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01/09 22:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: while there are positive signals such as strong performance in advanced packaging and NAND, there are concerns about flat revenue, gross margin pressures, and significant tariff impacts. The lack of specific guidance and the $700 million China impact remain unchanged. The Q&A reveals confidence in future growth drivers but lacks concrete details. Given these factors, the stock price is likely to remain stable in the short term, resulting in a neutral sentiment.
Revenue Revenue came in at $5.17 billion, which was an increase of 10% from the prior quarter. The increase was attributed to customer advanced payments from several newer customers and strong performance in leading-edge processes and mature nodes by domestic Chinese customers.
Gross Margin Gross margin came in at 50.3%, close to the top end of the guided range and improving from the March quarter level of 49%. The increase is tied to a stronger mix and continued progress in operational efficiencies from the close-to-customer manufacturing strategy.
Operating Margin Operating margin was 34.4%, near the high end of the guidance. This represents a record level for Lam in both dollars and percentage terms, driven by a stronger mix and operational efficiencies.
Earnings Per Share (EPS) Diluted earnings per share were $1.33, exceeding the high end of the guidance range. This was driven by higher revenue, stronger gross margin performance, and a lower tax rate.
Free Cash Flow Free cash flow generation in fiscal '25 was 29% of revenue, approximately $5.4 billion, which was a record for the company in dollar terms. This was achieved through a growing top line, favorable mix, and strong operational execution.
Deferred Revenue The deferred revenue balance at the end of the quarter was $2.68 billion, an increase of approximately $670 million from the March quarter. This was related to customer advanced payments from several newer customers.
Customer Support Business Group (CSBG) Revenue CSBG revenue in the June quarter totaled approximately $1.7 billion, consistent with the March quarter and the June quarter of a year ago. There was a record quarter for upgrade revenue driven by NAND technology conversions, offset by a decline in Reliant Systems.
Regional Revenue Composition China region revenue came in at 35%, an increase from the prior quarter level of 31%, driven by increasing investment from global multinational customers and domestic Chinese customers. Korea and Taiwan revenue decreased to 22% and 19%, respectively, while Japan revenue at 14% was a record in dollar terms.
Dextro cobots: Expanded capabilities to cover 3 additional tool types, enhancing equipment maintenance precision, repeatability, and operational cost efficiency.
Halo ALD Moly tool: Ramping at multiple NAND customers, addressing resistance challenges in advanced gate-all-around nodes, and driving a 3x increase in metal deposition SAM per wafer.
SABRE 3D system: Achieved best-in-class performance in advanced packaging, with market share expected to grow nearly 5 points year-on-year in 2025.
Akara etch tool: Secured multiple new application wins in DRAM scaling, delivering industry-leading depth uniformity and profile control.
Wafer Fabrication Equipment (WFE) spending: Projected to reach $105 billion in 2025, up from $100 billion, driven by increased domestic China spending.
Advanced packaging: Growing adoption in DRAM, CPUs, GPUs, and ASICs, with Lam's SAM expanding significantly in this segment.
Gross margin: Exceeded 50% for the first time since the Lam-Novellus merger, reaching 50.3% in the June quarter.
Operational efficiencies: Improved inventory turns to 2.4x and reduced days sales outstanding to 59 days.
Served Available Market (SAM) expansion: Set to grow to mid-30s percent of WFE in 2025 and high 30% range in the long term, driven by investments in atomic-level device scaling and advanced packaging.
R&D investments: Focused on creating the broadest product portfolio in the company's history, enabling over 50% share of incremental SAM.
Market Environment: Potential risks from reliance on domestic China-related spending for wafer fabrication equipment (WFE), which could be impacted by geopolitical tensions or regulatory changes. Non-China investments are expected to remain flat, which may limit growth opportunities.
Technology Transition: Challenges in transitioning to advanced technologies like gate-all-around and molybdenum adoption, which involve slower and more complex processes. This could lead to increased costs and operational complexities.
Supply Chain: Dependence on advanced manufacturing facilities in Asia and potential risks from supply chain disruptions or geopolitical issues in the region.
Customer Concentration: High revenue concentration from specific regions like China (35%) and Korea (22%), which could pose risks if demand fluctuates in these areas.
Operational Costs: Increased operating expenses, particularly in R&D and incentive compensation, which could pressure margins if revenue growth does not keep pace.
Regulatory Risks: Exposure to tariffs and other regulatory measures, which are factored into gross margin guidance but could still impact profitability.
WFE Spending for 2025: Expected to be in the $105 billion range, up from the prior view of approximately $100 billion, predominantly due to an uptick in domestic China-related spending. Non-China investments are expected to remain broadly consistent with prior views. WFE in the second half of the calendar year is expected to be roughly flat with the first half.
WFE Spending for 2026: Too early to comment on the overall level of WFE spending. However, Lam is confident in its strong position in gate-all-around, advanced packaging, high-bandwidth memory, and NAND layer conversions, which positions the company to outperform.
Served Available Market (SAM) Expansion: In 2025, Lam's SAM is set to expand to around mid-30s percent of WFE due to industry drivers. The company expects to grow its SAM to the high 30% range of WFE over the long term by delivering critical solutions for atomic-level device scaling, new materials innovation, and advanced packaging integration.
ALD Moly Tool Adoption: Moly adoption is expected to increase broadly as more customers convert NAND capacity to 200 layers and higher in the next few years. Lam is leading the industry transition to ALD Moly in NAND and foundry/logic.
Advanced Packaging Growth: Advanced packaging adoption is expected to grow significantly, driven by next-generation AI requirements. Lam's SABRE 3D market share in advanced packaging is expected to grow nearly 5 points year-on-year in calendar 2025.
Momentum in Etch Tools: Lam's Vantex system and Akara etch tools are gaining traction. Vantex secured a key multi-generation etch decision at a major NAND customer, while Akara secured multiple new application wins at a top DRAM maker.
September 2025 Quarter Guidance: Revenue is expected to be $5.2 billion, plus or minus $300 million. Gross margin is expected to be 50%, plus or minus 1 percentage point. Operating margins are expected to be 34%, plus or minus 1 percentage point. Earnings per share are expected to be $1.20, plus or minus $0.10.
Dividends Paid: The company paid $295 million in dividends during the June quarter.
Share Buybacks: Approximately $1.3 billion was allocated to share buybacks through a combination of open market share repurchases and an accelerated share repurchase program. The ASR will continue into the September quarter.
Remaining Authorization: The company has $7.5 billion remaining on its Board-authorized share repurchase program.
The earnings call summary indicates strong financial performance with a projected increase in WFE spending and SAM expansion. Product development and market strategy are robust, with significant advancements in NAND and AI infrastructure, suggesting future growth. The Q&A section highlights strong market demand and strategic positioning, though some uncertainties remain about China WFE and infrastructure limitations. Overall, the positive outlook on financial metrics, product development, and market strategy outweighs the uncertainties, leading to a positive sentiment rating.
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