Lam Research Corporation Q2 FY26 Earnings Analysis

- Strong demand expected across all major product areas, with WFE (wafer fab equipment) growth continuing into 2026 and 2027 driven by expanded clean room capacity and advanced technology needs. - NAND market sees increasing importance due to AI memory hierarchy, with anticipated demand ramp and capacity additions. - DRAM side shows solid growth (45% YoY), with higher layer count in HBM4 expected to increase equipment content per wafer. - Services and spares growth supported by high fab utilization, stable in near term with innovation in equipment intelligence and cobots enhancing productivity. - Upgrade spending (~$40 billion) expected through end of 2027, including both upgrades and new equipment, sustaining business volume. - Longer-term visibility improving due to customers' long-term fab plans and LTAs, aiding efficient capacity planning. - Overall, demand is broad-based across NAND, DRAM, foundry, and logic, fueling sustained revenue expansion.

- Forecasted record earnings per share (EPS) of $1.65 ± $0.15 for the year, based on approximately 1.255 billion shares. - Operating margins expected around 36.5% ± 1 percentage point, showing strong profitability. - Gross margin guidance of 50.5% ± 1 percentage point, reflecting operational efficiency and strong product mix. - Operating expenses expected to grow but at a pace lower than revenue, enabling margin expansion and leverage. - Management plans to update long-term financial targets later in the year, indicating confidence in continued growth and margin improvement. - Strong free cash flow generation allows for shareholder returns and financial stability without need for customer down payments. - Growth driven by expanding installed base, spares, services, and upgrade business amid robust industry utilization and demand.

- Capital expenditures in the March quarter were $332 million, up $71 million from the prior quarter, supporting strong demand. - Investments are focused on a second manufacturing facility in Malaysia, and lab-related investments in the U.S. and Taiwan. - For the full year, capital expenditures are expected to be in the 4% to 5% of revenue range. - Additional R&D investments will continue throughout the year to extend technology leadership. - The company is growing headcount primarily in manufacturing, field organizations, and R&D to support volume growth and long-term product roadmap. - Plans include disciplined operational investments and some innovative initiatives funded by increased spending within affordability.

- The company retired $750 million of unsecured notes that reached maturity using cash from the balance sheet in the March quarter. - There is no mention of any new debt fundraising planned. - The company does not require down payments from customers and generates ample free cash flow from operations. - Capital expenditures for the year are planned at 4% to 5% of revenue, supporting organic growth such as a new manufacturing facility in Malaysia. - Share repurchases continue, with $4.3 billion remaining on the share repurchase program as of March. - No indications of new equity fundraising; focus remains on returning capital to shareholders via buybacks and dividends. - Overall, no current or near-term plans for new fundraising via debt or equity were disclosed.

- Deferred revenue balance at quarter end was $2.22 billion, flat sequentially (Page 3). - Customer down payments decreased by roughly $300 million, now at the lowest level in nearly 4 years (Page 3). - Longer visibility with customers due to long-term contracts and fab construction plans, aiding in capacity planning (Page 11). - No down payments required from customers; ample free cash flow supports business (Page 11). - Demand environment strong with accelerating investments, especially in memory segments like DRAM and NAND (Pages 3, 4, 15). - Foundry segment remains robust with ongoing mature node spending and advanced packaging growth (Page 3). - Growth driven by expansion in spares, upgrades, and services with high fab utilization (Page 4).