Lam Research Corporation

Good day and welcome to the LAM Research Corporation's March 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Ram Ganesh, Vice President of Investor Relations. Please go ahead.

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 1 p.m. Pacific time. The release and the accompanying presentation slides for today's call can also be found on the investor section of the company's website. Today's presentation and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings. Actual results could differ materially from those expressed in such forward-looking statements. Please see the accompanying presentation slides for additional information. Today's discussion of 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 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.

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 edge intensity. In 2026, we see LAM's Served Available Market, or SAM, percent of WFE expanding to slightly more than the mid-30s percent level, well on track toward our stated goal of high 30s percent over the next few years. SLAM is prepared for this moment by transforming how we innovate, build, and support the semiconductor manufacturing equipment needed to address the industry's most critical challenges. Our commitment to R&D and the velocity with which we have scaled our development capabilities have enabled us to create the broadest, most competitive product and services portfolio in the company's history. This is fueling our current outperformance and puts us in an excellent position to deliver on our future growth ambitions. Across all device segments, we are seeing greater opportunity for LAM. In NAND, AI transformation is moving beyond compute and into the storage layer. Token economics are driving changes to the memory hierarchy used in AI data centers, including rising adoption of higher layer count QLC-based NAND devices for SSDs. We expect total data center bits this year to be greater than both PC and mobile segments combined, with continuing growth in data center mix into the future. The growing device performance requirements of AI data centers are driving an acceleration of NAND technology upgrades. As you may recall, we said in early 2025 that roughly $40 billion in conversion spending would be required over several years to enable existing NAND-installed wafer capacity to produce devices with more than 200 layers. 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 installed 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 edge opportunities, all rooted in our established leadership in high aspect ratio cryo-edge, dielectric stack deposition, word line metalization, backside stress management, and gap fill technologies. In dielectric etch, our VANTEX and FLEX tool sets deliver the industry's highest power density and productivity for dielectric channel hole etch applications, where we have a market-leading position. In conductor etch, we're 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 Strata, Altus Halo ALD, and Vector DT products. Altogether, we believe the production proven strength of our portfolio puts LAM in a great position to outperform overall NAND WFE growth as AI demand accelerates over the next few years. In DRAM, AI's power and efficiency requirements are driving an industry transition to 1C generation devices. As feature dimensions shrink, the industry is shifting from traditional silicon nitride-based dielectric films deposited using furnace to more advanced ALD silicon carbide low K layers to achieve bitline capacitance reduction. Studies have shown that re-architected device structures combined with low-K bit-line spacers can reduce capacitance by over 60%. LAM's striker carbide solution, with its unique plasma source, enables capacitance scaling by depositing dense, conformal, and tunable low-K dielectric films with high productivity. As a result, our striker-based solutions are the tools of record at all leading memory makers for bitline spacer applications. As the industry moves to 1C nodes, we see our total dielectric deposition SAM and DRAM growing more than 20%. With innovations like Striker 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 both dielectric edge wins at a key FounderLogic manufacturer, our first dielectric edge 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&D to enable faster ramps of new nodes for NAND and DRAM production. We are also gaining momentum with our Dextro cobots. which deliver an unprecedented level of automated tool maintenance precision and repeatability. Customers using Dextro in production are benefiting from higher output and, in some cases, improved yield from existing capacity. In the March quarter, we expanded Dextro coverage to eight LAM tool types, up from six last quarter. We also introduced the next generation of Dextro, which packs 10 times more compute power than the first generation into a smaller footprint. This quarter, we will ship our first Dextro Cobot for a deposition product, further increasing our ability to create value from our overall installed base more than 100,000 chambers. It's an exciting time for the semiconductor industry and for LAM. In an accelerating demand environment, we see rising deposition and etch intensity creating a multi-year outperformance setup for LAM. We have made strategic investments across the company to capitalize on this opportunity, increasing the velocity of both our technology development and our operational execution. Our progress can be seen in our strong March quarter results, our higher June quarter outlook, and our expectation that 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.