Lam Research Corporation Q3 2026 Earnings Call Summary

Performance outperformance was driven by the first $2 billion quarter in the Customer Support Business Group (CSBG) and record DRAM revenue as AI compute needs accelerate.

The AI transformation is shifting from compute to the storage layer, pulling forward NAND technology conversions to 200-plus layer devices with the majority of spending now expected by the end of 2027.

Strategic investments in global operations, including a major manufacturing footprint in Malaysia, have delivered structural gross margin improvements through logistics efficiencies and lower labor costs.

The transition to 1C generation DRAM is expanding Lam’s dielectric deposition SAM by more than 20% due to the shift from traditional furnace-based films to advanced ALD silicon carbide layers.

Management attributes margin expansion to ‘self-help’ activities and higher tool reliability, which reduces installation and warranty costs during fast customer production ramps.

Advanced packaging revenue is expected to grow over 50% in 2026, fueled by unmatched experience in copper plating and TSV etch for high-bandwidth memory (HBM) applications.

WFE projections for 2026 have been raised to $140 billion with a bias to the upside. with an upward bias as customers work through clean room constraints and accelerate leading-edge investments.

Second-half calendar year 2026 revenues are expected to exceed the first half, supported by a growing backlog and the opening of a second manufacturing facility in Malaysia.

Management anticipates 2027 will be another year of compelling WFE growth as new greenfield fab projects currently in planning stages begin tooling.

The company plans to increase R&D investments throughout the remainder of the year to extend technology leadership in high-aspect ratio cryo etch and dielectric stack deposition.

June quarter guidance assumes expanding gross margins to 50.5% despite slight headwinds from customer product mix, reflecting sustained operational efficiency.

Customer down payments reached their lowest level in nearly four years, primarily because the fastest-growing customers are not the ones who typically provide prepayments.

China revenue is expected to decline as a percentage of total revenue in the June quarter as global multinational spending outpaces regional growth.

A small workforce optimization was undertaken during the March quarter to focus on organizational efficiency as the company scales its manufacturing and R&D headcount.

Inventory turns reached 2.9x, the highest level in over four years, reflecting disciplined asset utilization and supply chain alignment with growing demand.