Q4 2026 Lam Research Corp Earnings Call

July 29, 2026

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 a touchtone phone.

Operator: 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: 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.

Speaker #1: Please go ahead.

Speaker #2: Thank you. And good afternoon, everyone. Welcome to the Lam Research Quarterly Earnings Conference call. With me today are Tim Archer, President and Chief Executive Officer; and Doug Bettinger, Executive Vice President and Chief Financial Officer.

Ram Ganesh: Thank you, and good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment, and we will review our financial results for the June 2026 quarter and our outlook for the September 2026 quarter. 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 be found on the Investors section of the company's website. Today's presentation and Q&A include forward-looking statements based on our current beliefs, expectations, and assumptions. These statements are subject to risks and uncertainties, and actual results could differ materially from those expressed or implied in such statements.

Speaker #1: Good day, and welcome to the Lam Research Corporation June 26 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.

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

Speaker #1: presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1, on a touchtone phone. To withdraw your question, please press star, then 2.

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

Speaker #1: 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 #2: Thank you, and good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer.

Speaker #2: Today's presentation and Q&A include forward-looking statements based on our current beliefs, expectations, and assumptions. These statements are subject to risks and uncertainties in actual results could differ materially from those expressed or implied in such statements.

Speaker #2: For a discussion of factors that could cause actual results to differ materially, please refer to the risk factors in our most recently filed periodic reports on Form 10-K and Form 10-Q, and subsequent filings with the SEC and the Cautionary Statement in the accompanying presentation slides.

Ram Ganesh: For a discussion of factors that could cause actual results to differ materially, please refer to the risk factors in our most recently filed periodic reports on Form 10-K, on Form 10-Q, and subsequent filings with the SEC and the cautionary statement in the accompanying presentation slides. 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 3:00 PM Pacific Time. A replay of this call will be made available later this afternoon on our website. With that, I will hand the call over to Tim.

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

Speaker #2: 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.

Speaker #2: This call is scheduled to last until 3:00 PM Pacific Time. A replay of this call will be made available later this afternoon on our website.

Speaker #2: And with that, I'll hand the call over to Tim.

Speaker #3: Thanks, Ram. In the June quarter, Lam delivered record revenue operating margin and earnings per share. Sequential top-line growth was led by a doubling of NAND revenue from the prior quarter, underscoring the growing importance of storage to AI system performance.

Tim Archer: Thanks, Ram. In the June quarter, Lam delivered record revenue, operating margin, and earnings per share. Sequential top-line growth was led by a doubling of NAND revenue from the prior quarter, underscoring the growing importance of storage to AI system performance. Our Customer Support Business Group also posted strong revenue growth driven by robust demand for upgrades, Reliant, and Equipment Intelligence-enabled services. As we enter the H2 of the year, we expect calendar 2026 Wafer Fab Equipment spending, or WFE, to be in the low $150 billion range, up from our prior outlook of $140 billion with upside bias. Against this backdrop of rising demand, Lam's momentum is strong. Our $8.1 billion September quarter revenue guide represents more than 20% growth quarter-on-quarter, and we see 2026 shaping up to be our third consecutive year of relative outperformance to WFE.

Speaker #3: Our customer support business group also posted strong revenue growth driven by robust demand for upgrades, reliant, and equipment intelligence-enabled services. As we enter the second half of the year, we expect calendar 2026 wafer fab equipment spending, or WFE, to be in the low $150 billion range.

Speaker #2: ...PM Pacific Time. 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.

Speaker #3: Up from our prior outlook of $140 billion with upside bias. Against this backdrop of rising demand, Lam's momentum is strong. Our 8.1 billion September quarter revenue guide represents more than 20% growth quarter on quarter.

Speaker #3: And we see 2026 shaping up to be our third consecutive year of relative outperformance to WFE. Looking into 2027, we see an extraordinary setup for WFE growth.

Speaker #3: Our customer support business group also posted strong revenue growth driven by robust demand for upgrades, reliant, and equipment-intelligence-enabled services. As we enter the second half of the year, we expect calendar 2026 wafer fab equipment spending, or WFE, to be in the low $150 billion range.

Tim Archer: Looking into 2027, we see an extraordinary setup for WFE growth. AI is driving record revenue and profitability for our customers, who have signaled unprecedented long-term demand visibility. They've also announced multi-year timelines for new fab projects and are working with us to secure equipment orders to fill the incremental clean room space as it comes online. Spending on capacity is occurring alongside investments in technology transitions that are creating structural opportunities for Lam to outgrow WFE. As a driver of industry investment, we are seeing AI progress through distinct waves, from training to inference to agentic, and now increasingly physical AI. Each wave is building on what came before, creating new AI use cases, greater demand, and new performance requirements. We're seeing the impact of this progression, notably in NAND, where expanding context windows and persistent memory requirements are driving significantly higher demand for flash storage.

Speaker #3: AI is driving record revenue and profitability for our customers, who have signaled unprecedented long-term demand visibility. They've also announced multi-year timelines for new fab projects, and are working with us to secure equipment orders to fill the incremental cleanroom space as it comes online.

Speaker #3: Spending on capacity is occurring alongside investments in technology transitions that are creating structural opportunities for Lam to outgrow WFE. As a driver of industry investment, we are seeing AI progress through distinct waves.

Speaker #3: And we see 2026 shaping up to be our third consecutive year of relative outperformance to WFE. Looking into 2027, we see an extraordinary setup for WFE growth.

Speaker #3: From training, to inference, to agentic, and now increasingly physical AI. Each wave is building on what came before, creating new AI use cases, greater demand, and new performance requirements.

Speaker #3: We're seeing the impact of this progression notably in NAND, where expanding context windows and persistent memory requirements are driving significantly higher demand for flash storage.

Speaker #3: In response, customers are in the near term adding bit supply and improving device capability through install-based conversions to 200-plus-layer architectures. As layer counts rise, and manufacturing complexity grows, so does our opportunity.

Tim Archer: In response, customers are, in the near term, adding bit supply and improving device capability through installed base conversions to 200-plus layer architectures. As layer counts rise and manufacturing complexity grows, so does our opportunity. We expect Lam Served Available Market, or SAM, per wafer in NAND to double from the 128-layer node to 500-plus layer devices. AI is also reshaping the technology requirements in advanced foundry logic and DRAM. Gate-all-around, CFET, HBM, 4F squared, and panel-level advanced packaging all feature prominently in the current and future AI device roadmaps. Through these transitions, increasing deposition and etch intensity remains the common thread. Higher aspect ratio structures, more complex 3D architectures, smaller pitch patterning, and new materials integration are all areas where Lam is a leader.

Speaker #3: From training to inference to agentic and now increasingly physical AI. Each wave is building on what came before, creating new AI use cases greater demand and new performance requirements.

Speaker #3: We expect Lam's served available market, or SAM per wafer, in NAND to double from the $128-layer node to $500-plus-layer devices. AI is also reshaping the technology requirements in advanced foundry logic and DRAM.

Speaker #3: Gate all around, CFET, HBM, 4F squared, and panel-level advanced packaging all feature prominently in the current and future AI device roadmaps. Through these transitions, increasing deposition and etch intensity remains the common thread.

Speaker #3: Higher aspect ratio structures, more complex 3D architectures, smaller pitch patterning, and new materials integration are all areas where Lam is a leader. We see the benefit of this technology acceleration in our expanding SAM, and we are moving toward our target of high 30s SAM as a percentage of WFE faster than what we had outlined at our 2025 investor day.

Speaker #3: We expect Lam's served available market, or SAM per wafer in NAND, to double from the 128-layer node to 500-plus-layer devices. AI is also reshaping the technology requirements in advanced foundry logic and DRAM.

Tim Archer: We see the benefit of this technology acceleration in our expanding SAM, and we are moving towards our target of high thirties SAM as a percentage of WFE faster than what we had outlined at our 2025 Investor Day. Let me highlight a few examples that illustrate why we're excited about what's ahead for Lam. Starting with conductor etch, Lam is the industry leader with an installed base of more than 40,000 chambers worldwide. With our latest platform, Acara, we are further strengthening our position. Acara combines unique direct drive plasma technology with industry-leading high aspect ratio patterning capabilities. First adopted for 2 nanometer and below gate-all-around architectures in foundry logic, Acara is now gaining momentum in advanced DRAM. We have secured several strategic tool of record positions, including recent wins for the most challenging gate etch applications.

Speaker #3: Gate all-around, CFET, HBM, 4F squared, and panel-level advanced packaging all feature prominently in the current and future AI device roadmaps. Through these transitions, increasing deposition and etch intensity remains the common thread.

Speaker #3: Let me highlight a few examples that illustrate why we're excited about what's ahead for Lam. Starting with conductor etch, Lam is the industry leader with an install base of more than 40,000 chambers worldwide.

Speaker #3: With our latest platform, Aqara, we are further strengthening our position. Aqara combines unique direct-drive plasma technology with industry-leading high-aspect-ratio patterning capabilities. First adopted for 2-nanometer and below, gate all-around architectures in foundry logic, Aqara is now gaining momentum in advanced DRAM.

Speaker #3: Higher aspect ratio structures more complex 3D architectures smaller pitch patterning and new materials integration are all areas where Lam is a leader. We see the benefit of this technology acceleration in our expanding SAM, and we are moving towards our target of high 30s SAM as a percentage of WFE faster than what we had outlined at our 2025 Investor Day.

Speaker #3: We have secured several strategic tool-of-record positions including recent wins for the most challenging gate-etch applications. Since its launch, Aqara's install base has doubled every year.

Tim Archer: Since its launch, Acara's installed base has doubled every year, and we expect that growth trajectory to continue in 2027. DRAM pitch scaling is also driving higher interconnect density and wiring complexity. Shrinking dimensions place increasing demands on pattern fidelity, RC performance, and reliability, driving adoption of advanced hard masks, etch stops, and diffusion barriers. We previously addressed these patterning challenges in foundry logic and are now extending those capabilities and our production-proven technologies into DRAM. For example, DRAM customers are adopting our VECTOR hard mask deposition platform for low-k film patterning. By co-optimizing the hard mask film properties with our conductor etch process, we have shown we can deliver improved transistor performance and better yield. Lam's co-optimized solution also offers over 20% cost savings to customers compared to traditional approaches. Similarly, DRAM customers are increasingly adopting our VECTOR diffusion barrier systems to meet next-generation requirements.

Speaker #3: And we expect that growth trajectory to continue in 2027. DRAM pitch scaling is also driving higher interconnect density and wiring complexity. Shrinking dimensions place increasing demands on pattern fidelity RC performance, and reliability.

Speaker #3: With our latest platform, Aqara, we are further strengthening our position. Aqara combines unique direct-drive plasma technology with industry-leading high aspect ratio patterning capabilities. First adopted for 2-nanometer and below gate-all-around architectures in foundry logic, Aqara is now gaining momentum in advanced DRAM.

Speaker #3: Driving adoption of advanced hard masks etch stops and diffusion barriers. We previously addressed these patterning challenges in foundry logic, and are now extending those capabilities in our production-proven technologies into DRAM.

Speaker #3: We have secured several strategic tool-of-record positions, including recent wins for the most challenging gate-etch applications. Since its launch, Aqara's installed base has doubled every year, and we expect that growth trajectory to continue into 2027.

Speaker #3: For example, DRAM customers are adopting our vector hard mask deposition platform for low K-film patterning. By co-optimizing the hard mask film properties with our conductor etch process, we have shown we can deliver improved transistor performance and better yield.

Speaker #3: DRAM pitch scaling is also driving higher interconnect density and wiring complexity. Shrinking dimensions place increasing demands on pattern fidelity RC performance and reliability. Driving adoption of advanced hard masks etch stops and diffusion barriers.

Speaker #3: Lam's co-optimized solution also offers over 20% cost savings to customers compared to traditional approaches. Similarly, DRAM customers are increasingly adopting our vector diffusion barrier systems to meet next-generation requirements.

Speaker #3: We previously addressed these patterning challenges in foundry logic, and are now extending those capabilities in our production-proven technologies into DRAM. For example, DRAM customers are adopting our vector hard mask deposition platform for low K film patterning, by co-optimizing the hard mask film properties with our conductor etch process.

Speaker #3: Our modular architecture combines interface cleaning etch stop enhancement and hermetic protection to prevent shorting at tighter pitches and reduce capacitance by approximately 5% versus competing technologies.

Tim Archer: Our modular architecture combines interface cleaning, etch stop enhancement, and hermetic protection to prevent shorting at tighter pitches and reduce capacitance by approximately 5% versus competing technologies. As devices scale, surface engineering becomes increasingly important for reducing defectivity and variability. In the transition from FinFET to gate-all-around, the number of applications requiring surface treatment roughly doubles. Our Argos selective etch system uniquely addresses this need. By leveraging proprietary plasma technology, Argos creates a radical-rich environment that enables highly selective surface treatment with minimal substrate damage. As a result, we are winning leading-edge foundry logic customers at 2 nanometer and below and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging. As an industry leader in TSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Speaker #3: As devices scale, surface engineering becomes increasingly important for reducing defectivity and variability. In the transition from thin-fet to gate all-around, the number of applications requiring surface treatment roughly doubles.

Speaker #3: We have shown we can deliver improved transistor performance and better yield. Lam's co-optimized solution also offers over 20% cost savings to customers compared to traditional approaches.

Speaker #3: Similarly, DRAM customers are increasingly adopting our vector diffusion barrier systems to meet next-generation requirements. Our modular architecture combines interface cleaning, etch stop enhancement, and hermetic protection to prevent shorting at tighter pitches and reduce capacitance by approximately 5% versus competing technologies.

Speaker #3: Our Argos selective etch system uniquely addresses this need. By leveraging proprietary plasma technology, Argos creates a radical-rich environment that enables highly selective surface treatment with minimal substrate damage.

Speaker #3: As a result, we are winning leading-edge foundry logic customers at 2-nanometer and below, and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging, as an industry leader in PSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Speaker #3: As devices scale, surface engineering becomes increasingly important, reducing defectivity and variability. In the transition from FinFET to gate all-around, the number of applications requiring surface treatment roughly doubles.

Speaker #3: The long-term opportunity is even more compelling, as AI performance will increasingly depend less on transistor density scaling and instead on integrating more chiplets, more HBM stacks, and greater memory bandwidth within a single package.

Tim Archer: The long-term opportunity is even more compelling, as AI performance will increasingly depend less on transistor density scaling and instead on integrating more chiplets, more HBM stacks, and greater memory bandwidth within a single package. We expect each successive generation of advanced packaging to require more redistribution layers, denser copper interconnects, taller mega pillar structures, and increasingly complex power delivery networks. We also see future AI packages exceeding nine times the reticle size, roughly three times larger than today's mainstream device designs. This is driving the industry to look beyond traditional wafer-based architectures toward larger format panel-level packaging approaches. Panels enable the creation of larger AI packages, but they also introduce new challenges to maintain deposition uniformity, material properties, defect control, and yield across the larger panel area.

Speaker #3: We expect each successive generation of advanced packaging to require more redistribution layers denser copper interconnects, taller megapillar structures, and increasingly complex power delivery networks.

Speaker #3: As a result, we are winning leading-edge foundry logic customers at 2 nanometers and below, and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging, as an industry leader in TSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Speaker #3: We also see future AI packages exceeding 9 times the reticle size, roughly 3 times larger than today's mainstream device designs. This is driving the industry to look beyond traditional wafer-based architectures toward larger, format panel-level packaging approaches.

Speaker #3: Panels enable the creation of larger AI packages but they also introduce new challenges to maintain deposition uniformity material properties defect control and yield across the larger panel area.

Speaker #3: We expect each successive generation of advanced packaging to require more redistribution layers denser copper interconnects, taller mega-pillar structures, and increasingly complex power delivery networks.

Speaker #3: By leveraging technology and learning from our wafer-based Sabre 3D and advanced wet processing platforms, we have shipped 510 by 515 millimeter panel systems into development programs across multiple geographies, and this year we will also ship our first 310 by 310 millimeter panel tool.

Tim Archer: By leveraging technology and learning from our wafer-based SABRE 3D and advanced wet processing platforms, we have shipped 510 by 515 millimeter panel systems into development programs across multiple geographies. This year, we will also ship our first 310 by 310 millimeter panel tool, putting us at the leading edge of this important packaging transition. In CSBG, customers are increasingly leveraging Lam's Equipment Intelligence and fab automation solutions to help increase capacity as they race to meet growing AI demand. Lam's Dextro cobots, the industry's first collaborative maintenance robots, are seeing rapid adoption. The precision and repeatability of automated maintenance is leading to improved first-time right recovery, higher tool availability, and increased output, all critical at a time of industry-wide supply shortages. We are accelerating Dextro application development, and since the start of 2026, have doubled the number of preventative maintenance tasks that can be automated.

Speaker #3: We also see future AI packages exceeding nine times the reticle size, roughly three times larger than today's mainstream device designs. This is driving the industry to look beyond traditional wafer-based architectures toward larger-format, panel-level packaging approaches.

Speaker #3: Putting us at the leading edge of this important packaging transition. In CSBG, customers are increasingly leveraging Lam's equipment intelligence and fab automation solutions to help increase capacity as they race to meet growing AI demand.

Speaker #3: Panels enable the creation of larger AI packages, but they also introduce new challenges to maintain deposition uniformity material properties defect control and yield across the larger panel area.

Speaker #3: Lam's dextrocobots the industry's first collaborative maintenance robots are seeing rapid adoption. The precision and repeatability of automated maintenance is leading to improved first-time-write recovery, higher tool availability, and increased output, all critical at a time of industry-wide supply shortages.

Speaker #3: We are accelerating dextero application development and since the start of 2026 have doubled the number of preventative maintenance tasks that can be automated. Importantly, many of the equipment intelligence and dextero solutions initially proven out for NAND are now expanding into DRAM.

Speaker #3: This puts us at the leading edge of this important packaging transition. In CSBG, customers are increasingly leveraging Lam's equipment intelligence and fab automation solutions to help increase capacity as they race to meet growing AI demand.

Tim Archer: Importantly, many of the Equipment Intelligence and Dextro solutions initially proven out for NAND are now expanding into DRAM, creating additional service revenue opportunities in the H2 of the year. Overall, we are still in the very early stages of a multi-year rollout of these offerings across our installed base. To sum up, this is an exciting time for the industry and for Lam. AI is driving unprecedented demand, greater technical requirements, and accelerated architectural scaling at both the device and packaging level. These trends all point to more opportunities for Lam. With our etch and deposition technology leadership, our close customer partnerships, and our increasing operational velocity, we believe we are well-positioned to outperform this year and in the years ahead. Thank you, and here's Doug.

Speaker #3: Creating additional service revenue opportunities in the second half of the year. Overall, we are still in the very early stages of a multi-year rollout of these offerings across our installed base.

Speaker #3: Lam's Dextrocobots, the industry's first collaborative maintenance robots, are seeing rapid adoption. The precision and repeatability of automated maintenance is leading to improved first-time-right recovery, higher tool availability, and increased output—all critical at a time of industry-wide supply shortages.

Speaker #3: So to sum up, this is an exciting time for the industry and for Lam. AI is driving unprecedented demand, greater technical requirements, and accelerated architectural scaling at both the device and packaging level.

Speaker #3: We are accelerating dextero application development, and since the start of 2026, have doubled the number of preventative maintenance tasks that can be automated. Importantly, many of the equipment intelligence and dextero solutions initially proven out for NAND are now expanding into DRAM.

Speaker #3: These trends all point to more opportunities for Lam. With our etch and deposition technology leadership, our close customer partnerships, and our increasing operational velocity, we believe we are well positioned to outperform this year and in the years ahead.

Speaker #3: Thank you, and here's Doug.

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.

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.

Speaker #1: We were pleased with our continued strong execution in the June quarter, resulting in our fourth consecutive quarter of record revenue. Our highest quarterly gross margin in 20 years, record operating margin and record earnings per share.

Doug Bettinger: We were pleased with our continued strong execution in the June quarter, resulting in our fourth consecutive quarter of record revenue, our highest quarterly gross margin in 20 years, record operating margin, and record earnings per share. We just finished fiscal year 2026. We had record revenue of $23.2 billion and gross margin of 50.6%. Our diluted earnings per share in fiscal year 2026 was also a record, coming in at $5.82, which was up 41% from fiscal year 2025. We are ahead of the profitability objectives we discussed at our 2025 Investor Day, delivered through robust top-line growth and strong operational execution. Let's look at the details of our June quarter financial results. Our revenue was above the midpoint of guidance, while gross margin, operating margin, and earnings per share all exceeded the high end of our guided range.

Speaker #1: We just finished fiscal year 2026 and we had record revenue of $23.2 billion and gross margin of $50.6%. Our diluted earnings per share in fiscal year 2026 was also our record, coming in at $5.82, which was up 41% from fiscal year 2025.

Speaker #3: Thank you and here's Doug.

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: We're ahead of the profitability objectives we discussed at our 2025 investor day. Delivered through robust top-line growth and strong operational execution. Let's look at the details of our June quarter financial results.

Speaker #1: We were pleased with our continued strong execution in the June quarter, resulting in our fourth consecutive quarter of record revenue, our highest quarterly gross margin in 20 years, record operating margin, and record earnings per share.

Speaker #1: Our revenue was above the midpoint of guidance. What gross margin, operating margin, and earnings per share all exceeded the high end of our guided range.

Speaker #1: We just finished fiscal year 2026, and we had record revenue of 23.2 billion dollars and gross margin of 50.6%. Our diluted earnings per share in fiscal year 2026 was also our record, coming in at $5.82, which was up 41% from fiscal year 2025.

Speaker #1: Revenue for the June quarter was $6.72 billion which was up 15% sequentially and up 30% from the same period in 2025. Our deferred revenue balance at quarter end was $2.43 billion which was an increase of $213 million from March quarter.

Doug Bettinger: Revenue for the June quarter was $6.72 billion, which was up 15% sequentially and up 30% from the same period in 2025. Our deferred revenue balance at quarter end was $2.43 billion, which was an increase of $213 million from the March quarter. The increase was driven by a variety of factors, the largest of which was customer down payments. From a market segment perspective, June quarter systems revenue in memory was 46%, an increase from 39% in the prior quarter. On a dollar basis, this represented a record level for us in total memory. Within memory, non-volatile memory accounted for 23% of our systems revenue, which was up from the March quarter level of 12%. NAND revenue dollars more than doubled sequentially as the industry focuses on conversions to 256 layer and above class devices, primarily enabling enterprise SSDs.

Speaker #1: We're ahead of the profitability objectives we discussed at our 2025 investor day, delivered through robust top-line growth and strong operational execution. Let's look at the details of our June quarter financial results.

Speaker #1: The increase was driven by a variety of factors. The largest of which was customer down payments. From a market segment perspective, June quarter systems revenue in memory was $46%, an increase from $39% in the prior quarter.

Speaker #1: Our revenue was above the midpoint of guidance. What gross margin, operating margin, and earnings per share all exceeded the high end of our guided range.

Speaker #1: On a dollar basis, this represented a record level for us in total memory. Within memory, nonvolatile memory accounted for 23% of our systems revenue which was up from the March quarter level of 12%.

Speaker #1: Revenue for the June quarter was 6.72 billion dollars, which was up 15% sequentially, and up 30% from the same period in 2025. Our deferred revenue balance at quarter end was 2.43 billion dollars, which was an increase of 213 million dollars from March quarter.

Speaker #1: NAND revenue dollars more than doubled sequentially as the industry focuses on conversions to 256-layer and above-class devices primarily enabling enterprise SSDs. DRAM remained strong.

Speaker #1: The increase was driven by a variety of factors, the largest of which was customer down payments. From a market segment perspective, June quarter systems revenue in memory was 46%, an increase from 39% in the prior quarter.

Doug Bettinger: DRAM remained strong, representing 23% of systems revenue, compared with 27% in the March quarter. On a dollar basis, DRAM revenue was flattish with the record level we set in the March quarter. DRAM spending remained directed towards wafer additions and technology upgrades across 1-alpha, 1-beta, and 1-gamma nodes, enabling DDR5, LPDDR5, and high bandwidth memory. Foundry represented 44% of our systems revenue, down from the percentage concentration March quarter of 54%. Mature node spending with our customers in China was down sequentially. This was largely offset by strength in leading-edge process node investments in 2 and 3 nanometer capability, as well as advanced packaging. Finally, logic and other were 10% of our systems revenue in the June quarter, which was up from the prior quarter level of 7%. Let me now discuss the regional composition of our total revenue.

Speaker #1: Representing 23% of systems revenue compared with 27% in the March quarter. On a dollar basis, DRAM revenue was in the March quarter. DRAM spending remained directed towards wafer additions and technology upgrades across 1 alpha, 1 beta, and 1 gamma nodes enabling DDR5, LPDDR5, and high bandwidth memory.

Speaker #1: On a dollar basis, this represented a record level for us in total memory. Within memory, non-volatile memory accounted for 23% of our systems revenue, which was up from the March quarter level of 12%.

Speaker #1: NAND revenue dollars more than doubled sequentially, as the industry focuses on conversions to 256-layer and above-class devices, primarily enabling enterprise SSDs. DRAM remained strong.

Speaker #1: Quality represented 44% of our systems revenue, down from the percentage concentration in March quarter of 54%. Mature node spending with our customers in China was down sequentially.

Speaker #1: Representing 23% of systems revenue compared with 27% in the March quarter. On a dollar basis, DRAM revenue was flattish with the record level we set in the March quarter.

Speaker #1: This was largely offset by strength in leading-edge process node investments in 2 and 3 nanometer capability, as well as advanced packaging. And finally, logic and other were 10% of our systems revenue in the June quarter, which was up from the prior quarter level of 7%.

Speaker #1: DRAM spending remained directed towards wafer additions, and technology upgrades, across 1 alpha, 1 beta, and 1 gamma nodes, enabling DDR5, LPDDR5, and high bandwidth memory.

Speaker #1: Let me now discuss the regional composition of our total revenue. The Taiwan region contributed $27% of revenue, up from the March quarter at $23%.

Doug Bettinger: The Taiwan region contributed 27% of revenue, up from the Q1 at 23%. Taiwan represented a new record level for us in dollar terms. China declined as we expected it would, and accounted for 26% of revenue. I will just remind you that China was 34% of revenue Q1. I would mention that within China, the global multinational customers grew sequentially, while the domestic customer base declined. Our next largest geographic region was Korea at 20% of revenue in the Q2, down a little bit from the Q1 level of 23%. The Customer Support Business Group generated a third consecutive quarter of record revenue at nearly $2.5 billion in the Q2, which was up 17% sequentially from Q1, and 43% higher than the same period in 2025. Sequentially, the increase was primarily due to record upgrade revenue.

Speaker #1: Quality represented 44% of our systems revenue down from the percentage concentration in March quarter of 54%. Mature node spending with our customers in China was down sequentially.

Speaker #1: Taiwan represented a new record level for us in dollar terms. China declined as we expected it would and accounted for 26% of revenue. I'll just remind you that China was 34% of revenue last quarter.

Speaker #1: I would mention that within China, the global multinational customers grew sequentially while the domestic customer base declined. Our next largest geographic region was Korea at 20% of revenue in the June quarter, down a little bit from the March quarter level of 23%.

Speaker #1: Let me now discuss some regional composition of our total revenue. The Taiwan region contributed 27% of revenue, up from the March quarter at 23%.

Speaker #1: The customer support business group generated a third consecutive quarter of record revenue at nearly $2.5 billion in the June quarter, which was up 17% sequentially from March quarter and 43% higher than the same period in 2025.

Speaker #1: Taiwan represented a new record level for us in dollar terms. China declined as we expected it would, and accounted for 26% of revenue. I'll just remind you that China was 34% of revenue last quarter.

Speaker #1: Sequentially, the increase was primarily due to record upgrade revenue. We also saw a smaller increases in reliant and services. Spare part purchases remained consistent with their strong level from the March quarter.

Speaker #1: I would mention that within China, the global multinational customers grew sequentially, while the domestic customer base declined. Our next largest geographic region was Korea at 20% of revenue in the June quarter, down a little bit from the March quarter level of 23%.

Doug Bettinger: We also saw smaller increases in Reliant and services. Spare part purchases remained consistent with their strong level from the Q1. Let's look at the gross margin performance. The Q2 came in at 52%, exceeding the upper end of our guidance range and improving from the Q1 level of 49.9%. Gross margin was stronger due to a myriad of factors, including pricing actions, operational and scale efficiencies, as well as a favorable product mix. Operating expenses in the Q2 were $916 million, up from the prior quarter amount of $866 million. The increase was mainly due to employee-related spending associated with higher headcount and variable compensation expense as a result of our improving profitability. R&D accounted for 67% of our total operating expenses. We are funding incremental product spending that should enhance the breadth and competitiveness of our future portfolio.

Speaker #1: Let's look at the gross margin performance. The June quarter came in at 52%, exceeding the upper end of our guidance range and improving from the March quarter level of 49.9%.

Speaker #1: The customer support business group generated a third consecutive quarter of record revenue at nearly 2.5 billion dollars in the June quarter, which was up 17% sequentially from March quarter and 43% higher than the same period in 2025.

Speaker #1: Gross margin was stronger due to a myriad of factors, including pricing actions, operational and scale efficiencies, as well as a favorable product mix. Operating expenses in the June quarter were $916 million, up from the prior quarter amount of $866 million.

Speaker #1: The increase was mainly due to employee-related spending associated with higher headcount and variable compensation expense as a result of our improving profitability. R&D accounted for 67% of our total operating expenses.

Speaker #1: Let's look at the gross margin performance. The June quarter came in at 52%, exceeding the upper end of our guidance range and improving from the March quarter level of 49.9%.

Speaker #1: We are funding incremental product spending that should enhance the breadth and competitiveness of our future portfolio. Operating margin for the June quarter was 38.4%, also exceeding the upper end of our guidance range and improving from the March quarter level of 35%.

Speaker #1: Gross margin was stronger due to a myriad of factors, including pricing actions, operational and scale efficiencies, as well as a favorable product mix. Operating expenses in the June quarter were 916 million dollars, up from the prior quarter amount of 866 million dollars.

Doug Bettinger: Operating margin for the Q2 was 38.4%, also exceeding the upper end of our guidance range, an improvement from the Q1 level of 35%. This improvement was primarily due to the higher revenue and stronger gross margin. Our non-GAAP tax rate Q3 was 11%, in line with our expectations. We do believe the tax rate will be in the mid-teens in the Q3 due to the increase in revenue in higher tax jurisdictions, primarily the United States, as we enter the new fiscal year. The US GILTI rate is also higher as we enter the fiscal year. We should expect this uptick in the tax rate to continue for the remainder of 2026 and likely beyond. Other income and expense for the Q2 was approximately $19 million in expense, compared with $8 million in expense in the Q1.

Speaker #1: This improvement was primarily due to the higher revenue and stronger gross margin. Our non-gap tax rates third quarter was 11%, in line with our expectations.

Speaker #1: The increase was mainly due to employee-related spending associated with higher headcount and variable compensation expense, as a result of our improving profitability. R&D accounted for 67% of our total operating expenses.

Speaker #1: We do believe the tax rate will be in the mid-teens in the September quarter due to the increase in revenue and higher tax jurisdictions primarily the United States, as we enter the new fiscal year.

Speaker #1: We are funding incremental product spending that should enhance the breadth and competitiveness of our future portfolio. Operating margin for the June quarter was 38.4%, also exceeding the upper end of our guidance range, and improving from the March quarter level of 35%.

Speaker #1: The US guilty rate is also higher as we enter the fiscal year. We should expect this uptick in the tax rate to continue for the remainder of 2026 and likely beyond.

Speaker #1: This improvement was primarily due to the higher revenue, and stronger gross margin. Our non-gap tax rate third quarter was 11%, in line with our expectations.

Speaker #1: Other income and expense for the June quarter was approximately $19 million in expense compared with $8 million in expense in the March quarter. The change in OI&E was primarily due to foreign exchange.

Doug Bettinger: The change in OI&E was primarily due to foreign exchange. As we've talked about in the past, you should expect to see variability in OI&E quarter to quarter. Let's look at capital return. We allocated approximately $246 million to share repurchases, and we paid $325 million in dividends in the Q2. We returned 45% of free cash flow in the quarter. Year to date, we've returned 81% of free cash flow, and our plans remain to return at least 85% of free cash flow to our shareholders over time. For the Q2, diluted earnings per share were a record $1.82. The diluted share count was roughly 1.26 billion shares, down from the Q1. We have $4 billion remaining on our board-authorized share repurchase program. Let me pivot to the balance sheet.

Speaker #1: And as we've talked about in the past, you should expect to see variability in OI&E quarter to quarter. Let's look at capital return. We allocated approximately $246 million to share repurposes and we paid $325 million in dividends in the June quarter.

Speaker #1: We do believe the tax rate will be in the mid-teens in the September quarter, due to the increase in revenue and higher tax jurisdictions, primarily the United States, as we enter the new fiscal year.

Speaker #1: The U.S. guilty rate is also higher as we enter the fiscal year. We should expect this uptick in the tax rate to continue for the remainder of 2026, and likely beyond.

Speaker #1: We returned 45% of free cash flow in the quarter. Year to date, we've returned $81% of free cash flow and our plans remain to return at least $85% of free cash flow to our shareholders over time.

Speaker #1: Other income and expense for the June quarter was approximately $19 million in expense, compared with $8 million in expense in the March quarter.

Speaker #1: For the June quarter, diluted earnings per share were record $1.82. The diluted share count was roughly 1.26 billion shares, down from the March quarter.

Speaker #1: The change in OI&E was primarily due to foreign exchange. And as we've talked about in the past, you should expect to see variability in OI&E quarter to quarter.

Speaker #1: We have $4 billion remaining on our board-authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short-term investments totaled $5.6 billion at the end of the June quarter.

Speaker #1: Let's look at capital return. We allocated approximately 246 million dollars to share repurposes, and we paid 325 million dollars in dividends in the June quarter.

Doug Bettinger: Our cash and short-term investments totaled $5.6 billion at the end of the Q2, up from $4.8 billion at the end of the Q1. The primary factors behind the cash increase were cash from operating activities, somewhat offset by our capital return activities. As the business grows, we'd like to build a little bit more cash on the balance sheet to support potential liquidity needs like capital spending and working capital. Day sales outstanding were 72 days in the Q2, an increase from 64 days in the Q1. Inventory at the Q2 end totaled $4.3 billion, which was an increase from the Q1 as we are building inventory to meet growing customer demand. Nonetheless, inventory turns continued to improve, coming in at three times versus 2.9 times in the prior quarter.

Speaker #1: We returned 45% of free cash flow in the quarter. Year to date, we've returned 81% of free cash flow, and our plans remain to return at least 85% of free cash flow to our shareholders over time.

Speaker #1: Up from $4.8 billion at the end of the March quarter. The primary factors behind the cash increase were cash from operating activities somewhat offset by our capital return activities.

Speaker #1: As the business grows, we'd like to build a little bit more cash on the balance sheet to support potential liquidity needs like capital spending, and working capital.

Speaker #1: For the June quarter, diluted earnings per share were record $1.82. The diluted share count was roughly 1.26 billion shares, down from the March quarter.

Speaker #1: There's a excuse me, day sales outstanding were 72 days in the June quarter and increased from 64 days in the March quarter. Inventory at the June quarter end totaled $4.3 billion which was an increase from the March quarter as we are building inventory to meet growing customer demand.

Speaker #1: We have 4 billion dollars remaining on our board authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short-term investments totaled 5.6 billion dollars at the end of the June quarter.

Speaker #1: Up from 4.8 billion dollars at the end of the March quarter. The primary factors behind the cash increase were cash from operating activities somewhat offset by our capital return activities.

Speaker #1: Nonetheless, inventory turns continued to improve coming in at three times versus 2.9 times in the prior quarter. This is the highest inventory turns level we've delivered in almost five years.

Speaker #1: As the business grows, we'd like to build a little bit more cash on the balance sheet to support potential liquidity needs like capital spending, and working capital.

Doug Bettinger: This is the highest inventory turns level we've delivered in almost five years. Our non-cash expenses in the Q2 included approximately $104 million for equity compensation, $105 million in depreciation, and $15 million in amortization. Capital expenditures in the Q2 were $189 million. Capital spending was centered on lab investments in the US and global growth in our manufacturing facilities. We ended the Q2 with approximately 22,400 regular full-time employees, which was an increase of approximately 1,800 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installations as well as growing manufacturing activities. We also added headcount in R&D. Now let's turn to our non-GAAP guidance for the Q3 2026.

Speaker #1: Our non-cash expenses in the June quarter included approximately $104 million for equity compensation, $105 million in depreciation, and $15 million in amortization. Capital expenditures in the June quarter were $189 million.

Speaker #1: Excuse me. Days sales outstanding were 72 days in the June quarter, an increase from 64 days in the March quarter. Inventory at the June quarter end totaled $4.3 billion, which was an increase from the March quarter, as we are building inventory to meet growing customer demand.

Speaker #1: Capital spending was centered on lab investments in the United States, and global growth in our manufacturing facilities. We ended the June quarter with approximately $22,400 regular full-time employees which was an increase of approximately $1,800 people from the prior quarter.

Speaker #1: We had headcount growth primarily in the factory and field organizations to support increased tool installations as well as growing manufacturing activities. We also added headcount in R&D.

Speaker #1: Our non-cash expenses in the June quarter included approximately 104 million dollars for equity compensation, 105 million dollars in depreciation, and 15 million dollars in amortization.

Speaker #1: Capital expenditures in the June quarter were $189 million. Capital spending was centered on lab investments in the United States and global growth in our manufacturing facilities.

Speaker #1: Now let's turn to our non-gap guidance for the September 2026 quarter. We're expecting revenue of $8.1 billion plus or minus $400 million. Gross margin of $52% plus or minus 1 percentage point.

Doug Bettinger: We're expecting revenue of $8.1 billion ± $400 million, gross margin of 52% ± 1 percentage point, operating margins of 39.5% ± 1 percentage point. I would just mention we are growing spending in the Q3, albeit at a much slower rate than the growth in revenue. Finally, we're expecting earnings per share of $2.15 ± $0.15, based on a share count of approximately 1.255 billion shares. Let me wrap up by sharing a brief update to the long-term profitability framework that we introduced at our Investor Day a year and a half ago. Since then, demand has strengthened significantly and we're executing well to the strategy that we outlined. As Tim mentioned, we see 2026 shaping up to be our third consecutive year, our outperformance to the growth in WFE.

Speaker #1: We ended the June quarter with approximately 22,400 regular, full-time employees, which was an increase of approximately 1,800 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installations, as well as growing manufacturing activities.

Speaker #1: Operating margins of $39.5% plus or minus 1 percentage point. I would just mention, we are growing spending in the September quarter albeit at a much slower rate than the growth in revenue.

Speaker #1: And finally, we're expecting earnings per share of $2.15 plus or minus 15 cents based on a share count of approximately 1.255 billion shares. So let me wrap up by sharing a brief update to the long-term profitability framework that we introduced at our investor day a year and a half ago.

Speaker #1: We also added headcount in R&D. Now let's turn to our non-GAAP guidance for the September 2026 quarter. We're expecting revenue of $8.1 billion, plus or minus $400 million.

Speaker #1: Since then, demand has strengthened significantly and we're executing well to the strategy that we outlined. As Tim mentioned, we see 2026 shaping up to be our third consecutive year our outperformance to the growth in WFE.

Speaker #1: Gross margin of 52%, plus or minus 1 percentage point. Operating margins of 39.5%, plus or minus 1 percentage point. I would just mention we are growing spending in the September quarter, albeit at a much slower rate than the growth in revenue.

Speaker #1: We've been growing the CSBG business faster than the installed base and are close to customer strategy has helped expand our margins. If technology inflections increasing deposition edge intensity reinforce our confidence that we can continue to expand our SAM while creating additional opportunities for gaining share.

Doug Bettinger: We've been growing the CSBG business faster than the installed base, our close-to-customer strategy has helped expand our margins. The technology inflections increasing deposition etch intensity reinforce our confidence that we can continue to expand our SAM while creating additional opportunities for gaining share. Our SAM expansion is trending toward that high 30% range that we communicated. Now, within this framework, we intend to drive gross margins to the mid-50% level and operating margins to the mid-40% level over the next several years as the AI transformation drives continued greater investment in global semiconductor capacity. Operator, that concludes our scripted remarks. We would now like to open up the call for questions.

Speaker #1: And finally, we're expecting earnings per share of $2.15, plus or minus $0.15, based on a share count of approximately 1.255 billion shares. So let me wrap up by sharing a brief update to the long-term profitability framework that we introduced at our Investor Day a year and a half ago.

Speaker #1: Since then, demand has strengthened significantly, and we're executing well to the strategy that we outlined, as Tim mentioned. We see 2026 shaping up to be our third consecutive year of outperformance compared to the growth in WFE.

Speaker #1: Our SAM expansion is trending toward that high 30% range that we communicated. Now, within this framework, we intend to drive gross margins to the mid-50% level and operating margins to the mid-40% level over the next several years as the AI transformation drives continued greater investment in global semiconductor capacity.

Speaker #1: We've been growing the CSPG business faster than the installed base, and are close to customer strategy has helped expand our margins. The technology inflections increasing deposition etch intensity reinforce our confidence that we can continue to expand our SAM while creating additional opportunities for gaining share.

Speaker #1: Operator, that concludes our scripted remarks. We would now like to open up the call for questions.

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. If you're using a speakerphone, please pick up your hands up before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone 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. At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Arcuri with UBS. Please go ahead.

Speaker #1: Our SAM expansion is trending toward that high-30% range that we communicated. Now, within this framework, we intend to drive gross margins to the mid-50% level and operating margins to the mid-40% level over the next several years, as the AI transformation drives continued greater investment in global semiconductor capacity.

Speaker #2: 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.

Speaker #2: At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Archery with UBS. Please go ahead.

Speaker #3: Thanks a lot. Doug, I know you usually don't guide by segment. But service was up so much in June and based upon the gross margin guidance, which you're guiding basically flattish on such a big up revenue, I would imagine that it's up big again in September.

Speaker #1: Operator, that concludes our scripted remarks. We would now like to open up the call for questions.

Timothy Arcuri: Thanks a lot. Doug, I know you usually don't guide by segment, service was up so much in June, based upon the gross margin guidance, which you're guiding basically flattish on such a big up revenue, I would imagine that it's up big again in September. Can you give us some sense of sort of what to expect in service within the guidance for September?

Speaker #2: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker #3: So can you give us some sense of sort of what to expect in service within the guidance for September?

Speaker #2: 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.

Speaker #4: Listen, Tim, I think you're going to see similar profile to what we saw this quarter. And I won't get into specific numbers necessarily, but upgrades are going to continue to be strong.

Doug Bettinger: Listen, Tim, I think you're going to see similar profile of what we saw this quarter, I won't get into specific numbers necessarily, upgrades are going to continue to be strong, I think, right? Driven by what you got going on in NAND investment. I expect spares to continue to be pretty strong given the high utilization in the industry. Then we're excited about what's going on in advanced service with all the cobot and Equipment Intelligence. I think it's going to be pretty consistent across the board, Tim, similar to what we saw this quarter.

Speaker #2: At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Arkery with UBS. Please go ahead.

Speaker #4: I think, right, driven by what you got going on in NAND investment. I expect spares to continue to be pretty strong given the high utilization in the industry and then we're excited about what's going on in advanced service with all the cobot and equipment intelligence.

Speaker #3: Thanks a lot. Doug, I know you usually don't guide by segment, but service was up so much in June, and based upon the gross margin guidance, which you're guiding basically flattish on such a big up revenue, I would imagine that it's up big again in September.

Speaker #4: So I think it's going to be pretty consistent across the board, Tim, similar to what we saw this quarter.

Speaker #3: Great, Doug. And then so the new gross margin of mid-50s, that makes perfect sense. That's great. And I guess the question is, how long will it take to get gross margin to that level?

Speaker #3: So can you give us some sense of sort of what to expect in service within the guidance for September?

Timothy Arcuri: Great, Doug. The new gross margin of mid-50s, that makes perfect sense. That's great. I guess the question is, how long will it take to get gross margin to that level? I know, obviously, if you look at your margins versus, say, the large foundry margins, it used to be within 5 points, now it's between 5 and 7 points as early as H1 of 2024, now the gap is like 2x that. There's obviously a lot of room for you to move it up. How long will it take for you to move that up? Is it like a revenue thing or is it a time thing?

Speaker #3: I know, I mean, obviously, if you look at your margins versus, say, the large foundry margins, I mean, you used to be within five points and now it's between five and seven points as early as the first half of '24.

Speaker #4: I think, right, driven by what you got going on in NAND investment. I expect spares to continue to be pretty strong, given the high utilization in the industry, and then we're excited about what's going on in advanced service with all the cobot and equipment intelligence.

Speaker #3: And now you're like the gap is like two X that. So there's obviously a lot of room for you to move it up. How long will it take you for you to move that up?

Speaker #3: Is it like a revenue thing or is it a time thing?

Speaker #4: So I think it's going to be pretty consistent across the board, Tim, similar to what we saw this quarter.

Speaker #4: A little bit of both, Tim. Honestly, right? Part of it is scale and scope and revenue growth. Part of it is new product introduction and getting fairly paid for the value we're delivering.

Doug Bettinger: A little bit of both, Tim, honestly, right? Part of it is scale and scope and revenue growth. Part of it is new product introduction and getting fairly paid for the value we're delivering. I expect, Tim, this is over the next several years, that we'll continue to drive it on an annual basis for sure, but it's going to take several years, I think, to get to those levels, Tim.

Speaker #3: Great, Doug. So the new gross margin of mid-50s—that makes perfect sense, that's great. And I guess the question is, how long will it take to get gross margin to that level?

Speaker #4: I expect, Tim, this is over the next several years that we'll continue to drive it on an annual basis for sure, but it's going to take several years, I think, to get to those levels, Tim.

Speaker #3: I know, I mean, obviously, if you look at your margins versus, say, the large foundry margins, I mean, you used to be within five points, and now it's between five and seven points as early as the first half of '24, and now you're like the gap is like two X that.

Speaker #3: Okay, Doug. Thank you.

Timothy Arcuri: Okay, Doug. Thank you.

Speaker #4: Yep. Thanks, Tim.

Doug Bettinger: Yep. Thanks, Tim.

Speaker #2: The next question comes from CJ Muse with Cantor. Please go ahead.

Operator: The next question comes from C.J. Muse with Cantor. Please go ahead.

Operator: The next question comes from CJ Muse with Cantor. Please go ahead.

Speaker #3: So there's obviously a lot of room for you to move it up. How long will it take you for you to move that up?

Speaker #5: Doug, good afternoon. Thank you for taking the question. I guess a follow-up on the CSBG side of the house. It looks like you're going to grow in the mid-30s plus or minus.

C.J. Muse: Doug, good afternoon. Thank you for taking the question. I guess a follow-up on the CSBG side of the house. It looks like you are going to grow in the mid 30s, ±. Just curious, how do you think about the growth rate beyond 2026 into 2027? How much strength should we continue to see from NAND inside here? How are you thinking about Reliant? Does that start to recover more meaningfully? Do we see sustained kind of spares as well? Would love to hear your thoughts there.

CJ Muse: Doug, good afternoon. Thank you for taking the question. I guess a follow-up on the CSBG side of the house. It looks like you are going to grow in the mid 30s, ±. Just curious, how do you think about the growth rate beyond 2026 into 2027? How much strength should we continue to see from NAND inside here? How are you thinking about Reliant? Does that start to recover more meaningfully? Do we see sustained kind of spares as well? Would love to hear your thoughts there.

Speaker #3: Is it like a revenue thing, or is it a time thing?

Speaker #4: It's a little bit of both, Tim, honestly, right? Part of it is scale and scope, and revenue growth. Part of it is new product introduction and getting fairly paid for the value we're delivering.

Speaker #5: And just curious, how do you think about the growth rate beyond '26 into '27? How much strength should we continue to see from NAND inside here?

Speaker #4: I expect, Tim, that over the next several years, we'll continue to drive it on an annual basis for sure. But it's going to take several years, I think, to get to those levels, Tim.

Speaker #5: How are you thinking about reliance? Does that start to recover more meaningfully? And do we see sustained kind of spares as well? We'd love to hear your thoughts there.

Speaker #3: Okay, Doug. Thank you.

Speaker #4: Yep. Thanks, Tim.

Speaker #2: The next question comes from CJ Mews with Cantor. Please go ahead.

Speaker #4: Yeah, CJ, I'll start and then I'll let Tim add on. Yeah, the framework we put out the investor day a year and a half ago still, I would encourage you to think about it in a similar way.

Doug Bettinger: Yeah, CJ, I will start and then I will let Tim add on. Yeah, the framework we put out the investor day a year and a half ago, still, I would encourage you to think about it in a similar way. Now, clearly we have grown faster than that suggested back a year and a half ago, and that has come a little bit from advanced services. We are super excited about that driving incremental growth. It has come, Tim, also from just really high utilization in the industry, which drives consumption of spares and service. To the extent that that continues, spares and service will continue to be really strong from that. I think the way to think about Reliant is think about what is going on in the mature node investment, a little bit of what is happening in China, and then more broadly, what is happening in the analog industrial automotive space.

Speaker #5: Hey, good afternoon. Thank you for taking the question. I guess a follow-up on the CSPG side of the house. It looks like you're going to grow in the mid-30s, plus or minus.

Speaker #4: Now, clearly, we've grown faster than that suggested back a year and a half ago. And that's come a little bit from event services. We're super excited about that driving incremental growth.

Speaker #5: And just curious, how do you think about the growth rate beyond ’26 into ’27? How much strength should we continue to see from NAND inside here?

Speaker #4: It's come, Tim, also from just really high utilization in the industry. Which drives consumption of spares and service to the extent that that continues, spares and service will continue to be really strong from that.

Speaker #5: How are you thinking about Reliant? Does that start to recover more meaningfully? And do we see sustained kind of spares as well? We'd love to hear your thoughts there.

Speaker #4: And then I think the way to think about reliant is think about what's going on in the mature node investment a little bit of what's happening in China and then more broadly what's happening in the analog industrial automotive space.

Speaker #4: Yeah, CJ, I'll start, and then I'll let Tim add on. Yeah, you know the framework we put out the investor day a year and a half ago still, I would encourage you to think about it in a similar way.

Speaker #4: So that'll be a little bit more situational, I guess. But that's the framework to think about. We're probably going to do a little bit better than the growth that we talked about a year and a half ago though, CJ.

Doug Bettinger: That will be a little bit more situational, I guess. That is the framework to think about. We are probably going to do a little bit better than the growth that we talked about a year and a half ago, though, CJ.

Speaker #4: Now, clearly, we've grown faster than that suggested back a year and a half ago. And that's come a little bit from advanced services. We're super excited about that driving incremental growth.

Speaker #5: Perfect. And then I guess, could you speak to perhaps new entrants or more meaningful spending from historically larger spenders on the logic front? What kind of visibility do you have today?

C.J. Muse: Perfect. I guess could you speak to perhaps new entrants or more meaningful spending from historically larger spenders on the logic front? What kind of visibility do you have today, and what kind of growth should we expect into 2027 and beyond?

CJ Muse: Perfect. I guess could you speak to perhaps new entrants or more meaningful spending from historically larger spenders on the logic front? What kind of visibility do you have today, and what kind of growth should we expect into 2027 and beyond?

Speaker #4: And then I think the way to think about reliant is think about what's going on in the mature node investment a little bit of what's happening in China, and then more broadly what's happening in the analog industrial automotive space.

Speaker #5: And what kind of growth should we expect into '27 and beyond?

Speaker #4: Yeah, CJ, you're funny. Asking that tricky question about new logic customers. Yeah, there's some new stuff going on. There's clearly dialogue and I'll let Tim comment a little bit.

Doug Bettinger: CJ, you're funny, asking that tricky question about new logic customers. There's some new stuff going on. There's clearly dialogue. I'll let Tim comment a little bit. We are talking to that new logic customer in the US. That is happening.

Speaker #4: So that'll be a little bit more situational, I guess, but that's the framework to think about. We're probably going to do a little bit better than the growth that we talked about a year and a half ago, though, CJ.

Speaker #4: We are talking to that new logic customer in the US. That is happening.

Speaker #3: Yeah, I don't have much to add other than to say we're engaged and I think what's exciting for us is that in many cases where we have new entrants come into foundry logic or memory or any of the spaces, they're always looking at some of the more innovative approaches.

Tim Archer: I don't have much to add other than to say we're engaged. I think what's exciting for us is that, in many cases where we have new entrants come into foundry logic or memory or any of the spaces, they're always looking at some of the more innovative approaches. They're not encumbered by kind of the roadmaps and install base it's existed in. I think that we're hopeful that when we think about all of the new systems that we've talked about, I mentioned a few in the prepared remarks, but we've talked about a lot of others in other calls. That's an opportunity for us to showcase the significant technical improvement Lam has made on the foundry logic side. I think that's what new entrants mean for us, is more opportunities to grow our share within that space.

Speaker #3: They're not encumbered by kind of the roadmaps and install basis existed in. So I think that we're hopeful that when we think about all of the new systems that we've talked about, I mentioned a few in the prepared remarks, but we've talked about a lot of others in other calls, that's an opportunity for us to showcase the significant technical improvement LAM is made on the foundry logic side.

Speaker #4: Yeah, CJ, you're funny. Asking that tricky question about new logic customers. Yeah, there's some new stuff going on. There's clearly dialogue and all that, Tim, comment a little bit.

Speaker #4: We are talking to that new logic customer in the US. That is happening.

Speaker #3: And I think that's what new entrants mean for us is more opportunities to grow our share within that space.

Speaker #3: Yeah, I don't have much to add other than to say we're engaged, and I think what's exciting for us is that in many cases where we have new entrants, come into foundry logic or memory or any of the spaces, they're always looking at some of the more innovative approaches.

Speaker #5: Thank you.

Speaker #4: Thanks, CJ.

C.J. Muse: Thank you.

CJ Muse: Thank you.

Speaker #2: The next question comes from Harlan Sur with JP Morgan. Please go ahead.

Doug Bettinger: Thanks, CJ.

Operator: The next question comes from Harlan Sur with JPMorgan. Please go ahead.

Speaker #6: Hey, good afternoon. Thanks for taking my question. As I look back historically, your gross margins seem to have taken a structural step up in 2023, but I believe this corresponded to the team moving a bigger part of the volume manufacturing flowing through your more efficient low-cost Malaysia facility and as the team has continued to scale volumes higher through Malaysia, since then, right, they incremented you've been able to drive incrementally higher margins on these products and that continues to be a gross margin benefit.

Harlan Sur: Good afternoon. Thanks for taking my question. As we look back historically, your gross margins seem to have taken a structural step up in 2023, but I believe this corresponded to the team moving a bigger part of the volume manufacturing flowing through your more efficient, low-cost Malaysia facility. As the team has continued to scale volumes higher through Malaysia since then, right, you've been able to drive incrementally higher margins on these products, and that continues to be a gross margin benefit. Looking at your strong gross margin results for June and for the September outlook, how much of the incremental gross margin improvement is coming from the volume next to Malaysia and the increases there, or could it be product mix, new product introduction upgrades, and/or just incremental pricing increases on your systems?

Speaker #3: That's an opportunity for us to showcase the significant technical improvement LAM has made on the foundry logic side and I think that's what new entrants mean for us is more opportunities to grow our share within that space.

Speaker #5: Thank you.

Speaker #4: Thanks, CJ.

Speaker #6: Looking at your strong gross margin results for June, and for the September outlook, how much of the incremental gross margin improvement is coming from the volume mix through Malaysia and the increases there?

Speaker #2: The next question comes from Harlan Sir. With JP Morgan, please go ahead.

Speaker #6: Hey, good afternoon. Thanks for taking my question. Let me look back historically. Your gross margins seem to have taken a structural step up in 2023, and I believe this corresponded to the team moving a bigger part of the volume manufacturing flow through your more efficient, low-cost Malaysia facility.

Speaker #6: Or could it be product mix? New product introduction, upgrades, and/or just incremental pricing increases on your systems? And maybe which of these dynamics is going to be most influential in driving you to your mid-50s sort of new long-term targets?

Harlan Sur: Maybe which of these dynamics is going to be most influential in driving you to your mid-fifties sort of new long-term targets?

Speaker #6: And as the team has continued to scale volumes higher through Malaysia since then, right, that increment that you've been able to drive has resulted in incrementally higher margins.

Speaker #3: Yeah, Harlan, let me start just because and I know you want to get to the quantification. I'll let Doug do some of that to the extent that he can.

Tim Archer: Yeah, Harlan, let me start, just because I know you want to get to the quantification. I'll let Doug do some of that to the extent that he can. I just wanted to point out, when we look at the tremendous operational execution, and I refer to it as operational velocity inside the company, I wanted to just make sure it's clear. We have been able to execute to what have been really accelerated customer demands because of what I see as a strategic asset in our global manufacturing footprint and a global supply chain footprint. We have factories in Oregon and California and Ohio, in Malaysia and Taiwan and Korea and Austria. Really, as we've looked at this tremendous growth period we've gone through and expect to continue to go through, we've leveraged that full scope of sites and supply chains.

Speaker #6: On these products, and that continues to be a gross margin benefit. Looking at your strong gross margin results for June, and for the September outlook, how much of the incremental gross margin improvement is coming from the volume mix through Malaysia and the increases there, or could it be product mix?

Speaker #3: But I just wanted to point out when we look at the tremendous operational execution and I referred to it as operational velocity inside the company, I wanted to just make sure it's clear.

Speaker #3: We have been able to execute to what have been really accelerated customer demands because of what I see as a strategic asset in our global manufacturing footprint.

Speaker #6: New product introduction, upgrades, and/or just incremental pricing increases on your systems? And maybe which of these dynamics is going to be most influential in driving you to your mid-50s sort of new long-term targets?

Speaker #3: And global supply chain footprint. We have factories in Oregon and California and Ohio. In Malaysia and Taiwan and Korea. And Austria. And really, as we've looked at this tremendous growth period we've gone through and expect to continue to go through, we've leveraged that full scope of sites and supply chains and what's really helped us is that they're not all interrelated and so they're not all being driven by the same demand.

Speaker #3: Yeah, Harlan, let me start, just because—and I know you want to get to the quantification. I'll let Doug do some of that, to the extent that he can.

Speaker #3: But I just wanted to point out, when we look at the tremendous operational execution and I refer to it as operational velocity inside the company, I wanted to just make sure it's clear.

Tim Archer: What's really helped us is that they're not all interrelated, they're not all being driven by the same demand. In that way, we can both get what we need when we need it, and also at the prices that we need it. There's an element of really being able to leverage this global capability. I think that's somewhat unique in how Lam has driven our operational structure. I'll let Doug talk to the second part of your question.

Speaker #3: And so in that way, we can both get what we need when we need it and also at the prices that we need it.

Speaker #3: We have been able to execute to what have been really accelerated customer demands because of what I see as a strategic asset in our global manufacturing footprint.

Speaker #3: And so there's an element of really being able to leverage this global capability. I think that's somewhat unique in how LAM has driven our operational structure.

Speaker #3: And global supply chain footprint. We have factories in Oregon and California and Ohio and Malaysia and Taiwan and Korea, and Austria. And really, as we've looked at this tremendous growth period we've gone through and expect to continue to go through, we've leveraged that full scope of sites and supply chains and what's really helped us is that they're not all interrelated.

Speaker #3: And I'll let Doug talk to the second part of your question.

Speaker #4: Yeah, Harlan, a lot of the uptick that you're seeing gross margin has come from exactly what Tim just outlined. On top of that, we got new products coming out every single year.

Doug Bettinger: Yeah, Harlan, a lot of the uptick that you're seeing gross margin has come from exactly what Tim just outlined. On top of that, we got new products coming out every single year, theoretically adding more value to customers and driving improving profitability. Clearly, that's going to be our ongoing objective. Clearly, we're always working to get fairly paid for the value we're delivering to the customers. We're absolutely working on that. Yes, a lot of it has come from operational efficiencies, close to customer strategy. All of that were conscious strategies that we've outlined over the last several years and have been talking about.

Speaker #4: Theoretically, adding more value to the customers and driving improving profitability. Clearly, that's going to be our ongoing objective. Clearly, we're always working to get fairly paid for the value we're delivering to the customers.

Speaker #3: And so they're not all being driven by the same demand. In that way, we can both get what we need when we need it, and also at the prices that we need it.

Speaker #4: We're absolutely working on that. And then, yes, a lot of it has come from operational efficiencies, close to customer strategy, all of that were conscious strategies that we've outlined over the last several years and have been talking about.

Speaker #3: And so there's an element of really being able to leverage this global capability. I think that's somewhat unique in how LAM has driven our operational structure.

Speaker #3: And I'll let Doug talk to the second part of your question.

Speaker #6: No, I appreciate that. And then on advanced packaging, you came into this year with a view of greater than 40% growth. You upped that to greater than 50% growth last earnings.

Harlan Sur: No, I appreciate that. On advanced packaging, you came into this year with a view of greater than 40% growth. You upped that to greater than 50% growth last earnings. Now you're looking at 70% growth today, right? Is the increase in the outlook due to HBM or 2.5D to 3.5D SOIC advanced packaging transitions happening faster, or is it customers just pulling in production capability from next year into this year? Curious.

Speaker #4: Yeah, Harlan, a lot of the uptick that you're seeing gross margin has come from exactly what Tim just outlined. On top of that, we got new products coming out every single year.

Speaker #6: Now you're looking at 70% growth today, right? Is the increase in the outlook due to HBM or two and a half feet or three and a half feet SOIC advanced packaging transitions happening faster?

Speaker #4: Theoretically, adding more value to the customers and driving improved profitability—clearly, that's going to be our ongoing objective. Clearly, we're always working to get fairly paid for the value we're delivering to the customers.

Speaker #6: Or is it customers just pulling in production capability from next year into this year? Curious.

Speaker #3: Yeah, I mean, Harlan, it's just everything. I mean, advanced packaging, I mentioned it in my prepared remarks, it's becoming quite a technical tool for our customers and for the industry to drive greater performance.

Tim Archer: Yeah, Harlan, it's just everything. Advanced packaging, I mentioned it in my prepared remarks. It's becoming quite a technical tool for our customers, and for the industry to drive greater performance. It's everything you just mentioned. It's 2.5D. It's in the foundry logic space. It's in HBM. I think that what we're excited about is, obviously, as it moves also into panel packaging, that's a place where Lam we feel like we've gotten out to an early start there. We think that transition is very in the very early stages, but it's in an important inflection point there as well. I think just next few years, advanced packaging growth will be a little bit hard to predict because adoption is just occurring all over the place.

Speaker #6: No, I appreciate that. And then, on advanced packaging, you came into this year with a view of greater than 40% growth. You upped that to greater than 50% growth last earnings.

Speaker #3: So it's everything you just mentioned. It's 2.5D, it's in the foundry logic space, it's in HBM. And I think that what we're excited about is obviously, as it moves also into panel packaging, that's a place where LAM we feel like we've gotten out to an early start there.

Speaker #3: And we think that transition is very early stages. But it's an important inflection point there as well. So I think just next few years, advanced packaging growth will be a little bit hard to predict because adoption is just occurring all over the place.

Speaker #6: Or is it customers just pulling in production capability from next year into this year? Curious.

Speaker #3: Yeah, I mean, Harlan, it’s just everything. I mean, advanced packaging—I mentioned it in my prepared remarks—it’s becoming quite a technical tool for our customers and for the industry to drive greater performance.

Speaker #4: But our clear leadership, Harlan, I'll just remind you in the TSVH and the copper electroplating, I call it the drill and fill. We just have really strong product offerings there.

Doug Bettinger: Our clear leadership, Harlan, I'll just remind you, in the TSVH, in the copper electroplating, I call it the drill and fill, we just have really strong product offerings there. As that goes, we just benefit extensively from our technical leadership.

Speaker #3: So, it's everything you just mentioned. It's 2.5D, it's in the foundry logic space, it's in HBM. And I think that what we're excited about is, obviously, as it moves also into panel packaging—that's a place where Lam, we feel like we've gotten out to an early start there.

Speaker #4: So as that goes, we just benefit extensively from our technical leadership.

Speaker #6: No, absolutely. Thanks, Tim. Thanks, Doug.

Harlan Sur: No, absolutely. Thanks, Tim. Thanks, Doug.

Speaker #4: Yeah, thanks, Harlan.

Doug Bettinger: Yeah. Thanks, Harlan.

Speaker #2: The next question comes from Atif Malik with City. Please go ahead.

Speaker #3: And we think that transition is in the very early stages, but it's at an important inflection point as well. So, I think over the next few years, advanced packaging growth will be a little bit hard to predict because adoption is just occurring all over the place.

Operator: The next question comes from Atif Malik with Citi. Please go ahead.

Operator: The next question comes from Aatif Malik with Citi. Please go ahead.

Speaker #7: Hi, thank you for taking my question. I know you guys talked about doubling of NAND revenues and the context window or KV cash. There is a third-party trend force forecasting.

Atif Malik: Hi, thank you for taking my questions. I know you guys talked about doubling of NAND revenues and the context vendor, Kioxia. There is a third party TrendForce forecasting a divergence in memory fundamentals next year. They're calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer, and shortages to continue in the DRAM side, which is more driven by data center. Are you seeing anything in your conversations with the memory makers that are pointing to some sort of a oversupply or a reversal in the NAND fundamentals for next year?

Aatif Malik: Hi, thank you for taking my questions. I know you guys talked about doubling of NAND revenues and the context vendor, Kioxia. There is a third party TrendForce forecasting a divergence in memory fundamentals next year. They're calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer, and shortages to continue in the DRAM side, which is more driven by data center. Are you seeing anything in your conversations with the memory makers that are pointing to some sort of a oversupply or a reversal in the NAND fundamentals for next year?

Speaker #7: I divergence in memory fundamentals next year. They're calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer.

Speaker #4: But our clear leadership, Harlan—I'll just remind you—in the TSV etch and the copper electroplating, I call it the "drill and fill." We just have really strong product offerings there.

Speaker #7: And shortages to continue in the DRAM side, which is more driven by data center. Are you seeing anything in your conversations with the memory makers that are pointing to some sort of a oversupply or a reversal in the NAND fundamentals for next year?

Speaker #4: So as that goes, we just benefit extensively from our technical leadership.

Speaker #6: No, absolutely. Thanks, Tim. Thanks, Doug.

Speaker #4: Yeah, thanks, Harlan.

Speaker #2: The next question comes from Matif Malik with City. Please go ahead.

Speaker #3: I think that it's as we've said on NAND, I mean, clearly customers are right now progressing through upgrades to 200-plus layer devices. There's some greenfield this year.

Tim Archer: I think that it's, as we've said on NAND, clearly customers are right now progressing through upgrades to 200-plus layer devices. There's some greenfield this year. It's a ways out before there's a lot of greenfield coming in demand. I think that, again, next year, we're still having conversations about how to continue to upgrade the existing installed base and get the fleet up to kind of current state-of-the-art in terms of NAND. I think it's a little early on 2028, but our view right now is fundamentals are still about the same for us. I think what I tried to highlight in my prepared remarks is, the Lam story is a lot bigger than just NAND, and there's often this focus.

Speaker #6: Hi, thank you for taking my questions. I know you guys talked about doubling of NAND revenues and the context window, or KV cache. There is a third-party, TrendForce, forecasting that divergence in memory fundamentals next year.

Speaker #3: It's a ways out before there's a lot of greenfield coming in demand. So I think that, again, next year we haven't we're still having conversations about how to continue to upgrade the existing installed base and get the fleet up to kind of current state of the art in terms of NAND.

Speaker #6: They're calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer and shortages to continue in the DRAM side, which is more driven by data center.

Speaker #6: Are you seeing anything in your conversations with the memory makers that is pointing to any sort of oversupply or a reversal in the NAND fundamentals for next year?

Speaker #3: And so I think it's a little early on 2028, but our view right now is fundamentals are still about the same for us. I think what I tried to highlight in my prepared remarks is the LAM story is a lot bigger than just NAND.

Speaker #3: I think that it's as we've said on NAND. I mean, clearly, customers are right now progressing through upgrades to 200-plus-layer devices. There's some greenfield this year.

Speaker #3: And there's often this focus but what we've done is we've successfully looked at these vertical scaling trends that are occurring in both DRAM and foundry logic.

Tim Archer: What we've done is we've successfully looked at these vertical scaling trends that are occurring in both DRAM and foundry logic, and we've applied all of that learning and expertise that we have from 3D NAND into those. Those are the basis for a lot of the wins that I was talking about in my remarks. I think that's a trend that continues into 2028 and beyond as well. You've got NAND, and then you've got DRAM and foundry logic as well. I would point out, we said that we believe 2027 looks like a great setup Not only for the industry, but for Lam. That's an environment where next year we still see DRAM being the fastest grower, foundry logic being the second fastest grower, and NAND being third.

Speaker #3: It's a ways out before there's a lot of greenfield coming in demand. So I think that, again, next year, we're still having conversations about how to continue to upgrade the existing installed base and get the fleet up to kind of current state of the art in terms of NAND.

Speaker #3: And we've applied all of that learning and expertise that we have from 3D NAND into those. And those are the basis for a lot of the wins that I was talking about in my remarks.

Speaker #3: And I think that's a trend that continues into 2028 and beyond as well. So we've got NAND and then you've got DRAM and foundry logic as well.

Speaker #3: And I would point out, we said that we believe 2027 looks like a great setup, not only for the industry but for LAM. And that's an environment where next year we still see DRAM being the fastest grower.

Speaker #3: And there's often this focus, but what we've done is we've successfully looked at these vertical scaling trends that are occurring in both DRAM and foundry logic, and we've applied all of that learning and expertise that we have from 3D NAND into those.

Speaker #3: Foundry logic being the second fastest grower. And NAND being third. And that's exactly the setup that we came into this year on. And clearly, our results so far in 2026 are quite good.

Tim Archer: That's exactly the setup that we came into this year on, and clearly our results so far in 2026 are quite good. We think even in that environment, Lam can do extremely well.

Speaker #3: So we think even in that environment, LAM can do extremely well.

Speaker #3: And those are the basis for a lot of the wins that I was talking about in my remarks. I think that's a trend that continues into 2028 and beyond as well.

Speaker #7: Thank you, Tim. And then Taiwan was a record revenue year. Can you just talk about your foundry share gains at three and two nanometers?

Atif Malik: Thank you, Tim. Taiwan was a record revenue year. Can you just talk about your foundry share gains at 3 and 2 nanometer?

Aatif Malik: Thank you, Tim. Taiwan was a record revenue year. Can you just talk about your foundry share gains at 3 and 2 nanometer?

Speaker #3: So we've got NAND and then you've got DRAM and foundry logic as well. And I would point out, we said that we believe 2027 looks like a great setup, not only for the industry, but for LAM, and that's an environment where next year we still see DRAM being the fastest grower, foundry logic being the second fastest grower, and NAND being third.

Speaker #3: Sure. I mean, well, I can't tell you specifically. Obviously, some of that gets quite close to a single customer, but look, it's back to the things that we've talked about.

Tim Archer: Sure. I can't tell you specifically, obviously, since some of that gets quite close to a single customer, but look, it's back to the things that we've talked about. As customers are shrinking and they're moving to gate-all-around, it's the verticalization of the transistor structure. It's the focus on things like RC performance. If you go back and look at our transcripts from the last number of calls, we've been talking about things like low-K spacers, and we talked about the importance of patterning etch as features become ever smaller and taller because of EUV patterning and device shrink. I would just say anything that's related, again, to something becoming higher aspect ratio, it requires etch.

Speaker #3: As customers are shrinking and they're moving to gate all around, it's the verticalization of the transistor structure. It's the focus on things like RC performance and if you go back and look at our transcripts from the last number of calls, we've been talking about things like low-case spacers and we talked about the importance of patterning edge as features become ever smaller and taller because of EUV patterning and device shrink.

Speaker #3: And that's exactly the setup that we came into this year on. And clearly, our results so far in 2026 are quite good. So we think even in that environment, LAM can do extremely well.

Speaker #5: Thank you, Tim. And then Taiwan was a record revenue year. Can you just talk about your foundry share gains at three and two nanometers?

Speaker #3: Sure. I mean, well, I can't tell you specifically, obviously, since some of that gets quite close to a single customer. But look, it's back to the things that we've talked about.

Speaker #3: And so I would just say anything that's related, again, to something becoming higher aspect ratio, it requires edge. If it has to do with RC, meaning metalization resistance or dielectric capacitance, those are areas where LAM's new ALD tools where our new edge tools like Aqara are doing extremely well.

Tim Archer: If it has to do with RC, meaning metallization resistance or dielectric capacitance, those are areas where Lam's new ALD tools, where our new etch tools like Akara are doing extremely well. Not just in Taiwan, but really at every leading-edge foundry logic customer around the world, because these are unique capabilities built into our newest tools, and they're doing great at the customer.

Speaker #3: As customers are shrinking and they're moving to gate-all-around, it's the verticalization of the transistor structure, it's the focus on things like RC performance. And if you go back and look at our transcripts from the last number of calls, we've been talking about things like low-k spacers, and we've talked about the importance of patterning edge as features become ever smaller and taller because of EUV patterning and device shrink.

Speaker #3: Not every leading-edge foundry logic customer around the world because these are unique capabilities built into our newest tools and they're doing great at the customer.

Speaker #7: Thank you.

Speaker #4: Thanks, Atif.

Doug Bettinger: Thank you.

Aatif Malik: Thank you.

Doug Bettinger: Thanks, Satya.

Speaker #2: The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Speaker #3: And so I would just say anything that's related, again, to something becoming higher aspect ratio, it requires etch, if it has to do with RC, meaning metalization resistance or dielectric capacitance, those are areas where LAM's new ALD tools where our new etch tools like Aqara are doing extremely well.

Operator: The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Speaker #7: Good afternoon. Thanks for taking my question. I was wondering as you look at the growth rates of industries going to post in 2026, how would you handicap looking in the 2027 where you could see a similar better or worse growth rate relative to this year?

Jim Schneider: Good afternoon, and thank you for taking my question. I was wondering, as you look at the growth rates the industry is going to post in 2026, how would you handicap looking into 2027, whether you could see a similar better or worse growth rate relative to this year?

Speaker #3: Not just in Taiwan, but really at every leading-edge foundry logic customer around the world, because these are unique capabilities built into our newest tools, and they're doing great at the customer.

Speaker #4: Yeah, Jim, we're not going to get into talking specifically about next year, at least not numerically. I would tell you though that as we look at kind of what's being invested in the industry is still meaningfully under supplied, right?

Doug Bettinger: Yeah, Jim, we're not going to get into talking specifically about next year, at least not numerically. I would tell you, though, that as we look at what's being invested in, the industry is still meaningfully undersupplied, right? You've got clean room coming online over the next, I don't know, 12 months and beyond, frankly. All that will lead to incremental opportunity as we get into 2027. It's too soon for us to put quantification around what 2027's going to be, but it looks like it's going to set up to be a pretty darn good year, Jim. I guess I'd just leave it at that.

Speaker #4: You've got clean room coming online over the next I don't know, 12 months and beyond, frankly. And all that will lead to incremental opportunities we get into '27.

Speaker #5: Thank you.

Speaker #4: Thanks, Dr.

Speaker #2: The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Speaker #6: Good afternoon. Thanks for taking my question. I was wondering, as you look at the growth rates of industries going to post in 2026, how would you handicap looking at the 2027 when you could see a similar better or worse growth rate relative to this year?

Speaker #4: It's too soon for us to put quantification around what '27 is going to be. But it looks like it's going to set up to be a pretty darn good year, Jim.

Speaker #4: I guess I'd just leave it at that.

Speaker #7: That's fair enough. Understand. And then maybe just as a follow-up, you mentioned pricing being one of the factors that growth must have performance in the quarter.

Jim Schneider: That's fair enough. Understand. Then maybe just as a follow-up, you mentioned pricing being one of the factors that drove gross margin outperformance in the quarter. Can you speak to some of the factors that drove that? Do you see opportunities for further pricing actions in the short term, for example, like-to-like pricing pieces, even within the same program, the same fab project?

Speaker #4: Yeah, Jim, we're not going to get into talking specifically about next year, at least not numerically. I would tell you, though, that as we look at kind of what's being invested in the industry is still meaningfully undersupplied, right?

Speaker #7: Can you speak to some of the factors that drove that? And do you see opportunities for further pricing actions in the short term? For example, like the light pricing increases, even within the same program, the same project.

Speaker #4: You've got clean room coming online over the next, I don't know, 12 months and beyond, frankly. And all that will lead to incremental opportunities.

Speaker #4: All right, Jim. I mean, we're always working on getting fairly paid for the value we're delivering. Last quarter, it was no different than it ever has been.

Doug Bettinger: Yeah, Jim, we're always working on getting fairly paid for the value we're delivering. Last quarter was no different than it ever has been. Pricing is always a component of what's been going on, in addition to operational efficiency, that close-to-customer strategy I talked about, all these new products that we're bringing out delivering better gross margin because it's solving more difficult technical challenges. All that contributes to what you're seeing us deliver in gross margin, frankly, how we will strive to continue to expand gross margin to that mid-50% level. We're going to work on all of this stuff.

Speaker #4: We get into '27. It's too soon for us to put quantification around what '27 is going to be. But it looks like it's going to set up to be a pretty darn good year, Jim.

Speaker #4: Pricing has always a component of what's been going on. In addition to operational efficiency, that close to customer strategy I talked about, all these new products that we're bringing out, delivering better gross margin because it's solving more difficult technical challenges, all that contributes to what you're seeing us deliver in gross margin.

Speaker #4: I guess I'll just leave it at that.

Speaker #6: That's fair enough. I understand. And then maybe just as a follow-up—you mentioned pricing being one of those factors that drove most of the outperformance in the quarter.

Speaker #6: Can you speak to some of the factors that drove that? And do you see opportunities for further pricing actions in the short term? For example, like the light pricing increases, even within the same program, the same project.

Speaker #4: And frankly, how we will strive to continue to expand gross margin to that mid-50% level. We're going to work on all of this stuff.

Speaker #7: Thank you.

Jim Schneider: Thank you.

Speaker #4: Yep. Thanks, Jim.

Doug Bettinger: Yeah. Thanks, Jim.

Speaker #2: The next question comes from Srini Pajjuri with RBC Capital Markets. Please go ahead.

Speaker #4: All right, Jim. I mean, we’re always working on getting fairly paid for the value we’re delivering. Last quarter, it was no different than it ever has been.

Operator: The next question comes from Srini Pajjuri with RBC Capital Markets. Please go ahead.

Speaker #6: Thank you. Tim, on your WFE comment about 150 billion, I think you said you alluded to maybe further upward bias for the year. I'm just trying to get a sense of what your lead times are and in case if there's more upside in I guess in the second half of the year, how well positioned you are to be able to supply to any potential upside.

Speaker #4: Pricing is always a component of what's been going on. In addition to operational efficiency and that close-to-customer strategy I talked about, all these new products that we're bringing out are delivering better gross margin because they're solving more difficult technical challenges. All that contributes to what you're seeing us deliver in gross margin.

Srini Pajjuri: Thank you. Tim, on your WFE comment about $150 billion, I think you said you alluded to maybe further upward bias for the year. I'm just trying to get a sense of what your lead times are, and in case if there's more upside in, I guess, in H2 of the year, how well-positioned you are to be able to supply any potential upside.

Speaker #4: And frankly, we will strive to continue to expand gross margin to that mid-50% level. We're going to work on all of this stuff.

Speaker #3: Yeah. Sorry, that might have been poorly worded in the remarks. It was our previous quarter's guidance was 140 billion with upside bias. And that upside bias played out to get us to 150 now.

Doug Bettinger: Yeah, sorry, that might have been poorly worded in the remarks. Our previous quarter's guidance was $140 billion with upside bias, that upside bias played out to get us to $150 billion now. This outlook was in the $150 billion range. We didn't say upside bias for this current outlook. To that extent, your second part of your question about what capabilities do we have, I know we were thinking one of the questions might be, how did you go from $140 billion to $150 billion when you said it was clean room constrained? People find ways, the demand is very strong, people have squeezed out a little bit of extra space. They've resolved bottleneck tools.

Speaker #6: Thank you.

Speaker #4: Yeah. Thanks, Jim.

Speaker #2: The next question comes from Srini Pujori with RBC Capital Markets. Please go ahead.

Speaker #3: So this outlook was in the 150 billion dollar range. We didn't say upside bias for this current outlook. But to that extent, I mean, your second part of your question about what capability do we have?

Speaker #5: Thank you. Tim, on your WFE comment about 150 billion, I think you said you alluded to maybe further upward bias for the year. I'm just trying to get a sense of what your lead times are and in case if there's more upside in I guess in the second half of the year, how well positioned you are to be able to supply to any potential upside.

Speaker #3: I mean, I know we were thinking one of the questions might be, how did you go to from 140 to 150 when you said it was clean room constrained?

Speaker #3: People find ways and the demand is very strong. And so people have squeezed out a little bit of extra space. They've resolved bottleneck tools.

Speaker #3: Yeah, sorry, that might have been poorly worded in the remarks. Our previous quarter's guidance was $140 billion with upside bias, and that upside bias played out to get us to $150 billion now.

Speaker #3: We work with customers on if we happen to be the bottleneck tool from a throughput perspective, in places we work with customers to resolve those and that sometimes frees them up to spend a little bit more to resolve other bottleneck tools.

Doug Bettinger: If we happen to be the bottleneck tool from a throughput perspective, in places, we work with customers to resolve those, that sometimes frees them up to spend a little bit more, to resolve other bottleneck tools. That's the $140 billion to $150 billion. From this point forward, as you said, lead times are challenging, maybe referring back to the answer I gave about our strategic global manufacturing supply chain, our team is doing a phenomenal job, a heroic job, I think, responding to urgent customer requests. When those do come up, we've been able to meet those needs. I think as we move through H2 of the year, that becomes more and more difficult to see anything further in this year as true surprise upside. That's why the discussions are now out into 2027 and beyond.

Speaker #3: So this outlook was in the $150 billion range. We didn't say "upside bias" for this current outlook. But to that extent—I mean, your second part of your question—about what capability do we have?

Speaker #3: So that's kind of the 140 to 150. From this point forward, as you said, lead times are challenging, but maybe referring back to the answer I gave about our strategic global manufacturing supply chain, our team is doing a phenomenal job, a heroic job.

Speaker #3: I mean, I know we were thinking one of the questions might be, how did you go from 140 to 150 when you said it was clean room constrained?

Speaker #3: I think responding to urgent customer requests and so when those do come up, we've been able to meet those needs. I think as we move through the second half of the year, that becomes more and more difficult to see anything further in this year.

Speaker #3: People find ways and the demand is very strong. And so people have squeezed out a little bit of extra space. They've resolved bottleneck tools.

Speaker #3: We work with customers so that, if we happen to be the bottleneck tool from a throughput perspective in places, we work with customers to resolve those. And that sometimes frees them up to spend a little bit more to resolve other bottleneck tools.

Speaker #3: As true surprise upside. And that's why the discussions are now out in the '27 and beyond to make sure that as new fabs come into play, this is my comment about visibility.

Tim Archer: To make sure that as new fabs come into play, this is my comment about visibility, as those new fabs are opening up, customers want to make sure they have secured the tools they need from Lam. Those discussions are taking place at lead time or beyond.

Doug Bettinger: To make sure that as new fabs come into play, this is my comment about visibility, as those new fabs are opening up, customers want to make sure they have secured the tools they need from Lam. Those discussions are taking place at lead time or beyond.

Speaker #3: So that's kind of the 140 to 150. From this point forward, as you said, lead times are challenging. But maybe referring back to the answer I gave about our strategic global manufacturing supply chain—our team is doing a phenomenal job, a heroic job.

Speaker #3: As those new fabs are opening up, customers want to make sure they have secured the tools they need from LAM to those discussions are taking place at lead time or beyond.

Speaker #6: Thank you. And then my follow-up, maybe on gross margins, Doug, pretty impressive gross margin performance despite the fact that China declined pretty meaningfully sequentially.

Srini Pajjuri: Thank you. My follow-up, maybe on gross margins. Doug, pretty impressive gross margin performance despite the fact that China declined pretty meaningfully sequentially. I am just trying to get a sense of what you are seeing in terms of China overall demand. Are you expecting, I guess, China to recover in the next few quarters? I see your deferred revenue balance went up a little bit. Just trying to get a sense of how to think about China going forward.

Speaker #6: So I'm just trying to get a sense of what you're seeing in terms of China overall demand. Are you expecting I guess China to recover in the next few quarters?

Speaker #3: And that's why the discussions are now out in the '27 and beyond to make sure that as new fabs come into play, this is my comment about visibility, as those new fabs are opening up, customers want to make sure they have secured the tools they need from LAM to those discussions are taking place at lead time or beyond.

Speaker #6: I see you were different revenue balance went up a little bit. So just trying to get a sense of how to think about China going forward.

Speaker #4: Yeah, Srini, I still think China overall WFE is flat to slightly up. Similar to what we said before. I think quarter by quarter, you'll see some lumpiness to it.

Doug Bettinger: Yeah, Srini, I still think China overall WFE is flat to slightly up, similar to what we said before. I think quarter by quarter, you'll see some lumpiness to it, right? Our view is still largely the same. I would just also point out a comment that I made in my script, and maybe that we're going to continue to see, is understanding that China region, you also have the global multinational customers with fabs in China showing up in that number, that 26%. In the June quarter, those global multinationals in China actually grew somewhat, while the indigenous Chinese customers declined. It won't surprise me if that's a similar trend that we see as we go through the latter part of the year as well.

Speaker #4: But our view is still largely the same. I would just also point out a comment that I made in my script and maybe that we're going to continue to see is understanding that China region, you also have the global multinational customers with fabs in China showing up in that number, that 26%.

Speaker #5: Thank you. And then my follow-up maybe on gross margins. Doug, pretty impressive gross margin performance despite the fact that China declined pretty meaningfully sequentially.

Speaker #5: So I'm just trying to get a sense of what you're seeing in terms of China overall demand. Are you expecting I guess China to recover in the next few quarters?

Speaker #4: And in the June quarter, those global multinationals in China actually grew somewhat while the indigenous Chinese customers declined. It won't surprise me if that's a similar trend that we see as we go through the latter part of the year as well.

Speaker #5: I see your deferred revenue balance went up a little bit, so I'm just trying to get a sense of how to think about China going forward.

Speaker #4: Yeah, Srini, I still think China overall WFE is flat to slightly up, similar to what we said before. I think quarter by quarter, you'll see some lumpiness to it.

Speaker #6: Thank you.

Srini Pajjuri: Thank you.

Speaker #4: Yeah. Thanks, Srini.

Doug Bettinger: Yeah. Thanks, Srini.

Speaker #2: The next question comes from Devek Arya with Bank of America Securities. Please go ahead.

Operator: The next question comes from Vivek Arya with Bank of America Securities. Please go ahead.

Speaker #5: Hi, this is Michael Mani on from Devek Arya. Thanks so much for taking our question. My first question is on MAND. So it seems like the company is pretty close to realizing the 40 billion upgrade opportunity faster than expected.

Michael Mani: Hi, this is Michael Mani on for Vivek Arya. Thanks so much for taking our question. My first question is on NAND. It seems like the company's pretty close to realizing the $40 billion upgrade opportunity faster than expected. As you've described in the past, that's not so much of a static opportunity, like whatever has been upgraded 200 layers eventually has to migrate to 300 layers and above, which could trigger another wave of spending for NAND. Where are we in that kind of phase 2 of upgrades? Is there a way to kind of contextualize how big that opportunity could be relative to the initial $40 billion upgrade opportunity we saw in the last couple of years? Thank you.

Speaker #5: But as you've described in the past, that's not so much the static opportunity. Whatever has been upgraded to under layers eventually has to migrate to 300 layers and above.

Speaker #4: And in the June quarter, those global multinationals in China actually grew somewhat, while the indigenous Chinese customers declined. It wouldn't surprise me if that's a similar trend that we see as we go through the latter part of the year as well.

Speaker #5: Which could trigger another wave of spending for NAND. Where are we in that kind of second phase of upgrades? And is there a way to kind of contextualize how big that opportunity could be relative to the initial 40 billion upgrade opportunity you saw in the last couple of years?

Speaker #5: Thank you.

Speaker #4: Yeah. Thanks, Srini.

Speaker #2: The next question comes from Devek Arya with Bank of America Securities. Please go ahead.

Speaker #5: Thank you.

Speaker #3: Yeah, it's a good question. We've said that it is not a static thing. And in fact, as the industry if we look at this year, we made a comment.

Tim Archer: Yeah, it's a good question. We've said that it is not a static thing. In fact, as the industry, if we look at this year, we made a comment. It's a combination of both upgrades plus some greenfield shipments, and that's kind of going to characterize the next couple of years. Most of that $40 billion we had previously said would likely occur in upgrades, would likely occur before the end of 2027. As you pointed out, it kind of all starts again. The key is, since greenfield additions have been made in that period of time, the next time it rolls through and you go from 200 to 300-plus or 400-plus, it's an even bigger installed base. While we haven't quantified that, but it's a good action item for us to get to you into the future.

Speaker #7: Hi, this is Michael Mani from Zachariah. Thanks so much for taking our question. My first question is on MAND. So, it seems like the company is pretty close to realizing the $40 billion upgrade opportunity faster than expected, but as you've described in the past, that's not so much a static opportunity. Whatever has been upgraded to 200 layers eventually has to migrate to 300 layers and above.

Speaker #3: It's a combination of both upgrades plus some greenfield shipments. And that's kind of going to characterize the next couple of years. I mean, most of that 40 billion, we had previously said would likely occur in upgrades would likely occur before the end of 2027.

Speaker #3: But then as you pointed out, it kind of all starts again but the key is since greenfield additions have been made in that period of time, the next time it rolls through and you go from 200 to 300 plus or 400 plus it's an even bigger installed base.

Speaker #7: Which could trigger another wave of spending for NAND. Where are we in that kind of second phase of upgrades? And is there a way to kind of contextualize how big that opportunity could be relative to the initial $40 billion upgrade opportunity you saw in the last couple of years?

Speaker #3: And so while we have not we haven't quantified that, but it's a good action item for us to get to you into the future.

Speaker #7: Thank you.

Speaker #3: Yeah. It's a good question. We've said that it is not a static thing. And in fact, as the industry if we look at this year, we made a comment.

Speaker #3: But you can imagine that as you go with we've described from 200 to 300 to 400 to 500 layers. I made I said that our SAM will double from the 200 plus layer to the 500 plus layer on a per wafer basis.

Tim Archer: You can imagine that as you go, as we've described, from 200 to 300 to 400 to 500 layers. I said that our SAM will double from the 200-plus layer to the 500-plus layer on a per wafer basis. That's a combination of longer process times to process the taller stacks, plus additional tools that get added in to deal with all the complexity of all that stacking. That's where Lam's opportunity really lies, is helping address the complexity of stacking to 500 layers and beyond for customers.

Speaker #3: It's a combination of both upgrades, plus some greenfield shipments. And that's kind of going to characterize the next couple of years. I mean, most of that $40 billion we had previously said would likely occur in upgrades, would likely occur before the end of 2027.

Speaker #3: And that's a combination of longer process times to process the taller stacks plus additional tools that get added in to deal with all the complexity of all that stacking.

Speaker #3: But then, as you pointed out, it kind of all starts again. But the key is, since greenfield additions have been made in that period of time, the next time it rolls through and you go from 200 to 300-plus or 400-plus, it's an even bigger installed base.

Speaker #3: And that's where LAMD's opportunity really lies is helping address the complexity of stacking to 500 layers and beyond for customers.

Speaker #3: And so while we have not—we haven't quantified that, but it's a good action item for us to get to you in the future.

Speaker #3: But you can imagine that as you go, as we've described from 200 to 300 to 400 to 500 layers, I said that our SAM will double from the 200-plus layer to the 500-plus layer on a per wafer basis.

Speaker #5: Great. Thank you. And for my follow-up, I wanted to ask about DRAM. So I think a lot of the strong outgrowth LAMD has seen over the last couple of years in share gains has been mainly driven by HTM, which are TSE drilling and electric plating tools.

Michael Mani: Great. Thank you. For my follow-up, I wanted to ask about DRAM. I think a lot of the strong outgrowth Lam has seen over the last couple of years in share gains has been mainly driven by HBM, which are TSV drilling and electroplating tools. Could you talk about your share opportunity in traditional or conventional DRAM, especially as we move to new nodes like 1Z and 1-gamma, given that right now that seems like where most of the industry capacity constraints are over the next couple of years. Thank you.

Speaker #5: But could you talk about your share opportunity in traditional conventional DRAM? Especially as we move to new nodes like 1C and 1G, given that right now that seems like where most of the industry capacity constraints are over the next couple of years.

Speaker #3: And that's a combination of longer process times to process the taller stacks, plus additional tools that get added in to deal with all the complexity of all that stacking. And that's where Lam's opportunity really lies, helping address the complexity of stacking to 500 layers and beyond for customers.

Speaker #5: Thank you.

Speaker #3: Sure. Sure. I mean, it's obviously as you mentioned, HBM has been a tremendous for LAMD from the standpoint of the position we have in the TSE formation and other elements of the HBM process itself.

Tim Archer: Yeah, sure. Obviously, as you mentioned, HBM has been tremendous for Lam from the standpoint of the position we have in the TSV formation and other elements of the HBM process itself. I mentioned a couple of improvements. As DRAM performance at the device level continues to push forward in the future nodes, they're incorporating more processes that are associated with higher performance. It's low-k's, it's also introduction of more EUV layers, which pulls in and makes Lam's patterning etch tools that much more critical. We're seeing wins across very conventional front-end types of devices. In my prepared remarks, I talked about if you're trying to build very high-performance DRAM, you start to worry about things, as I mentioned, like the diffusion barrier performance and the etch stop layer performance.

Speaker #7: Great, thank you. And for my follow-up, I wanted to ask about DRAM. So, I think a lot of the strong outgrowth LAM has seen over the last couple of years, in share gains, has been mainly driven by HVM—which are TSV drilling and electroplating tools.

Speaker #3: But I mentioned a couple of improvements as DRAM performance. At the device level continues to push forward in the future nodes. They're incorporating more processes that are associated with higher performance.

Speaker #7: But could you talk about your share opportunity in traditional and conventional DRAM, especially as you move to new nodes like 1C and 1-gamma, given that right now that seems to be where most of the industry capacity constraints are over the next couple of years?

Speaker #3: It's low pays. It's also introduction of more EUV layers, which pulls in and makes LAMD's patterning etch tools that much more critical. And so we're seeing wins across very conventional front-end types of devices.

Speaker #7: Thank you.

Speaker #3: Yeah, sure, sure. I mean, it's obvious, as you mentioned, HBM has been tremendous for Lam from the standpoint of the position we have in the TSV formation and other elements of the HBM process itself.

Speaker #3: In my prepared remarks, I talked about if you're trying to build very high-performance DRAM, you start to worry about things as I mentioned, like the diffusion barrier performance and the etch stop layer performance.

Speaker #3: But I mentioned a couple of improvements as DRAM performance at the device level continues to push forward in future nodes. They're incorporating more processes that are associated with higher performance.

Speaker #3: And that's an area where today we hold a very strong leadership position in advanced leading edge foundry logic. And the reality is, as you try to push DRAM performance ahead, it starts to look a lot like leading edge foundry logic.

Tim Archer: That's an area where today we hold a very strong leadership position in advanced leading-edge foundry logic. The reality is, as you try to push DRAM performance ahead, it starts to look a lot like leading-edge foundry logic. I think that's where the real strength of Lam's portfolio is that in many ways, the performance requirements across all three devices, as we see more vertical scaling, more performance, they're all converging. I think that a couple of years from now, we're going to look back and we'll say, "Hey, everything kind of became 3D NAND-like." Much taller, much more complex, requiring higher performance tools. Right now, I think DRAM is seeing that. We are winning in conventional DRAM, but it's related to the strength of the device, the patterning of the device, the materials that are being introduced. I think that continues.

Speaker #3: It's low pays. It's also introduction of more EUV layers, which pulls in and makes Lam's patterning etch tools that much more critical. And so we're seeing wins across very conventional front-end types of devices.

Speaker #3: And I think that's where the real strength of LAMD's portfolio is that in many ways, the performance requirements across all three devices, as we see more vertical scaling, more performance, they're all converging.

Speaker #3: In my prepared remarks, I talked about how, if you're trying to build very high-performance DRAM, you start to worry about things, as I mentioned, like the diffusion barrier performance and the etch stop layer performance.

Speaker #3: And I think that a couple of years from now, we're going to look back and we'll say, "Hey, everything kind of became 3D NAND-like." Much taller, much more complex, requiring high-performance tools.

Speaker #3: And right now, I think DRAM is seeing that. So we are winning in conventional DRAM. But it's related to the strength of the device, the patterning of the device, the materials that are being introduced.

Speaker #3: And that's an area where today we hold a very strong leadership position in advanced, leading-edge foundry logic. And the reality is, as you try to push DRAM performance ahead, it starts to look a lot like leading-edge foundry logic.

Speaker #3: And I think that continues. And then you layer on top of that, if you do HBM, it's even better for us.

Tim Archer: You layer on top of that, if you do HBM, it's even better for us.

Speaker #3: And I think that's where the real strength of LAM's portfolio is—that, in many ways, the performance requirements across all three devices, as we see more vertical scaling and more performance, are all converging.

Speaker #5: Thank you very much.

Michael Mani: Thank you very much.

Speaker #4: Yeah. Thank you.

Doug Bettinger: Yep, thank you.

Speaker #2: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Operator: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Speaker #6: Hi. Thank you for the question. I wanted to bring it back to a framework that you guys brought up on one of your calls last year, about the relationship between WFE spending and total data center spending.

Melissa Weathers: Hi. Thank you for the question. I wanted to bring it back to a framework that you guys brought up on one of your calls last year, about the relationship between WFE spending and total data center spending. Especially with the market looking at potential slowing of AI spending or more efficient models. Is there any way you can help us think about your view of WFE in the context of potential slowing AI spending, and how do we think about the resilience of your business there?

Speaker #3: And I think that a couple of years from now, we're going to look back and we'll say, "Hey, everything kind of became 3D NAND-like"—much taller, much more complex, requiring high-performance tools.

Speaker #6: Especially with the market looking at potential slowing of AI spending or more efficient models. Is there any way you can help us think about your view of WFE in the context of potential slowing AI spending?

Speaker #3: And right now, I think DRAM is seeing that. So, we are winning in conventional DRAM, but it's related to the strength of the device, the patterning of the device, the materials that are being introduced.

Speaker #3: And I think that continues. And then you layer on top of that, if you do HBM, it's even better for us.

Speaker #6: And how do we think about the resilience of your business there?

Speaker #3: Yeah, listen, Melissa. I think as we look into next

Speaker #7: Thank you very much.

Doug Bettinger: Yeah. Listen, Melissa, I think as we look into next year, the fact that the industry is undersupplied this year is going to roll into next year. We feel great about what's going to happen with WFE. Yeah, that metric we talked about, the $100 billion data center CapEx equating, if I remember the number, to roughly $8 billion in WFE. That was probably a little bit of a low estimate as we sit here today. It's probably trending, I don't know, a billion or 2 higher. That clearly, at the end of the day, is what's driving demand. At the end of the day, the hyperscale investment is trickling all the way back to WFE, and that is absolutely a driver. The numbers are probably a little higher than we had talked about, whatever it was, middle part of last year.

Speaker #4: year, the fact that the industry is undersupplied this year is going to roll into next year. So we feel great about what's going to happen with WFE.

Speaker #4: Yeah. Thank you.

Speaker #2: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Speaker #4: Yeah, that metric we talked about the 100 billion dollar data center capex equating, if I remember the number, roughly 8 billion dollars in WFE.

Speaker #4: That was probably a little bit of a low estimate as we sit here today. It's probably trending, I don't know, a billion or two higher.

Speaker #6: Especially with the market looking at a potential slowing of AI spending or more efficient models, is there any way you can help us think about your view of WFE in the context of potentially slowing AI spending?

Speaker #4: But that clearly, at the end of the day, is what's driving demand. At the end of the day, the hyperscale investment is trickling all the way back to WFE.

Speaker #6: And how do we think about the resilience for your business there?

Speaker #4: And that is absolutely a driver. The numbers are probably a little higher than we had talked about whatever it was, middle part of last year.

Speaker #3: Yeah. Listen, Melissa, I think

Speaker #4: As we look into next year, the fact that the industry is undersupplied this year is going to roll into next year. So we feel great about what's going to happen with WFE.

Speaker #6: Perfect. Thank you. And then on the supply side, I'm sure you guys are getting more visibility from your own customers. But I was wondering, Doug, you talked about higher inventory terms.

Melissa Weathers: Perfect. Thank you. On the supply side, I'm sure you guys are getting more visibility from your own customers. I was wondering, Doug, you talked about higher inventory terms. What kind of partnership and visibility are you giving your suppliers to make sure you can bring on capacity for this strong ramp?

Speaker #4: Yeah, that metric we talked about—the $100 billion data center capex equating, if I remember the number, to roughly $8 billion in WFE.

Speaker #6: What kind of partnership and visibility are you giving your suppliers to make sure you can bring on capacity for this strong ramp?

Speaker #4: That was probably a little bit of a low estimate as we sit here today. It's probably trending, I don't know, a billion or two higher.

Speaker #4: All the same visibility we get, Melissa, is propagating its way all the way back through our supply chain. And even a couple of layers deep in the supply chain.

Speaker #4: But that clearly, at the end of the day, is what's driving demand. At the end of the day, the hyperscale investment is trickling all the way back to WFE.

Doug Bettinger: All the same visibility we get, Melissa, is propagating its way all the way back through our supply chain, and even a couple of layers deep in the supply chain. We're doing everything we can to make sure we're not going to be the bottleneck. I would tell you, it's a lot of work. We got a lot of things we're expediting and working our way through. We'll continue to do that. That part of the company is doing an extraordinary job managing this for us.

Speaker #4: So we're doing everything we can to make sure we're not going to be the bottleneck. I would tell you, it's a lot of work.

Speaker #4: And that is absolutely a driver. The numbers are probably a little higher than we had talked about, whatever it was, middle part of last year.

Speaker #4: We got a lot of things we're expediting and working our way through. We'll continue to do that. But that part of the company is doing an extraordinary job managing this for us.

Speaker #6: Perfect. Thank you. And then on the supply side, I'm sure you guys are getting more visibility from your own customers, but I was wondering, Doug, you talked about higher inventory turns.

Speaker #6: Thanks, Doug.

Melissa Weathers: Thanks, Doug.

Speaker #4: Yeah. Thanks, Melissa.

Doug Bettinger: Yep. Thanks, Melissa.

Speaker #6: What kind of partnership and visibility are you giving your suppliers to make sure you can bring on capacity for this strong ramp?

Speaker #2: The next question comes from Stacy Rasgon with Bernstein Research. Please go ahead.

Operator: The next question comes from Stacy Rasgon with Bernstein Research. Please go ahead.

Speaker #7: Hi guys. Thanks for taking my questions. For the first one, Doug, I know you said 27 is going to be kind of a remarkable year.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. For the first one, Doug, I know you said 2027 is going to be kind of a remarkable year. I won't ask you to give us a number, but I mean, are clean rooms really the limiter to how big 2027 can be? If clean rooms were unlimited, I think you guys are growing. You guys think WFE's growing from like 110 to 150 this year, so that's mid-thirties. If clean rooms were unlimited, is there no question that we could grow that much next year or even more? Is that where the demand, is the demand there to do something like that?

Stacy Rasgon (Bernstein Research: Hi, guys. Thanks for taking my questions. For the first one, Doug, I know you said 2027 is going to be kind of a remarkable year. I won't ask you to give us a number, but I mean, are clean rooms really the limiter to how big 2027 can be? If clean rooms were unlimited, I think you guys are growing. You guys think WFE's growing from like 110 to 150 this year, so that's mid-thirties. If clean rooms were unlimited, is there no question that we could grow that much next year or even more? Is that where the demand, is the demand there to do something like that?

Speaker #4: All the same visibility we get, Melissa, is propagating its way all the way back through our supply chain—and even a couple of layers deep in the supply chain.

Speaker #7: And I want to ask you to give us a number. But I mean, are clean rooms really the limiter to how big 27 can be?

Speaker #4: So we're doing everything we can to make sure we're not going to be the bottleneck. I would tell you, it's a lot of work.

Speaker #7: I mean, if clean rooms were unlimited, I think you guys are growing. You think you guys think WFE is growing from like 110 to 150 this year.

Speaker #4: We’ve got a lot of things we’re expediting and working our way through. We’ll continue to do that. But that part of the company is doing an extraordinary job managing this for us.

Speaker #7: So that's mid-30s. If clean rooms were unlimited, is there no question that we could grow that much next year or even more? Is that where the demand is the demand there to do something like that?

Speaker #4: Yeah, Stacy. Again, I'm not going to put numbers on it right now. It's too soon for us to do that. But when I look into what's going on in the industry, I don't know.

Speaker #6: Thanks, Doug.

Doug Bettinger: Stacy, again, I'm not going to put numbers on it right now. It's too soon for us to do that. When I look into what's going on in the industry, I don't know. When you just look at the bigger customers, there's probably eight, nine, 10 new fabs coming online between now and the end of next year that's going to enable the reception of more equipment. We're excited about where this is going. I'm not going to put a number on it quite yet, though. We'll do that as we get further down the road here.

Speaker #4: Yeah. Thanks, Melissa.

Speaker #2: The next question comes from Stacy Rasgon with Bernstein Research. Please go ahead.

Speaker #4: When you just look at the bigger customers, there's probably 8, 9, 10 new fabs coming online between now and the end of next year.

Speaker #5: Hi guys, thanks for taking my questions. For the first one, Doug, I know you said 2027 is going to be kind of a remarkable year.

Speaker #4: That's going to enable the reception more equipment. So we're excited about where this is going. I'm not going to put a number on it quite yet, though.

Speaker #5: And I want to ask you to give us a number. But, I mean, are clean rooms really the limiter to how big 27 can be?

Speaker #5: I mean, if cleanrooms were unlimited, I think you guys are growing. Do you think WFE is growing from like $110 billion to $150 billion this year?

Speaker #4: We'll do that as we get further down the road here.

Speaker #7: Got it. For my follow-up, let me try one more way. Again, I'll try to ask this without you having to put numbers on it.

Stacy Rasgon: Got it. For my follow-up, let me try one more way. Again, I'll try to ask this without you having to put numbers on it. If 2027's going to be that good, do you think the setup is good enough where at a minimum, we could see sequential growth from here until the end of 2027? Is the setup, and I guess, the availability of space enough that at least you could be willing to sign up for something like that?

Stacy Rasgon (Bernstein Research: Got it. For my follow-up, let me try one more way. Again, I'll try to ask this without you having to put numbers on it. If 2027's going to be that good, do you think the setup is good enough where at a minimum, we could see sequential growth from here until the end of 2027? Is the setup, and I guess, the availability of space enough that at least you could be willing to sign up for something like that?

Speaker #5: So that's mid-30s. If clean rooms were unlimited, is there no question that we could grow that much next year, or even more? Is that where the demand is? Is the demand there to do something like that?

Speaker #7: But if 27 is going to be that good, do you think the setup is good enough where at a minimum we could C sequential growth from here until the end of 27?

Speaker #4: Yeah, Stacey, again, I'm not going to put numbers on it right now—it's too soon for us to do that. But when I look into what's going on in the industry, I don't know.

Speaker #7: Is the setup, and I guess the availability of space enough that at least you could be willing to sign up for something like that?

Speaker #4: When you just look at the bigger customers, there are probably eight, nine, or ten new fabs coming online between now and the end of next year.

Speaker #4: Yeah, maybe, Stacy. When you look at it, this doesn't all come on in any one quarter. So it comes on kind of bit by bit.

Doug Bettinger: Yeah, maybe, Stacy. When you look at it, this doesn't all come on in any one quarter. It comes on kind of bit by bit. I'm, again, not going to guide you quarter by quarter through next year. I feel incrementally good about each successive quarter as I sit here right now. As we get a little bit closer, maybe I'll give you a little more color.

Speaker #4: That's going to enable the reception of more equipment, so we're excited about where this is going. I'm not going to put a number on it quite yet, though.

Speaker #4: Again, I'm not going to guide you quarter by quarter through next year. But I feel incrementally good about each successive quarter, as I sit here right now.

Speaker #4: We'll do that as we get further down the road here.

Speaker #5: Got it. For my follow-up, let me try one more way. Again, I'll try to ask this without you having to put numbers on it, but if '27 is going to be that good, do you think the setup is good enough that we're at a minimum where we could see sequential growth from here until the end of '27?

Speaker #4: And as we get a little bit closer, maybe I'll give you a little more color.

Speaker #7: Got it. That's super helpful. Thank you, Doug.

Stacy Rasgon: Got it. That's super helpful. Thank you, Doug.

Stacy Rasgon (Bernstein Research: Got it. That's super helpful. Thank you, Doug.

Speaker #4: Thanks, Stacy.

Doug Bettinger: Thanks, Stacy.

Speaker #2: The next question comes from Chris Sancar with TD Callan. Please go ahead.

Operator: The next question comes from Krish Sankar with TD Cowen. Please go ahead.

Speaker #5: Yeah. Hi. Thanks for doing a question. I told them, Doug, you mentioned about growing inventory. But the inventory management is still lean. When I look at prior cycles, this is the time where you should be building a lot more inventory, given the huge WFE potential ahead.

Krish Sankar: Yeah, hi. Thanks for taking my question. I have two of them. Doug, you mentioned about growing inventory, but the inventory management is still lean. When I look at prior cycles, this is the time where you should be building a lot more inventory, given the huge WFE potential ahead. I'm just wondering, is this a new norm for inventory management, or is this more supply chain being constrained on capacity? If you can just triangulate that to what your lead times are today, that'd be helpful too.

Speaker #5: Is the setup, and I guess the availability of space, enough that you would at least be willing to sign up for something like that?

Speaker #4: Yeah. Maybe, Stacey. When you look at it, this doesn't all come on in any one quarter, so it comes on kind of bit by bit.

Speaker #5: I'm just wondering, is this a new norm for inventory management, or is this more supply chain being constrained on capacity? And if you can just triangulate that to what your lead times are today, that would be helpful too.

Speaker #4: Again, I'm not going to guide you quarter by quarter through next year, but I feel incrementally good about each successive quarter, as I sit here right now.

Speaker #4: No, it's just us efficiently managing the built-in inventory. We are absolutely growing inventory. I think it grew 300 million or something last quarter. But at the same time, terms improved.

Speaker #4: And as we get a little bit closer, maybe I'll give you a little more color.

Doug Bettinger: No, it's just us efficiently managing the built-in inventory. We are absolutely growing inventory. I think it grew $300 million or something last quarter. At the same time, turns improved. I think you're going to continue to see us think about it in the same way. We clearly are going to need to build inventory as you get into revenue growth like we're seeing. We'll also be focused on efficiency and making sure we're managing the cash for the company well.

Speaker #5: Got it. That's super helpful. Thank you, Doug.

Speaker #4: Thanks, Stacey.

Speaker #2: The next question comes from Chris Sancar with TD Cowen. Please go ahead.

Speaker #4: I think you're going to continue to see us think about it in the same way. We clearly are going to need to build inventory as you get into revenue growth, like we're seeing.

Speaker #7: Yeah, hi. Thanks for taking my question. I told them, Doug, you mentioned about growing inventory, but the inventory management is still lean. When I look at prior cycles, this is the time where you should be building a lot more inventory.

Speaker #4: But we'll also be focused on efficiency and making sure we're managing the cash for the company well.

Speaker #7: Given the huge WFE potential ahead, I'm just wondering: Is this a new norm for inventory management, or is this more a result of the supply chain being constrained on capacity? And if you can just triangulate that to what your lead times are today, that'll be helpful too.

Speaker #5: Gotcha. And then a quick follow-up on gross margins. I thought you mentioned that some of the strengths in June came from pricing too. I understand product mix might not have an impact, but is he assumed current level of volumes?

Krish Sankar: Got you. A quick follow-up on gross margins. I thought you mentioned that some of the strength in June came from pricing too. I understand product mix might have an impact, but if you assume current level of volumes, is 50%+ the right baseline for gross margins to assume?

Speaker #5: Is 50-plus percent the right baseline for gross margins to assume?

Speaker #4: No, it's just us efficiently managing the built-in inventory. We are absolutely growing inventory. I think it grew $300 million or something last quarter. But at the same time, terms improved.

Speaker #4: You mean as we go forward, Chris? Is that your question?

Doug Bettinger: You mean as we go forward, Krish? Is that your question?

Speaker #5: Yeah. Yeah. If you're at these volume levels, yeah.

Krish Sankar: Yeah. If you're at these volume levels, yeah.

Speaker #4: I think you're going to continue to see us think about it in the same way. We clearly are going to need to build inventory as you get into revenue growth like we're seeing.

Speaker #4: Yeah. No, I think so. Listen, we're in that 51, 52 percent range right now. I think we can continue to deliver that in the near term.

Doug Bettinger: Yeah. No, I think so. Listen, we're in that 51% to 52% range right now. I think we can continue to deliver that in the near term.

Speaker #4: But we'll also be focused on efficiency and making sure we're managing the cash for the company well.

Speaker #5: Great. Thanks a lot, Doug.

Krish Sankar: Great. Thanks a lot, Doug.

Speaker #4: Yeah. Thanks, Chris.

Doug Bettinger: Thanks, Krish.

Speaker #2: The next question comes from Blaine Curtis with Jefferies. Please go ahead.

Operator: The next question comes from Blayne Curtis with Jefferies. Please go ahead.

Speaker #7: Gotcha. And then a quick follow-up on gross margins. I thought you mentioned that some of the strength in June came from pricing too. I understand product mix might have an impact, but if we assume the current level of volumes, is 50-plus percent the right baseline for gross margins to assume?

Speaker #3: Hey, good afternoon, guys. I actually want to ask on pricing. It's been kind of an investor theme, and I'm kind of just curious what you're seeing like for like pricing.

Blayne Curtis: Hey, good afternoon, guys. I actually want to ask on pricing, it's been a kind of an investor theme. I'm kind of just curious what you're seeing like for like pricing in the industry and you.

Speaker #3: In the industry and you?

Speaker #4: Yeah, Blaine, I'm not going to talk about like for like pricing. When I describe the solid gross margin that we saw last quarter, I talked a little bit about pricing.

Doug Bettinger: Yeah, Blayne, I'm not going to talk about like for like pricing. When I describe the solid gross margin that we saw last quarter, I talked a little bit about pricing, about operational and scale efficiencies, and about product mix. All of that contributed. We're always doing everything we can to get fairly paid for the value we're delivering. That's true today. It's been true for, I don't know, a decade, longer. We're working on all of those things, Blayne.

Speaker #4: You mean as we go forward, Chris? Is that your question?

Speaker #7: Yeah, yeah. If you had these volume levels, yeah.

Speaker #4: About operational and scale efficiencies, and about product mix. All of that contributed. We're always doing everything we can to get fairly paid for the value we're delivering.

Speaker #4: Yeah, no, I think so. Listen, we're in that 51 to 52 percent range right now. I think we can continue to deliver that in the near term.

Speaker #7: Okay. Thanks a lot, Doug.

Speaker #4: That's true today. It's been true for, I don't know, a decade, longer. But we're working on all of those things, Blaine.

Speaker #4: Yeah. Thanks, Chris.

Speaker #2: The next question comes from Blaine Curtis with Jefferies. Please go ahead.

Speaker #8: Hey, good afternoon, guys. I actually want to ask about pricing. It's been kind of an investor theme, and I'm just curious what you're seeing in like-for-like pricing.

Speaker #3: Gotcha. And then I want to ask you in terms of just your CapEx plans and in terms of adding this back-end end capacity, there's a lot of talk of WFE could be 300 billion.

Blayne Curtis: Got you. I want to ask you, in terms of just your CapEx plans and in terms of adding this backend capacity, there's a lot of talk of WFE $300 billion. Just kind of curious, what are you starting today, and what could that spending be over the next year or 2 years?

Speaker #8: In the industry and you?

Speaker #4: Yeah, Blaine, I'm not going to talk about like-for-like pricing. When I described the solid gross margin that we saw last quarter, I talked a little bit about pricing.

Speaker #3: Just kind of curious, what are you starting today? And what could that spending be over the next year or two years?

Speaker #4: Yeah, Blaine, I still think we can manage the company to 4 to 5 percent of revenue going towards CapEx, as we build out lab infrastructure.

Doug Bettinger: Yeah, Blayne, I still think we can manage the company to 4% to 5% of revenue going towards CapEx as we build out lab infrastructure. We're making big investments in labs, by the way. This isn't just manufacturing capacity. We're also very focused, Blayne, on, I don't know, I think about it as footprint densification, getting more output for the same square footage that we have in manufacturing. The company's doing a really nice job at that. We probably haven't talked enough about it. We're making the investments we need to support where we believe the customers are going to be. We'll be ahead of that.

Speaker #4: About operational and scale efficiencies, and about product mix—all of that contributed. We're always doing everything we can to get fairly paid for the value we're delivering.

Speaker #4: We're making big investments in labs, by the way. This isn't just manufacturing capacity. We're also very focused on, I don't know, I think about it as footprint densification, getting more output for the same square footage that we have in manufacturing.

Speaker #4: That's true today. It's been true for, I don't know, a decade—longer. But we're working on all of those things, Blaine.

Speaker #8: Got it. And then I want to ask you, in terms of your CapEx plans and adding this back-end capacity—there's a lot of talk that WFE could be $300 billion.

Speaker #4: The company's doing a really nice job with that. We probably haven't talked enough about it. But we're making the investments we need to support where we believe the customers are going to be.

Speaker #8: Just kind of curious, what are you starting today? And what could that spending be over the next year or two years?

Speaker #4: We'll be ahead of that.

Speaker #3: Thank you.

Speaker #5: Yeah. I think if you don't mind, I'd just add, Doug's comment about labs. I mean, if we think about CapEx and investment and long-term for the company, we sit in a position where as etch and depth intensity is growing, and playing a much more important role to kind of our future roadmaps of our customers, we see a lot of opportunity for new product development to accelerate SAM expansion even further.

Blayne Curtis: Thank you.

Tim Archer: Yeah, I think, if you don't mind, I'd just add to Doug's comment about labs. If we think about CapEx and investment and long-term for the company, we sit in a position where as etch and dep intensity is growing and playing a much more important role to the kind of our future roadmaps of our customers. We see a lot of opportunity for new product development, to accelerate SAM expansion even further. Labs play a big role in that. Tooling for those labs plays a big role in that. Where we see opportunity, we will invest in the company to accelerate growth.

Speaker #4: Yeah, Blaine, I still think we can manage the company to 4% to 5% of revenue going toward CapEx as we build up lab infrastructure.

Speaker #4: We're making big investments in labs, by the way. This isn't just manufacturing capacity. We're also very focused, Blaine, on—I don't know, I think about it as footprint densification, getting more output for the same square footage that we have in manufacturing.

Speaker #5: And so labs play a big role in that. Tooling for those labs plays a big role in that. And so where we see opportunity, we will invest in the company to accelerate growth.

Speaker #4: The company's doing a really nice job at that. We probably haven't talked enough about it, but we're making the investments we need to support where we believe the customers are going to be.

Speaker #4: We'll be ahead of that.

Speaker #8: Thank you.

Speaker #7: Yeah, I think, if you don't mind, I'd just add to Doug's comment about labs. I mean, if we think about CapEx and investment and long-term for the company, we sit in a position where, as etch and dep intensities are growing and playing a much more important role in our future roadmaps for our customers, we see a lot of opportunity for new product development to accelerate SAM expansion even further.

Speaker #3: Thanks, Blaine.

Doug Bettinger: Thanks, Blayne.

Speaker #2: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Operator: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Speaker #5: Yeah. Hi, Tim and Doug. Just a question on the when you look at the DRAMs side, obviously going very nicely. But when you look at HBM 440 and HBF, obviously it looks like your capital intensity starts to pick up significantly for LAM.

Vijay Rakesh: Yeah. Hi, Tim and Doug. Just a question on the when you look at the DRAMs side, obviously going very nicely, but when you look at HBM4 and HBM4E, obviously looks like your capital intensity starts to pick up significantly for Lam. Any way of kind of sizing the opportunity there for every 100 wafers, whether it's HBM4E with TSVs or in HBM4? Thanks, and a follow-up.

Speaker #5: Any way of kind of sizing their opportunity there for every 100 wafers? Whether it's HBF with ESVs or HBM 440? Thanks. And a follow-up.

Speaker #7: And so labs play a big role in that. Tooling for those labs plays a big role in that. And so where we see opportunity, we will invest in the company to accelerate growth.

Speaker #4: Yeah. And Vijay, we haven't put numbers around that. But clearly, I mean, relative to your HBM question, as the stack gets taller, process times take longer.

Doug Bettinger: Yeah, no, Vijay, we haven't put numbers around that. Clearly, relative to your HBM question, as the stack gets taller, process times take longer, you need more equipment, and clearly we're enabling a lot of that with the things we do around the TSV. We haven't put specific numbers on it, and I'm not prepared to do it right now.

Speaker #7: Thanks, Blaine.

Speaker #2: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Speaker #4: You need more equipment. And clearly, we're enabling a lot of that with the things we do around the TSP. But we haven't put specific numbers on it.

Speaker #7: Yeah. Hi, Tim and Doug. Just a question—when you look at the DRAM side, obviously growing very nicely, but when you look at HBM, 4-40, and HBF, obviously it looks like your capital intensity starts to pick up significantly for Lam.

Speaker #4: And I'm not prepared to do it right now.

Speaker #5: You're right. And when you look at the when you look at the LAM revenues this year, 2026, it looks like you're somewhere in that 30 billion neighborhood on 150 billion WFE.

Vijay Rakesh: Got it. When you look at the Lam revenues this year, 2026, looks like you're somewhere in that $30 billion neighborhood on $150 billion WFE, so about 20% share back of the envelope. You talked about a 30% SAM. When do you start to kind of scale and bridge into that, I guess, and what would be the timeframe?

Speaker #7: Any way of kind of sizing their opportunity there for every 100 wafers, whether it's HBF with ESVs or HBM440? Thanks. And a follow-up.

Speaker #5: So about 20% share back of the envelope. And you talked about a 30% SAM. When you start to kind of scale and bridge into that, I guess, what would be the time frame?

Speaker #4: Yeah. And WG, we haven't put numbers around that, but clearly, I mean, relative to your HBM question, as the stack gets taller, process times take longer, you need more equipment, and clearly we're enabling a lot of that with the things we do around the TSP.

Speaker #4: Yeah, Vijay, what we talked about, I got to take you back to the investor day in the beginning of 2025. We at that point were talking about our SAM expanding from the low 30% of WFE range into the high 30% range.

Doug Bettinger: Yeah, Vijay, what we talked about, I got to take you back to the investor day in the beginning of 2025. We at that point were talking about our SAM expanding from the low 30% of WFE range into the high 30% range. As we sit here today, we're probably trending already to that high level. We're, I don't know, I'd guess 36.5% this year, something like that. We're progressing quite nicely. I'm not exactly sure the math that you were doing. It might be confusing a little bit of the CSBG business in there as well, which isn't purely WFE. Maybe we can take that offline.

Speaker #4: But we haven't put specific numbers on it, and I'm not prepared to do that right now.

Speaker #4: As we sit here today, we're probably trending already to that high level. We're, I don't know, I'd guess 36, 36 and a half percent this year, something like that.

Speaker #7: Yeah. And when you look at LAM revenues this year, 2026, it looks like you're somewhere in that $30 billion neighborhood on $150 billion WFE.

Speaker #4: So we're progressing quite nicely. I'm not exactly sure the math that you were doing. It might be confusing a little bit of the CSPG business in there as well, which isn't purely WFE.

Speaker #7: So about 20% share, back of the envelope. And you talked about a 30% SAM. When you start to kind of scale and bridge into that, I guess, what would be the timeframe?

Speaker #4: So maybe we can take that offline.

Speaker #5: Got it. Thanks. Thanks.

Vijay Rakesh: Got it. Great. Thanks.

Speaker #4: Yeah, Vijay, what we talked about—I’ve got to take you back to the investor day at the beginning of 2025. At that point, we were talking about our SAM expanding from the low-30% of WFE range into the high-30% range.

Speaker #4: Yeah. Thank you. Operator, we will take one more question, please.

Doug Bettinger: Yep. Thank you. Operator, we will take one more question, please.

Speaker #2: Okay. Our final question will come from Shane Brett with Morgan Stanley. You may go ahead.

Operator: Okay. Our final question will come from Shane Brett with Morgan Stanley. You may go ahead.

Speaker #3: Thank you for letting me ask a question. So my first question is, you talk a lot about etch and depth, but you've gained quite a bit of share in cleaning over the last few years.

Shane Brett: Thank you for letting me ask a question. My first question is, you talk a lot about etch and dep, but you've gained quite a bit of share in cleaning over the last few years. Could you talk about the role cleaning plays in your SAM expansion? Is there a world where you actually become the leading market shareholder for clean? Thank you.

Speaker #4: As we sit here today, we're probably trending already to that high level. We're, I don't know, I'd guess 36, 36 and a half percent this year, something like that.

Speaker #3: Could you talk about the role cleaning plays in your SAM expansion? And is there a world where you'd actually become the leading market shareholder for clean?

Speaker #3: Thank you.

Speaker #4: So we're progressing quite nicely. I'm not exactly sure about the math that you were doing. It might be confusing a little bit of the CSPG business in there as well, which isn't purely WFE.

Speaker #5: Yeah. I guess we've still focused on the 3D scaling that's occurring in all these devices. We sometimes forget about clean, but you're right. It is a very important business for us and one that has grown nicely.

Tim Archer: Yeah, I guess we've so focused on the 3D scaling that's occurring in all these devices, we sometimes forget about clean. You're right, it's a very important business for us and one that has grown nicely. I think, again, as we talked a little bit today, although it's not purely cleaning, but we talked about the selective etch process kind of surface treatment. Clean kind of plays into that as well, although with different tools. It's the focus, as you are getting to more and more difficult technologies, the need to control surfaces, the need to perform cleans, eliminate defectivity, all just are becoming much more important to the customers. We've seen our performance in clean, where we are really the focused on the high-performing critical cleans, we've done extremely well.

Speaker #4: So maybe we can take that offline.

Speaker #7: Got it. Thanks. Thanks.

Speaker #5: And I think, again, as customers focus, we talked a little bit today, although it's not purely cleaning, but we talked about the selective etch process, kind of surface treatment.

Speaker #4: Yeah. Thank you. Operator, we will take one more question, please.

Speaker #2: Okay. Our final question will come from Shane Brett with Morgan Stanley. You may go ahead.

Speaker #5: And clean kind of plays into that as well, although with different tools. But it's the focus as you are getting to more and more difficult technologies, the need to control surfaces, the need to perform cleans, eliminate defectivity, all just are becoming much more important to the customers.

Speaker #8: Thank you for letting me ask a question. So, my first question is: you talk a lot about etch and dep, but you've gained quite a bit of share in cleaning over the last few years.

Speaker #8: Could you talk about the role cleaning plays in your SAM expansion? And is there a world where you’d actually become the leading market shareholder for clean?

Speaker #8: Thank you.

Speaker #7: Yeah, I guess we've still focused on the 3D scaling that's occurring in all these devices. We sometimes forget about clean, but you're right—it is a very important business for us and one that has grown nicely.

Speaker #5: And so we've seen our performance in clean, where we are really the focus on the high-performing, critical cleans, we've done extremely well. And so I don't know about the number one player because there's a lot of I'd have to go look at that market.

Tim Archer: I don't know about the number one player because there's a lot of I'd have to go look at that market. In terms of critical cleans, that of course would be our objective, is to help our customers with all of their processes.

Speaker #7: And I think, again, as customers focus—we talked a little bit today, although it's not purely cleaning, but we talked about the selective etch process, kind of surface treatment.

Speaker #5: But in terms of critical cleans, that, of course, would be our objective is to help our customers with all of those processes.

Speaker #7: And clean kind of plays into that as well, although with different tools. But as you are getting to more and more difficult technologies, the need to control surfaces, the need to perform cleans, eliminate defectivity—all just are becoming much more important to the customers.

Speaker #3: Got it. Thank you. And for my follow-up, apologies if this is a little repetitive to prior questions, but I want to dig into DRAM.

Shane Brett: Got it. Thank you. For my follow-up, apologies if this is a little repetitive to prior questions, I want to dig into DRAM, as your DRAM revenue may double this year. You mentioned earlier to a question that DRAM will be the fastest driver next year. Just how big could DRAM be for you in 2027 as a % of your system revenue? How much of that growth could be based on share gain? Thank you.

Speaker #3: As your DRAM revenue may double this year, but you mentioned earlier to a question that DRAM will be the fastest driver next year. Just how big could DRAM be for you in 2027 as a percentage of your system revenue?

Speaker #7: And so we've seen our performance in clean where we are really the focus on the high-performing critical cleans. We've done extremely well. And so I don't know about the number one player because there's a lot of I'd have to go look at that market.

Speaker #3: And kind of how much of that growth could be based on share gain? Thank you.

Speaker #4: Yeah, Shane. We're not going to put numbers around next year yet. Too soon. But what Tim said is, as we look into next year, we expect the growth drivers next year to be largely the same as they are this year.

Doug Bettinger: Yes, Shane, we're not going to put numbers around next year yet. Too soon. What Tim said is, as we look into next year, we expect the growth drivers next year to be largely the same as they are this year, led by growth in DRAM WFE, followed by leading-edge foundry and logic, followed by NAND. We see everything growing into next year. Frankly, Shane, when we think about the guide for next quarter at $8.1 billion, I think you're going to see everything growing next quarter as well.

Speaker #7: But in terms of critical cleans, that, of course, would be our objective—to help our customers with all of those processes.

Speaker #4: Led by growth in DRAM, WFE, followed by leading-edge foundry and logic, followed by NAND. We see everything growing into next year. And frankly, Shane, when we think about the guide for next quarter at 8.1 billion dollars, I think you're going to see everything grow in next quarter as well.

Speaker #8: Got it. Thank you. And for my follow-up—apologies if this is a little repetitive to prior questions—but I want to dig into DRAM.

Speaker #8: As your DRAM revenue may double this year, but you mentioned earlier in response to a question that DRAM will be the fastest driver next year, just how big could DRAM be for you in 2027 as a percentage of your system revenue?

Speaker #3: Great. Thank you.

Shane Brett: Great. Thank you.

Speaker #4: Thanks, Shane.

Doug Bettinger: Thanks, Shane.

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

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

Speaker #8: And kind of, how much of that growth could be based on share gain? Thank you.

Speaker #4: Yeah. I would just say thank you all for joining our call. We're very excited about what's going on in the industry right now and our unique position in it.

Doug Bettinger: Yeah, I would just say thank you all for joining our call. We're very excited about what's going on in the industry right now and our unique position in it. As we talked about, both Tim and I, we're looking into what we believe to be our third consecutive year of outperforming growth in WFE because of the intensity of etch and deposition. I wouldn't change our position for anybody in the industry. Our execution has been great, and we intend to continue delivering that. We look forward to seeing all of you guys on upcoming NDRs and conferences. With that operator, we're all concluded.

Speaker #4: Yeah. Shane, we're not going to put numbers around next year yet—too soon. But what Tim said is, as we look into next year, we expect the growth drivers next year to be largely the same as they are this year.

Speaker #4: As we talked about, both Tim and I, we're looking into what we believe to be our third consecutive year of outperforming growth in WFE because of the intensity of etch and deposition.

Speaker #4: Led by growth in DRAM, WFE, followed by leading-edge foundry and logic, and then by NAND. We see everything growing into next year. And frankly, Shane, when we think about the guide for next quarter at $8.1 billion, I think you're going to see everything grow next quarter as well.

Speaker #4: And I wouldn't change our position for anybody in the industry. Our execution has been great, and we intend to continue delivering that. And we look forward to seeing all of you guys on upcoming NDRs and conferences.

Speaker #8: Great. Thank you.

Speaker #4: Thanks, Shane.

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

Speaker #4: And with that, Operator, we're all concluded.

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

Speaker #4: Yeah, I would just say thank you all for joining our call. We're very excited about what's going on in the industry right now and our unique position in it.

Speaker #4: As we talked about, both Tim and I—we're looking into what we believe to be our third consecutive year of outperforming growth in WFE, because of the intensity of etch and deposition.

Speaker #4: And I wouldn't change our position for anybody in the industry. Our execution has been great, and we intend to continue delivering that. We look forward to seeing all of you at upcoming NDRs and conferences.

Speaker #4: And with that, operator, we're all concluded.

Operator: Good day, welcome to the Lam Research Corporation 26 June 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, welcome to the Lam Research Corporation 26 June 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.

Ram Ganesh: Thank you, good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment, and we'll review our financial results for the Q2 2026 and our outlook for the Q3 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 be found on the Investors section of the company's website. Today's presentation and Q&A include forward-looking statements based on our current beliefs, expectations, and assumptions. These statements are subject to risks and uncertainties, and actual results could differ materially from those expressed or implied in such statements.

Ram Ganesh: Thank you, good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment, and we'll review our financial results for the Q2 2026 and our outlook for the Q3 2026. The press release detailing our financial results was distributed a little after 1:00PM Pacific Time. The release and the accompanying presentation slides for today's call can be found on the Investors section of the company's website. Today's presentation and Q&A include forward-looking statements based on our current beliefs, expectations, and assumptions. These statements are subject to risks and uncertainties, and actual results could differ materially from those expressed or implied in such statements.

Ram Ganesh: For a discussion of factors that could cause actual results to differ materially, please refer to the risk factors in our most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings with the SEC and the cautionary statement in the accompanying presentation slides. 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 3:00 PM 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.

Ram Ganesh: For a discussion of factors that could cause actual results to differ materially, please refer to the risk factors in our most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings with the SEC and the cautionary statement in the accompanying presentation slides. 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.

Tim Archer: Thanks, Ram. In the Q2, Lam delivered record revenue, operating margin, and earnings per share. Sequential top-line growth was led by a doubling of NAND revenue from the prior quarter, underscoring the growing importance of storage to AI system performance. Our Customer Support Business Group also posted strong revenue growth driven by robust demand for upgrades, Reliant, and Equipment Intelligence-enabled services. As we enter the H2, we expect calendar 2026 wafer fab equipment spending, or WFE, to be in the low $150 billion range, up from our prior outlook of $140 billion with upside bias. Against this backdrop of rising demand, Lam's momentum is strong. Our $8.1 billion Q3 revenue guide represents more than 20% growth quarter-on-quarter, and we see 2026 shaping up to be our third consecutive year of relative outperformance to WFE.

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 a touch-tone phone.

Speaker #1: Please go ahead.

Speaker #2: Thank you. And good afternoon, everyone. Welcome to the Lam Research quarterly earnings conference call. With me today are Tim Archer, President and Chief Executive Officer; and Doug Bettinger, Executive Vice President and Chief Financial Officer.

Tim Archer: Looking into 2027, we see an extraordinary setup for WFE growth. AI is driving record revenue and profitability for our customers, who have signaled unprecedented long-term demand visibility. They've also announced multi-year timelines for new fab projects and are working with us to secure equipment orders to fill the incremental clean room space as it comes online. Spending on capacity is occurring alongside investments in technology transitions that are creating structural opportunities for Lam to outgrow WFE. As a driver of industry investment, we are seeing AI progress through distinct waves, from training to inference, to agentic, and now increasingly physical AI. Each wave is building on what came before, creating new AI use cases, greater demand, and new performance requirements. We're seeing the impact of this progression, notably in NAND, where expanding context windows and persistent memory requirements are driving significantly higher demand for flash storage.

Tim Archer: In response, customers are, in the near term, adding bit supply and improving device capability through installed base conversions to 200-plus layer architectures. As layer counts rise and manufacturing complexity grows, so does our opportunity. We expect Lam Served Available Market, or SAM per wafer in NAND, to double from the 128-layer node to 500-plus layer devices. AI is also reshaping the technology requirements in advanced foundry logic and DRAM. Gate-all-around, CFET, HBM, 4F², and panel-level advanced packaging all feature prominently in the current and future AI device roadmaps. Through these transitions, increasing deposition and etch intensity remains the common thread. Higher aspect ratio structures, more complex 3D architectures, smaller pitch patterning, and new materials integration are all areas where Lam is a leader.

Tim Archer: In response, customers are, in the near term, adding bit supply and improving device capability through installed base conversions to 200+ layer architectures. As layer counts rise and manufacturing complexity grows, so does our opportunity. We expect Lam Served Available Market, or SAM per wafer in NAND, to double from the 128-layer node to 500+ layer devices. AI is also reshaping the technology requirements in advanced foundry logic and DRAM. Gate-all-around, CFET, HBM, 4F², and panel-level advanced packaging all feature prominently in the current and future AI device roadmaps. Through these transitions, increasing deposition and etch intensity remains the common thread. Higher aspect ratio structures, more complex 3D architectures, smaller pitch patterning, and new materials integration are all areas where Lam is a leader.

Speaker #2: This call is scheduled to last until 3:00 PM Pacific Time. A replay of this call will be made available later this afternoon on our website.

Speaker #2: And with that, I'll hand the call over to Tim.

Tim Archer: We see the benefit of this technology acceleration in our expanding SAM, and we are moving towards our target of high 30s SAM as a percentage of WFE faster than what we had outlined at our 2025 Investor Day. Let me highlight a few examples that illustrate why we're excited about what's ahead for Lam. Starting with conductor etch, Lam is the industry leader with an installed base of more than 40,000 chambers worldwide. With our latest platform, Akara, we are further strengthening our position. Akara combines unique direct drive plasma technology with industry-leading high-aspect-ratio patterning capabilities. First adopted for 2 nanometer and below gate-all-around architectures in foundry logic, Akara is now gaining momentum in advanced DRAM. We have secured several strategic tool of record positions, including recent wins for the most challenging gate etch applications.

Tim Archer: We see the benefit of this technology acceleration in our expanding SAM, and we are moving towards our target of high 30s SAM as a percentage of WFE faster than what we had outlined at our 2025 Investor Day. Let me highlight a few examples that illustrate why we're excited about what's ahead for Lam. Starting with conductor etch, Lam is the industry leader with an installed base of more than 40,000 chambers worldwide. With our latest platform, Akara, we are further strengthening our position. Akara combines unique direct drive plasma technology with industry-leading high-aspect-ratio patterning capabilities. First adopted for 2nm and below gate-all-around architectures in foundry logic, Akara is now gaining momentum in advanced DRAM. We have secured several strategic tool of record positions, including recent wins for the most challenging gate etch applications.

Speaker #3: And we see 2026 shaping up to be our third consecutive year of relative outperformance to WFE. Looking into 2027, we see an extraordinary setup for WFE growth.

Tim Archer: Since its launch, Akara's installed base has doubled every year, and we expect that growth trajectory to continue in 2027. DRAM pitch scaling is also driving higher interconnect density and wiring complexity. Shrinking dimensions place increasing demands on pattern fidelity, RC performance, and reliability, driving adoption of advanced hard masks, etch stops, and diffusion barriers. We previously addressed these patterning challenges in foundry logic and are now extending those capabilities and our production-proven technologies into DRAM. For example, DRAM customers are adopting our VECTOR hard mask deposition platform for low-k film patterning. By co-optimizing the hard mask film properties with our conductor etch process, we have shown we can deliver improved transistor performance and better yield. Lam's co-optimized solution also offers over 20% cost savings to customers compared to traditional approaches. Similarly, DRAM customers are increasingly adopting our VECTOR diffusion barrier systems to meet next-generation requirements.

Tim Archer: Our modular architecture combines interface cleaning, etch stop enhancement, and hermetic protection to prevent shorting at tighter pitches and reduce capacitance by approximately 5% versus competing technologies. As devices scale, surface engineering becomes increasingly important for reducing defectivity and variability. In the transition from FinFET to gate-all-around, the number of applications requiring surface treatment roughly doubles. Our Argos selective etch system uniquely addresses this need. By leveraging proprietary plasma technology, Argos creates a radical rich environment that enables highly selective surface treatment with minimal substrate damage. As a result, we are winning leading-edge foundry logic customers at 2 nanometer and below and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging. As an industry leader in TSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Tim Archer: Our modular architecture combines interface cleaning, etch stop enhancement, and hermetic protection to prevent shorting at tighter pitches and reduce capacitance by approximately 5% versus competing technologies. As devices scale, surface engineering becomes increasingly important for reducing defectivity and variability. In the transition from FinFET to gate-all-around, the number of applications requiring surface treatment roughly doubles. Our Argos selective etch system uniquely addresses this need. By leveraging proprietary plasma technology, Argos creates a radical rich environment that enables highly selective surface treatment with minimal substrate damage. As a result, we are winning leading-edge foundry logic customers at 2 nm and below and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging. As an industry leader in TSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Speaker #3: With our latest platform, Aqara, we are further strengthening our position. Aqara combines unique direct-drive plasma technology with industry-leading high aspect ratio patterning capabilities. First adopted for 2-nanometer and below, gate all-around architectures in foundry logic, Aqara has now gaining momentum in advanced DRAM.

Tim Archer: The long-term opportunity is even more compelling, as AI performance will increasingly depend less on transistor density scaling and instead on integrating more chiplets, more HBM stacks, and greater memory bandwidth within a single package. We expect each successive generation of advanced packaging to require more redistribution layers, denser copper interconnects, taller mega-pillar structures, and increasingly complex power delivery networks. We also see future AI packages exceeding nine times the reticle size, roughly three times larger than today's mainstream device designs. This is driving the industry to look beyond traditional wafer-based architectures toward larger format, panel-level packaging approaches. Panels enable the creation of larger AI packages, but they also introduce new challenges to maintain deposition uniformity, material properties, defect control, and yield across the larger panel area.

Speaker #3: For example, DRAM customers are adopting our vector hard mask deposition platform for low co-optimizing the hard mask film properties with our conductor etch process, we have shown we can deliver improved transistor performance and better yield.

Tim Archer: By leveraging technology and learning from our wafer-based SABRE 3D and advanced wet processing platforms, we have shipped 510 by 515 millimeter panel systems into development programs across multiple geographies, and this year we will also ship our first 310 by 310 millimeter panel tool, putting us at the leading edge of this important packaging transition. In CSBG, customers are increasingly leveraging Lam's Equipment Intelligence and fab automation solutions to help increase capacity as they race to meet growing AI demand. Lam's Dextro cobots, the industry's first collaborative maintenance robots, are seeing rapid adoption. The precision and repeatability of automated maintenance is leading to improved first-time right recovery, higher tool availability, and increased output, all critical at a time of industry-wide supply shortages. We are accelerating Dextro application development and since the start of 2026 have doubled the number of preventative maintenance tasks that can be automated.

Speaker #3: As a result, we are winning leading-edge foundry logic customers at 2-nanometer and below, and expanding Argos into a growing set of DRAM applications. Turning to advanced packaging, as an industry leader in TSV etch and electroplating, we are on track to deliver greater than 70% year-on-year growth.

Speaker #3: The long-term opportunity is even more compelling as AI performance will increasingly depend less on transistor density scaling and instead on integrating more chiplets, more HBM stacks, and greater memory bandwidth within a single package.

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. We were pleased with our continued strong execution in Q2, resulting in our fourth consecutive quarter of record revenue, our highest quarterly gross margin in 20 years, record operating margin, and record earnings per share. We just finished fiscal year 2026, we had record revenue of $23.2 billion and gross margin of 50.6%. Our diluted earnings per share in fiscal year 2026 was also a record, coming in at $5.82, which was up 41% from fiscal year 2025. We're ahead of the profitability objectives we discussed at our 2025 Investor Day, delivered through robust top-line growth and strong operational execution. Let's look at the details of our Q2 financial results.

Speaker #3: By leveraging technology and learning from our wafer-based saber 3D and advanced wet processing platforms, we have shipped 510 by 515 millimeter panel systems into development programs across multiple geographies and this year we will also ship our first 310 by 310 millimeter panel tool.

Doug Bettinger: Our revenue was above the midpoint of guidance, while gross margin, operating margin, and earnings per share all exceeded the high end of our guided range. Revenue for Q2 was $6.72 billion, which was up 15% sequentially, up 30% from the same period in 2025. Our deferred revenue balance at quarter end was $2.43 billion, which was an increase of $213 million from Q1. The increase was driven by a variety of factors, the largest of which was customer down payments. From a market segment perspective, Q2 systems revenue in memory was 46%, an increase from 39% in the prior quarter. On a dollar basis, this represented a record level for us in total memory. Within memory, non-volatile memory accounted for 23% of our systems revenue, which was up from the Q1 level of 12%.

Speaker #3: So to sum up, this is an exciting time for the industry and for Lam. AI is driving unprecedented demand greater technical requirements and accelerated architectural scaling at both the device and packaging level.

Doug Bettinger: NAND revenue dollars more than doubled sequentially as the industry focuses on conversions to 256-layer and above class devices, primarily enabling enterprise SSDs. DRAM remained strong, representing 23% of systems revenue, compared with 27% in Q1. On a dollar basis, DRAM revenue was flattish with the record level we set in Q1. DRAM spending remained directed towards wafer additions and technology upgrades across 1alpha, 1beta, and 1gamma nodes, enabling DDR5, LPDDR5, and High Bandwidth Memory. Foundry represented 44% of our systems revenue, down from the percentage concentration Q1 of 54%. Mature node spending with our customers in China was down sequentially. This was largely offset by strength in leading-edge process node investments in 2 and 3 nanometer capability, as well as advanced packaging.

Speaker #3: Thank you and here's Doug.

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: We were pleased with our continued strong execution in the June quarter resulting in our fourth consecutive quarter of record revenue. Our highest quarterly gross margin in 20 years record operating margin and record earnings per share.

Speaker #1: We just finished fiscal year 2026 and we had record revenue of 23.2 billion dollars and gross margin of 50.6%. Our diluted earnings per share in fiscal year 2026 was also our record coming in at $5.82 which was up 41% from fiscal year 2025.

Speaker #1: We're ahead of the profitability objectives we discussed at our 2025 investor day delivered through robust top-line growth and strong operational execution. Let's look at the details of our June quarter financial results.

Doug Bettinger: Finally, logic and other were 10% of our systems revenue in Q2, which was up from the prior quarter level of 7%. Let me now discuss the regional composition of our total revenue. The Taiwan region contributed 27% of revenue, up from Q1 at 23%. Taiwan represented a new record level for us in dollar terms. China declined as we expected it would, and accounted for 26% of revenue. I'll just remind you that China was 34% of revenue last quarter. I would mention that within China, the global multinational customers grew sequentially, while the domestic customer base declined. Our next largest geographic region was Korea at 20% of revenue in Q2, down a little bit from the Q1 level of 23%.

Speaker #1: Our revenue was above the midpoint of guidance. We'll gross margin operating margin and earnings per share all exceeded the high end of our guided range.

Speaker #1: Revenue for the June quarter was 6.72 billion dollars which was up 15% sequentially and up 30% from the same period in 2025. Our deferred revenue balance at quarter end was 2.43 billion dollars which was an increase of 213 million dollars from March quarter.

Speaker #1: The increase was driven by a variety of factors the largest of which was customer down payments. From a market segment perspective, June quarter systems revenue in memory was 46% an increase from 39% in the prior quarter.

Doug Bettinger: The Customer Support Business Group generated a third consecutive quarter of record revenue at nearly $2.5 billion in Q2, which was up 17% sequentially from Q1, 43% higher than the same period in 2025. Sequentially, the increase was primarily due to record upgrade revenue. We also saw smaller increases in Reliant and services. Spare part purchases remained consistent with their strong level from Q1. Let's look at the gross margin performance. Q2 came in at 52%, exceeding the upper end of our guidance range and improving from the Q1 level of 49.9%. Gross margin was stronger due to a myriad of factors, including pricing actions, operational and scale efficiencies, as well as a favorable product mix. Operating expenses in Q2 were $916 million, up from the prior quarter amount of $866 million.

Speaker #1: On a dollar basis, this represented a record level for us in total memory. Within memory, non-volatile memory accounted for 23% of our systems revenue which was up from the March quarter level of 12%.

Speaker #1: NAND revenue dollars more than doubled sequentially as the industry focuses on conversions to 256 layer and above class devices primarily enabling enterprise SSDs. DRAM remained strong.

Speaker #1: Representing 23% of systems revenue compared with 27% in the March quarter. On a dollar basis, DRAM revenue was flattish with the record level we set in the March quarter.

Speaker #1: DRAM spending remained directed towards wafer additions and technology upgrades across 1 alpha, 1 beta, and 1 gamma nodes enabling DDR5, LPDDR5, and high bandwidth memory.

Speaker #1: Quality represented 44% of our systems revenue down from the percentage concentration March quarter of 54%. Mature node spending with our customers in China was down sequentially.

Doug Bettinger: The increase was mainly due to employee-related spending associated with higher headcount and variable compensation expense as a result of our improving profitability. R&D accounted for 67% of our total operating expenses. We are funding incremental product spending that should enhance the breadth and competitiveness of our future portfolio. Operating margin for Q2 was 38.4%, also exceeding the upper end of our guidance range, and improving from the Q1 level of 35%. This improvement was primarily due to the higher revenue and stronger gross margin. Our non-GAAP tax rate Q3 was 11%, in line with our expectations. We do believe the tax rate will be in the mid-teens in Q3 due to the increase in revenue in higher tax jurisdictions, primarily the US, as we enter the new fiscal year. The US GILTI rate is also higher as we enter the fiscal year.

Speaker #1: This was largely offset by strength in leading edge process node investments in 2 and 3 nanometer capability as well as advanced packaging. And finally, logic and other were 10% of our systems revenue in the June quarter which was up from the prior quarter level of 7%.

Speaker #1: Let me now discuss the regional composition of our total revenue. The Taiwan region contributed 27% of revenue up from the March quarter at 23%.

Speaker #1: I would mention that within China the global multinational customers grew sequentially while the domestic customer base declined. Our next largest geographic region was Korea at 20% of revenue in the June quarter down a little bit from the March quarter level of 23%.

Doug Bettinger: You should expect this uptick in the tax rate to continue for the remainder of 2026 and likely beyond. Other income and expense for Q2 was approximately $19 million in expense, compared with $8 million in expense in Q1. The change in OI&E was primarily due to foreign exchange. As we've talked about in the past, you should expect to see variability in OI&E quarter-to-quarter. Let's look at capital return. We allocated approximately $246 million to share repurchases, and we paid $325 million in dividends in Q2. We returned 45% of free cash flow in the quarter. Year-to-date, we've returned 81% of free cash flow, and our plans remain to return at least 85% of free cash flow to our shareholders over time. For Q2, diluted earnings per share were a record $1.82.

Speaker #1: The customer support business group generated a third consecutive quarter of record revenue at nearly 2.5 billion dollars in the June quarter which was up 17% sequentially from March quarter and 43% higher than the same period in 2025.

Speaker #1: Let's look at the gross margin performance. The June quarter came in at 52% exceeding the upper end of our guidance range and improving from the March quarter level of 49.9%.

Speaker #1: Gross margin was stronger due to a myriad of factors including pricing actions, operational and scale efficiencies, as well as a favorable product mix. Operating expenses in the June quarter were 916 million dollars up from the prior quarter amount of 866 million dollars.

Doug Bettinger: The diluted share count was roughly 1.26 billion shares, down from Q1. We have $4 billion remaining on our board-authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short-term investments totaled $5.6 billion at the end of Q2, up from $4.8 billion at the end of Q1. The primary factors behind the cash increase were cash from operating activities, somewhat offset by our capital return activities. As the business grows, we'd like to build a little bit more cash on the balance sheet to support potential liquidity needs like capital spending and working capital. Business days sales outstanding were 72 days in Q2, an increase from 64 days in Q1.

Speaker #1: The increase was mainly due to employee related spending associated with higher headcount and variable compensation expense as a result of our improving profitability. R&D accounted for 67% of our total operating expenses.

Speaker #1: We are funding incremental product spending that should enhance the breadth and competitiveness of our future portfolio. Operating margin for the June quarter was 38.4% also exceeding the upper end of our guidance range and improving from the March quarter level of 35%.

Doug Bettinger: Inventory at the June quarter end totaled $4.3 billion, which was an increase from the March quarter as we are building inventory to meet growing customer demand. Nonetheless, inventory turns continued to improve, coming in at 3 times versus 2.9 times in the prior quarter. This is the highest inventory turns level we've delivered in almost 5 years. Our non-cash expenses in the June quarter included approximately $104 million for equity compensation, $105 million in depreciation, and $15 million in amortization. Capital expenditures in the June quarter were $189 million. Capital spending was centered on lab investments in the United States and global growth in our manufacturing facilities. We ended the June quarter with approximately 22,400 regular full-time employees, which was an increase of approximately 1,800 people from the prior quarter.

Speaker #1: This improvement was primarily due to the higher revenue and stronger gross margin. Our non-gap tax rates third quarter was 11% in line with our expectations.

Speaker #1: The US guilty rate is also higher as we enter the fiscal year. We should expect this uptick in the tax rate to continue for the remainder of 2026 and likely beyond.

Speaker #1: Other income and expense for the June quarter was approximately 19 million dollars in expense compared with 8 million dollars in expense in the March quarter.

Speaker #1: The change in OI&E was primarily due to foreign exchange. And as we've talked about in the past, you should expect to see variability in OI&E quarter to quarter.

Speaker #1: Let's look at capital return. We allocated approximately 246 million dollars to share repurposes and we paid 325 million dollars in dividends in the June quarter.

Doug Bettinger: We had headcount growth primarily in the factory and field organizations to support increased tool installations as well as growing manufacturing activities. We also added headcount in R&D. Let's turn to our non-GAAP guidance for the September 2026 quarter. We're expecting revenue of $8.1 billion ±$400 million. Gross margin of 52% ±1 percentage point. Operating margins of 39.5% ±1 percentage point. I would just mention, we are growing spending in the September quarter, albeit at a much slower rate than the growth in revenue. Finally, we're expecting earnings per share of $2.15 ±$0.15, based on a share count of approximately 1.255 billion shares. Let me wrap up by sharing a brief update to the long-term profitability framework that we introduced at our investor day a year and a half ago.

Speaker #1: We returned 45% of free cash flow in the quarter. Year to date, we've returned 81% of free cash flow and our plans remain to return at least 85% of free cash flow to our shareholders over time.

Speaker #1: For the June quarter, diluted earnings per share were record $1.82. The diluted share count was roughly 1.26 billion shares down from the March quarter.

Speaker #1: We have 4 billion dollars remaining on our board authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short term investments totaled 5.6 billion dollars at the end of the June quarter.

Speaker #1: As the business grows, we'd like to build a little bit more cash on the balance sheet to support potential liquidity needs like capital spending and working capital.

Doug Bettinger: Since then, demand has strengthened significantly, and we're executing well to the strategy that we outlined. As Tim mentioned, we see 2026 shaping up to be our third consecutive year, our outperformance to the growth in WFE. We've been growing the CSBG business faster than the installed base, and our close-to-customer strategy has helped expand our margins. The technology inflections increasing deposition etch intensity reinforce our confidence that we can continue to expand our SAM while creating additional opportunities for gaining share. Our SAM expansion is trending toward that high 30% range that we communicated. Within this framework, we intend to drive gross margins to the mid-50% level and operating margins to the mid-40% level over the next several years as the AI transformation drives continued greater investment in global semiconductor capacity. Operator, that concludes our scripted remarks.

Speaker #1: There's a excuse me. Day sales outstanding were 72 days in the June quarter and increased from 64 days in the March quarter. Inventory at the June quarter end totaled 4.3 billion dollars which was an increase from the March quarter as we are building inventory to meet growing customer demand.

Speaker #1: Capital expenditures in the June quarter were 189 million dollars. Capital spending was centered on lab investments in the United States, and global growth in our manufacturing facilities.

Doug Bettinger: We would now like to open up the call for questions.

Speaker #1: We ended the June quarter with approximately 22,400 regular full-time time employees which was an increase of approximately 1,800 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installations as well as growing manufacturing activities.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're 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. At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Arcuri with UBS. Please go ahead.

Speaker #1: We also added headcount in R&D. Now let's turn to our non-gap guidance for the September 2026 quarter. We're expecting revenue of 8.1 billion dollars plus or minus 400 million dollars.

Timothy Arcuri: Thanks a lot. Doug, I know you usually don't guide by segment. Service was up so much in June, and based upon the gross margin guidance, which you're guiding basically flattish on such a big up revenue, I would imagine that it's up big again in September. Can you give us some sense of sort of what to expect in service within the guidance for September?

Speaker #1: Gross margin of 52% plus or minus 1 percentage point. Operating margins of 39.5% plus or minus 1 percentage point. I would just mention we are growing spending in the September quarter albeit at a much slower rate than the growth in revenue.

Speaker #1: And finally, we're expecting earnings per share of $2.15 plus or minus 15 cents based on a share count of approximately 1.255 billion shares. So let me wrap up by sharing a brief update to the long term profitability framework that we introduced at our investor day a year and a half ago.

Doug Bettinger: Listen, Tim, I think you're going to see similar profile of what we saw this quarter. I won't get into specific numbers necessarily. Upgrades are going to continue to be strong, I think, right? Driven by what you got going on in NAND investment. I expect spares to continue to be pretty strong given the high utilization in the industry. We're excited about what's going on advanced service with all the cobot and Equipment Intelligence. I think it's going to be pretty consistent across the board, Tim, similar to what we saw this quarter.

Timothy Arcuri: Great, Doug. The new gross margin of mid-50s, that makes perfect sense. That's great. I guess the question is, how long will it take to get gross margin to that level? I know, obviously, if you look at your margins versus, say, the large foundry margins, it used to be within 5 points, and now it's between 5 and 7 points as early as H1 2024, and now the gap is 2x that. There's obviously a lot of room for you to move it up. How long will it take for you to move that up? Is it like a revenue thing or is it a time thing?

Speaker #1: We've been growing the CSBG business faster than the installed base and are close to customer strategy has helped expand our margins. The technology inflections increasing deposition etch intensity reinforce our confidence that we can continue to expand our SAM while creating additional opportunities for gaining share.

Speaker #1: Our SAM expansion is trending toward that high 30% range that we communicated. Now, within this framework, we intend to drive gross margins to the mid 50% level and operating margins to the mid 40% level over the next several years as the AI transformation drives continued greater investment in global semiconductor capacity.

Speaker #1: Operator, that concludes our scripted remarks. We would now like to open up the call for questions.

Timothy Arcuri: Okay, Doug. Thank you.

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. If you're using a speakerphone, please pick up your handset before pressing the keys.

Doug Bettinger: Yep. Thanks, Tim.

Operator: The next question comes from C.J. Muse with Cantor. Please go ahead.

C.J. Muse: Yeah, good afternoon. Thank you for taking the question. I guess a follow-up on the CSBG side of the house. It looks like you're going to grow in the mid-30s ±. Just curious, how do you think about the growth rate beyond 2026 into 2027? How much strength should we continue to see from NAND inside here? How are you thinking about Reliant? Does that start to recover more meaningfully? Do we see sustained spares as well? Would love to hear your thoughts there.

Speaker #2: 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.

Speaker #2: At this time, we will pause momentarily to assemble our roster. The first question today comes from Timothy Archery with UBS. Please go ahead.

Speaker #3: Thanks a lot. Doug, I know you usually don't guide by segment. But service was up so much in June and based upon the gross margin guidance which you're guiding basically flattish on such a big up revenue, I would imagine that it's up big again in September.

Doug Bettinger: CJ, I'll start. I'll let Tim add on. The framework we put out the investor day a year and a half ago, still, I would encourage you to think about it in a similar way. Clearly, we've grown faster than that suggested back a year and a half ago, that's come a little bit from advanced services. We're super excited about that driving incremental growth. It's come, Tim, also from just really high utilization in the industry, which drives consumption of spares and service. To the extent that that continues, spares and service will continue to be really strong from that. I think the way to think about Reliant is think about what's going on in the mature node investment, what's happening in China, more broadly, what's happening in the analog industrial automotive space.

Doug Bettinger: C.J., I'll start. I'll let Tim add on. The framework we put out the investor day a year and a half ago, still, I would encourage you to think about it in a similar way. Clearly, we've grown faster than that suggested back a year and a half ago, that's come a little bit from advanced services. We're super excited about that driving incremental growth. It's come, Tim, also from just really high utilization in the industry, which drives consumption of spares and service. To the extent that that continues, spares and service will continue to be really strong from that. I think the way to think about Reliant is think about what's going on in the mature node investment, what's happening in China, more broadly, what's happening in the analog industrial automotive space.

Speaker #3: So can you give us some sense of sort of what to expect in service within the guidance for September?

Speaker #4: I think, right? Driven by what you got going on in NAND investment. I expect spares to continue to be pretty strong given the high utilization in the industry and then we're excited about what's going on in advance.

Speaker #4: Service with all the cobot and equipment intelligence. So I think it's going to be pretty consistent across the board, Tim, similar to what we saw this quarter.

Speaker #3: Great, Doug. And then so the new gross margin of mid 50s that makes perfect sense. That's great. And I guess the question is how long will it take to get gross margin to that level?

Doug Bettinger: That'll be a little bit more situational, I guess. That's the framework to think about. We're probably going to do a little bit better than the growth that we talked about a year and a half ago, though, CJ.

Speaker #3: I know, I mean, obviously if you look at your margins versus say the large foundry margins, I mean, you used to be within five points and now it's between five and seven points as early as the first half of '24.

C.J. Muse: Perfect. I guess, could you speak to perhaps new entrants or more meaningful spending from historically larger spenders on the logic front? What kind of visibility do you have today? What kind of growth should we expect into 2027 and beyond?

Speaker #3: And now you're like the gap is like two X that. So there's obviously a lot of room for you to move it up. How long will it take you for you to move that up?

Speaker #3: Is it like a revenue thing or is it a time thing?

Speaker #4: It's a little bit of both, Tim. Honestly, right? Part of it is scale and scope and revenue growth. Part of it is new product introduction and getting fairly paid for the value we're delivering.

Doug Bettinger: Yeah, CJ, you're funny, asking that tricky question about new logic customers. Yeah, there's some new stuff going on. There's clearly dialogue, and I'll let Tim comment a little bit. We are talking to that new logic customer in the US. That is happening.

Doug Bettinger: Yeah, C.J., you're funny, asking that tricky question about new logic customers. Yeah, there's some new stuff going on. There's clearly dialogue, and I'll let Tim comment a little bit. We are talking to that new logic customer in the US. That is happening.

Speaker #4: I expect, Tim, this is over the next several years that we'll continue to drive it on an annual basis for sure. But it's going to take several years, I think, to get to those levels, Tim.

Speaker #3: Okay, Doug. Thank you.

Speaker #4: Yep. Thanks, Tim.

Tim Archer: Yeah. I don't have much to add other than to say we're engaged. I think what's exciting for us is that, in many cases where we have new entrants come into foundry logic or memory or any of the spaces, they're always looking at some of the more innovative approaches. They're not encumbered by kind of the roadmaps and install base it's existed in. I think that we're hopeful that when we think about all of the new systems that we've talked about, I mentioned a few in the prepared remarks, but we've talked about a lot of others in other calls. That's an opportunity for us to showcase the significant technical improvement Lam has made on the foundry logic side. I think that's what new entrants mean for us, is more opportunities to grow our share within that space.

Speaker #2: The next question comes from CJ Mews with Cantor. Please go ahead.

Speaker #5: Doug, good afternoon. Thank you for taking the question. I guess a follow up on the CSBG side of the house. It looks like you're going to grow in the mid 30s plus or minus.

Speaker #5: And just curious, how do you think about the growth rate beyond '26 into '27? How much strength should we continue to see from NAND inside here?

Speaker #5: How are you thinking about reliant? Does that start to recover more meaningfully? And do we see sustained kind of spares as well? We'd love to hear your thoughts there.

Speaker #4: Yeah, CJ, I'll start and then I'll let Tim add on. Yeah, you know the framework we put out the investor day a year and a half ago still, I would encourage you to think about it in a similar way.

C.J. Muse: Thank you.

Doug Bettinger: Go ahead, CJ.

Doug Bettinger: Go ahead, C.J.

Operator: The next question comes from Harlan Sur with J.P. Morgan. Please go ahead.

Harlan Sur: Good afternoon. Thanks for taking my question. As we look back historically, your gross margins seem to have taken a structural step up in 2023. I believe this corresponded to the team moving a bigger part of the volume manufacturing flowing through your more efficient low-cost Malaysia facility. As the team has continued to scale volumes higher through Malaysia since then, right, you've been able to drive incrementally higher margins on these products, and that continues to be a gross margin benefit. Looking at your strong gross margin results for June and for the September outlook, how much of the incremental gross margin improvement is coming from the volume mix to Malaysia and the increases there? Or could it be product mix, new product introduction upgrades, and/or just incremental pricing increases on your systems?

Speaker #5: Perfect. And then I guess could you speak to perhaps new entrants or more meaningful spending from historically larger spenders on the logic front? What kind of visibility do you have today?

Harlan Sur: Maybe which of these dynamics is going to be most influential in driving you to your mid-fifties sort of new long-term targets?

Tim Archer: Yeah. Harlan, let me start, just because. I know you want to get to the quantification. I'll let Doug do some of that to the extent that he can. I just wanted to point out, when we look at the tremendous operational execution, and I refer to it as operational velocity inside the company, I want to just make sure it's clear. We have been able to execute to what have been really accelerated customer demands because of what I see as a strategic asset in our global manufacturing footprint and a global supply chain footprint. We have factories in Oregon and California and Ohio, in Malaysia and Taiwan and Korea and Austria. Really, as we've looked at this tremendous growth period we've gone through and expect to continue to go through, we've leveraged that full scope of sites and supply chains.

Speaker #5: And what kind of growth should we expect into '27 and beyond?

Speaker #4: Yeah, CJ, you're funny. Asking that tricky question about new logic customers. Yeah, there's some new stuff going on. There's clearly dialogue and I'll let Tim comment a little bit.

Speaker #4: We are talking to that new logic customer in the US. That is happening.

Tim Archer: What's really helped us is that they're not all interrelated, so they're not all being driven by the same demand. In that way, we can both get what we need when we need it and also at the prices that we need it. There's an element of really being able to leverage this global capability. I think that's somewhat unique in how Lam has driven our operational structure. I'll let Doug talk to the second part of your question.

Speaker #3: That's an opportunity for us to showcase the significant technical improvement LAM is an aid on the foundry logic side. And I think that's what new entrants mean for us is more opportunities to grow our share within that space.

Speaker #5: Thank you.

Speaker #4: Thanks, CJ.

Speaker #2: The next question comes from Harlan Sir. With JP Morgan, please go ahead.

Speaker #6: And as the team has continued to scale volumes higher through Malaysia, since then, right, they increment that you've been able to drive incrementally higher margins on these products and that continues to be a gross margin benefit.

Harlan Sur: I appreciate that. On advanced packaging, you came into this year with a view of greater than 40% growth. You upped that to greater than 50% growth last earnings. Now you're looking at 70% growth today, right? Is the increase in the outlook due to HBM or 2.5D to 3.5D SOIC advanced packaging transitions happening faster, or is it customers just pulling in production capability from next year into this year? Curious.

Speaker #3: Yeah, Harlan, let me start just because and I know you want to get to the quantification. I'll let Doug do some of that to the extent that he can.

Tim Archer: Yeah, Harlan, it's just everything. Advanced packaging, I mentioned it in my prepared remarks. It's becoming quite a technical tool for our customers and for the industry to drive greater performance. It's everything you just mentioned. It's 2.5D. It's in the foundry logic space. It's in HBM. I think that what we're excited about is obviously as it moves also into panel packaging, that's a place where Lam, we feel like we've gotten out to an early start there. We think that transition is very in the very early stages, but it's in an important inflection point there as well. I think just next few years, advanced packaging growth will be a little bit hard to predict because adoption is just occurring all over the place.

Speaker #3: But I just wanted to point out when we look at the tremendous operational execution and I refer to it as operational velocity inside the company, I wanted to just make sure it's clear.

Speaker #3: We have been able to execute to what have been really accelerated customer demands because of what I see as a strategic asset in our global manufacturing footprint.

Doug Bettinger: Our clear leadership, Harlan, I will just remind you, in the TSV etch and the copper electroplating, I call it the drill and fill, we just have really strong product offerings there. As that goes, we just benefit extensively from our technical leadership.

Speaker #3: And so they're not all being driven by the same demand. And so in that way, we can both get what we need when we need it and also at the prices that we need it.

Harlan Sur: No, absolutely. Thanks, Tim. Thanks, Doug.

Speaker #3: And so there's an element of really being able to leverage this global capability. I think that's somewhat unique in how LAM has driven our operational structure.

Doug Bettinger: Yeah. Thanks, Harlan.

Operator: The next question comes from Atif Malik with Citi. Please go ahead.

Speaker #3: And I'll let Doug talk to the second part of your question.

Atif Malik: Hi. Thank you for taking my questions. I know you guys talked about doubling of NAND revenues and the context vendor, KB Cash. There is a third party TrendForce forecasting a divergence in memory fundamentals next year. They are calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer, and shortages to continue in the DRAM side, which is more driven by data center. Are you seeing anything in your conversations with the memory makers that are pointing to some sort of an oversupply or a reversal in the NAND fundamentals for next year?

Speaker #4: Yeah, Harlan, a lot of the uptick that you're seeing gross margin has come from exactly what Tim just outlined. On top of that, we got new products coming out every single year.

Tim Archer: I think that, as we have said on NAND, clearly customers are right now progressing through upgrades to 200-plus layer devices. There is some greenfield this year. It is a ways out before there is a lot of greenfield coming into NAND. I think that, again, next year we are still having conversations about how to continue to upgrade the existing installed base and get the fleet up to kind of current state of the art in terms of NAND. I think it is a little early on 2028, but our view right now is fundamentals are still about the same for us. I think what I tried to highlight in my prepared remarks is the Lam story is a lot bigger than just NAND, and there is often this focus.

Speaker #6: Well, I appreciate that. And then on advanced packaging, you came into this year with the view of greater than 40% growth. You upped that to greater than 50% growth last earnings.

Speaker #6: Or is it customers just pulling in production capability from next year into this year? Curious.

Tim Archer: What we have done is we have successfully looked at these vertical scaling trends that are occurring in both DRAM and foundry logic, and we have applied all of that learning and expertise that we have from 3D NAND into those. Those are the basis for a lot of the wins that I was talking about in my remarks. I think that is a trend that continues into 2028 and beyond as well. You have got NAND, and then you have got DRAM and foundry logic as well. I would point out, we said that we believe 2027 looks like a great setup, not only for the industry, but for Lam. That is an environment where next year we still see DRAM being the fastest grower, foundry logic being the second fastest grower, and NAND being third. That is exactly the setup that we came into this year on.

Speaker #3: And we think that transition is very early stages, but it's in an important inflection point there as well. So I think just next few years, advanced packaging growth will be a little bit hard to predict because adoption is just occurring all over the place.

Speaker #4: But our clear leadership, Harlan, I'll just remind you, in the TSV etch and the copper electroplating, I call it the drill and fill. We just have really strong product offerings there.

Speaker #4: So as that goes, we just benefit extensively from our technical leadership.

Speaker #6: No, absolutely. Thanks, Tim. Thanks, Doug.

Tim Archer: Clearly, our results so far in 2026 are quite good. We think even in that environment, Lam can do extremely well.

Speaker #4: Yeah, thanks, Harlan.

Speaker #2: The next question comes from Matif Malik with City. Please go ahead.

Atif Malik: Thank you, Tim. Taiwan was a record revenue year. Can you just talk about your foundry share gains at 3 and 2 nanometer?

Speaker #7: Hi, thank you for taking my questions. I know you guys talked about doubling of NAND revenues and the context window or KV cash. There is a third-party trend force forecasting that divergence in memory fundamentals next year.

Tim Archer: Sure. I can't tell you specifically, obviously, since some of that gets quite close to a single customer. Look, it's back to the things that we've talked about. As customers are shrinking and they're moving to gate-all-around, it's the verticalization of the transistor structure. It's the focus on things like RC performance. If you go back and look at our transcripts from the last number of calls, we've been talking about things like low-k spacers, and we talked about the importance of patterning etch as features become ever smaller and taller because of EUV patterning and device shrink. I would just say anything that's related, again, to something becoming higher aspect ratio, it requires etch.

Speaker #7: They're calling for an oversupply in NAND because of the NAND demand getting pulled down by weaker consumer and shortages to continue in the DRAM side, which is more driven by data center.

Speaker #7: Are you seeing anything in your conversations with the memory makers that are pointing to some sort of a oversupply or a reversal in the NAND fundamentals for next year?

Speaker #3: I think that it's as we've said on NAND, I mean, clearly customers are right now progressing through upgrades to 200 plus layer devices. There's some greenfield this year.

Tim Archer: If it has to do with RC, meaning metalization resistance or dielectric capacitance, those are areas where Lam's new ALD tools, where our new etch tools like Akara are doing extremely well, not just in Taiwan, but really at every leading-edge foundry logic customer around the world. Because these are unique capabilities built into our newest tools, and they're doing great at the customer.

Speaker #3: And there's often this focus but what we've done is we've successfully looked at these vertical scaling trends that are occurring in both DRAM and foundry logic and we've applied all of that learning and expertise that we have from 3D NAND into those.

Atif Malik: Thank you.

Doug Bettinger: Thanks, Atif.

Operator: The next question comes from James Schneider with Goldman Sachs. Please go ahead.

James Schneider: Good afternoon. Thanks for taking my question. I was wondering, as you look at the growth rates the industry is going to post in 2026, how would you handicap looking into 2027, whether you would see a similar, better, or worse growth rate relative to this year?

Speaker #3: And those are the basis for a lot of the wins that I was talking about in my remarks. And I think that's a trend that continues into 2028 and beyond as well.

Doug Bettinger: Yeah, Jim, we're not going to get into talking specifically about next year, at least not numerically. I would tell you, though, that as we look at what's being invested in, the industry is still meaningfully undersupplied, right? You've got clean room coming online over the next, I don't know, 12 months and beyond, frankly, and all that will lead to incremental opportunity as we get into 2027. It's too soon for us to put quantification around what 2027's going to be, but it looks like it's going to set up to be a pretty darn good year, Jim. I guess I'd just leave it at that.

Speaker #3: And that's an environment where next year we still see DRAM being the fastest grower. Foundry logic being the second fastest grower. And NAND being third.

Speaker #3: And that's exactly the setup that we came into this year on. And clearly, our results so far in 2026 are quite good. So we think even in that environment, LAM can do extremely well.

Speaker #7: Thank you, Tim. And then Taiwan was a record revenue year. Can you just talk about your foundry share gains at three and two nanometers?

James Schneider: That's fair enough. Understand. Maybe just as a follow-up, you mentioned pricing being one of the factors that drove gross margin performance in the quarter. Can you speak to some of the factors that drove that? Do you see opportunities for further pricing actions in the short term, for example, like-to-like pricing pieces, even within the same program, the same fab project?

Speaker #3: Sure. I mean, well, I can't tell you specifically. Obviously, since some of that gets quite close to a single customer, but look, it's back to the things that we've talked about.

Doug Bettinger: Yeah, Jim, we're always working on getting fairly paid for the value we're delivering. Last quarter was no different than it ever has been. Pricing is always a component of what's been going on, in addition to operational efficiency, that close-to-customer strategy I talked about, all these new products that we're bringing out and delivering better gross margin because it's solving more difficult technical challenges. All that contributes to what you're seeing us deliver in gross margin. Frankly, how we will strive to continue to expand gross margin to that mid-50% level. We're going to work on all of this stuff.

Speaker #3: And so I would just say anything that's related, again, to something becoming higher aspect ratio, it requires etch. If it has to do with RC, meaning metalization resistance or dielectric capacitance, those are areas where LAM's new ALD tools where our new etch tools like Aqara are doing extremely well.

James Schneider: Thank you.

Doug Bettinger: Yeah. Thanks, Jim.

Operator: The next question comes from Srini Pajjuri with RBC Capital Markets. Please go ahead.

Speaker #3: Not just in Taiwan, but really at every leading edge foundry logic customer around the world because these are unique capabilities built into our newest tools and they're doing great at the customer.

Srini Pajjuri: Thank you. Tim, on your WFE comment about $150 billion, I think you said you alluded to maybe further upward bias for the year. I'm just trying to get a sense of what your lead times are, and in case if there's more upside in, I guess, H2, how well-positioned you are to be able to supply any potential upside.

Speaker #7: Thank you.

Speaker #4: Thanks, Dr.

Speaker #2: The next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Tim Archer: Yeah, sorry, that might have been poorly worded in the remarks. Our previous quarter's guidance was $140 billion with upside bias, and that upside bias played out to get us to $150 billion now. This outlook was in the $150 billion range. We didn't say upside bias for this current outlook. To that extent, your second part of your question about what capability do we have, I know we were thinking one of the questions might be, how did you go from $140 billion to $150 billion when you said it was clean room constrained? People find ways, and the demand is very strong, and so people have squeezed out a little bit of extra space. They've resolved bottleneck tools.

Speaker #7: Good afternoon. Thanks for taking my question. I was wondering as you look at the growth rates of industries going to post in 2026, how would you handicap looking at the 2027 when you could see a similar better or worse growth rate relative to this year?

Speaker #4: You've got clean room coming online over the next I don't know, 12 months and beyond, frankly. And all that will lead to incremental opportunities.

Speaker #4: We get into '27. It's too soon for us to put quantification around what '27 is going to be. But it looks like it's going to set up to be a pretty darn good year, Jim.

Tim Archer: We work with customers on if we happen to be the bottleneck tool from a throughput perspective in places, we work with customers to resolve those, and that sometimes frees them up to spend a little bit more to resolve other bottleneck tools. That's the $140 billion to $150 billion. From this point forward, as you said, lead times are challenging. Maybe referring back to the answer I gave about our strategic global manufacturing supply chain, our team is doing a phenomenal job, a heroic job, I think, responding to urgent customer requests. When those do come up, we've been able to meet those needs. I think as we move through H2, that becomes more and more difficult to see anything further in this year as true surprise upside.

Speaker #4: I guess I'd just leave it at that.

Speaker #7: That's fair enough. Understand. And then maybe just as a follow-up, you mentioned pricing being one of those factors that grows most outperformance in the quarter.

Speaker #7: Can you speak to some of the factors that drove that? And do you see opportunities for further pricing actions in the short term? For example, lights-to-light pricing increases, even within the same program, the same set of projects.

Speaker #4: All right, Jim. I mean, we're always working on getting fairly paid for the value we're delivering. Last quarter, it was no different than it ever has been.

Speaker #4: Pricing is always a component of what's been going on. In addition to operational efficiency, that close to customer strategy I talked about, all these new products that we're bringing out, delivering better gross margin because it's solving more difficult technical challenges, all that contributes to what you're seeing us deliver in gross margin.

Tim Archer: That's why the discussions are now out into 2027 and beyond, to make sure that as new fabs come into play, this is my comment about visibility, as those new fabs are opening up, customers want to make sure they have secured the tools they need from Lam. Those discussions are taking place at lead time or beyond.

Speaker #4: And frankly, how we will strive to continue to expand gross margin to that mid-50% level. We're going to work on all of this stuff.

Srini Pajjuri: Thank you. My follow-up, maybe on gross margins. Doug, pretty impressive gross margin performance despite the fact that China declined pretty meaningfully sequentially. I'm just trying to get a sense of what you're seeing in terms of China overall demand. Are you expecting, I guess, China to recover in the next few quarters? I see your deferred revenue balance went up a little bit. Just trying to get a sense of how to think about China going forward.

Speaker #4: Yeah. Thanks, Jim.

Speaker #2: The next question comes from Srini Pujori with RBC Capital Markets. Please go ahead.

Speaker #6: Thank you. Tim, on your WFE comment about 150 billion, I think you said you alluded to maybe further upward bias for the year. I'm just trying to get a sense of what your lead times are and in case if there's more upside I guess in the second half of the year, how well positioned you are to be able to supply to any potential upside.

Doug Bettinger: Yeah, Srini, I still think China overall WFE is flat to slightly up, similar to what we said before. I think quarter by quarter, you'll see some lumpiness to it. Our view is still largely the same. I would just also point out a comment that I made in my script, and maybe that we're going to continue to see, is understanding that China region, you also have the global multinational customers with fabs in China showing up in that number, that 26%. In the Q2, those global multinationals in China actually grew somewhat while the indigenous Chinese customers declined. It won't surprise me if that's a similar trend that we see as we go through the latter part of the year as well.

Speaker #3: I mean, I know we were thinking one of the questions might be, how did you go to from 140 to 150 when you said it was clean room constrained?

Speaker #3: People find ways and the demand is very strong. And so people have squeezed out a little bit of extra space. They've resolved bottleneck tools.

Srini Pajjuri: Thank you.

Doug Bettinger: Yeah. Thanks, Srini.

Operator: The next question comes from Vivek Arya with Bank of America Securities. Please go ahead.

Speaker #3: We work with customers on if we happen to be the bottleneck tool from a throughput perspective, in places we work with customers to resolve those and that's sometimes frees them up to spend a little bit more to resolve other bottleneck tools.

Michael Mani: Hi, this is Michael Mani on for Vivek Arya. Thanks so much for taking our question. My first question is on NAND. It seems like the company's pretty close to realizing the $40 billion upgrade opportunity faster than expected. As you've described in the past, that's not so much of a static opportunity. Like whatever has been upgraded to 200 layers eventually has to migrate to 300 layers and above, which could trigger another wave of spending for NAND. Where are we in that kind of second phase of upgrades, and is there a way to kind of contextualize how big that opportunity could be relative to the initial $40 billion upgrade opportunity we saw in the last couple of years? Thank you.

Speaker #3: And so when those do come up, we've been able to meet those needs. I think as we move through the second half of the year, that becomes more and more difficult to see anything further in this year, as true surprise upside.

Tim Archer: Yeah. It's a good question. We've said that it is not a static thing, and in fact, as the industry, if we look at this year, we made a comment. It's a combination of both upgrades plus some greenfield shipments, and that's kind of going to characterize the next couple of years. Most of that $40 billion we had previously said would likely occur in upgrades, would likely occur before the end of 2027. As you pointed out, it kind of all starts again. The key is, since greenfield additions have been made in that period of time, the next time it rolls through and you go from 200 to 300-plus or 400-plus, it's an even bigger installed base. While we haven't quantified that, but it's a good action item for us to get to you into the future.

Speaker #3: And that's why the discussions are now out in the '27 and beyond to make sure that as new fabs come into play, this is my comment about visibility.

Speaker #3: As those new fabs are opening up, customers want to make sure they have secured the tools they need from LAM to those discussions are taking place at lead time or beyond.

Speaker #6: Thank you. And then my follow-up maybe on gross margins. Doug, pretty impressive gross margin performance despite the fact that China declined pretty meaningfully sequentially.

Speaker #6: So I'm just trying to get a sense of what you're seeing in terms of China overall demand. Are you expecting I guess China to recover in the next few quarters?

Tim Archer: You can imagine that as you go with, we've described from 200 to 300 to 400 to 500 layers I said that our SAM will double from the 200-plus layer to the 500-plus layer on a per wafer basis. That's a combination of longer process times to process the taller stacks, plus additional tools that get added in to deal with all the complexity of all that stacking. That's where Lam's opportunity really lies, is helping address the complexity of stacking to 500 layers and beyond for customers.

Speaker #6: I see you were different revenue balance went up a little bit. So just trying to get a sense of how to think about China going forward.

Speaker #4: Yeah, Srini, I still think China overall WFE is flat to slightly up, similar to what we said before. I think quarter by quarter, you'll see some lumpiness to it.

Speaker #6: Thank you.

Speaker #4: Yeah. Thanks, Srini.

Speaker #2: The next question comes from Devek Arya with Bank of America Securities. Please go ahead.

Speaker #5: Hi, this is Michael Mani on from Zach Aria. Thanks so much for taking our question. My first question is on NAND. So it seems like the company is pretty close to realizing the 40 billion upgrade opportunity faster than expected, but as you've described in the past, that's not so much of a static opportunity.

Tim Archer: Yeah. Sure. Obviously, as you mentioned, HBM has been tremendous for Lam from the standpoint of the position we have in the TSV formation and other elements of the HBM process itself. I mentioned a couple of improvements. As DRAM performance at the device level continues to push forward in the future nodes, they're incorporating more processes that are associated with higher performance. It's low-k's, it's also introduction of more EUV layers, which pulls in, and makes Lam's patterning etch tools that much more critical. We're seeing wins across very conventional front-end types of devices. In my prepared remarks, I talked about if you're trying to build very high performance DRAM, you start to worry about things, as I mentioned, like the diffusion barrier performance and the etch stop layer performance.

Speaker #5: Whatever has been upgraded to under layers eventually has to migrate to 300 layers and above. Which could trigger another wave of spending for NAND.

Speaker #5: Where are we in that kind of second phase of upgrades? And is there a way to kind of contextualize how big that opportunity could be relative to the initial 40 billion upgrade opportunity we saw in the last couple of years?

Speaker #5: Thank you.

Speaker #3: Yeah. It's a good question. We've said that it is not a static thing. And in fact, as the industry if we look at this year, we made a comment.

Speaker #3: But then as you pointed out, it kind of all starts again. But the key is since greenfield additions have been made in that period of time, the next time it rolls through and you go from 200 to 300 plus or 400 plus gets an even bigger installed base.

Tim Archer: That's an area where today we hold a very strong leadership position in advanced leading-edge foundry logic. The reality is, as you try to push DRAM performance ahead, it starts to look a lot like leading-edge foundry logic. I think that's where the real strength of Lam's portfolio is that in many ways, the performance requirements across all three devices, as we see more vertical scaling, more performance, they're all converging. I think that a couple of years from now, we're going to look back and we'll say, "Hey, everything kind of became 3D NAND-like, much taller, much more complex, requiring higher performance tools." Right now, I think DRAM is seeing that. We are winning in conventional DRAM, it's related to the strength of the device, the patterning of the device, the materials that are being introduced, and I think that continues.

Speaker #3: And so while we have not we haven't quantified that, but it's a good action item for us to get to you into the future.

Speaker #3: But you can imagine that as you go with we've described from 200 to 300 to 400 to 500 layers, I made I said that our SAM will double from the 200 plus layer to the 500 plus layer on a per wafer basis.

Speaker #3: And that's a combination of longer process times to process the taller stacks plus additional tools that get added in to deal with all the complexity of all that stacking.

Speaker #3: And that's where LAM's opportunity really lies is helping address the complexity of stacking to 500 layers and beyond for customers.

Tim Archer: You layer on top of that, if you do HBM, it is even better for us.

Speaker #5: Great. Thank you. And for my follow-up, I wanted to ask about DRAM. So I think a lot of the strong outgrowth LAM has seen over the last couple of years in share gains has been mainly driven by HTM, which are TSE drilling and electric plating tools.

Michael Mani: Thank you very much.

Doug Bettinger: Yep, thank you.

Operator: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Melissa Weathers: Hi. Thank you for the question. I wanted to bring it back to a framework that you guys brought up on one of your calls last year, about the relationship between WFE spending and total data center spending. Especially with the market looking at potential slowing of AI spending or more efficient models, is there any way you can help us think about your view of WFE in the context of potential slowing AI spending? How do we think about the resilience of your business there?

Speaker #5: But could you talk about your share opportunity in traditional and conventional DRAM, especially as you move to new nodes like 1C and 1Gamma given that right now that seems like where most of the industry capacity constraints are over the next couple of years?

Speaker #5: Thank you.

Speaker #3: Sure. Sure. I mean, it's obviously as you mentioned, HBM has been a tremendous for LAM from the standpoint of the position we have in the TSV formation and other elements of the HBM process itself.

Doug Bettinger: Yeah. Listen, Melissa, I think as we look into next year, the fact that the industry is undersupplied this year is going to roll into next year. We feel great about what's going to happen with WFE. Yeah, that metric, we talked about the $100 billion data center CapEx equating, if I remember the number, to roughly $8 billion in WFE. That was probably a little bit of a low estimate as we sit here today. It's probably trending, I don't know, a billion or two higher. That clearly, at the end of the day, is what's driving demand. At the end of the day, the hyperscale investment is trickling all the way back to WFE, and that is absolutely a driver. The numbers are probably a little higher than we had talked about, whatever it was, middle part of last year.

Speaker #3: But I mentioned a couple of improvements as DRAM performance. At the device level, it continues to push forward in the future nodes. They're incorporating more processes that are associated with higher performance.

Speaker #3: It's low pays. It's also introduction of more EUV layers, which pulls in and makes LAM's patterning etch tools that much more critical. And so we're seeing wins across very conventional front-end types of devices.

Melissa Weathers: Perfect. Thank you. On the supply side, I'm sure you guys are getting more visibility from your own customers, but I was wondering, Doug, you talked about higher inventory turns. What kind of partnership and visibility are you giving your suppliers to make sure you can bring on capacity for this strong ramp?

Speaker #3: And I think that's where the real strength of LAM's portfolio is that in many ways, the performance requirements across all three devices, as we see more vertical scaling, more performance, they're all converging.

Speaker #3: And right now, I think DRAM is seeing that. So it's we are winning in conventional DRAM. But it's related to the strength of the device, the patterning of the device, the materials that are being introduced.

Melissa Weathers: Thanks, Doug.

Doug Bettinger: Yep. Thanks, Melissa.

Operator: The next question comes from Stacy Rasgon with Bernstein Research. Please go ahead.

Speaker #3: And I think that continues. And then you layer on top of that, if you do HBM, it's even better for us.

Stacy Rasgon: Hi, guys. Thanks for taking my questions. For the first one, Doug, I know you said 2027 is going to be kind of a remarkable year. I want to ask you to give us a number, but are clean rooms really the limiter to how big 2027 can be? If clean rooms were unlimited, I think you guys are growing. You guys think WFE's growing from like 110 to 150 this year, so that's mid-thirties. If clean rooms were unlimited, is there no question that we could grow that much next year or even more? Is that where the demand, is the demand there to do something like that?

Speaker #5: Thank you very much.

Speaker #4: Yeah. Thank you.

Speaker #2: The next question comes from Melissa Weathers with Deutsche Bank. Please go ahead.

Doug Bettinger: Yeah, Stacy, again, I'm not going to put numbers on it right now. It's too soon for us to do that. When I look into what's going on in the industry, I don't know, when you just look at the bigger customers. There's probably 8, 9, 10 new fabs coming online between now and the end of next year that's going to enable the reception of more equipment. We're excited about where this is going. I'm not going to put a number on it quite yet, though. We'll do that as we get further down the road here.

Speaker #6: And how do we think about the resilience of your business there?

Speaker #4: Yeah. Listen, Melissa, I think as we look into next year, the fact that the industry is undersupplied this year is going to roll into next year.

Speaker #4: So we feel great about what's going to happen with WFE. Yeah, that metric we talked about the 100 billion dollar data center capex equating, if I remember the number, to roughly 8 billion dollars in WFE.

Stacy Rasgon: Got it. For my follow-up, let me try one more way. Again, I'll try to ask this without you having to put numbers on it. If 2027 is going to be that good, do you think the setup is good enough where, at a minimum, we could see sequential growth from here until the end of 2027? Is the setup, and I guess, the availability of space enough that at least you could be willing to sign up for something like that?

Speaker #4: That was probably a little bit of a low estimate as we sit here today. It's probably trending I don't know, a billion or two higher.

Speaker #4: But that clearly, at the end of the day, is what's driving demand. At the end of the day, the hyperscale investment is trickling all the way back to WFE.

Speaker #4: And that is absolutely a driver. The numbers are probably a little higher than we had talked about whatever it was, middle part of last year.

Speaker #6: Perfect. Thank you. And then on the supply side, I'm sure you guys are getting more visibility from your own customers, but I was wondering Doug, you talked about higher inventory turns.

Speaker #6: What kind of partnership and visibility are you giving your suppliers to make sure you can bring on capacity for this strong ramp?

Stacy Rasgon: Got it. That's super helpful. Thank you, Doug.

Doug Bettinger: Thanks, Stacy.

Speaker #4: All the same visibility we get, Melissa, is propagating its way all the way back through our supply chain. And even a couple of layers deep in the supply chain.

Operator: The next question comes from Krish Sankar with TD Cowen. Please go ahead.

Krish Sankar: Yeah. Hi, thanks for taking my question. I had two of them, Doug. You mentioned about growing inventory, but the inventory management is still lean. When I look at prior cycles, this is the time where you should be building a lot more inventory, given the huge WFE potential ahead. I'm just wondering, is this a new norm for inventory management, or is this more supply chain being constrained on capacity? If you can just triangulate that to what your lead times are today, that'd be helpful too.

Speaker #4: So we're doing everything we can to make sure we're not going to be the bottleneck. I would tell you, it's a lot of work.

Speaker #4: We got a lot of things we're expediting and working our way through. We'll continue to do that. But that part of the company is doing an extraordinary job managing this for us.

Speaker #6: Thanks, Doug.

Speaker #4: Yeah. Thanks, Melissa.

Speaker #2: The next question comes from Stacey Razgon with Bernstein Research. Please go ahead.

Doug Bettinger: No, it's just us efficiently managing the built-in inventory. We are absolutely growing inventory. I think it grew $300 million or something last quarter, but at the same time, turns improved. I think you're going to continue to see us think about it in the same way. We clearly are going to need to build inventory as we get into revenue growth like we're seeing. We'll also be focused on efficiency and making sure we're managing the cash for the company well.

Speaker #7: Hi guys. Thanks for taking my questions. For the first one, Doug, I know you said 27 is going to be kind of a remarkable year.

Speaker #7: And I want to ask you to give us a number. But I mean, are clean rooms really the limiter to how big 27 can be?

Speaker #7: I mean, if clean rooms were unlimited, I think you guys are growing. You think you guys think WFE is growing from like 110 to 150 this year.

Krish Sankar: Got you. A quick follow-up on gross margins. I thought you mentioned that some of the strength in June came from pricing, too. I understand product mix might have an impact, but if you assume current level of volumes, is 50-plus% the right baseline for gross margins to assume?

Speaker #5: Yeah. Stacey, again, I'm not going to put numbers on it right now. It's too soon for us to do that. But when I look into what's going on in the industry, I don't know.

Speaker #5: When you just look at the bigger customers, there's probably 8, 9, 10 new fabs coming online between now and the end of next year.

Doug Bettinger: You mean as we go forward, Krish, is that your question?

Krish Sankar: Yeah. If you have these volume levels, yeah.

Doug Bettinger: Yeah. No, I think so. Listen, we're in that 51%, 52% range right now. I think we can continue to deliver that in the near term.

Speaker #5: That's going to enable the reception more equipment. So we're excited about where this is going. I'm not going to put a number on it quite yet, though.

Speaker #5: We'll do that as we get further down the road here.

Krish Sankar: Great. I have no more then.

Doug Bettinger: Thanks, Krish.

Speaker #7: Got it. For my follow-up, let me try one more way. Again, I'll try to answer this without you having to put numbers on it.

Operator: The next question comes from Blayne Curtis with Jefferies. Please go ahead.

Blayne Curtis: Hey, good afternoon, guys. I actually want to ask on pricing. It's been a kind of an investor theme, and I'm kind of just curious what you're seeing like for like pricing in the industry and you.

Speaker #7: But if 27 is going to be that good, do you think the setup is good enough where at a minimum we could C sequential growth from here until the end of 27?

Speaker #7: Is the setup, and I guess the availability of space enough that at least you could be willing to sign up for something like that?

Doug Bettinger: Yeah, Blayne, I'm not going to talk about like for like pricing. When I described the solid gross margin that we saw last quarter, I talked a little bit about pricing, about operational and scale efficiencies, and about product mix. All of that contributed. We're always doing everything we can to get fairly paid for the value we're delivering. That's true today. It's been true for, I don't know, a decade, longer. We're working on all of those things, Blayne.

Speaker #5: Yeah. Maybe, Stacey. When you look at it, this doesn't all come on in any one quarter. So it comes on kind of bit by bit.

Speaker #5: Again, I'm not going to guide you quarter by quarter through next year. But I feel incrementally good about each successive quarter, as I sit here right now.

Speaker #5: And as we get a little bit closer, maybe I'll give you a little more color.

Blayne Curtis: Got you. I want to ask you, in terms of just your CapEx plans and in terms of adding this backend capacity, there's a lot of talk of WFE could be $300 billion. Just kind of curious, what are you starting today, and what could that spending be over the next year or two years?

Speaker #7: Got it. That's super helpful. Thank you, Doug.

Speaker #5: Thanks, Stacey.

Speaker #2: The next question comes from Chris Sancar with TD Cowan. Please go ahead.

Speaker #3: Yeah. Hi. Thanks for doing question. I told them, Doug, you mentioned about growing inventory. But the inventory management is still lean. When I look at prior cycles, this is the time where you should be building a lot more inventory, given the huge WFE potential ahead.

Speaker #3: I'm just wondering, is this a new norm for inventory management, or is this more supply chain being constrained on capacity? And if you can just triangulate that to what your lead times are today, that'll be helpful too.

Speaker #4: No. It's just us efficiently managing the built-in inventory. We are absolutely growing inventory. I think it grew 300 million or something last quarter. But at the same time, turns improved.

Speaker #4: I think you're going to continue to see us think about it in the same way. We clearly are going to need to build inventory as you get into revenue growth like we're seeing.

Tim Archer: Thank you.

Speaker #4: But we'll also be focused on efficiency and making sure we're managing the cash for the company well.

Tim Archer: I think, if you don't mind, I'd just add to Doug's comment about labs. If we think about CapEx and investment and long-term for the company, we sit in a position where as etch and dep intensity's growing and playing a much more important role to kind of our future roadmaps of our customers, we see a lot of opportunity for new product development to accelerate SAM expansion even further. Labs play a big role in that. Tooling for those labs plays a big role in that. Where we see opportunity, we will invest in the company to accelerate growth.

Speaker #3: Gotcha. And then a quick follow-up on growth margins. I thought you mentioned that some of the strengths in June came from pricing too. I understand product mix might have an impact.

Speaker #3: But if we assume current level of volumes, is 50-plus percent the right baseline for gross margins to assume?

Speaker #4: You mean as we go forward, Chris? Is that your question?

Speaker #3: Yeah. Yeah. If you're at these volume levels, yeah.

Speaker #4: Yeah. No, I think so. Listen, we're in that 51, 52 percent range right now. I think we can continue to deliver that in the near term.

Speaker #3: Okay. Thanks a lot, Doug.

Doug Bettinger: Thanks, Blayne.

Speaker #4: Yeah. Thanks, Chris.

Operator: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Speaker #2: The next question comes from Blaine Curtis with Jefferies. Please go ahead.

Vijay Rakesh: Yeah. Hi there, Tim and Doug. Just a question on the, when you look at the DRAMs side, obviously growing very nicely, but when you look at HBM4 and HBM4E, obviously looks like your capital intensity starts to pick up significantly for Lam. Any way of kind of sizing the opportunity there for every 100 wafers, whether it's HBM4E with TSVs or in HBM4? Thanks. I follow up.

Speaker #8: Hey. Good afternoon, guys. I actually want to ask on pricing. It's been kind of an investor theme, and I'm kind of just curious what you're seeing like for like pricing.

Speaker #8: In the industry and you?

Speaker #4: Yeah. Blaine, I'm not going to talk about like for like pricing. When I described the solid gross margin that we saw last quarter, I talked a little bit about pricing.

Speaker #4: About operational and scale efficiencies, and about product mix. All of that contributed. We're always doing everything we can to get fairly paid for the value we're delivering.

Doug Bettinger: No, Vijay, we haven't put numbers around that, clearly, relative to your HBM question, as the stack gets taller, process times take longer. You need more equipment, and clearly, we're enabling a lot of that with the things we do around the TSV. We haven't put specific numbers on it, and I'm not prepared to do it right now.

Speaker #4: That's true today. It's been true for, I don't know, a decade, longer. But we're working on all of those things, Blaine.

Speaker #8: Gotcha. And then I want to ask you in terms of just your CapEx plans and in terms of adding this back-end capacity, there's a lot of talk of WFE could be 300 billion.

Vijay Rakesh: Got it. When you look at the Lam revenues this year, 2026, looks like you're somewhere in that $30 billion neighborhood on $150 billion WFE, so about 20% share back of the envelope. You talked about a 30% SAM. When you start to scale and bridge into that, I guess, what would be the timeframe?

Speaker #8: Just kind of curious, what are you starting today? And what could that spending be over the next year or two years?

Speaker #4: Yeah. Blaine, I still think we can manage the company to 4 to 5 percent of revenue going towards CapEx as we build out lab infrastructure.

Speaker #4: We're making big investments in labs, by the way. This isn't just manufacturing capacity. We're also very focused Blaine on, I don't know, I think about it as footprint densification, getting more output for the same square footage that we have in manufacturing.

Doug Bettinger: Vijay, what we talked about, I got to take you back to the Investor Day in the beginning of 2025. We at that point, were talking about our SAM expanding from the low 30% of WFE range into the high 30% range. As we sit here today, we're probably trending already to that high level. We're, I don't know, I'd guess 36.5% this year, something like that. We're progressing quite nicely. I'm not exactly sure the math that you were doing, it might be confusing a little bit of the CSBG business in there as well, which isn't purely WFE. Maybe we can take that offline.

Speaker #4: We'll be ahead of that.

Speaker #8: Thank you.

Speaker #3: Yeah. I think if you don't mind, I'd just add, Doug's comment about labs. I mean, if we think about CapEx and investment and long-term for the company, we sit in a position where as etch and depth intensities growing, and playing a much more important role to kind of our future roadmaps of our customers, we see a lot of opportunity for new product development to accelerate SAM expansion even further.

Vijay Rakesh: Got it. Great. Thanks.

Doug Bettinger: Yep. Thank you. Operator, we will take one more question, please.

Operator: Okay, our final question will come from Shane Brett with Morgan Stanley. You may go ahead.

Speaker #3: And so labs play a big role in that. Tooling for those labs plays a big role in that. And so where we see opportunity, we will invest in the company to accelerate growth.

Speaker #8: Thanks, Blaine.

Speaker #2: The next question comes from Vijay Rakesh with Mizuho. Please go ahead.

Tim Archer: Yeah, I guess we've so focused on the 3D scaling that's occurring in all these devices, we sometimes forget about clean. You're right, it's a very important business for us and one that has grown nicely. I think, again, as customers focus, we talked a little bit today, although it's not purely cleaning, we talked about the selective etch process, kind of surface treatment. Clean kind of plays into that as well, although with different tools. It's the focus, as you are getting to more and more difficult technologies, the need to control surfaces, the need to perform cleans, eliminate defectivity, all just are becoming much more important to the customers. So, we've seen our performance in clean, where we are really the focused on the high-performing critical cleans, we've done extremely well.

Speaker #3: Yeah. Hi, Tim and Doug. Just a question on the when you look at the DRAMs side, obviously growing very nicely. But when you look at HBM440 and HBF, obviously looks like your capital intensity starts to pick up significantly for LAM.

Speaker #3: Any way of kind of sizing their opportunity there for every 100 wafers whether it's HBF with ESVs or HBM440? Thanks. And a follow-up.

Speaker #4: Yeah. And WG, we haven't put numbers around that. But clearly, I mean, relative to your HBM question, as the stack gets taller, process times take longer, you need more equipment.

Speaker #4: And clearly, we're enabling a lot of that with the things we do around the TSP. But we haven't put specific numbers on it. And I'm not prepared to do it right now.

Tim Archer: I don't know about the number one player, because I'd have to go look at that market. In terms of critical cleans, that of course, would be our objective, is to help our customers with all of their processes.

Speaker #3: You got it. And when you look at the when you look at the LAM revenues this year, 2026, looks like you're somewhere in that 30 billion neighborhood on 150 billion WFE.

Speaker #3: So about 20% share back of the envelope. And you talked about a 30% SAM. When you start to kind of scale and bridge into that, I guess, what would be the time frame?

Shane Brett: Got it. Thank you. For my follow-up, apologies if this is a little repetitive to prior questions, I want to dig into DRAM. Your DRAM revenue may double this year, but you mentioned earlier to a question that DRAM will be the fastest driver next year. Just how big could DRAM be for you in 2027 as a percentage of your system revenue? How much of that growth could be based on share gain? Thank you.

Speaker #4: Yeah. Vijay, what we talked about, I got to take you back to the investor day in the beginning of 2025. We at that point were talking about our SAM expanding from the low 30% of WFE range into the high 30% range.

Doug Bettinger: Yes, Shane. We're not going to put numbers around next year yet. Too soon. What Tim said is, as we look into next year, we expect the growth drivers next year to be largely the same as they are this year, led by growth in DRAM WFE, followed by leading-edge foundry and logic, followed by NAND. We see everything growing into next year. Frankly, Shane, when we think about the guide for next quarter at $8.1 billion, I think you're going to see everything growing next quarter as well.

Speaker #4: As we sit here today, we're probably trending already to that high level. We're, I don't know, I'd guess 36, 36 and a half percent this year, something like that.

Speaker #4: So we're progressing quite nicely. I'm not exactly sure the math that you were doing. It might be confusing a little bit of the CSPG business in there as well, which isn't purely WFE.

Speaker #4: So maybe we can take that offline.

Shane Brett: Great. Thank you.

Speaker #3: Got it. Thanks. Thanks.

Doug Bettinger: Thanks, Shane.

Speaker #4: Yeah. Thank you. Operator, we will take one more question, please.

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

Speaker #2: Okay. Our final question will come from Shane Brett with Morgan Stanley. You may go ahead.

Doug Bettinger: Yeah, I would just say, thank you all for joining our call. We're very excited about what's going on in the industry right now and our unique position in it. As we talked about, both Tim and I, we're looking into what we believe to be our third consecutive year of outperforming growth in WFE because of the intensity of etch and deposition. I wouldn't change our position for anybody in the industry. Our execution has been great, and we intend to continue delivering that. We look forward to seeing all of you guys on upcoming NDRs and conferences. With that, operator, we're all concluded.

Speaker #5: Thank you for letting me ask a question. So my first question is, you talk a lot about etch and depth, but you've gained quite a bit of share in cleaning over the last few years.

Speaker #5: Could you talk about the role cleaning plays in your SAM expansion? And is there a world where you'd be actually become the leading market shareholder for clean?

Speaker #5: Thank you.

Speaker #3: Yeah. I guess we've still focused on the 3D scaling that's occurring in all these devices. We sometimes forget about clean, but you're right. It is a very important business for us and one that has grown nicely.

Speaker #3: And I think, again, as customers focus, we talked a little bit today, although it's not purely cleaning, but we talked about the selective etch process, kind of surface treatment.

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

Speaker #3: And clean kind of plays into that as well, although with different tools. But it's the focus as you are getting to more and more difficult technologies, the need to control surfaces, the need to perform cleans, eliminate defectivity, to the customers.

Speaker #3: And so we've seen our performance in clean where we are really the focus on the high-performing critical cleans. We've done extremely well. And so I don't know about the number one player because there's a lot of I'd have to go look at that market.

Speaker #3: But in terms of critical cleans, that, of course, would be our objective is to help our customers with all of those processes.

Speaker #5: Got it. Thank you. And for my follow-up, apologies if this is a little repetitive to prior questions, but I want to dig into DRAM.

Speaker #5: As your DRAM revenue may double this year, but you mentioned earlier to a question that DRAM will be the fastest driver next year. Just how big could DRAM be for you in 2027 as a percentage of your system revenue?

Speaker #5: And kind of how much of that growth could be based on share gain? Thank you.

Speaker #4: Shane, we're not going to put numbers around next year yet. Too soon. But what Tim said is, as we look into next year, we expect the growth drivers next year to be largely the same as they are this year.

Speaker #5: Great. Thank you.

Speaker #4: Thanks, Shane.

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

Speaker #4: Yeah. I would just say thank you all for joining our call. We're very excited about what's going on in the industry right now and our unique position in it.

Speaker #4: As we talked about, both Tim and I, we're looking into what we believe to be our third consecutive year of outperforming growth in WFE because of the intensity of etch and deposition.

Speaker #4: And with that, operator, we're all concluded.

Q4 2026 Lam Research Corp Earnings Call

Request DemoDemo

Lam Research

Earnings