Date: April 22, 2026 | Source: Motley Fool (fool.com) / company press release
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Timothy Archer (President & CEO): 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. 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 Lam's served available market, or SAM, percent of WFE expanding to slightly more than the mid-30s percent level, well on track towards our stated goal of high 30s percent over the next few years.
We now anticipate that this conversion [to higher layer count NAND] 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. 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, metallization, backside stress management and gap fill technologies.
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 to more advanced ALD silicon carbide layers to achieve bit line capacity in production. Lam's Stryker carbide solution with its unique plasma source enables capacitive scaling. With innovations like Stryker ALD, we believe Lam is well positioned to gain share within this expanding opportunity. We are carrying that momentum into 2026 as we capture more opportunities from inflections at the leading edge. Most notably, this quarter we achieved our first dielectric etch wins at a key foundry logic manufacturer.
We see growing demand for our advanced packaging solutions, where we bring unmatched experience in equipment design and process technology for copper plating. 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. Highlights included a new agreement with a leading foundry/logic customer to deploy our equipment intelligence services for critical deposition applications. We are also gaining momentum with our Dextro cobots, which deliver an unprecedented level of automated tool maintenance precision. 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 of more than 100,000 chambers.
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.
Douglas Bettinger (CFO): Excellent. Thank you, Tim. Good afternoon, everyone. Lam is 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. The deferred revenue balance at quarter end came in at $2.22 billion, which was flat sequentially. Down payments are now at the lowest level we've seen in nearly 4 years. Revenue in dollar terms was approximately flat sequentially, and it was up 35% year-over-year.
Wait — let me correct that: revenue was up 9% sequentially to $5.84 billion and up 24% 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. 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. 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 the March quarter, in line with the 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 levels in dollar terms in March. 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. March quarter operating margin was 35% at the high end of our guidance range due to the higher revenue and the improved gross margin. 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. We have $4.3 billion remaining on our board authorized share repurchase program.
Let me pivot to the balance sheet. Days sales outstanding was 64 days in the March quarter, an increase from 59 days in the December quarter. Inventory turns improved to 2.9x from 2.7x in the prior quarter. As we scale the organization, we also undertook a small workforce optimization focused on efficiency. Looking forward, we continue to expect capital expenditure to be in the 4% to 5% of revenue range.
Let's turn to our non-GAAP guidance for the June 2026 quarter. We're expecting revenue of $6.6 billion, plus or minus $400 million. Gross margin of 50.5%, plus or minus 1 percentage point. We're expecting this expanding gross margin despite slight headwinds that we're seeing from customer mix. And finally, we're forecasting record earnings per share of $1.65, plus or minus $0.15, based on a share count of approximately 1.255 billion shares. With our expanding installed base, the strength of our product portfolio and our disciplined approach to capital allocation, we remain confident in Lam's setup for continued outperformance. Operator, that concludes our prepared remarks. We would now like to open up the call for questions.
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Timothy Arcuri (UBS): The guidance is great at 50.5%. It sounds like despite mix against you, you're already at your target model. Can you deconstruct how you got here so fast, and what are the puts and takes going forward?
Douglas Bettinger: We're pretty pleased with where we're at from a gross margin standpoint. It's been a lot of hard work. Four or five years ago, we talked about expanding our factory footprint to be closer to our customers, and that has delivered efficiencies from a proximity standpoint, shorter logistic lanes, lower labor cost, better supply chain. On top of that, we're working on everything we can do to get paid for the value we're delivering. When you put all that together, we're pretty pleased. And I'll encourage you to keep gross margin roughly in the levels we just guided for June — it's going to level out at where it's at for the rest of the year.
Timothy Archer: The performance of our tools is important — we've ensured all our new tools entering the field have a level of maturity beyond what we've delivered in the past, which benefits installation and warranty spending, flowing through to gross margin.
C.J. Muse (Cantor): How are you working your supply chain for readiness for the 2027 ramp?
Timothy Archer: We're about halfway through '26, so given our lead times, we're having conversations with customers about '27, and in some cases beyond — customers have announced fabs with openings in 2028. The more visibility we have, the better we can get our supply chain ready. Our view on WFE for 2026 has a lot to do with what can be executed. We're preparing for new fab openings and true greenfield shipments as they roll out later this year and through next year.
Douglas Bettinger: It feels like it's setting up to be a pretty good year in '27 right now based on what we can see.
Harlan Sur (JPMorgan): Beyond Dextro cobots, what other enhancements are you driving to the installed base on productivity, and how are you monetizing this?
Timothy Archer: Production output, uptime and yield are what's most critical to customers in the immediate term. Equipment Intelligence allows us to look at massive amounts of data from our tools on every single wafer, shortening troubleshooting time and helping ramp tools faster. Dextro cobots at some customers have yielded improvements in both output and yield through better first-time-right maintenance. We monetize through services and, in some cases, new tools.
Atif Malik (Citi): What has changed in the NAND market vs 90 days ago?
Timothy Archer: There is increased demand for NAND coming from AI data centers, and it's increasingly important in the AI memory hierarchy. You need more bits, more capable bits, and QLC to meet AI data center demands, which has pushed accelerated conversions. That's what caused more activity in the NAND space, and eventually you need to add greenfield back. It's materializing as a significant opportunity for Lam now and for quite some time.
Melissa Weathers (Deutsche Bank): Do you ascribe to the view that this memory cycle is different this time?
Timothy Archer: It's different for Lam in that so many of these new devices have different architectures, 3D scaling. It's a cycle in which you're seeing dramatic improvement and change in the etch and dep intensity, which drives both SAM expansion plus share gain. Compared to prior upturns in memory, we're doing even better because of that extra layer of etch and dep intensity scaling.
Douglas Bettinger: Memory is so critical in all of these accelerated compute architectures to feed the parallel compute. The criticality of it is more than it's ever been.
Srini Pajjuri (RBC): What are you seeing in China, and are down payments down due to China?
Douglas Bettinger: WFE in China is flattish year-over-year from '25 to '26, maybe up a little. You're seeing significant growth from the global multinational set of customers, so China as a percent of overall revenue is coming down. Down payments tend to come from smaller customers, and a lot of them are in the China region, so those two things are correlated.
Vivek Arya (BofA): How is the memory customers' shift to long-term contracts translating into your visibility and pricing power?
Timothy Archer: It's translated into longer visibility for us. We're having conversations with customers now at the time they're starting to construct fabs. It's allowing us to be more efficient in our operational capabilities.
Douglas Bettinger: We don't need down payments — we generate ample free cash flow. The commitments we're going to get from customers are important and significant, but it doesn't require down payments for us.
Stacy Rasgon (Bernstein): In the $40 billion upgrade opportunity, why shouldn't that be a big driver of services growth between now and end of '27?
Douglas Bettinger: In that $40 billion there's some new things — some new equipment as the industry moves to moly, so it's not all upgrades. Upgrades were quite strong last year and will continue for the next year or two. Spares and service are already strong in March, and Reliant is a bit softer with mature-node spending. That gets you to quarter-by-quarter plus-or-minus flattish as you go through the rest of the year.
Vijay Rakesh (Mizuho): On DRAM, HBM3E to HBM4 with higher layer count — is there content uplift per wafer?
Douglas Bettinger: Clearly it goes up. We haven't given specific numbers, but the higher stack requires more equipment. HBM4 requires more equipment and is a little more challenging for the industry.
Joseph Quatrochi (Wells Fargo): Where do lead times sit, and when does the second Malaysia factory ramp?
Douglas Bettinger: We don't put numbers around lead times, but they are stretching out as demand is quite strong. The second Malaysia facility will come on in the second half of the year, approximately the same size as the first (our largest factory), giving us the opportunity to scale into next year's demand.