Lam Research Corporation

Welcome to the LAM Research Corporation December 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 limit yourselves to one question and one follow-up. Please note that 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.

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, We review our financial results for the December 2025 quarter and our outlook for the March 2026 quarter. The press release detailing our financial results was distributed a little after 1 p.m. Pacific time. The release can also be found on the investor relations section of the company's website along with the presentation slide that accompany today's call. Today's presentation and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings. Please see accompanying slides in the presentation 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 slides in the presentation. This call is scheduled to last until 3 p.m. Pacific time. A replay of this call will be made available later this afternoon on our website. And with that, I'll hand the call over to Tim.

Thank you, Ram, and good afternoon, everyone. We ended calendar year 2025 on a strong note, delivering December quarter revenues ahead of the midpoint of our guidance. Gross margins, operating margins, and EPS all exceeded the high end of the range. Our performance demonstrates continued strong execution in an accelerating semiconductor demand environment. At our Investor Day event last year, we outlined our tremendous opportunity to expand our market and gain share at every successive technology node. Vertical scaling of device and packaging architectures is driving higher deposition and edge intensity and moving the market to our strengths. The vision we shared was to more than double LAM's revenue and profit over the next five years. Today, we are well on our way. With the industry ramping capacity and adopting new technologies to meet the demands of the AI transformation, LAM's deposition and edge capabilities are proving to be key enablers in the transition to gate-all-around transistors, backside power deposition, high-performance materials, and 3D advanced packaging. We prepared for this moment, launching an array of new products and advanced services targeted at broadening our exposure across DRAM, Leading Edge Foundry Logic, and NAND. We have also invested in expanding our manufacturing and R&D footprint to increase operational velocity in response to strong customer demand. In 2025, we achieved record revenues of more than $20 billion and expanded our served available market, or SAM, share of WFE into the mid-30s percent range. This marks solid progress for our multi-year goal of being in the high 30s. Our ship share of WFE grew by well over one percentage point year on year, and our CSBG business hit key milestones, with the size of our installed base topping 100,000 chambers and revenue growing faster than the increase in installed base units. We are proud of these accomplishments, but there's even more to come. The AI transformation is driving industry spending higher. In 2025, WFE came in close to $110 billion. Our initial 2026 view is for WFE to be in the $135 billion range, with the growth in spending remaining constrained by a shortage of available clean room space. Chipmakers have been public about their efforts to alleviate constraints, but they have also commented on sold-out conditions persisting, indicating the magnitude of the challenge. We expect WFE this year to be weighted to the second half with robust growth in investments across all three device segments, led by DRAM and Leading Edge Foundry Logic. All indications are that we are still in the early stages of the AI build-out. End markets are signaling a strong appetite for greater compute and storage capability at both the device and package level. In Foundry Logic, customers are accelerating migration to nodes employing gate all-around transistors. If you recall, We previously said that the transition to gate-all-around equates to roughly $1 billion in incremental LAM-FAM for every 100,000 wafer starts per month of capacity. Given the 3D nature of gate-all-around structures, we are well-positioned with our deposition and edge portfolio to gain share within this segment. In addition, customers are integrating more functionality with advanced packaging. We previously estimated advanced packaging would make up a mid-single-digit percentage of overall foundry logic equipment spend. As additional devices, including those for mobile applications, adopt more complex packaging schemes, we see this number moving higher. In high bandwidth memory, or HBM, advanced packaging is critical for the transition to HBM4 and 4E and stacking of up to 16 layers. LAM is in an excellent position given our market leadership in electroplating and TSV Edge. We expect our overall advanced packaging business to grow more than 40% in 2026, outperforming our view of WFE growth in this space. Finally, in NAND, demand is growing faster than previously expected as new use cases for high-capacity SSDs emerge. Non-volatile context memory layers that enable large-scale AI inference have the potential to add incremental growth in NAND bit demand. For every two to three million accelerators sold, we estimate an incremental one-point increase in overall NAND bit demand growth. LAM has the industry's largest installed base of NAND systems and is well positioned to outperform as the NAND market inflects higher. Against this backdrop of strong semiconductor demand and accelerated technology transitions, we are seeing increased momentum for our newly launched products. ACARA, our latest generation conductor edge system, has doubled its installed base over the past year, with production tool of record wins for EUV and high aspect ratio edge applications in advanced DRAM and foundry logic. Critical dimensions in foundry logic are shrinking by roughly 10% to 20% node to node. Similarly, in DRAM, Aspect ratios are increasing with each node, and process complexity is set to grow even more with future moves to 4S2 and 3D DRAM. Consequently, multiple customers have chosen ACARA for its unmatched ability to etch the smallest dimensions at very high aspect ratios while maintaining profile control and reducing variability across the wafer. This is achieved through new innovations including our direct-drive solid-state power delivery hardware and tempo plasma pulsing. In next-generation gate-all-around devices, we expect the number of applications using ACARA to grow by roughly two times, including wins for critical front-end silicon-etch applications. In DRAM, we already have wins with ACARA for the 1C node that are set to ramp this year and expect growing momentum as the applications using a car expand nearly three times in the subsequent 1D node. As we look out over a multi-year period, the unprecedented AI ramp demands greater speed and agility across the ecosystem. Our customers are moving faster at every stage of process development and manufacturing, so we have increased the velocity of our execution across the board. We are strengthening our supply base, automating logistics, and ramping high volume manufacturing. Over the last four years, we have nearly doubled our overall manufacturing capacity. And in 2025, we launched state of the art automated warehouses that enable greater production efficiency. These investments have proved critical in a fast ramping market environment. And we're set to expand our footprint further to meet the demand we see over the next several years. Our product sales and support teams are also executing to the accelerated pace of customer demand. Over the course of 2025, LAM was recognized with nearly 40 supplier awards, highlighting in many cases our fast tool installations and outstanding production ramp support. Looking forward, we see LAM's equipment intelligence solutions and Dextro cobots leading the way to the autonomous fab with predictive and automated maintenance and precise global fleet matching. Dextro continued to gain momentum in 2025, expanding to cover six different LAM tool types. And finally, in an environment where inflections are more complex and innovation timelines are compressing, we have transformed our R&D capabilities to help us stay ahead. We are utilizing Velocity Labs, located close to our customers, to screen new materials, new hardware, and new process regimes at a rate not previously possible. We are also leveraging LAM's digital twin capabilities to shorten product development cycles and converge on next-generation tool and process solutions with greater efficiency. Wrapping up, the growth we envisioned for LAM at our investor event one year ago is materializing faster than we anticipated. We are making progress against our SAM expansion, share gain, and profitability objectives. And with the demand environment continuing to accelerate, we are elevating our focus on scaling the company delivering for customers, and outperforming in the AI era. Thank you, and here's Doug.