What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-25 compared with 2025-01-31 · 74 added, 69 removed, 189 unchanged (43% of the section changed)

43 unchanged sentences

our ability to scale our operations to respond to changes in our business;

our goals and initiatives with respect to environmental, social and governance matters, including emissions, and human capital, including inclusion and diversity;

the value of our patents;

our goals and initiatives with respect to environmental, social and governance matters, including emissions, and human capital, the value of our patents;

the materiality of potential losses arising from legal proceedings;

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and the sufficiency of our financial resources or liquidity to support future business activities (including, but not limited to, operations, investments, debt service requirements, dividends, and capital expenditures).

Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our annual report on Form 10-K for the year ended June 30, 2024 (our “2024 Form 10-K”), our quarterly report on Form 10-Q for the fiscal quarter ended September 29, 2024, and our current reports on Form 8-K.

Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Part II Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our annual report on Form 10-K for the year ended June 30, 2024 (our “2024 Form 10-K”), our quarterly reports on Form 10-Q for the fiscal quarters ended September 29, 2024 and December 29, 2024, and our current reports on Form 8-K.

Such risks, uncertainties, and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed in this report and in ways not readily foreseeable.

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Documents To Review In Connection With Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

For a full understanding of our financial position and results of operations for the three and six months ended December 29, 2024, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our 2024 Form 10-K.

For a full understanding of our financial position and results of operations for the three and nine months ended March 30, 2025, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our 2024 Form 10-K.

Lam Research Corporation 2025 Q3 10-Q 17

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and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Overall, calendar year 2024 wafer fabrication equipment spending was higher, driven by increases in both the memory and non-memory market segments versus calendar year 2023.

In the short term, volatility in the semiconductor demand environment, as well as other risks and uncertainties, may negatively impact our revenue and operating margin.

In fiscal year 2025, we anticipate strong wafer fabrication equipment spending levels driven by an increase in both the memory and non-memory market segments.

In the short term, volatility in the semiconductor industry environment from trade restrictions, tariffs, as well as other direct and indirect risks and uncertainties, have, and in the future may, negatively impact our revenue and operating margin.

Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

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Three Months Ended

2024 September 29,

2025 December 29,

(in thousands, except per share data and percentages)

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Diluted net income per share $ 1.03 $ 0.92

In the December 2024 quarter, revenu e increased 5% compared to the three months ended September 29, 2024 (the “September 2024 quarter”), driven by an increase in systems revenue as a result of strengthened memory investments in both the NAND and dynamic random access memory (“DRAM”) market segments.

The deferred revenue balance was $2,031.6 million at the end of the December 2024 quarter, a slight decrease relative to the balance at the end of the September 2024 quarter of $2,047.0 million.

In the March 2025 quarter, revenu e increased 8% compared to the three months ended December 29, 2024 (the “December 2024 quarter”), driven by an increase in systems revenue as a result of strengthened investments in the Foundry market segment.

T he deferred revenue balance was $2,010.9 million at the end of the March 2025 quarter, a slight decrease relative to the balance at the end of the December 2024 quarter of $2,031.6 million.

We aim to balance the requirements of our customers with the availability of resources, as well as performance to our operational and financial objectives.

As a result, from time to time, we exercise discretion and judgment as to the timing and prioritization of manufacturing and deliveries of products, which has impacted, including in the current fiscal year, and may in the future impact, the timing of revenue recognition with respect to such products.

The decrease in gross margin as a percentage of revenue in the December 2024 quarter compared to the September 2024 quarter was primarily a r esult of unfavorable customer mix.

Operating expenses in the December 2024 quarter were flat compared to the September 2024 quarter, as increases in headcount and incentive compensation expense were largely offset by lower elective deferred compensation plan-related costs.

Our cash, cash equivalents, and restricted cash balances decreased to $5.7 billion at the end of the December 2024 quarter compared to $6.1 billion at the end of the September 2024 quarter.

This decrease was primarily the result of $697.7 million of share repurchases, including net share settlement of employee stock-based compensation and excise tax;

The increase in gross margin as a percentage of revenue in the March 2025 quarter compared to the December 2024 quarter was primarily a result of favorable changes in customer and product mix.

The increase in operating expenses in the March 2025 quarter compared to the December 2024 quarter was driven by an increase in employee-related costs as a result of seasonality and higher headcount, as well as increased supplies expense, offset by lower elective deferred compensation plan-related costs.

Our cash, cash equivalents, and restricted cash balances decreased to $5.5 billion at the end of the March 2025 quarter compared to $5.7 billion at the end of the December 2024 quarter.

This decrease was primarily the result of $504.0 million of principal payments on debt instruments and debt issuance costs;

$435.3 million of share repurchases, including net share settlement of employee stock-based compensation and excise tax;

$295.7 million of dividends paid to stockholders;

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partially offset by $1,308.7 million of cash generated from operating activities.

Employee headcount as of December 29, 2024 was approximately 18,300.

Employee headcount as of March 30, 2025 was approximately 18,600.

RESULTS OF OPERATIONS

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Revenue (in millions) $ 4,720 $ 4,376 $ 13,264 $ 11,034

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Taiwan 24 % 17 % 19 % 10 %

United States 9 % 12 % 11 % 7 %

Japan 10 % 8 % 9 % 11 %

United States 4 % 9 % 8 % 7 %

Southeast Asia 4 % 7 % 4 % 4 %

Europe 3 % 3 % 4 % 5 %

The increase in revenue for the six months ended December 29, 2024 compared to the same period in 2023 was due to increases in equipment spending by our customers across all market segments as well as higher customer support-related revenue.

The increase in revenue for the nine months ended March 30, 2025 compared to the same period in 2024 was due to increases in equipment spending by our customers across all market segments as well as higher customer support-related revenue.

Lam Research Corporation 2025 Q3 10-Q 19

The following table presents our revenue disaggregated between systems and customer support-related revenue:

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(In thousands)

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The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows:

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Memory 43 % 50 % 43 % 44 %

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Logic/integrated device manufacturing 9 % 15 % 15 % 17 %

The increase in the memory market segment for the December 2024 quarter compared to the September 2024 quarter was primarily attributable to NAND investments by our customers for equipment and upgrades, partially offset by lower Foundry and Logic spending.

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

The decrease in the memory market segment for the March 2025 quarter compared to the December 2024 quarter was primarily attributable to a decrease in non-volatile memory.

There was also a decrease in Logic spending by our customers in the quarter.

These decreases were offset by increased Foundry spending for both leading and mature node investments.

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(in thousands, except percentages)

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Percent of revenue 49.0 % 47.4 % 48.2 % 47.2 %

Gross margin as a percentage of re venue was lower in the December 2024 quarter compared to the September 2024 quarter mainly as a result of unfavorable customer mix changes.

The increase in gross margin as a percentage of revenue in the six months ended December 29, 2024 compared to the same period in the prior year was primarily due to improved factory efficiencies, partially offset by unfavorable changes in customer mix, increased transformational charges, and higher employee-related expenses.

Gross margin as a percentage of re venue was higher in the March 2025 quarter compared to the December 2024 quarter mainly as a result of favorable customer and product mix.

The increase in gross margin as a percentage of revenue in the nine months ended March 30, 2025 compared to the same period in the prior year was primarily due to improved factory efficiencies, partially offset by unfavorable changes in customer mix and increased transformational charges.

Research and Development

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(in thousands, except percentages)

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Percent of revenue 11.1 % 11.3 % 11.4 % 12.7 %

We co ntinued to make significant R&D investments in the December 2024 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufactu ring processes.

R&D expense in the December 2024 quarter was flat compared to the September 2024 quarter, as increases in headcount and incentive compensation expense were largely offset by lower elective deferred compensation plan-related costs.

R&D expense in the six months ended December 29, 2024 increased compared to the same period in the prior year, driven by higher headcount and incentive compensation expense as well as spending on outside services, partially offset by lower supplies expense.

We continued to make significant R&D investments in the March 2025 quarter focused on leading-edge deposition, etch, clean and other semiconductor manufacturing processes.

The increase in R&D expense in the March 2025 quarter compared to the December 2024 quarter was primarily driven by an increase in employee-related costs as a result of seasonality and higher headcount, as well as increased lab-related spending, partially offset by lower elective deferred compensation plan-related costs.

R&D expense in the nine months ended March 30, 2025 increased compared to the same period in the prior year, driven by higher employee-related costs as a result of increased headcount, as well as spending on outside services, partially offset by lower supplies expense and lower elective deferred compensation plan-related costs.

Lam Research Corporation 2025 Q3 10-Q 20

Selling, General, and Administrative

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(in thousands, except percentages)

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Percent of revenue 4.8 % 5.6 % 5.4 % 5.9 %

SG&A expense during the December 2024 quarter was flat to the September 2024 quarter, with increases in incentive compensation and supplies expenses largely offset by lower spending on outs ide services.

SG&A expense during the six months ended December 29, 2024 increased compared to the same period in the prior year, driven by increases in headcount and incentive compensation expense as well as higher spending for transformational activities.

SG&A expense during the March 2025 quarter decreased compared to the December 2024 quarter as a result of lower facilities costs and elective deferred compensation plan-related costs.

SG&A expense during the nine months ended March 30, 2025 increased compared to the same period in the prior year, driven by higher employee-related costs as a result of increased headcount as well as higher spending for transformational activities, partially offset by lower elective deferred compensation plan-related costs.

Restructuring Charges, N et

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The restructuring plan was substantially completed as of June 30, 2024.

No restructuring charges were recorded during the six months ended December 29, 2024.

During the six months ended December 24, 2023, the company recorded net restructuring costs of $26.6 million.

No restructuring charges were recorded during the nine months ended March 30, 2025.

During the nine months ended March 31, 2024, the company recorded net restructuring costs of $57.1 million.

Please refer to Note 14, “Restructuring charges, net,” to our Condensed Consolidated Financial Statements, included in Part I of this Form 10-Q for additional information.

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Other income (expense), net consisted of the following:

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(in thousands)

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Interest expense (45,184) (45,299) (135,429) (138,797)

Gains on deferred compensation plan-related assets, net 4,502 17,420 21,922 22,629

Foreign exchange (losses) gains, net (5,117) (9,686) (14,803) 701

(Losses) Gains on deferred compensation plan-related assets, net (16,903) 4,502 5,019 49,124

Foreign exchange losses, net (4,702) (5,117) (19,505) (3,643)

Other, net (8,884) 2,565 (7,475) (24,082)

$ (25,035) $ 14,262 $ 19,308 $ 68,513

Interest income decreased in the December 2024 quarter as compared to the September 2024 quarter, primarily due to lower cash balances and lower interest rates.

Interest income increased for the six months ended December 29, 2024, compared to the same period in 2023, because of higher cash balances, partially offset by lower interest rates.

Interest expense was flat for all periods presented.

The gains on deferred compensation plan-related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.

Interest income decreased in the March 2025 quarter as compared to the December 2024 quarter, primarily due to lower interest rates and lower cash average balances.

Interest income decreased for the nine months ended March 30, 2025, compared to the same period in 2024, primarily due to lower interest rates, partially offset by higher cash balances.

Interest expense was at consistent levels for all periods presented.

The variations in deferred compensation plan-related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.

Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.

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Our provision for income taxes and effective tax rate for the periods indicated were as follows:

Three Months Ended Six Months Ended

2024 September 29,

2024 December 29,

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

(in thousands, except percentages)

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Effective tax rate 13.4 % 11.7 % 12.9 % 12.4 %

The decrease in the effective tax rate for the December 2024 quarter compared to the September 2024 quarter was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation and the income tax benefit from a change in tax law in the December 2024 quarter.

The effective tax rate for the six months ended December 29, 2024 compared to the same period in the prior year remained consistent.

The increase in the effective tax rate for the March 2025 quarter compared to the December 2024 quarter was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation and the income tax benefit from a change in tax law in the December 2024 quarter.

The increase in the effective tax rate for the nine months ended March 30, 2025 compared to the same period in the prior year was primarily due to lower benefit of the R&D tax credit as a percentage of pre-tax income and lower stock-based compensation excess tax benefits, offset by the income tax benefit from a change in tax law in the nine months ended March 30, 2025.

International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States.

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LIQUIDITY AND CAPITAL RESOURCES

Total gross cash, cash equivalents, and restricted cash balances were $5.7 billion at December 29, 2024 compared to $5.9 billion as of June 30, 2024.

Total gross cash, cash equivalents, and restricted cash balances were $5.5 billion at March 30, 2025 compared to $5.9 billion as of June 30, 2024.

The decrease was primarily driven by $2,130.0 million of share repurchases, including net share settlement on employee stock-based compensation and excise tax;

$854.3 million in dividends paid;

and $298.9 million in capital expenditures, partially offset by cash generated from operating activities totaling $2,310.4 million.

$587.0 million in capital expenditures;

and $506.0 million of principal payments on debt instruments and debt issuance costs, partially offset by cash generated from operating activities totaling $3,619.1 million.

Cash Flow from Operating Activities

Net cash provided by operating activities of $2,310.4 million during the six months ended December 29, 2024 consisted of (in thousands):

Net cash provided by operating activities of $3,619.1 million during the nine months ended March 30, 2025 consisted of (in thousands):

Net income $ 3,638,129

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increases in accounts receivable of $706.3 million, inventory of $319.7 million, and prepaid expenses and other current assets of $41.9 million.

Lam Research Corporation 2025 Q3 10-Q 22

These uses of cash were offset by the following sources of cash:

increases in deferred gross profit of $464.6 million, trade accounts payable of $193.8 million, and accrued expenses and other liabilities of $72.5 million.

Lam Research Corporation 2025 Q2 10-Q 22

Cash Flow from Investing Activities

Net cash used for investing activities during the six months ended December 29, 2024 was $285.9 million, primarily consisting of capital expenditures.

Net cash used for investing activities during the nine months ended March 30, 2025 was $578.8 million, primarily consisting of capital expenditures.

Cash Flow from Financing Activities

Net cash used for financing activities during the six months ended December 29, 2024 was $2,194.6 million, primarily consisting of $1,694.7 million in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise tax, and $558.6 million in dividends paid.

Net cash used for financing activities during the nine months ended March 30, 2025 was $3,427.1 million, primarily consisting of $2,130.0 million in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise tax, $854.3 million in dividends paid;

and $506.0 million of principal payments on debt instruments and debt issuance costs.

Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure.

Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of December 29, 2024, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months.

Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of March 30, 2025, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months.

However, factors outside of our control, including uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, are currently, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors.

In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services.

While we have substantial cash balances, we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities.

We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives.

However, domestic and global macroeconomic and political conditions could cause disruptions to the capital markets and otherwise make any financing more challenging, and there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all.

During the three months ended March 30, 2025, $500 million principal value of our 2025 Notes were settled upon maturity using available cash on hand.

In January 2025, we entered into a Third Amended and Restated Credit Agreement.

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Please refer to Note 11, “Long-term Debt and Other Borrowings,” to our Condensed Consolidated Financial Statements, included in Part I of this form 10-Q for additional information.

In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services.

While we have substantial cash balances, we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities.

We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis