On Wednesday, Lam Research (NASDAQ:LRCX) discussed third-quarter financial results during its earnings call. The full transcript is provided below.
Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.
The full earnings call is available at https://edge.media-server.com/mmc/p/wrujpbdh/
Summary
Lam Research reported record revenues for the March 2026 quarter, driven by strong demand in the AI-driven semiconductor market and a $2 billion quarter from their Customer Support Business Group.
The company upgraded its 2026 WFE outlook to $140 billion, with potential upside, and anticipates continued growth into 2027, driven by AI and NAND technology advancements.
Lam Research’s gross margin reached 49.9% in the March quarter, and June quarter guidance suggests further improvement to 50.5%, attributed to operational efficiencies and tool performance.
The company is expanding its manufacturing capabilities, including a second facility in Malaysia, and continues to invest in R&D to maintain technology leadership.
Management highlighted strategic initiatives like advanced packaging and equipment intelligence services, and projected 2026 Customer Support Business Group revenue growth to exceed 50%.
Full Transcript
OPERATOR
Good day and welcome to the Lam Research Corporation’s March 2026 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone 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 (Vice President of Investor Relations)
Thank you and good afternoon everyone. Welcome to Lam Research Quarterly Earnings Conference call. With me today are Tim Archer, President and Chief Executive Officer, and Doug Bittinger, Executive Vice President and Chief Financial Officer. During today’s call, we will share our overview on the business environment and we’ll review our financial results for the March 2026 quarter and our outlook for the June 2026 quarter. The press release detailing our financial results was distributed a little after 1pm Pacific time. The release and the accompanying presentation slides for today’s call can also be found on the Investors section of the company’s website. Today’s presentation and Q and A include forward looking statements that are subject to risks and uncertainties reflected in the risk factors and disclosed in our SEC public filings. Actual results could differ materially from those expressed in such forward looking statements. Please see the accompanying presentation slides for additional information. 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 3pm 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. Thank you Ram and good afternoon everyone. LAM is off to a solid start in calendar year 2026 with revenues and profitability in the March quarter at the upper end of our guidance ranges and earnings per share exceeding the top end of our guided range. Revenues were at record levels highlighted by the first $2 billion quarter from our Customer support business group. Our guidance for the June quarter points to lam’s strong momentum in an accelerating AI driven semiconductor demand environment. In January, we shared our outlook for 2026 WFE in the $135 billion range. Since then, spending projections from customers have moved higher across all device segments. We now expect WFE of $140 billion with a bias to the upside as the industry continues to work through various constraints. We believe this sets the stage for another year of compelling WFE growth in 2027. For Lam, the AI driven demand environment is creating an ideal setup for continued outperformance. Semiconductor technology inflections required to meet escalating AI compute needs are driving higher deposition and etch intensity. In 2026 we see LAMs served available market or M percent of WFE expanding to slightly more than the mid 30s percent level, well on track toward our stated goal of high 30s percent over the next few years. Lam has prepared for this moment by transforming how we innovate, build and support the semiconductor manufacturing equipment needed to address the industry’s most critical challenges. Our commitment to R and D and the velocity with which we have scaled our development capabilities have enabled us to create the broadest, most competitive product and services portfolio in the company’s history. This is fueling our current outperformance and and puts us in an excellent position to deliver on our future growth ambitions. Across all device segments, we are seeing greater opportunity for LAM in nand. AI transformation is moving beyond COMPUTE and into the storage layer. Token economics are driving changes to the memory hierarchy used in AI data centers, including rising adoption of higher layer count QLC based NAND devices for SSDs. We expect total data center bits this year to be greater than both PC and mobile segments. Combined with growing continuing growth in data center mix into the future, the growing device performance requirements of AI data centers are driving an acceleration of NAND technology upgrades. As you may recall, we said in early 2025 that that roughly $40 billion in conversion spending would be required over several years to enable existing NAND installed wafer capacity to produce devices with more than 200 layers. We now anticipate that this conversion will be pulled forward with the majority of spending occurring before the end of calendar year 2027. In parallel, we expect growth in bit demand will drive greenfield capacity investment, especially considering that overall industry installed wafer capacity is expected to decline more than 20% from prior highs by the end of this year. Looking further ahead, we see continued adoption of NAND in the AI memory stack, driving even higher layer count NAND devices With the largest install base of tools for 3D NAND, Lam is uniquely positioned to benefit from this trend as manufacturing complexity scales. With layer count, we see an expanding set of deposition and etch opportunities all rooted in our established leadership in high aspect ratio, cryo etch, dielectric stack deposition, word line metallization, backside stress management and gap fill technologies in dielectric etch. Our vanpex and Flex toolsets deliver the industry’s highest power density and productivity for dielectric channel hole etch applications where we have a market leading position in conductor etch. We are also seeing momentum for our KEO systems as customers collaborate with us to maximize device yield in a constrained capacity environment. In a recent win, a customer switched to KEO in the middle of their production ramp due to superior defect performance and better yield in deposition. We are seeing the transition to higher layer count. NAND also drive greater demand for our strada, Altus, Halo ALD and Vector DT products. Altogether, we believe the production proven strength of our portfolio puts LAM in a great position to outperform overall NAND. WFE growth as AI demand accelerates over the next few years in DRAM, AI’s power and efficiency requirements are driving an industry transition to one C generation devices as feature dimensions shrink, the industry is shifting from traditional silicon nitride based dielectric films deposited using furnace to more advanced ALD silicon carbide low K layers to achieve bit line capacitance reduction. Studies have shown that re architected device structures combined with low K bit line spacers can reduce capacitance by over 60%. Lam’s Stryker carbide solution with its unique plasma source enables capacitance scaling by depositing dense conformal and tunable low K dielectric films with high productivity. As a result, our Stryker based solutions are the tools of record at all leading memory makers for bitline spacer applications. As the industry moves to 1C nodes, we see our total dielectric deposition, M and DRAM growing more than 20%. With innovations like Stryker ALD, we believe Lam is well positioned to gain share within this expanding opportunity in foundry logic. Calendar 2025 was a record year for Lam. We are carrying that momentum into 2026 as we capture more opportunities from inflections at the leading edge. Most notably this quarter we achieved multiple dielectric etch wins at a key founderlogic manufacturer. Our first dielectric etch wins at this customer and finally we see growing demand for our advanced packaging solutions where we bring unmatched experience in equipment design and process technology for copper plating and TSE edge. Lam’s advanced packaging revenue growth is expected to exceed 50% in calendar year 2026. Turning to our customer support business group, we delivered our first $2 billion plus revenue quarter. Demand was strong across spares, upgrades and services. As customers look to improve FAB output in a space constrained environment, more opportunities are being created for CSBG to deliver innovations that increase productivity and enhance yield for our customers. Our services business posted mid teens growth over the December quarter. Highlights included a new agreement with a leading foundrylogic customer to deploy our equipment intelligence services for critical deposition applications. A top memory customer is also set to utilize our equipment intelligence capabilities in R and D to enable faster ramps of new nodes for NAND and DRAM production. We are also gaining momentum with our dextro cobots which deliver an unprecedented level of automated tool maintenance, precision and repeatability. Customers using dextro in production are benefiting from higher output and in some cases improved yield from existing capacity. In the March quarter we expanded Dextro coverage to 8 Lam tool types, up from 6 last quarter. We also introduced the next generation of Dextro which packs 10 times more compute power than the first generation into a smaller footprint. This quarter we will ship our first dextro cobot for a deposition product, further increasing our ability to create value from our overall install base of more than 100,000 chambers. It’s an exciting time for the semiconductor industry and for lam. In an accelerating demand environment, we see rising deposition and etch intensity creating a multi year outperformance setup for lam. We have made strategic investments across the company to capitalize on this opportunity, increasing the velocity of both our technology development and our operational execution. Our progress can be seen in our strong March quarter results, our higher June quarter outlook and our expectation that second half calendar year revenues will exceed the first half. In short, we are delivering on the tremendous opportunity in front of us with more to come. Thank you and here’s Doug. Excellent.
Doug Bettinger
Thank you Tim Good afternoon everyone and thank you for joining our call today during what I know is a very busy earnings season. Lam’s off to a solid start in 2026. Building on the momentum we delivered across 2025 in the March quarter, revenue, gross margin and operating margin came in above the midpoint of our guidance ranges, while earnings per share actually exceeded the high end of the range. We also achieved our third consecutive record revenue quarter. March quarter revenue came in at $5.84 billion, which was up 9% sequentially and up 24% from the same period in 2025. The deferred revenue balance at quarter end came in at $2.22 billion, which was flat sequentially. Within this balance, however, customer down payments came down by roughly $300 million while the other line items increased with the growing business levels. I just mentioned that down payments are now at the lowest level we’ve seen in nearly four years. From a market segment perspective, foundry accounted for 54% of our systems revenue in the March quarter, which was down from 59% in the December quarter. Revenue in dollar terms was approximately flat sequentially and it was up 35% year over year. Foundry saw strength in investments at the leading edge as well as ongoing mature node spending. Advanced packaging within Foundry continues to be an area of solid growth for us. Memory was 39% of systems revenue, up from 34% in the December quarter. Within memory we delivered record DRAM revenue, accounting for 27% of systems revenue, which was up from 23% in the December quarter. High bandwidth memory investments remained strong. The profile of spending is also gravitating towards the 1C node and beyond, enabling the ramp of DDR5 and LPDDR5. Nonvolatile memory contributed 12% of our systems revenue, up slightly from 11% in the December quarter. As Tim outlined, AI workloads are accelerating demand for higher capacity. NAND and LAM continues to benefit from strong leadership within this segment. We expect to see growth in NAND investments throughout the remainder of the year as the industry converts to 256 layer and above class devices and finally, the Logic and Other segment came in at 7% of systems revenue in March quarter in line with prior quarter. Let’s turn to the regional breakdown of our total revenue. China came in at 34%, which was a slight decrease from the prior quarter level of 35%. We expect that China revenue in the June quarter will decline from these levels. Korea and Taiwan each came in at 23%, which was both up from 20% in the prior quarter. Both the Korea and Taiwan regions represent record revenue level in dollar terms in March. And I just mentioned that this regional mix was generally in line with our expectations from the beginning of the quarter. Customer Support Business Group generated a record $2.1 billion in revenue in the March quarter, which was up sequentially and up 25% from the same period in 2025. Sequential growth was driven by our large and expanding installed base and the continued expansion across our spares, upgrades and services business, partly offset by reliant growth in spares and service, is benefiting from strong factory utilization across the industry. Let’s take a look at profitability. Gross margin in the March quarter was 49.9%, which was at the high end of the guidance range driven by multiple factors including favorable customer product mix as well as improved factory efficiencies. Operating expenses in the March quarter came in at $866 million, up from the prior quarter’s level of $827 million. The increase was driven by seasonal employee related costs as well as higher headcount. To support our growth, R and D accounted for 68% of total operating expenses. We will be growing R and D investments throughout the remainder of the year. March quarter operating margin was 35% at the high end of our guidance range due to the higher revenue and the improved gross margin. The non GAAP tax rate for the quarter was 9.2% which came in lower due to benefits from higher equity compensation vesting which is deductible on the taxes during the quarter. We continue to see the tax rate in the low to mid teens for calendar year 2026. Other income expense in the March quarter was $8 million in expense compared with $10 million in income in the December quarter. The variance in OIE was primarily the result of small losses in our venture portfolio as well as lower interest income. Interest income decreased due to the lower cash balance in the quarter and as we’ve talked about in the past, you should expect to see variability in OIE quarter to quarter for capital return. In the March quarter we allocated approximately $800 million to share buybacks through a combination of open share repurchases and a $200 million accelerated share repurchase transaction. Our average buyback price was approximately $211 per share. We also retired $750 million of unsecured notes that reached maturity using cash from the balance sheet. Additionally, we paid $326 million in dividends in the March quarter. We returned 139% of our free cash flow. Our plans remain to return at least 85% of free cash flow to our shareholders over time. The March quarter diluted earnings per share came in at a record of $1.47, which was above the high end of our guidance range. The diluted share count was 1.26 billion shares, which is flattish with the December quarter and consistent with our guidance. And I just mentioned that we have $4.3 billion remaining on our board authorized share repurchase program. Let me pivot to the balance sheet. Cash and cash equivalents totaled approximately $4.8 billion at the end of the March quarter, which was a decrease from $6.2 billion at the end of the December quarter. The decrease was primarily driven by capital return activities that debt pay down as well as capital spending. Day sales outstanding was 64 days in the March quarter, an increase from 59 days in the December quarter. Inventory turns improved to 2.9 times from 2.7 times in the prior quarter. These were Our highest level of inventory turns in over four years. As a company, we remain focused on our strong asset utilization and return on invested capital. We’re pleased with the sustained performance we continue to deliver here. We will be managing our inventory and supply chain to align with the growing demand that we see in front of us. Noncash expenses in the March quarter included approximately $97 million in equity compensation, $103 million in depreciation and $13 million in …
This post was originally published here
