Operating expenses in Q1 came in at $866 million, up from the prior quarter's level of $827 million. The increase was driven by seasonal employee-related costs, as well as higher headcount to support our growth. R&D accounted for 68% of total operating expenses. We will be growing R&D investments throughout the remainder of the year. Q1 operating margin was 35% at the high end of our guidance range due to the higher revenue and the improved gross margin. The non-GAAP tax rate for the quarter was 9.2%, which came in lower due to benefits from higher equity compensation vesting, which is deductible on the taxes during the quarter.

Doug Bettinger: Gross margin in Q1 was 49.9%, which was at the high end of the guidance range, driven by multiple factors, including favorable customer product mix as well as improved factory efficiencies. Operating expenses in Q1 came in at $866 million, up from the prior quarter's level of $827 million. The increase was driven by seasonal employee-related costs, as well as higher headcount to support our growth. R&D accounted for 68% of total operating expenses. We will be growing R&D investments throughout the remainder of the year. Q1 operating margin was 35% at the high end of our guidance range due to the higher revenue and the improved gross margin. The non-GAAP tax rate for the quarter was 9.2%, which came in lower due to benefits from higher equity compensation vesting, which is deductible on the taxes during the quarter.

Speaker #1: Operating expenses in the March quarter came in at $866 million, up from the prior quarter's level of $827 million. The increase was driven by seasonal employee-related costs, as well as higher headcount to support our growth.

Speaker #1: R&D accounted for 68% of total operating expenses. We will be growing R&D investments throughout the remainder of the year. March quarter operating margin was 35%, at the high end of our guidance range, due to the higher revenue, and the improved gross margin.

Speaker #1: The non-gap tax rate for the quarter was 9.2%, which came in lower due to benefits from higher equity compensation vesting, which is deductible on the taxes, during the quarter.

Douglas Bettinger: We continue to see the tax rate in the low to mid-teens for calendar year 2026. Other income expense in the March quarter was $8 million in expense, compared with $10 million in income in the December quarter. The variance in OINE was primarily the result of small losses in our venture portfolio, as well as lower interest income. Interest income decreased due to the lower cash balance in the quarter. As we've talked about in the past, you should expect to see variability in OINE quarter to quarter. For capital return in the March quarter, we allocated approximately $800 million to share buybacks through a combination of open share repurchases and a $200 million accelerated share repurchase transaction. Our average buyback price was approximately $211 per share. We also retired $750 million of unsecured notes that reached maturity using cash from the balance sheet.

Doug Bettinger: We continue to see the tax rate in the low to mid-teens for calendar year 2026. Other income expense in the March quarter was $8 million in expense, compared with $10 million in income in the December quarter. The variance in OINE was primarily the result of small losses in our venture portfolio, as well as lower interest income. Interest income decreased due to the lower cash balance in the quarter. As we've talked about in the past, you should expect to see variability in OINE quarter to quarter. For capital return in the March quarter, we allocated approximately $800 million to share buybacks through a combination of open share repurchases and a $200 million accelerated share repurchase transaction. Our average buyback price was approximately $211 per share. We also retired $750 million of unsecured notes that reached maturity using cash from the balance sheet.

Speaker #1: We continue to see the tax rate in the low to mid-teens for calendar year 2026. Other income and expense in the March quarter was $8 million in expense, compared with $10 million in income in the December quarter.

Speaker #1: The variance in OI&E was primarily the result of small losses in our venture portfolio, as well as lower interest income. Interest income decreased due to the lower cash balance in the quarter.

Speaker #1: And as we talked about in the past, you should expect to see variability in OI&E quarter to quarter. For capital return in the March quarter, we allocated approximately $800 million to share buybacks through a combination of open share repurchases, and a $200 million accelerated share repurchase transaction.

Speaker #1: Our average buyback price was approximately $211 per share. We also retired $750 million of unsecured notes that reached maturity, using cash from the balance sheet.

Douglas Bettinger: Additionally, we paid $326 million in dividends. In the March quarter, we returned 139% of our free cash flow. Our plans remain to return at least 85% of free cash flow to our shareholders over time. The March quarter diluted earnings per share came in at a record of $1.47, which was above the high end of our guidance range. The diluted share count was 1.26 billion shares, which is flat with the December quarter and consistent with our guidance. I just mentioned that we have $4.3 billion remaining on our board-authorized share repurchase program. Let me pivot to the balance sheet. Cash and cash equivalents totaled approximately $4.8 billion at the end of the March quarter, which was a decrease from $6.2 billion at the end of the December quarter. The decrease was primarily driven by capital return activities, the debt paydown, as well as capital spending.

Doug Bettinger: Additionally, we paid $326 million in dividends. In the March quarter, we returned 139% of our free cash flow. Our plans remain to return at least 85% of free cash flow to our shareholders over time. The March quarter diluted earnings per share came in at a record of $1.47, which was above the high end of our guidance range. The diluted share count was 1.26 billion shares, which is flat with the December quarter and consistent with our guidance. I just mentioned that we have $4.3 billion remaining on our board-authorized share repurchase program. Let me pivot to the balance sheet. Cash and cash equivalents totaled approximately $4.8 billion at the end of the March quarter, which was a decrease from $6.2 billion at the end of the December quarter. The decrease was primarily driven by capital return activities, the debt paydown, as well as capital spending.

Speaker #1: Additionally, we paid $326 million in dividends. In the March quarter, we returned 139% of our free cash flow. Our plans remain to return at least 85% of free cash flow to our shareholders over time.

Speaker #1: The March quarter delivered earnings per share that came in at a record $1.47, which was above the high end of our guidance range. The diluted share count was 1.26 billion shares, which is flat with the December quarter and consistent with our guidance.

Speaker #1: And I just mentioned that we have 4.3 billion remaining on our board authorized share repurchase program. Let me pivot to the Balance sheet , cash and cash equivalents totaled approximately $4.8 billion at the end of the March quarter , which was a decrease from $6.2 billion at the end of the December quarter .

Speaker #1: The decrease was primarily driven by capital return activities that debt paydown , as well as capital spending , day sales outstanding was 64 days in the March quarter .

Douglas Bettinger: Days sales outstanding was 64 days in Q3, an increase from 59 days in Q2. Inventory turns improved to 2.9 times from 2.7 times in the prior quarter. These were our highest level of inventory turns in over four years. As a company, we remain focused on our strong asset utilization and return on invested capital. We're pleased with the sustained performance we continue to deliver here. We will be managing our inventory and supply chain to align with the growing demand that we see in front of us. Non-cash expenses in Q3 included approximately $97 million in equity compensation, $103 million in depreciation, and $13 million in amortization. Capital expenditures in Q3 was $332 million, which was up $71 million from Q2. Spending was higher to support the strong demand environment that we're seeing.

Doug Bettinger: Days sales outstanding was 64 days in Q3, an increase from 59 days in Q2. Inventory turns improved to 2.9 times from 2.7 times in the prior quarter. These were our highest level of inventory turns in over four years. As a company, we remain focused on our strong asset utilization and return on invested capital. We're pleased with the sustained performance we continue to deliver here. We will be managing our inventory and supply chain to align with the growing demand that we see in front of us. Non-cash expenses in Q3 included approximately $97 million in equity compensation, $103 million in depreciation, and $13 million in amortization. Capital expenditures in Q3 was $332 million, which was up $71 million from Q2. Spending was higher to support the strong demand environment that we're seeing.

Speaker #1: An increase from 59 days in the December quarter. Inventory turns improved to 2.9 times from 2.7 times in the prior quarter. These were our highest level of inventory turns in over four years.

Speaker #1: As a company , we remain focused on our strong asset utilization and return on invested capital We're pleased with the sustained performance we continue to deliver here .

Speaker #1: We will be managing our inventory and supply chain to align with the growing demand that we see in front of us. Non-cash expenses in the March quarter included approximately $97 million in equity compensation, $103 million in depreciation, and $13 million in amortization.

Speaker #1: Capital expenditures in the March quarter was $332 million , which was up $71 million from the December quarter Let's turn to our non-GAAP guidance for the June 2026 quarter .

Douglas Bettinger: Investments are enabling a second manufacturing facility in Malaysia, as well as lab-related investments in the United States and Taiwan. Looking forward, we continue to expect capital expenditure to be in the 4% to 5% of revenue range. We ended the March quarter with approximately 20,600 regular full-time employees, which was an increase of approximately 900 people from the prior quarter. Headcount increases were primarily within the manufacturing and field organizations to support volume growth, as well as in R&D to support our long-term product roadmap. As we scaled the organization, we also undertook a small workforce optimization focused on efficiency. You'll see this in our non-GAAP reconciliation. Let's turn to our non-GAAP guidance for the June 2026 quarter. We're expecting revenue of $6.6 billion, ±$400 million. Gross margin of 50.5%, ±1 percentage point.

Doug Bettinger: Investments are enabling a second manufacturing facility in Malaysia, as well as lab-related investments in the United States and Taiwan. Looking forward, we continue to expect capital expenditure to be in the 4% to 5% of revenue range. We ended the March quarter with approximately 20,600 regular full-time employees, which was an increase of approximately 900 people from the prior quarter. Headcount increases were primarily within the manufacturing and field organizations to support volume growth, as well as in R&D to support our long-term product roadmap. As we scaled the organization, we also undertook a small workforce optimization focused on efficiency. You'll see this in our non-GAAP reconciliation. Let's turn to our non-GAAP guidance for the June 2026 quarter. We're expecting revenue of $6.6 billion, ±$400 million. Gross margin of 50.5%, ±1 percentage point.

Speaker #1: We're expecting revenue of $6.6 billion, plus or minus $400 million, and gross margin of 50.5%, plus or minus one percentage point.

Speaker #1: We're expecting this expanding gross margin despite slight headwinds that we're seeing from customer mix . For forecasting , operating margins of 36.5% plus one plus or minus one percentage point .

Douglas Bettinger: We're expecting this expanding gross margin despite slight headwinds that we're seeing from customer mix. We're forecasting operating margins of 36.5%, plus or minus one percentage point. Finally, we're forecasting record earnings per share of $1.65, plus or minus $0.15, based on a share count of approximately 1.255 billion shares. Let me wrap up. We're executing well against our financial objectives and driving operational efficiency while increasing R&D investments to extend our technology leadership. With our expanding installed base, the strength of our product portfolio, and our disciplined approach to capital allocation, we remain confident in Lam's setup for continued outperformance. Operator, that concludes our prepared remarks. We would now like to open up the call for questions.

Doug Bettinger: We're expecting this expanding gross margin despite slight headwinds that we're seeing from customer mix. We're forecasting operating margins of 36.5%, plus or minus one percentage point. Finally, we're forecasting record earnings per share of $1.65, plus or minus $0.15, based on a share count of approximately 1.255 billion shares. Let me wrap up. We're executing well against our financial objectives and driving operational efficiency while increasing R&D investments to extend our technology leadership. With our expanding installed base, the strength of our product portfolio, and our disciplined approach to capital allocation, we remain confident in Lam's setup for continued outperformance. Operator, that concludes our prepared remarks. We would now like to open up the call for questions.

Speaker #1: And finally, we’re forecasting record earnings per share of $1.65, plus or minus $0.15, based on a share count of approximately 1.255 billion shares.

Speaker #1: So let me wrap up . We're executing well against our financial objectives and driving operational efficiency while increasing R&D investments to extend our technology leadership with our expanding installed base .

Speaker #1: The strength of our product portfolio and our disciplined approach to capital allocation . We remain confident in Lam's setup for continued outperformance Operator .

Speaker #1: That concludes our prepared remarks. We would now like to open up the call for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. Our first question comes from Timothy Arcuri with UBS.

Speaker #2: We will now begin the question and answer session . To ask a question , you may press star , then one on your touch tone phone .

Speaker #2: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star .

Speaker #2: Then, two, please limit yourself to one question and one follow-up. Our first question comes from Timothy Arcuri with UBS.

Timothy Arcuri: Thanks a lot. Doug, I wanted to ask about gross margin. The guidance is great. It's 50.5. Sounds like despite mix being against you.

Speaker #3: Thanks a lot . Doug , I wanted to ask about gross margin . The guidance is great . It's 50.5 . Sounds like despite mix being against you So you're kind of already at your target model , right ?

Douglas Bettinger: Yeah.

Doug Bettinger: Yeah.

Timothy Arcuri: You're kind of already at your target model, right? Because you were saying above 50, and I'm not asking you to update that model, but can you deconstruct how you got here so fast? And maybe also, I think people want to hear how much capacity you have. I know you mentioned that you're adding another site in Malaysia. Can you just speak about what the puts and takes are going to be on margin going forward?

Speaker #3: Because you were saying above 50 and I'm not I'm not asking you to update that model . But but sort of can you like deconstruct how you got here so fast and maybe also , I think people want to hear how much , how much do you have ?

Speaker #3: I know you mentioned that you're adding another site in Malaysia, so can you just speak about sort of what the puts and takes are going to be on margin going forward?

Douglas Bettinger: Yeah. No, Tim, it's a great question. I think we're pretty pleased with where we're at from a gross margin standpoint. It's been a lot of real hard work from the company, honestly. I think you'll remember, I don't know, four or five years ago, we talked about expanding our factory footprint to be closer to where our customers were. That has delivered efficiencies from just the proximity standpoint, from shorter freight logistic lanes, from slightly lower cost, from a labor standpoint, a better supply chain set up, all of those things. Those were self-help activities that we undertook, and frankly, we've delivered on it. When I think about the global operations part of the company, they've really done a wonderful job. On top of that, we're working on everything we can do to get paid for the value we're delivering to customers.

Doug Bettinger: Yeah. No, Tim, it's a great question. I think we're pretty pleased with where we're at from a gross margin standpoint. It's been a lot of real hard work from the company, honestly. I think you'll remember, I don't know, four or five years ago, we talked about expanding our factory footprint to be closer to where our customers were. That has delivered efficiencies from just the proximity standpoint, from shorter freight logistic lanes, from slightly lower cost, from a labor standpoint, a better supply chain set up, all of those things. Those were self-help activities that we undertook, and frankly, we've delivered on it. When I think about the global operations part of the company, they've really done a wonderful job. On top of that, we're working on everything we can do to get paid for the value we're delivering to customers.

Speaker #1: Yeah . No , Tim , it's a great question . Yeah , I think , you know , we're pretty pleased with where we're at from a gross margin standpoint , you know , and it's been a lot of real hard work from the company .

Speaker #1: Honestly , I think you'll remember , I don't know , 4 or 5 years ago , we talked about expanding our factory footprint to be closer to where our customers were .

Speaker #1: And that has delivered efficiencies from just the proximity standpoint , from shorter freight logistics lanes , from slightly lower cost , from labor standpoint , a better supply chain setup , all of those things .

Speaker #1: Those were self-help activities that we undertook . And frankly , we've delivered on it . So when I think about the global operations part of the company , they've really done a wonderful job on top of that .

Speaker #1: You know, we'll work on everything we can do to get paid for the value we're delivering to customers. That's something we're always doing, and I think we're doing a reasonably good job with that.

Douglas Bettinger: That's something we're always doing, and I think we're doing a reasonably good job with that, Tim. Anyway, when you put all of that together, I think we're pretty pleased with all of that, and I'll let Tim add a few things here.

Doug Bettinger: That's something we're always doing, and I think we're doing a reasonably good job with that, Tim. Anyway, when you put all of that together, I think we're pretty pleased with all of that, and I'll let Tim add a few things here.

Speaker #1: Tim . So anyway , when you put all that together , I think we're we're pretty pleased with all of that . And I'll let , I'll let Tim add a few things here .

Timothy Archer: Yeah. No, I was just going to add one other part that's pretty important and showing up as very important in this constrained period, which is the performance of our tools. Doug talked about some of our higher R&D spending. A lot of that was to ensure that all of these new tools that we have hitting the field enter at a level of maturity that's beyond what we had probably delivered in the past. That's very important for our customers in a period of fast ramp. That also yields benefits for us in terms of installation and warranty spending, which flows through to gross margin, and so you're seeing some of that as well. That's something that, again, we're focused on going forward, is reliability of systems, maturity of tools as they hit the fabs.

Tim Archer: Yeah. No, I was just going to add one other part that's pretty important and showing up as very important in this constrained period, which is the performance of our tools. Doug talked about some of our higher R&D spending. A lot of that was to ensure that all of these new tools that we have hitting the field enter at a level of maturity that's beyond what we had probably delivered in the past. That's very important for our customers in a period of fast ramp. That also yields benefits for us in terms of installation and warranty spending, which flows through to gross margin, and so you're seeing some of that as well. That's something that, again, we're focused on going forward, is reliability of systems, maturity of tools as they hit the fabs.

Speaker #1: Yeah , no , I was just going to add one other part . That's pretty important in showing up is very important in this constrained period , which is the performance of our tools .

Speaker #1: We , we embarked . Doug talked about some of our higher R&D spending . A lot of that was to ensure that all of these new tools that we have hitting the field .

Speaker #1: You know, we've entered a level of maturity that's beyond what we had probably delivered in the past. And that's very important for our customers in a period of fast ramp that also yields benefits for us in terms of installation and warranty spending, which flows through to gross margin.

Speaker #1: And so you're seeing some of that as well . So that's something that again , we're we're focused on going forward is reliability of systems , maturity of tools as they hit the fence .

Douglas Bettinger: Let me just add one more thing.

Doug Bettinger: Let me just add one more thing.

Speaker #1: And let me just add one more thing. Let me—let me add one quick thing. I know there's going to be a question on his mind.

Timothy Archer: Please go on.

Tim Archer: Please go on.

Douglas Bettinger: Yeah. Let me add one quick thing. I know this is going to be a question on everybody's mind. Hey, how should I model gross margin for the rest of the year? I would encourage you to kind of keep it roughly in the levels that we just guided you to in June. This is going to kind of level out at where it's at, I think, for the rest of the year. As you build your models, keep that in mind.

Doug Bettinger: Yeah. Let me add one quick thing. I know this is going to be a question on everybody's mind. Hey, how should I model gross margin for the rest of the year? I would encourage you to kind of keep it roughly in the levels that we just guided you to in June. This is going to kind of level out at where it's at, I think, for the rest of the year. As you build your models, keep that in mind.

Speaker #1: Hey , how should our model gross margin for the rest of the year ? I would encourage you to kind of keep it roughly in the levels that we , we just guided you to in June .

Speaker #1: This is this is going to kind of level out at where it's at , I think , for the rest of the year .

Speaker #1: So, as you build your models, keep that in mind.

Timothy Arcuri: Awesome, Doug. Thanks. I guess just as a follow-up-

Speaker #3: Awesome . Doug . Thanks . And I guess just as a follow up , so there's been a big , massive new fab project .

Douglas Bettinger: Yep.

Doug Bettinger: Yep.

Timothy Arcuri: There's been a big, massive new fab project. You guys have obviously seen this news, bigger than anything we've ever seen before. I'd think that this customer would have to get in the queue, given how booked out things are. I don't want to ask just about that one customer, but are you seeing signs of these huge new fab projects, sort of the customer base expanding? If you did want to comment on that particular fab project, if they're sort of coming to you as like a new opportunity, that'd be great.

Speaker #3: I mean , you guys have obviously seen this news bigger than anything we've ever seen before . I mean , I think that this customer would have to get in the queue given how booked out things are .

Speaker #3: Are you seeing— I mean, I don't want to ask just about that one customer, but are you seeing these signs of these huge new fab projects?

Speaker #3: Sort of the , the customer base expanding ? And if you did want to comment on that particular fab project , if they're sort of coming to you as like a new opportunity , that'd be great .

Timothy Archer: Yeah. Obviously, we can't comment on any specific customer, but clearly the environment right now is such that there's just not enough compute, there's not enough memory in the world, and people are worried about supply. I don't think it's a surprise that more companies around the world will start to enter into the semiconductor space. That's why when we talk about the longer-term outlook, it's a combination both of increased demand, but really increased demand at some of the most compelling leading-edge opportunities that are presented to Lam. I think when we talk about WFE, there's only so much that can be executed in this year. Again, you see a lot of these projects starting to line up that I think represents opportunity in the future.

Tim Archer: Yeah. Obviously, we can't comment on any specific customer, but clearly the environment right now is such that there's just not enough compute, there's not enough memory in the world, and people are worried about supply. I don't think it's a surprise that more companies around the world will start to enter into the semiconductor space. That's why when we talk about the longer-term outlook, it's a combination both of increased demand, but really increased demand at some of the most compelling leading-edge opportunities that are presented to Lam. I think when we talk about WFE, there's only so much that can be executed in this year. Again, you see a lot of these projects starting to line up that I think represents opportunity in the future.

Speaker #1: Yeah , obviously we can't comment on any specific customer , but clearly the environment right now is such that there is there's just not enough compute , there's not enough memory in the world .

Speaker #1: And so, people are worried about supply. And so, I don't think it's a surprise that more companies around the world will start to enter into the semiconductor space.

Speaker #1: And that's why when we talk about the longer term outlook , it's a combination of increased demand . But really increased demand at some of the most compelling leading edge opportunities that are presented to Lam .

Speaker #1: And so I think this is when we talk about W.F., there's only so much that can be executed in this year.

Speaker #1: But again, you see a lot of these projects starting to line up that I think represents opportunity in... Thanks, Tim.

Douglas Bettinger: Thanks, Tim.

Timothy Arcuri: Thanks, Tim.

Operator: Our next question comes from C.J. Muse with Cantor Fitzgerald.

Speaker #2: Our next question comes from CJ Muse with Cantor Fitzgerald.

C.J. Muse: Good afternoon. Thanks for taking the question. I just wanted to touch on your commentary around 2027 visibility, and can you kind of speak to your discussions, conversations exceeding 18, 24 months, whether you're starting to see real slotting and desire to lock in time frames for delivery? I guess as part of that, how are you kind of working your supply chain for readiness for that ramp?

Speaker #4: Good afternoon . Thanks for taking the question . I just wanted to touch on your commentary around 27 visibility and can you kind of speak to , you know , your discussions , you know , conversations exceeding , you know , 18 , 24 months , whether you're starting to see real slotting in desire to lock in and , you know , time for delivery .

Speaker #4: And I guess as part of that , how are you kind of working your supply chain for , for readiness for that ramp

Timothy Archer: Yeah. Clearly we're about halfway through 2026, and so given our lead times, of course, we're having conversations with customers about 2027. In some cases, for planning purposes, like getting resources ready, engineers hired and trained in the right locations, some of those conversations even extend beyond that. We have customers who clearly announced fabs with openings in 2028. There's no reason not to start having conversations with them about what the tooling is that's going to be required based on the node that we run, kind of the size, the resourcing requirements. I'd say we're in various stages of those conversations. The more visibility we have, the better we can get our supply chain and our own capabilities ready.

Tim Archer: Yeah. Clearly we're about halfway through 2026, and so given our lead times, of course, we're having conversations with customers about 2027. In some cases, for planning purposes, like getting resources ready, engineers hired and trained in the right locations, some of those conversations even extend beyond that. We have customers who clearly announced fabs with openings in 2028. There's no reason not to start having conversations with them about what the tooling is that's going to be required based on the node that we run, kind of the size, the resourcing requirements. I'd say we're in various stages of those conversations. The more visibility we have, the better we can get our supply chain and our own capabilities ready.

Speaker #1: Yeah . So clearly we're about halfway through 26 . And so given our lead times , of course , we're having conversations with customers about 27 you know , and in some cases , for planning purposes , like getting resources ready , engineers hired and trained in the right locations .

Speaker #1: Some of those conversations even extend beyond that. We have customers who have clearly announced fabs with openings in 2028. There's no reason not to start having conversations with them about what the tooling is.

Speaker #1: It's going to be required based on the node that we run . Kind of the size , the resourcing requirements . So I'd say we're in various stages of those , those conversations , but the more visibility we have , the better we can get our supply chain and our own capabilities ready .

Timothy Archer: I think it is a case where today our view on WFE, as I said, for 2026, really has a lot to do with what we believe can be executed. We talked about this upward bias. We're working a lot with customers on near-term constraints, things they can do within their existing fabs, at the same time preparing for those new fab openings and true kind of greenfield shipments as they roll out later this year and through next year.

Tim Archer: I think it is a case where today our view on WFE, as I said, for 2026, really has a lot to do with what we believe can be executed. We talked about this upward bias. We're working a lot with customers on near-term constraints, things they can do within their existing fabs, at the same time preparing for those new fab openings and true kind of greenfield shipments as they roll out later this year and through next year.

Speaker #1: You know , I think it is it is a case where today our view on WFC is , as I said , for 2026 , really has a lot to do with what we believe can be executed .

Speaker #1: We talked about this upward bias . We're working a lot with customers on near-term constraints , things they can do within their existing fabs , but at the same time , preparing for those , those new fab openings and true greenfield shipments as they as they roll out later this year and through next year .

Douglas Bettinger: Yeah. C.J., I'd just add, it feels like it's setting up to be a pretty good year in 2027 right now based on what we can see.

Doug Bettinger: Yeah. C.J., I'd just add, it feels like it's setting up to be a pretty good year in 2027 right now based on what we can see.

Speaker #1: Yeah, I just added, it feels like it's setting up to be a pretty good year in '27 right now, based on what we can see.

C.J. Muse: Excellent. Maybe a question on CSBG. Obviously, tremendous focus on trying to get every bit out the door in this very tight environment. Curious if kind of the upgrade business that you're seeing is sustainable, and is there kind of work that we should be thinking about for full calendar year 2026 revenue growth in that bucket? Thank you.

Speaker #4: Excellent . And then maybe a question on Csbg , obviously tremendous focus on trying to get every , every bit out the door in this very tight environment .

Speaker #4: Curious if kind of the upgrade business that you're seeing is sustainable, and is there work that we should be thinking about for full calendar year '26 revenue growth in that bucket?

Speaker #4: Thank you .

Douglas Bettinger: Yeah, C.J., no, it's a great question. Listen, I think we're feeling really good about CSBG. Industry utilizations are high, so spares was quite strong in March. Service was quite strong in March. Tim talked about the new Equipment Intelligence and cobots that we're rolling out. We're excited about that. Our customers are excited about that.

Doug Bettinger: Yeah, C.J., no, it's a great question. Listen, I think we're feeling really good about CSBG. Industry utilizations are high, so spares was quite strong in March. Service was quite strong in March. Tim talked about the new Equipment Intelligence and cobots that we're rolling out. We're excited about that. Our customers are excited about that.

Speaker #1: Yes . That's a great question . Listen , I think we're feeling really good about SPG industry . Utilizations are high . So spares was was quite strong in March .

Speaker #1: Service was quite strong in March. Tim talked about the new equipment intelligence and cobots that we're rolling out. We're excited about that.

Speaker #1: Our customers are excited about that . So when you see how strong it was in March , I think it popped up . I think it's going to sustain roughly at these levels as we go through the remaining quarters in the calendar year , maybe up a little bit .

Timothy Archer: When you see how strong it was in March, I think it popped up. I think it's going to kind of sustain roughly at these levels as we go through the remaining quarters in the calendar year, maybe up a little bit. I think we're feeling pretty good about the strength that we're seeing here. Frankly, we're innovating here too. I think we feel pretty good.

Doug Bettinger: When you see how strong it was in March, I think it popped up. I think it's going to kind of sustain roughly at these levels as we go through the remaining quarters in the calendar year, maybe up a little bit. I think we're feeling pretty good about the strength that we're seeing here. Frankly, we're innovating here too. I think we feel pretty good.

Speaker #1: But I think we're feeling pretty good about the strength that we're seeing here. And frankly, we're innovating here too. So I think we feel pretty good.

Operator: Our next question comes from Harlan Sur with JPMorgan.

Speaker #2: Our next question comes from Harlan Sur with JP Morgan.

Harlan Sur: Hey, good afternoon. Thanks for taking my question. When I speak with the process development and integration engineers, obviously of your customers, they're very focused on next generation technologies and architectures, and that's what we hear on these calls, right? How Lam is enabling 3D device architecture, cell structures, driving high aspect ratios, new materials, et cetera. Then when we speak with the manufacturing and operations teams, it's a very different focus, right? The vocabulary set is very different. It's all about throughput, uptime, defectivity, overall fab cycle time. Especially with the tight supply situation and constrained clean room space environment that we're in today, any incremental improvement in high volume productivity could unlock literally millions of dollars of incremental wafer output. You've talked about things like the Dextro cobot, but any other enhancements that you're driving, Tim, to the installed base on productivity and manufacturability?

Speaker #5: Hey , good afternoon . Thanks for taking my question . You know , when you when I speak with the process development and integration engineers , obviously of your customers , they're very focused on next generation technologies and architectures .

Speaker #5: And that's what we hear on these calls , right ? How Lam is enabling 3D device architecture , cell structures , driving high aspect ratios , new materials , etc.

Speaker #5: . But then when we speak with the manufacturing and operations teams , it's a very different focus , right ? And the vocabulary set is very different .

Speaker #5: It's all about throughput , uptime , dpph activity , overall fab cycle time , and especially with the tight supply situation and constrained space environment that we're in today , any incremental improvement in high volume productivity could unlock like literally millions of dollars of incremental wafer output .

Speaker #5: You've talked about things like the dextro cobot , but any other enhancements that you're driving , Tim , to the installed base on productivity and then durability and more importantly , like , how are you guys monetizing this ?

Harlan Sur: More importantly, how are you guys monetizing this? I assume it's maybe primarily services and upgrades.

Speaker #5: I assume it's maybe primarily services and upgrades.

Timothy Archer: Yeah. It is a two-focus world, as you talked about, and the good news is we've got the company organized in a way that we can focus on both with significant intensity. Clearly leading edge, being in front of those inflections a number of years, we said sometimes 5, 6, 7 years, you're working with a customer in advance of that node ever reaching production. At the same time, especially in the environment we're in right now, production output, uptime, yield, those things are really what are most critical to customers in the immediate term. Plus, I would say, really identifying the bottleneck tools within the customer that's limiting output and helping them with those workstations.

Tim Archer: Yeah. It is a two-focus world, as you talked about, and the good news is we've got the company organized in a way that we can focus on both with significant intensity. Clearly leading edge, being in front of those inflections a number of years, we said sometimes 5, 6, 7 years, you're working with a customer in advance of that node ever reaching production. At the same time, especially in the environment we're in right now, production output, uptime, yield, those things are really what are most critical to customers in the immediate term. Plus, I would say, really identifying the bottleneck tools within the customer that's limiting output and helping them with those workstations.

Speaker #1: Yeah , it's , it is a , it is a two focus world , as you talked about . And the good news is we , we've got the company organized in a way that we can focus on both with significant intensity .

Speaker #1: So clearly leading edge being in front of those inflections a number of years , you know , we said , you know , sometimes five , six , seven years , you're working with a customer in advance of that node ever reaching production .

Speaker #1: the same time , especially in the environment we're in right now , I mean , production output , uptime , yield , those things are really what are most critical to our customers in the immediate term .

Speaker #1: Plus , I would say really identifying the bottleneck tools within the customer that's limiting output and , and helping them with those , those workstations , equipment , intelligence .

Timothy Archer: Equipment Intelligence, if you think about what it does, is it allows us to look at massive amounts of data coming from our tools on every single wafer, and that shortens troubleshooting time if there is a problem with the tool. It helps us with the time to ramp those tools, either on a new process or as they start up. It helps us to match tools better, tool to tool, chamber to chamber. All those things can lead to those tiny little improvements in yield that really do matter for the customer. On the Dextro cobot, we've talked about the fact that at some customers, the precision and repeatability of the maintenance has actually yielded improvements in both output and yield. It does that through better first time right. You do the maintenance, it comes back up, and is back into production more quickly.

Tim Archer: Equipment Intelligence, if you think about what it does, is it allows us to look at massive amounts of data coming from our tools on every single wafer, and that shortens troubleshooting time if there is a problem with the tool. It helps us with the time to ramp those tools, either on a new process or as they start up. It helps us to match tools better, tool to tool, chamber to chamber. All those things can lead to those tiny little improvements in yield that really do matter for the customer. On the Dextro cobot, we've talked about the fact that at some customers, the precision and repeatability of the maintenance has actually yielded improvements in both output and yield. It does that through better first time right. You do the maintenance, it comes back up, and is back into production more quickly.

Speaker #1: If you think about what it does is it allows us to look at massive amounts of data coming from our tools on every single wafer .

Speaker #1: And that shortens troubleshooting time. If there is a problem with the tool, it helps us with the time to ramp up those tools, either on a new process or as they start up, and helps us to match tools.

Speaker #1: Better tool to tool chamber to chamber . All those things can yield lead to those those tiny little improvements in yield that really do matter for the customer on the dextro Cobot we've talked about the fact that at some customers , the precision and repeatability of the maintenance is actually yielded improvements in in both output and yield .

Speaker #1: And does through that , through better first time , right ? You do the maintenance , it comes back up and is back into production more quickly .

Timothy Archer: Also just the improved repeatability of, let's say, the new part placement inside the chamber, actually has had some positive impact on yield. That's something we're really focused on. How do we monetize it? Yeah, it's through services, and obviously, in some cases, new tool sales.

Tim Archer: Also just the improved repeatability of, let's say, the new part placement inside the chamber, actually has had some positive impact on yield. That's something we're really focused on. How do we monetize it? Yeah, it's through services, and obviously, in some cases, new tool sales.

Speaker #1: And also, just the improved repeatability of, like, let's say, new part placement inside the chamber actually has had some positive impact on the yield.

Speaker #1: So that's a something we're really focused on . How do we monetize it ? Yeah , it's through services . And , and obviously in some cases , new tool sales .

Harlan Sur: Yeah. Okay. Thank you. I appreciate that. For Doug, your OpEx grew 5% sequentially in the March quarter. Implied OpEx growth in June is 7%. Given the leverage, it's allowing you to actually exceed your long-term operating margin targets of 35%. How should we think about the OpEx growth through the remainder of this year? I guess, when is the team going to update its long-term targets? Because as the year unfolds with more revenue growth, you're clearly going to drive margins above the 36.5% operating margin range that you guided to for June, right? When is the team contemplating updating its long-term targets? Thank you.

Speaker #5: Yeah . Okay . Thank you . I appreciate that . And for your 5% sequentially in the March quarter , implied opex growth in June is 7% .

Speaker #5: And given the leverage, it's allowing you to actually exceed your long-term operating margin targets of 35%. So how should we think about opex growth through the remainder of this year?

Speaker #5: And I guess , when is the team going to update its long term targets ? Because as the year unfolds on , more revenue growth , you're clearly going to drive margins above the 36.5% margin range that you guided to for June .

Speaker #5: Right . So what is the team contemplating like updating this long term targets ? Thank you .

Douglas Bettinger: Yeah, no, Harlan, it's a great question. First, let me talk about the spending trajectory for the year. Listen, I think at the end of the day, this management team likes to see the top line growing faster than spending so that we can deliver leverage, and that's absolutely how we're thinking about things this year. Having said that, we're going to grow spending this year because frankly, we can afford to do so, and we have some things that I think are quite innovative that we've been thinking about that we've wanted to put a little more money towards. We're going to do that. We've decided we're going to do that this year.

Doug Bettinger: Yeah, no, Harlan, it's a great question. First, let me talk about the spending trajectory for the year. Listen, I think at the end of the day, this management team likes to see the top line growing faster than spending so that we can deliver leverage, and that's absolutely how we're thinking about things this year. Having said that, we're going to grow spending this year because frankly, we can afford to do so, and we have some things that I think are quite innovative that we've been thinking about that we've wanted to put a little more money towards. We're going to do that. We've decided we're going to do that this year.

Speaker #6: Yeah . No , that's a great question . First , let me talk about this spending trajectory for the year . Listen , I think at the end of the day , this management team likes to see the top line growing faster than spending so that we can deliver leverage .

Speaker #6: And that's absolutely how we're thinking about things this year. Having said that, we're going to grow spending this year because, frankly, we can afford to do so.

Speaker #6: And we have some things that I think are quite innovative that we've been thinking about, that we've wanted to put a little more money towards.

Speaker #6: So we're going to do that . We've decided we're going to do that this year . And yeah , you know , we're talking internally about the fact that we're above the previous model that we gave .

Douglas Bettinger: Yeah, we're talking internally about the fact that we're above the previous model that we gave, and yeah, I know we need to give you an updated framework, and we will do that later in the year. We haven't bottomed out on exactly when or exactly how we're going to do it, but we know we need to, and we will be doing that, Harlan.

Doug Bettinger: Yeah, we're talking internally about the fact that we're above the previous model that we gave, and yeah, I know we need to give you an updated framework, and we will do that later in the year. We haven't bottomed out on exactly when or exactly how we're going to do it, but we know we need to, and we will be doing that, Harlan.

Speaker #6: And yeah, I know we need to give you an updated framework, and we will do that later in the year. And we haven't bottomed out on exactly when or exactly how we're going to do it, but we know we need to and we will be doing that.

Speaker #6: Harlan

Operator: Our next question comes from Atif Malik with Citi.

Speaker #2: Our next question comes from Atif Malik with Citi.

Atif Malik: Hi, thank you for taking my question. My question is on the NAND market. It seems like near term, NAND is still low, like 12% of sales, but something has changed versus 90 days ago. You guys are talking about NAND growing through the year and the pull forward in the $40 billion number. What has changed in the NAND market? Are you seeing signs of capacity additions or what has changed? Maybe it's CXL cache.

Speaker #1: I think you take my question . My question is on the Nand market . It seems like near-term Nand is still low . Like 12% of sales , but something has changed versus 90 days ago .

Speaker #1: You guys are talking about NAND growing through the year and a pull forward in the $40 billion number. So, can you—has that changed the NAND market?

Speaker #1: Are you seeing signs of capacity additions or what has changed? Maybe it's KB cache. Yeah. We didn't mention KB cache, but I think it's a good example of exactly what I was referring to when I talked about it.

Timothy Archer: Yeah, we didn't mention KV cache, but I think it's a good example of exactly what I was referring to when I talked about its increasingly important role in the AI memory hierarchy. Clearly there is increased demand for NAND coming from AI data centers, and that's helpful. Also, if you think of, on a relative basis, somewhat under-investment in that area, partly as customers made choices about clean room allocation and obviously some other devices like HBM were so hot during that period. Also, going back to what we said early last year, the installed base had gotten a little bit behind in terms of the state-of-the-art technology. Most of the installed base at that time, early 2025, about two-thirds of it was still running in the 1XX 100-plus layer technologies.

Tim Archer: Yeah, we didn't mention KV cache, but I think it's a good example of exactly what I was referring to when I talked about its increasingly important role in the AI memory hierarchy. Clearly there is increased demand for NAND coming from AI data centers, and that's helpful. Also, if you think of, on a relative basis, somewhat under-investment in that area, partly as customers made choices about clean room allocation and obviously some other devices like HBM were so hot during that period. Also, going back to what we said early last year, the installed base had gotten a little bit behind in terms of the state-of-the-art technology. Most of the installed base at that time, early 2025, about two-thirds of it was still running in the 1XX 100-plus layer technologies.

Speaker #1: It's an increasingly important role in the AI memory hierarchy. And so, clearly, there is increased demand for NAND coming from AI data centers.

Speaker #1: And that's helpful . But also if you think about the on a relative basis , somewhat underinvestment in that area , partly as customers make choices about clean room allocation and obviously some other devices , HBM were so hot during that period .

Speaker #1: Also , going back to what we said early last year , you know , the installed base had gotten a little bit behind in terms of the state of the art technology .

Speaker #1: And so most of the installed base at that time , early 2025 , about two thirds of it was still running in the the 100 hundred plus layer technologies .

Timothy Archer: Really, when you need to get those incremental bits out now, you need to be 200-layer plus. That's what's caused this acceleration is you need more bits, you need those bits to be more capable, you need QLC to meet AI data center demands. You've started to see the push for accelerated conversions in the technology, and that's what caused a lot more activity in the NAND space. As people pushed forward, we then also said, "Look, the conversions are going to happen because that's the quickest way to get to the higher capability, but you'll also need greenfield because those technology improvements, like in Lam's case, to go above 200-layer, we talked about the number of new tools you need to add to manage the complexity of higher layer count stacks." That in and of itself reduces total wafer output capacity of the industry.

Tim Archer: Really, when you need to get those incremental bits out now, you need to be 200-layer plus. That's what's caused this acceleration is you need more bits, you need those bits to be more capable, you need QLC to meet AI data center demands. You've started to see the push for accelerated conversions in the technology, and that's what caused a lot more activity in the NAND space. As people pushed forward, we then also said, "Look, the conversions are going to happen because that's the quickest way to get to the higher capability, but you'll also need greenfield because those technology improvements, like in Lam's case, to go above 200-layer, we talked about the number of new tools you need to add to manage the complexity of higher layer count stacks." That in and of itself reduces total wafer output capacity of the industry.

Speaker #1: Really , when you need to get those incremental bits out now you need to be 200 layer plus . And so that's what's caused this acceleration is you need more bits , you need those bits to be more capable .

Speaker #1: You need QLC to meet AI data center demands, and so you've started to see the push for accelerated conversions in the technology.

Speaker #1: And that is . That's what caused a lot more activity in the Nand space as , as people push forward . We then also said , look , the conversions are going to happen because that's the quickest way to get to the higher capability .

Speaker #1: But you also need greenfield, because those technology improvements—like in landscapes to go above 200 layers. We talked about the number of new tools you need to add to manage the complexity of higher layer count stacks.

Speaker #1: That in and of itself reduces total wafer output capacity of the industry. And so, eventually, you need to add greenfield back to continue to get the big growth needs.

Timothy Archer: Eventually you need to add greenfield back to continue to get the big growth you need. That's the reason we've started talking about it, is it's materializing as a significant opportunity now on the revenue side for Lam, and looks to be so for quite some time.

Tim Archer: Eventually you need to add greenfield back to continue to get the big growth you need. That's the reason we've started talking about it, is it's materializing as a significant opportunity now on the revenue side for Lam, and looks to be so for quite some time.

Speaker #1: So that's the reason we started talking about it—it's materializing as a significant opportunity. Now, on the revenue side for Lam, and it looks to be so for quite some time. Thanks, Tim.

Atif Malik: Yeah. Thanks, Tim. Doug, you talked about customer down payments at the lowest level in four years, and you're also talking about WFE growing in next year. Can you reconcile those two comments?

Speaker #7: You talked about customer down payments at the lowest level in four years, and you're also talking about WFH growing in the next year. Can you reconcile those two comments?

Douglas Bettinger: I guess what I would tell you, Atif, is the group of customers that generally provide the down payments aren't the ones that are growing the quickest, and that's absolutely what we're seeing going on right now.

Doug Bettinger: I guess what I would tell you, Atif, is the group of customers that generally provide the down payments aren't the ones that are growing the quickest, and that's absolutely what we're seeing going on right now. Thanks, Atif.

Speaker #6: I guess what I would tell you, Atif, is the group of customers that generally provide the down payments aren't the ones that are growing the quickest, and that's absolutely what we're seeing going on right now.

Atif Malik: Thanks, Atif.

Operator: Our next question comes from Melissa Weathers with Deutsche Bank.

Speaker #2: The question comes from Melissa Weathers with Deutsche Bank.

Melissa Weathers: Hi there. Thanks for letting me ask a question. I had a more thematic question, maybe for Tim, or Doug, if you want to take a stab, you can, too. We've heard a lot about reasons why this memory cycle is different with HBM and trade ratios and new applications like SOCAMM. It does seem like AI is driving memory bit demand growth a lot faster than what we've seen historically. I guess, do you ascribe to the view that this memory cycle is, I won't say the D word, but there's a change this time around? Then what kind of actions are you taking to de-risk the cyclical side of things, while still being able to capture the upside?

Speaker #8: Hi there . Thanks for letting me ask a question . I had a more thematic question maybe for Tim or Doug . If you want to take a stab , you can to We've heard a lot about reasons why this memory cycle is different with HBM and trade ratios and new applications like so cam .

Speaker #8: And it does seem like AI is driving memory demand growth a lot faster than what we've seen historically . So I guess , do you ascribe to the view that this memory cycle is I won't say the D word , but there's a change this time around .

Speaker #8: And then, what kind of actions are you taking to de-risk the cyclical side of things while still being able to capture the upside?

Timothy Archer: Okay. Well, it's a great question, and maybe I won't use the D word either, but I think it's, or maybe I will. I think it's different for Lam in that, and there was an earlier question that talked about how so many of these new devices have different architectures, 3D scaling. I think the most important thing about this memory cycle is it is a cycle in which you're seeing dramatic improvement and change in the etch and dep intensity. The complexity of 3D scaling has created a lot of new opportunities for Lam. That is driving both SAM expansion plus share gain for us through those new applications. I feel like compared to prior upturns in memory, we're doing even better just because of that extra layer of etch and dep intensity scaling.

Tim Archer: Okay. Well, it's a great question, and maybe I won't use the D word either, but I think it's, or maybe I will. I think it's different for Lam in that, and there was an earlier question that talked about how so many of these new devices have different architectures, 3D scaling. I think the most important thing about this memory cycle is it is a cycle in which you're seeing dramatic improvement and change in the etch and dep intensity. The complexity of 3D scaling has created a lot of new opportunities for Lam. That is driving both SAM expansion plus share gain for us through those new applications. I feel like compared to prior upturns in memory, we're doing even better just because of that extra layer of etch and dep intensity scaling.

Speaker #1: Okay , well , it's a great question and maybe I won't use the D word either , but I think it's it . Or maybe I will .

Speaker #1: I think it's different for Lam in that. And there was an earlier question that talked about how so many of these new devices have different architectures, 3D scaling.

Speaker #1: And so I think the most important thing about this memory cycle is it is a cycle in which you're seeing dramatic improvement and change in the etch and intensity.

Speaker #1: And so, you know, the complexity of 3D scaling has created a lot of new opportunities for Lam. And so that is driving both.

Speaker #1: Sam expansion plus share plus share gain for us through those new , new applications . So I feel like compared to prior upturns in memory , we , we are and we're doing even better just because of that , that extra layer of etching , depth , intensity , scaling .

Timothy Archer: How do we prepare if there is ultimately that peak, which we're certainly not calling right now given the tremendous demand that's out there. We operate very flexibly. Doug talked about a lot of our operational investments we've made. In many cases, some of the things we've talked about, Dextro cobots, Equipment Intelligence, these are all kinds of capabilities that in many ways allow us to support our customers without so much of the fixed cost scaling that we had to make in the past. We always have an eye on what's it going to look like if the business were to slow down. I think if you look at our track record in those periods, we've also outperformed.

Tim Archer: How do we prepare if there is ultimately that peak, which we're certainly not calling right now given the tremendous demand that's out there. We operate very flexibly. Doug talked about a lot of our operational investments we've made. In many cases, some of the things we've talked about, Dextro cobots, Equipment Intelligence, these are all kinds of capabilities that in many ways allow us to support our customers without so much of the fixed cost scaling that we had to make in the past. We always have an eye on what's it going to look like if the business were to slow down. I think if you look at our track record in those periods, we've also outperformed.

Speaker #1: How do we prepare , you know , if there is ultimately that peak , which , you know , we're not , we're certainly not calling right now , given the tremendous demand that's out there .

Speaker #1: But it is , you know , we operate very flexibly . I mean , Doug talked about a lot of our operational investments .

Speaker #1: We've made . And in many cases , some of the things we've talked about . Dextro , Cobots equipment intelligence , these are all kinds of capabilities that in many ways allow us to support our customers without so much of the fixed cost scaling that we had had to make in the past .

Speaker #1: And so we always have an eye on what it's going to look like if the business were to slow down. And I think if you look at our track record in those periods, we've also outperformed.

Douglas Bettinger: Melissa, maybe I'd just add, the way I'm looking at this right now is memory is just so critical in all of these accelerated compute architectures. To feed the parallel compute, you need just data coming in to keep the machine going. The criticality of it maybe is more than it's ever been, from my point of view. I observe, maybe I'll use a different D word, disciplined investment, right? Everybody likes profitability that they're generating right now. Everybody is just kind of plugging into where demand is, and I think that's a good thing for all of us in the industry.

Doug Bettinger: Melissa, maybe I'd just add, the way I'm looking at this right now is memory is just so critical in all of these accelerated compute architectures. To feed the parallel compute, you need just data coming in to keep the machine going. The criticality of it maybe is more than it's ever been, from my point of view. I observe, maybe I'll use a different D word, disciplined investment, right? Everybody likes profitability that they're generating right now. Everybody is just kind of plugging into where demand is, and I think that's a good thing for all of us in the industry.

Speaker #6: And Melissa , maybe I just add , I mean , the way I'm looking at this right now is memory is just so critical in all of these accelerated compute architectures to feed the parallel compute , you need just data coming in to keep the machine going .

Speaker #6: And so the criticality of it maybe is more than it's ever been from my point of view . And I observe , maybe I'll use a different D word disciplined investment , right ?

Speaker #6: I mean, everybody likes the profitability that they're generating right now. Everybody is just kind of legging into where demand is. And I think that's a good thing for all of us in the industry.

Operator: Our next question comes from Srinivas Pajjuri with RBC Capital Markets.

Speaker #2: Our next question comes from Sarine with RBC Capital Markets.

Srinivas Pajjuri: Thank you. My question is on China. Doug, I think your comment about prepayments being down. I'm guessing that's related to China. Can you talk about what you're seeing in terms of the demand environment in China? As you go through the next few quarters, what's your expectations?

Srini Pajjuri: Thank you. My question is on China. Doug, I think your comment about prepayments being down. I'm guessing that's related to China. Can you talk about what you're seeing in terms of the demand environment in China? As you go through the next few quarters, what's your expectations?

Speaker #9: Thank you . My question is on China . I think your comment about prepayments being down , I'm guessing that's related to China .

Speaker #9: Can you talk about what you're seeing in terms of the demand environment in China? And as you go through the next few quarters, what your expectation is?

Douglas Bettinger: Yeah. I think, Srini, what we described a quarter ago is still the way I would describe it this year. I think WFE in China is flattish year over year from 2025 to 2026. Maybe it's up a little bit. You're just seeing so significant growth from the global multinational set of customers that China, as a percent of the overall revenue, is coming down. The other dynamic in China is you're starting to see some of the global multinationals in China spending a little bit more too. When you look at that overall geographic distribution in China, it's also broadening out in that regard. Yeah, you're right about the fact that down payments are down. Down payments tend to come from smaller customers, and a lot of them are in the China region. Those two things are correlated together.

Doug Bettinger: Yeah. I think, Srini, what we described a quarter ago is still the way I would describe it this year. I think WFE in China is flattish year over year from 2025 to 2026. Maybe it's up a little bit. You're just seeing so significant growth from the global multinational set of customers that China, as a percent of the overall revenue, is coming down. The other dynamic in China is you're starting to see some of the global multinationals in China spending a little bit more too. When you look at that overall geographic distribution in China, it's also broadening out in that regard. Yeah, you're right about the fact that down payments are down. Down payments tend to come from smaller customers, and a lot of them are in the China region. Those two things are correlated together.

Speaker #6: Yeah , I think Srini , what we described a quarter ago is still the way I would describe it this year . I think WFP in China is a flattish year over year from 25 to 26 .

Speaker #6: Maybe it's up a little bit, but you're just seeing so significant growth from the global multinational set of customers that China, as a percent of the overall revenue, is coming down.

Speaker #6: The other dynamic in China is you're starting to see some of the global multinationals in China spending a little bit more too. So when you look at that overall geographic distribution in China, it's also broadening out in that regard.

Speaker #6: And yeah, you're right about the fact that down payments are down. Those down payments tend to come from smaller customers, and a lot of them are in the China region.

Speaker #6: And so those two things are correlated together.

Srinivas Pajjuri: Okay, great. My next question is on the CSBG. Obviously, I think it grew in a double-digit pace for the last several years. I think last quarter, if I recall correctly, I think you were expecting high single digits because of the Reliant slowdown here. It does seem like the clean room issue is not going to get resolved. Demand is very strong. My question is, are you seeing any acceleration in terms of your services and spares business? Is this something structural in your view going forward?

Srini Pajjuri: Okay, great. My next question is on the CSBG. Obviously, I think it grew in a double-digit pace for the last several years. I think last quarter, if I recall correctly, I think you were expecting high single digits because of the Reliant slowdown here. It does seem like the clean room issue is not going to get resolved. Demand is very strong. My question is, are you seeing any acceleration in terms of your services and spares business? Is this something structural in your view going forward?

Speaker #9: Okay , great . And then my next question is on the Csbg . So obviously , you know , I think it grew in double digit pace for the last several years .

Speaker #9: And I think last quarter , if I recall correctly , I think you were expecting high single digits because of the reliant slowdown here , but it does seem like the clean room issue is not going to get resolved .

Speaker #9: Demand is very strong . So my question is , should we are you seeing any acceleration in terms of your services and spares business ?

Speaker #9: Is this something structural, in your view, going forward?

Douglas Bettinger: Listen, Srini, and I'll let Tim comment after I give you a little bit of data. What drives a lot of spares in service, frankly, is utilization in the overall industry. Utilization right now and in the March quarter is very, very high. A lot of the growth, or at least contributing to some of the sequential growth in CSBG, was the uptick in spares and service from that utilization. I don't know that utilization can get any higher than it is. Frankly, it's pretty full out right now. When you think about growth sequentially over the next couple of quarters, those components of CSBG are probably kind of plus or minus where they are. Now, Tim talked about advanced service and cobots and AI. That layers on top of that to a certain extent.

Doug Bettinger: Listen, Srini, and I'll let Tim comment after I give you a little bit of data. What drives a lot of spares in service, frankly, is utilization in the overall industry. Utilization right now and in the March quarter is very, very high. A lot of the growth, or at least contributing to some of the sequential growth in CSBG, was the uptick in spares and service from that utilization. I don't know that utilization can get any higher than it is. Frankly, it's pretty full out right now. When you think about growth sequentially over the next couple of quarters, those components of CSBG are probably kind of plus or minus where they are. Now, Tim talked about advanced service and cobots and AI. That layers on top of that to a certain extent.

Speaker #6: And I'll let Tim comment after I give you a little bit of data . What drives a lot of spares and service ? Frankly , is utilization in the overall industry utilization right now and in the March quarter is very , very high .

Speaker #6: And so a lot of the growth, or at least contributing to some of the sequential growth in CSG, was the uptick in spares and service from that utilization.

Speaker #6: I don't know that utilization can get any higher than it is . Frankly . It's pretty full out right now . And so when you think about growth sequentially over the next couple of quarters , those components of csbg are probably kind of plus or minus where they are now .

Speaker #6: Tim talked about advanced service and cobots and AI that layers on top of that, to a certain extent. And then also, if you think about what's going on in mature node spending, a lot of that is what drives Reliant.

Douglas Bettinger: also, if you think about what's going on in mature node spending, a lot of that is what drives Reliant, and that's flattish this year. The real growth is coming from stuff at the leading edge, which we're really benefiting from the move to etch and dep intensity. Anyway, that's just a few things to think about relative to CSBG. Anything you'd add, Tim?

Doug Bettinger: also, if you think about what's going on in mature node spending, a lot of that is what drives Reliant, and that's flattish this year. The real growth is coming from stuff at the leading edge, which we're really benefiting from the move to etch and dep intensity. Anyway, that's just a few things to think about relative to CSBG. Anything you'd add, Tim?

Speaker #6: And that's , you know , flattish this year . The real growth is coming from stuff at the leading edge , which we're really benefiting from the move to edge and depth intensity .

Speaker #6: So anyway, that's just a few things to think about relative to CSBG. Anything you'd add, Tim?

Timothy Archer: No, not really. I would just point out that when you're trying to work on constrained workstations within a fab, again, this is where things like the Equipment Intelligence, how to get those tools up faster to production, there's a lot of focus on that. That's the short-term prove out, and I think that long-term, that then has a real benefit, because once the value has been seen in this kind of constrained environment, I think that it'll be more likely that new fabs get built with all of those intelligent services and automated maintenance capabilities built in right from the start.

Tim Archer: No, not really. I would just point out that when you're trying to work on constrained workstations within a fab, again, this is where things like the Equipment Intelligence, how to get those tools up faster to production, there's a lot of focus on that. That's the short-term prove out, and I think that long-term, that then has a real benefit, because once the value has been seen in this kind of constrained environment, I think that it'll be more likely that new fabs get built with all of those intelligent services and automated maintenance capabilities built in right from the start.

Speaker #1: No , not really . I would just , I would just point out that , you know , when you're trying to work on constrained workstations within a fab , you know , again , this is where things like the equipment intelligence , how to get those tools up faster for production .

Speaker #1: There's a lot of focus on that . You know , that's , that's the short term prove out . And I think that long term that then has a real benefit because , you know , once the value has been seen in this kind of constrained environment , I think that it'll be more likely that new fabs get built with all of those intelligent services and automated maintenance capabilities built in , right from the start

Douglas Bettinger: Operator, next question, please. Thanks, Srini.

Doug Bettinger: Operator, next question, please. Thanks, Srini.

Operator: Next question comes from Vivek Arya from Bank of America.

Speaker #7: Operator next question .

Speaker #6: Please. Thanks, Ray.

Speaker #2: Next question comes from Vivek, Ara from Bank of America.

Vivek Arya: Thanks for taking my question. Tim, many of your memory customers are talking about long-term contracts, LTAs, pricing arrangements, and whatnot. How is that translating into your visibility and pricing power? Should we expect customers to start putting down payments to secure your capacity also? If not, why not?

Speaker #10: Thanks for taking my question . To many of your memory . Customers are talking about long term contracts . Ltas , you know , pricing arrangements and whatnot .

Speaker #10: How is that translating into your visibility and pricing power? Should we expect customers to start putting down down payments to secure your capacity?

Speaker #10: Also? And if not, why not?

Timothy Archer: Well, it's a good question. I would say that it's translated into a longer visibility for us. As I mentioned in an answer earlier, clearly we're having conversations with customers now at around the time that they're starting to construct these fabs, which means we have much longer visibility. I think the most important thing there is to be ready with the resources that are needed and our own capacity to be needed to support those shipments. I would say, we're working with customers today short-term in their existing fabs. We're working with them with these long-term fab plans and being ready. In many ways, that's allowing us to be more efficient. Doug talked about disciplined build-out in our operational capabilities, our manufacturing, our supply chain. I would say that it is translating into financial benefit for Lam as well by having those longer visibility conversations.

Tim Archer: Well, it's a good question. I would say that it's translated into a longer visibility for us. As I mentioned in an answer earlier, clearly we're having conversations with customers now at around the time that they're starting to construct these fabs, which means we have much longer visibility. I think the most important thing there is to be ready with the resources that are needed and our own capacity to be needed to support those shipments. I would say, we're working with customers today short-term in their existing fabs. We're working with them with these long-term fab plans and being ready. In many ways, that's allowing us to be more efficient. Doug talked about disciplined build-out in our operational capabilities, our manufacturing, our supply chain. I would say that it is translating into financial benefit for Lam as well by having those longer visibility conversations.

Speaker #1: Well , it's it's a good question . I would say that it's translated into longer visibility for us , as I mentioned in a answer earlier , clearly we're having conversations with customers now at around the time that they're starting to construct these fabs , which means we have much longer visibility .

Speaker #1: And I think the most important thing there is to be ready with the resources that are needed, and our own capacity to support those shipments as needed.

Speaker #1: And so, I would say we're working with customers today, short term, in their existing fabs. We're working with them with these long-term fab plans and being ready.

Speaker #1: And you know , in many ways that's allowing us to be more efficient . Doug talked about disciplined build out in our operational capabilities , our manufacturing , our supply chain .

Speaker #1: I would say that it is translating into financial benefit for Lam as well, by having those longer visibility conversations.

Douglas Bettinger: Vivek, listen, we're having very long-term conversation with customers, but we don't need down payments. We generate ample free cash flow from the business we run. The commitments we're going to get from customers are important and significant, and they're happening certainly, but it doesn't require down payments for us.

Doug Bettinger: Vivek, listen, we're having very long-term conversation with customers, but we don't need down payments. We generate ample free cash flow from the business we run. The commitments we're going to get from customers are important and significant, and they're happening certainly, but it doesn't require down payments for us.

Speaker #6: Vivek , I mean , listen , we're having very long term conversations with customers , but we don't need down payments . We generate ample free cash flow from the business .

Speaker #6: We run , you know , the commitments we're going to get from customers are important . And significant , and they're happening certainly , but it doesn't require down payments for us .

Vivek Arya: All right. I guess maybe the subtext of my question is the gross margins that you're seeing, the 50.5%, how durable are they? Let's say if memory pricing goes down next year for whatever reason, do you still think these gross margins are sustainable and maybe you can even expand from these? Do you think these gross margins are because the industry is so tight today? I'm not asking for a gross margin forecast per se. I'm just trying to understand that if your customers are getting assurance of their pricing, is there anything Lam can do to help get assurance around your pricing and the sustainability of your margins over the next one, two years?

Speaker #10: I guess maybe the subtext of my question is the gross margins that you are seeing , right ? The 50.5% , how durable are they ?

Speaker #10: So let's say if memory pricing goes down next year for for whatever reason , do you still think , you know , these gross margins are sustainable and maybe , you know , you can even expand from these , or do you think these gross margins are because the industry is so tight ?

Speaker #10: Today ? So I'm not asking for a gross margin forecast per se . I'm just trying to understand that if you're a customers are getting assurance of their pricing , is there anything Lam can do to help get assurance around your pricing and your the sustainability of your margins over the next one two years ?

Timothy Archer: Yeah. Obviously, we're not going to give you a gross margin forecast longer term. I think that what you can see and what we've said is we have been building the gross margin improvement in our company around fundamental capabilities, either our own, through our own operational efficiency, or through the value that our equipment delivers. That can be technically as the manufacturing becomes more complex. It can be the unique capabilities our tools provide from a technical or a productivity perspective. We have moved at a pace where we feel like the improvements we're making are sustainable because they're rooted in real value or real efficiency. They're not leveraging sort of the opportunity, and they're not transactional in nature. They're really founded in fundamental value delivered to the customer.

Tim Archer: Yeah. Obviously, we're not going to give you a gross margin forecast longer term. I think that what you can see and what we've said is we have been building the gross margin improvement in our company around fundamental capabilities, either our own, through our own operational efficiency, or through the value that our equipment delivers. That can be technically as the manufacturing becomes more complex. It can be the unique capabilities our tools provide from a technical or a productivity perspective. We have moved at a pace where we feel like the improvements we're making are sustainable because they're rooted in real value or real efficiency. They're not leveraging sort of the opportunity, and they're not transactional in nature. They're really founded in fundamental value delivered to the customer.

Speaker #11: Yeah .

Speaker #1: You know what ? I obviously we're not going to give you a gross margin forecast longer term , but I think that what you can see and what we've said is we , we have been building the gross margin improvement in our company around fundamental capabilities .

Speaker #1: Either our own, through our own operational efficiency, or through the value that our equipment delivers. And that can be technical, as the manufacturing becomes more complex.

Speaker #1: It can be , you know , the unique capabilities , our tools provide from a technical or a productivity perspective . And so , you know , we have moved at a pace where we feel like the improvements we're making are sustainable because they're rooted in real value or real efficiency .

Speaker #1: And they're not a , they're not leveraging sort of the opportunity and they're not transactional in nature . They're really founded in fundamental value delivered to the customer .

Timothy Archer: When I talk about things like cobots, for instance, the value of a cobot is rooted directly in the value being delivered to the customer through better uptime, better yield, and we get paid for that. I think those types of things are sustainable. When we deliver technology that enables the move to the next technology node, we think those are sustainable regardless of the cycle, because it is delivering value to the customer. We're in this for the long term with our customers, and that's the way we look at all of this.

Tim Archer: When I talk about things like cobots, for instance, the value of a cobot is rooted directly in the value being delivered to the customer through better uptime, better yield, and we get paid for that. I think those types of things are sustainable. When we deliver technology that enables the move to the next technology node, we think those are sustainable regardless of the cycle, because it is delivering value to the customer. We're in this for the long term with our customers, and that's the way we look at all of this.

Speaker #1: And , you know , when I talk about things like , you know , cobots , for instance , the value of a cobot is rooted directly in the value being delivered to the customer through better uptime , better yield , and we get paid for that .

Speaker #1: And I think those types of things are sustainable when we deliver technology that enables the , the move to the next technology node , we think those are sustainable regardless of the cycle , because it is delivering value to the customer .

Speaker #1: And that's , you know , we're in this for the long term with our customers . And that's , that's what we look at at all of this .

Douglas Bettinger: Thanks, Brett.

Doug Bettinger: Thanks, Brett.

Operator: Our next question comes from James Schneider with Goldman Sachs.

Speaker #6: Thanks , Beck .

Speaker #2: Our next question comes from Jim Schneider with Goldman Sachs.

James Schneider: Good afternoon. Thanks for taking my question. I was wondering if you could maybe comment on, in terms of the WFE uptick you expect, which of the product areas do you expect the most kind of incremental leverage? Is it kind of split across all of them? You talked about advanced packaging, but which was driving the most upside to the overall spending envelope this year, do you believe? Is that being driven mostly by early fab clean room pull-ins or something else? Thank you.

Jim Schneider: Good afternoon. Thanks for taking my question. I was wondering if you could maybe comment on, in terms of the WFE uptick you expect, which of the product areas do you expect the most kind of incremental leverage? Is it kind of split across all of them? You talked about advanced packaging, but which was driving the most upside to the overall spending envelope this year, do you believe? Is that being driven mostly by early fab clean room pull-ins or something else? Thank you.

Speaker #12: Good afternoon . Thanks for taking my question . I was wondering if you could maybe comment on in terms of the the uptick you expect , which of the product areas do you expect the most kind of incremental leverage ?

Speaker #12: Is it kind of split across all of them? You talked about advanced packaging, but which was driving the most upside to the overall spending envelope this year?

Speaker #12: Do you believe ? And is that being driven mostly by early ? You know , fab clean room pull ins or something else ?

Douglas Bettinger: Yeah, Jim, I'll comment. If Tim wants to add, I'll let him do that. I think, the reality of it is everything is a little bit stronger. I think everybody in the industry is working on finding little bits of clean room that they've been able to just accelerate to a certain extent. Demand has always been there. Demand is as strong as I can remember it, frankly. It was strong 90 days ago. It continues to be maybe even a little bit stronger right now, and everybody found a little bit more clean room, and so they were able to take a little bit more equipment. Do you have a follow-up, Jim?

Doug Bettinger: Yeah, Jim, I'll comment. If Tim wants to add, I'll let him do that. I think, the reality of it is everything is a little bit stronger. I think everybody in the industry is working on finding little bits of clean room that they've been able to just accelerate to a certain extent. Demand has always been there. Demand is as strong as I can remember it, frankly. It was strong 90 days ago. It continues to be maybe even a little bit stronger right now, and everybody found a little bit more clean room, and so they were able to take a little bit more equipment. Do you have a follow-up, Jim?

Speaker #12: Thank you Jim .

Speaker #6: I'll comment, and then if Tim wants to add, I'll let him do that. I think, you know, the reality of it is everything is a little bit stronger.

Speaker #6: I think everybody in the industry is working on finding little bits of cleanroom that they've been able to just accelerate to a certain extent.

Speaker #6: Demand has always been there. Demand is as strong as I can remember it. Frankly, it was strong 90 days ago.

Speaker #6: It continues to be maybe even a little bit stronger right now. And everybody found a little bit more cleanroom. And so they were able to take a little bit more equipment. They have a follow.

Operator: Our next question comes from Stacy Rasgon.

Speaker #2: Up question comes from Stacy Rasgon.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. For the first one, I wanted to push a little bit more on the services growth. I understand the drivers around utilization topping and the Reliant weakness. I mean, you also talked about the $40 billion in upgrade spending pretty much all happening by the end of 2027. I don't get the feeling that we've had tens of billions of that upgrade spending happening already, so it almost feels like we should have tens of billions of upgrade spending happening between now and the end of next year. From what I understand, I thought that all goes into your services business. Why shouldn't that be a pretty big driver of services growth, I guess, between now and the end of 2027?

Speaker #1: Hi guys .

Speaker #13: Thanks for taking my questions . For the first one , I wanted to push a little bit more on the services growth . So I understand the drivers around utilization , topping and the client weakness .

Speaker #13: But you also talked about, you know, the $40 billion in upgrade spending pretty much all happening by the end of '27.

Speaker #13: I don't get the feeling that we've had like tens of billions of that upgrade spending happening already. So it almost feels like we should have tens of billions of upgrade spending happening between now and the end of next year.

Speaker #13: And from what I understand, I thought that all goes into your services business. So why shouldn't that be a pretty big driver of services growth?

Speaker #13: I guess between now and the 27th?

Douglas Bettinger: Yeah. Stacy, I would point out a couple things to you. In that $40 billion number, yeah, there's upgrades for sure, but there's also new equipment purchases, right? There's some new things, when you upgrade the installed base, you need to buy new equipment to break bottlenecks and constraints. There's also some new equipment as the industry moves to Moly, so it's not all just upgrades. The other thing I would say relative to upgrades is upgrades were actually quite strong last year in 2025, and are going to continue to be for the next year or two. That's part of the upgrade story. Then the other components, like I said, spares and service. It's already pretty darn strong in March.

Doug Bettinger: Yeah. Stacy, I would point out a couple things to you. In that $40 billion number, yeah, there's upgrades for sure, but there's also new equipment purchases, right? There's some new things, when you upgrade the installed base, you need to buy new equipment to break bottlenecks and constraints. There's also some new equipment as the industry moves to Moly, so it's not all just upgrades. The other thing I would say relative to upgrades is upgrades were actually quite strong last year in 2025, and are going to continue to be for the next year or two. That's part of the upgrade story. Then the other components, like I said, spares and service. It's already pretty darn strong in March.

Speaker #6: Yeah . Stacey , I would point out a couple things to you in that 40 billion number . Yeah . There's upgrades for sure .

Speaker #6: But there's also new equipment purchases , right ? There's some new things , right ? When you upgrade the installed base , you need to buy new equipment to break bottlenecks and constraints .

Speaker #6: There's also some new equipment as the industry moves to Mali. So it's not all just upgrades. And the other thing I would say, relative to upgrades, is upgrades are actually quite strong.

Speaker #6: Last year, in '25, and are going to continue to be for the next year or two. So that's part of the upgrade story.

Speaker #6: And then the other components , like I said , spares and service . Sorry , is pretty darn strong . In March . And frankly , reliant with the mature node spending being a little bit softer than everything else .

Douglas Bettinger: Frankly, Reliant, with the mature node spending being a little bit softer than everything else, that's the puts and takes to get you to kind of quarter by quarter, plus or minus flattish as you go through the rest of the year.

Doug Bettinger: Frankly, Reliant, with the mature node spending being a little bit softer than everything else, that's the puts and takes to get you to kind of quarter by quarter, plus or minus flattish as you go through the rest of the year.

Speaker #6: That's the puts and takes to get you to kind of quarter by quarter, plus or minus flattish as you go through the rest of the year.

Stacy Rasgon: Okay, that makes sense. If I could ask a follow-up. So you guys are seeing WFE growing this year on the order of, what, $30 billion? Like you said, 110 last year to now 140+ this year.

Speaker #13: Okay , that makes sense . If I could ask a follow up . So you guys are seeing WP growing this year on the order of what , $30 billion ?

Speaker #13: Like you said , 110 last year to now 140 plus this year . And that's very strong , but it's strong as it is , as you know , it is a constrained growth because of clean rooms .

Douglas Bettinger: Yep.

Doug Bettinger: Yep.

Stacy Rasgon: That's very strong, but as strong as it is, as you know, it is a constrained growth because of clean rooms, and those clean rooms start to come online into next year. Does that suggest to me that the sequential growth of WFE next year ought to be even stronger on a dollar basis than it is in 2026 because you'll have somewhere to actually put the tools, whereas you don't really have that this year? What's wrong with that logic? How would you push back on that?

Speaker #13: And those clean rooms start to come online in the next year. Does that suggest to me that the sequential growth of WP next year ought to be even stronger on a dollar basis than it is in '26, because you'll have somewhere to actually put the tools, whereas you don't really have that this year?

Speaker #13: Like, what's wrong with that logic? How would you push back on that?

Douglas Bettinger: I don't know, Stacy. I'm inclined to comment on the exact magnitude of WFE next year, but we do firmly, as we sit here today, look at clean rooms are going to be more available next year, and where we believe demand to be, WFE is going to be nicely growing next year. It's too soon for us to give you a number, but we feel pretty good about the growth trajectory into next year.

Doug Bettinger: I don't know, Stacy. I'm inclined to comment on the exact magnitude of WFE next year, but we do firmly, as we sit here today, look at clean rooms are going to be more available next year, and where we believe demand to be, WFE is going to be nicely growing next year. It's too soon for us to give you a number, but we feel pretty good about the growth trajectory into next year.

Speaker #6: I don't know , I'm declined to comment on the exact magnitude of WP next year , but we do firmly as we sit here today , look at clean rooms are going to be more available next year and where we believe demand to be , WP is going to be nicely growing next year .

Speaker #6: And it's too soon for us to give you a number. But we feel pretty good about the growth trajectory in the next year.

Timothy Archer: Yeah. I'd also point out that every year that goes by as technology advances, etch and deposition intensity rises. As those new clean rooms come on and they're targeting more advanced technology nodes, that's certainly better for Lam's position within whatever that the term I used, compelling WFE growth is.

Tim Archer: Yeah. I'd also point out that every year that goes by as technology advances, etch and deposition intensity rises. As those new clean rooms come on and they're targeting more advanced technology nodes, that's certainly better for Lam's position within whatever that the term I used, compelling WFE growth is.

Speaker #1: Yeah , I'd also point out that every year that goes by as technology advances , etching , deposition intensity rises . And so as those new clean rooms come on and they're targeting more advanced technology nodes , that's better for certainly better for Lam's position within whatever that the term I used compelling growth is

Douglas Bettinger: Thanks, Stacy.

Doug Bettinger: Thanks, Stacy.

Operator: Our next question comes from Krish Sankar with TD Cowen.

Speaker #6: Thanks , Stacey .

Speaker #2: Our next question comes from Krish Sankar with TD Cowen.

Krish Sankar: Yeah. Hi, thanks for taking my question. I just want to follow up on an earlier question on the upgrade to the WFE numbers, the $135 going to $140 billion plus. Is there a way to segment? Was the bigger driver NAND? Was it CPU tightness, or was it just AI strength?

Speaker #7: Yeah . Hi . Thanks for taking my question . I just wanted to follow up on an earlier question on the upgrade to the WiFi numbers , the 135 going to 140 billion plus .

Speaker #7: Is there a way to segment what was the bigger driver, NAND? Was it CPU tightness, or was it just AI strength?

Douglas Bettinger: Again, Krish, what I said is everything got a little bit stronger because everybody got a little bit more clean room. It's not any one component of the customer base. Everything is just a little bit better.

Doug Bettinger: Again, Krish, what I said is everything got a little bit stronger because everybody got a little bit more clean room. It's not any one component of the customer base. Everything is just a little bit better.

Speaker #6: Again, Krish, what I said is everything got a little bit stronger because everybody got a little bit more clean room. So it's not any one component of the customer base.

Speaker #6: Everything is just a little bit better.

Krish Sankar: Got it. As a quick follow-up, it looks like the third-party market share data came out, and you folks gained share in PECVD quite a bit last year. I'm curious, which vertical drove that PECVD share gain? Was it DRAM or foundry logic or something else?

Speaker #7: Got it , got it . I think there's a quick follow up . You know , it looks like the third party market share data came out and you folks gained share in PCB quite a bit last year .

Speaker #7: I'm curious, which vertical drove that PCB again? Was it DRAM or foundry logic or something else?

Douglas Bettinger: You want to take that one, Tim? You want me to?

Doug Bettinger: You want to take that one, Tim? You want me to?

Speaker #6: You want to take that

Timothy Archer: Sure. Go ahead, Doug.

Tim Archer: Sure. Go ahead, Doug.

Douglas Bettinger: Listen, I think PECVD is such a broad, pervasive tool. It shows up in every component of the customer base. One area I think that sometimes is underappreciated is the use of PECVD in underfill and advanced packaging, honestly, and that was a key contributor. Tim talked about we see packaging this year growing 50%. We talked about real strong growth last year. PECVD benefited from that, obviously.

Doug Bettinger: Listen, I think PECVD is such a broad, pervasive tool. It shows up in every component of the customer base. One area I think that sometimes is underappreciated is the use of PECVD in underfill and advanced packaging, honestly, and that was a key contributor. Tim talked about we see packaging this year growing 50%. We talked about real strong growth last year. PECVD benefited from that, obviously.

Speaker #1: Sure. Go ahead, Doug.

Speaker #6: Listen, I think the PCB is such a broad, pervasive tool. It shows up in every component of the customer base.

Speaker #6: One area I think that sometimes is underappreciated is the use of PVC, CVD, and underfill in advanced packaging, honestly. And that was a key contributor.

Speaker #6: Tim talked about . You know , we see packaging this year growing 50% . We talked about . Real strong growth last year .

Speaker #6: PCB benefited from that. Obviously.

Timothy Archer: Yeah. I think PECVD also shows up. It's challenging because you think about the old traditional PECVD applications, but even as I mentioned, as we move forward in NAND, for instance, even like our VECTOR DT backside stress management actually is a PECVD application.

Tim Archer: Yeah. I think PECVD also shows up. It's challenging because you think about the old traditional PECVD applications, but even as I mentioned, as we move forward in NAND, for instance, even like our VECTOR DT backside stress management actually is a PECVD application.

Speaker #1: Yeah . I think CVD also shows up . You know , it's it's challenging because you think about the old traditional PCB applications .

Speaker #1: But even as I mentioned , you know , as we move forward in Nand , for instance , even like our vector backside stress management actually is a PCB application .

Douglas Bettinger: Mm-hmm.

Doug Bettinger: Mm-hmm.

Timothy Archer: In many ways, it's such a pervasive technology and so we see that improvement in PECVD.

Tim Archer: In many ways, it's such a pervasive technology and so we see that improvement in PECVD.

Speaker #1: So , you know , in many ways it's , it's such a pervasive technology . And so , you know , we , we see that improvement in PCB

Operator: Our next question comes from Joe Quatrochi with Wells Fargo.

Speaker #2: Our next question comes from Joe with Wells Fargo.

Joe Quatrochi: Yeah, thanks for taking the questions. I was wondering if you could talk a little bit just about where your lead times sit today. Also, I think you talked about the second Malaysia factory opening. When is that ramp, and can you remind us what is the size of that relative to? I think it was a pretty large first facility that you had, like 700,000 sq ft.

Speaker #14: Yeah . Thanks for taking the questions . I was wondering if you could talk a little bit just about where your lead time sit today , and then also , I think you talked about the second Malaysia factory opening .

Speaker #14: When is that ramp? And can you remind us, like, what is the size of that relative to—I think it was a pretty large first facility that you have, like 700,000 ft²?

Douglas Bettinger: Yeah, Joe, appreciate it. We don't specifically put numbers around our lead times, but they are stretching out a little bit as demand is obviously quite strong. Things are stretched out. We're not going to give you a number, though. Second, the second Malaysia facility will come out in H2 of the year. Yep, you're right. The first one was our largest factory in the network. This will be nearly the same size or maybe approximately the same size as the first one. It'll give us the opportunity to scale into the next year's demand, I think.

Doug Bettinger: Yeah, Joe, appreciate it. We don't specifically put numbers around our lead times, but they are stretching out a little bit as demand is obviously quite strong. Things are stretched out. We're not going to give you a number, though. Second, the second Malaysia facility will come out in H2 of the year. Yep, you're right. The first one was our largest factory in the network. This will be nearly the same size or maybe approximately the same size as the first one. It'll give us the opportunity to scale into the next year's demand, I think.

Speaker #6: We don't specifically put numbers around our lead times , but they are stretching out a little bit . Is demand is is obviously quite strong , you know , so things are stretched out .

Speaker #6: We're not going to give you a number, though. Second, the second laser facility will come out in the second half of the year.

Speaker #6: And yep, you're right. The first one was our largest factory in the network. This will be nearly the same size, or maybe approximately the same size, as the first one.

Speaker #6: So, it will give us the opportunity to scale into next year's demand.

Joe Quatrochi: Think that's helpful. I'm just curious. I was wondering if you could talk a little bit about just your position for High Bandwidth Flash, and just any thoughts around that, and what does the SAM potentially look like for you guys there?

Speaker #11: I think

Speaker #14: That's helpful. And then I'm just curious. I was wondering if you could talk a bit about just your position for Haibane with flash, and just any thoughts around that.

Speaker #14: As you know, what does a SAM potentially look like for you guys there?

Douglas Bettinger: I'll let Tim take that one.

Doug Bettinger: I'll let Tim take that one.

Timothy Archer: Well, I think in any of these cases where you are talking about device architectures that require 3D scaling, obviously our SAM opportunity just grows. I think these devices and the exact process flows and such are still being worked through. The types of systems we have, whether it's high aspect ratio conductor etches, high aspect ratio dielectric etches, the depositions, ALD, it'll be a great opportunity for us when it comes to production.

Tim Archer: Well, I think in any of these cases where you are talking about device architectures that require 3D scaling, obviously our SAM opportunity just grows. I think these devices and the exact process flows and such are still being worked through. The types of systems we have, whether it's high aspect ratio conductor etches, high aspect ratio dielectric etches, the depositions, ALD, it'll be a great opportunity for us when it comes to production.

Speaker #6: Well, Tim, sure. Take that one.

Speaker #1: Well, I think in any of these cases, we're talking about device architectures that require 3D scaling. I mean, obviously, our SAM opportunity just grows.

Speaker #1: I think these these devices and the exact process flows and such are still being worked through . But the types of systems we have , whether it's an high aspect ratio , conductor etches , high aspect dielectric , etches the depositions , ALD , you know , it will be a great opportunity for us to fit when it comes to fruition .

Douglas Bettinger: Operator, I think we have time for one more question.

Doug Bettinger: Operator, I think we have time for one more question.

Speaker #6: I think we have time for one more question.

Operator: Our next question comes from Vijay Rakesh with Mizuho.

Speaker #2: Our next question comes from Vijay Rakesh with Mizuho.

Vijay Rakesh: Hi, Tim and Doug. Just a quick question on the DRAM side. Looks like it grew pretty nicely, up 45% year-on-year. When you look at HBM3 going to HBM4 with the higher layer count, I think 50% higher, is there a way to look at what your content uplift is per 100,000 wafers or something as HBM3 goes to HBM4 or 40? I have a quick follow-up.

Speaker #1: High .

Speaker #9: Just a quick question . On the Dram side . Looks like it grew pretty nicely , up 45% year on year on the when you look at HBM three going to HBM four with the higher layer count , I think 50% higher .

Speaker #9: Is there a way to look at what your content uplift is per 100,000 wafers or something? Is SSP three goes to HBM four or four, and a quick follow-up.

Douglas Bettinger: Yeah, Vijay, maybe I'll come in, and then maybe let Tim talk about the technology. Yeah, clearly, it goes up. We haven't given specific numbers around it, but obviously the higher stack requires more equipment. The trade ratio gets a little more challenging for the industry, so you clearly need more equipment. We haven't given a specific number on it, though, in terms of $ per 10,000.

Doug Bettinger: Yeah, Vijay, maybe I'll come in, and then maybe let Tim talk about the technology. Yeah, clearly, it goes up. We haven't given specific numbers around it, but obviously the higher stack requires more equipment. The trade ratio gets a little more challenging for the industry, so you clearly need more equipment. We haven't given a specific number on it, though, in terms of $ per 10,000.

Speaker #6: Vijay , maybe I'll come in and then maybe let Tim talk about technology . Yeah , clearly it goes up . We haven't given specific numbers around it , but obviously the higher stack required feedback .

Speaker #6: The higher stack requires more equipment. The trade ratio gets a little more challenging for the industry. So you clearly need more equipment.

Speaker #6: We haven't given a specific number on it though, in terms of dollar per 10-K.

Vijay Rakesh: Got it. Just on the follow-up on HBF, are you seeing both SanDisk and SK Hynix talking about it, I guess? Outside of that, when you look at high bandwidth flash, are you seeing investments or CapEx ticking up there? Is that something you're seeing into 2027? How would you look at that ramp? Thanks.

Speaker #11: Right

Speaker #9: And just on the follow up on Hbf , I mean , are you seeing both SanDisk and Hynix talking about it ? I guess , but you know , outside of that , when you look at high bandwidth flash , are you seeing investments or CapEx picking up there ?

Speaker #9: Is that something you're seeing into '27? How would you look at that ramp? Thanks.

Timothy Archer: Yeah. I'd probably leave it to our customers to talk about their timing on these kinds of new technologies. As I mentioned earlier, on any new technology, we're engaged with customers quite well ahead from a technology perspective of any production ramp, and then it's very much up to them the time of insert. The one thing that's true, and we talked about it, is that these are being driven by the growing importance of NAND as we see it within the AI memory hierarchy. Again, we think it's something that, in a matter of time, this kind of capability is likely needed, and Lam has technologies that will support it very well.

Tim Archer: Yeah. I'd probably leave it to our customers to talk about their timing on these kinds of new technologies. As I mentioned earlier, on any new technology, we're engaged with customers quite well ahead from a technology perspective of any production ramp, and then it's very much up to them the time of insert. The one thing that's true, and we talked about it, is that these are being driven by the growing importance of NAND as we see it within the AI memory hierarchy. Again, we think it's something that, in a matter of time, this kind of capability is likely needed, and Lam has technologies that will support it very well.

Speaker #1: Yeah , I'd probably leave it to our customers to talk about their timing on these kinds of new technologies . But you know , as I , as I mentioned earlier on , any new technology , we're engaged with customers quite well ahead from a technology perspective of any production ramp .

Speaker #1: And then it's very much up to them at the time of insertion , the one thing that's true , and we talked about it , is that , you know , these are being driven by the growing importance of Nand as we see it , within the AI memory hierarchy .

Speaker #1: And so again, we think it's something that, in a matter of time, this kind of capability is likely needed. And Lam's technologies will support it very well.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Douglas Bettinger for any closing remarks.

Speaker #2: This concludes our question and answer session. I would like to turn the conference back over to Douglas Bettinger for any closing remarks.

Douglas Bettinger: Listen, I think Tim and I and Ram would just like to thank everybody for your time and attention during what I know is a super busy earnings season. I know we're going to see lots of you as the quarter unfolds at different conferences and roadshows, so we're looking forward to that. Again, thank you for your interest in the company, and we appreciate it.

Doug Bettinger: Listen, I think Tim and I and Ram would just like to thank everybody for your time and attention during what I know is a super busy earnings season. I know we're going to see lots of you as the quarter unfolds at different conferences and roadshows, so we're looking forward to that. Again, thank you for your interest in the company, and we appreciate it.

Speaker #6: Listen, I think Tim and I, and Ron, would just like to thank everybody for your time and attention during what I know is a super busy earnings season.

Speaker #6: I know we're going to see lots of you as the quarter unfolds at different conferences and roadshows. So we're looking forward to that.

Speaker #6: And again, thank you for your interest in the company. We appreciate it.

Operator: This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Q3 2026 Lam Research Corp Earnings Call

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