Lam Research Corporation

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. 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 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 June 2026 quarter and our outlook for the September 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 be found on the investor 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. 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 10Q 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 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.

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 second half 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 Thank you all for joining us today. 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. We're expanding context windows and persistent memory requirements, providing significantly higher demand for flash storage. 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'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. 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. We see the benefit of this technology acceleration in our expanding SAM. and we are moving towards our target of high 30s, SAM is a percentage of WFP, 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 Edge, 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 two 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 edge applications. 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, edge 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 edge 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. Our modular architecture combines interface cleaning, edge 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 Edge 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 FoundryLogic customers at 2 nanometers 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. The long-term opportunity is even more compelling, as AI performance will increasingly depend Thank you for joining us. 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. 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 LAMS equipment intelligence and fab automation solutions to help increase capacity as they race to meet growing AI demand. LAMS 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 write 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. 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 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. 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. 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.