What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-24 compared with 2025-04-25 · 97 added, 109 removed, 154 unchanged (57% of the section changed)

47 unchanged sentences

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 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 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 29, 2025 (our “2025 Form 10-K”), 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 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.

For a full understanding of our financial position and results of operations for the three months ended September 28, 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 2025 Form 10-K.

Lam Research Corporation 2025 Q3 10-Q 16

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Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry.

We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines.

Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.

We have built a strong global presence with core competencies in areas like nanoscale manufacturing enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines.

Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, cloud and enterprise servers, wearables, automotive vehicles, and data storage devices.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, dynamic random-access memory, and logic devices.

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Our core technical competency is integrating hardware, process, materials, software, and process control, enabling results on the wafer.

Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer.

Semiconductor manufacturing, our customers’ business, involves the fabrication of multiple dies or integrated circuits on a wafer.

This involves the repetition of a set of core processes and can require hundreds of individual steps.

Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale.

Fabricating these devices requires a sequence of highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale.

Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

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Several factors create opportunities for sustainable differentiation for us:

(i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility;

(i) our focus on research and development, with several ongoing programs relating to sustaining engineering, product and process development, and concept and feasibility;

(ii) our ability to effectively leverage cycles of learning from our broad installed base;

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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.

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.

Wafer fabrication equipment spending levels are strong in the 2025 calendar year 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 had, and in the future may have, a negative impact on 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.

On October 2, 2024, the Company effected a ten-for-one stock split of its common stock and a proportional increase in the number of authorized shares.

All references made to share or per share amounts throughout this Form 10-Q, including those presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, have been retroactively adjusted to reflect the stock split.

Lam Research Corporation 2025 Q3 10-Q 17

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Three Months Ended

2025 December 29,

September 28,

2025 June 29,

(in thousands, except per share data and percentages)

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Diluted net income per share $ 1.24 $ 1.35

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.

In the September 2025 quarter, revenue increased 3% compared to the three months ended June 29, 2025 (the “June 2025 quarter”), driven by an increase in systems revenue as a result of sustained investments in the Foundry market segment as well as increases in customer support-related revenue.

T he deferred revenue balance was $2.77 billion at the end of the September 2025 quarter, an increase relative to the balance at the end of the June 2025 quarter of $2.68 billion.

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 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;

The increase in gross margin as a percentage of revenue in the September 2025 quarter compared to the June 2025 quarter was primarily a result of favorable changes in customer mix, partially offset by reduced factory efficiencies, higher tariff-related spend, and increased material costs.

The increase in operating expenses in the September 2025 quarter compared to the June 2025 quarter was driven by an increase in employee-related costs tied to higher headcount, partially offset by lower elective deferred compensation plan-related costs.

Our cash, cash equivalents, and restricted cash balances increased to $6.7 billion at the end of the September 2025 quarter compared to $6.4 billion at the end of the June 2025 quarter.

This increase was primarily the result of $1,779.0 million of cash generated from operating activities, partially offset by $975.8 million of share repurchases, including net share settlement of employee stock-based compensation and excise tax;

$292.0 million of dividends paid to stockholders;

and $185.1 million of capital expenditures.

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

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

Employee headcount as of September 28, 2025 was approximately 19,400.

Lam Research Corporation 2025 Q3 10-Q 18

RESULTS OF OPERATIONS

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

Revenue (in millions) $ 5,324 $ 5,171 $ 4,168

China 43 % 35 % 37 %

Korea 24 % 25 % 23 % 20 %

Taiwan 19 % 19 % 15 %

Korea 15 % 22 % 18 %

Japan 10 % 14 % 7 %

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Europe 2 % 2 % 5 %

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 increase in revenue in the September 2025 quarter compared to the same period in 2024 was tied to increases in Foundry equipment spending by our customers as well as higher customer support-related revenue.

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

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(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 Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Memory 43 % 50 % 43 % 44 %

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

Foundry 60 % 52 % 41 %

Memory 34 % 41 % 35 %

Logic/integrated device manufacturing 6 % 7 % 24 %

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,

The increase in the foundry market segment for the September 2025 quarter compared to the June 2025 quarter was driven by mature node investments.

This increase was offset by a decrease in memory which was attributable to a decrease in non-volatile memory.

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(in thousands, except percentages)

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Percent of revenue 50.4 % 50.1 % 48.0 %

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.

Gross margin as a percentage of re venue increased in the September 2025 quarter compared to the June 2025 quarter driven by favorable changes in customer mix, partially offset by reduced factory efficiencies, higher tariff-related spend, and increased material costs.

Lam Research Corporation 2025 Q3 10-Q 19

The increase in gross margin as a percentage of revenue in the September 2025 quarter compared to the same period in the prior year was primarily due to favorable changes in customer mix.

Research and Development

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(in thousands, except percentages)

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Percent of revenue 10.8 % 11.2 % 11.9 %

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

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

R&D expense in the September 2025 quarter was relatively flat compared to the June 2025 quarter.

R&D expense in the September 2025 quarter increased compared to the same period in the prior year, driven by higher employee-related costs as a result of increased headcount, and increased spending on supplies.

Selling, General, and Administrative

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(in thousands, except percentages)

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Percent of revenue 5.2 % 5.2 % 5.8 %

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

In fiscal year 2023, we initiated a restructuring plan that continued into fiscal year 2024, designed to better align our cost structure with our outlook for the economic environment and business opportunities.

Under the plan we terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs.

Employee severance and separation costs were primarily related to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits.

Additionally, we made a strategic decision to relocate certain manufacturing activities to pre-existing facilities.

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

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.

SG&A expense during the September 2025 quarter increased compared to both the June 2025 and the September 2024 quarters as a result of higher employee-related costs due to increased headcount.

Other Income (Expense), Net

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

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(in thousands)

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Interest expense (42,472) (42,774) (44,946)

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

Gains on deferred compensation plan-related assets, net 23,088 34,102 17,420

Foreign exchange losses, net (5,534) (6,907) (9,686)

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$ 30,074 $ 37,853 $ 30,081

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.

Interest income increased in the September 2025 quarter as compared to the June 2025 quarter, primarily due to higher cash balances.

Interest income decreased in the September 2025 quarter compared to the same period in the prior year, primarily due to lower interest rates, partially offset by higher cash balances.

Interest expense was flat in the September 2025 quarter as compared to the June 2025 quarter.

Interest expense decreased in the September 2025 quarter compared to the same period in the prior year primarily due to the maturity of $500 million of the Company’s senior notes in March 2025.

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.

The variation in other, net was primarily driven by fluctuations in the fair market value of equity investments for all periods presented.

Lam Research Corporation 2025 Q3 10-Q 20

The variation in other, net in the September 2025 quarter as compared to the June 2025 quarter and to the same period in the prior year was driven by fluctuations in the fair market value of equity investments and charitable contributions.

Income Tax Expense

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

Three Months Ended Nine Months Ended

2025 December 29,

2024 March 30,

2025 March 31,

Three Months Ended

September 28,

2025 June 29,

2025 September 29,

(in thousands, except percentages)

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Effective tax rate 15.6 % 3.3 % 13.7 %

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.

The increase in the effective tax rate for the September 2025 quarter compared to the June 2025 quarter was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation in the June 2025 quarter, the change in level and proportion of income in higher and lower tax jurisdictions, the revaluation of deferred taxes due to changes in the U.S.

taxation of non-U.S.

income under OBBBA, and GMT being fully effective starting in the September 2025 quarter.

The increase in the effective tax rate for the September 2025 quarter compared to the same period in the prior year was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions, the revaluation of deferred taxes due to changes in the U.S.

taxation of non-U.S.

income under OBBBA, and GMT being fully effective starting in the September 2025 quarter.

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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Any change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

BEPS 2.0 GMT is fully effective for us this fiscal year.

We assessed our exposure to GMT under currently enacted legislation and determined that we expect to meet transitional safe harbor requirements in most jurisdictions, with limited jurisdictions subject to GMT.

On July 4, 2025, the OBBBA was signed into law by U.S.

President Donald Trump.

The impact on income taxes due to change in legislation is required, under ASC 740, Income Taxes, to be recognized in the period in which the law is enacted, which is this fiscal year.

In general, the OBBBA introduces changes to U.S.

taxation, including changes in the taxation of non-U.S.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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LIQUIDITY AND CAPITAL RESOURCES

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;

Total gross cash, cash equivalents, and restricted cash balances were $6.7 billion at September 28, 2025 compared to $6.4 billion as of June 29, 2025.

The increase was primarily driven by cash generated from operating activities totaling $1,779.0 million, partially offset by $975.8 million of share repurchases, including net share settlement on employee stock-based compensation and excise tax;

$292.0 million in dividends paid;

$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 $3,619.1 million during the nine months ended March 30, 2025 consisted of (in thousands):

and $185.1 million in capital expenditures.

Lam Research Corporation 2025 Q3 10-Q 21

Cash Flows from Operating Activities

Net cash provided by operating activities of $1.78 billion during the three months ended September 28, 2025 consisted of (in thousands):

Net income $ 1,568,660

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Other (1,890)

Changes in operating asset and liability accounts, net of foreign exchange impact, included the following uses of cash:

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.

Cash Flow from Investing Activities

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 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.

Changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash:

decreases in inventory of $189.8 million and prepaid expenses and other current assets of $30.2 million, and increases in deferred gross profit of $80.9 million, accrued expenses and other liabilities of $25.2 million and accounts payable of $5.1 million.

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

increases in accounts receivable of $255.0 million.

Cash Flows from Investing Activities

Net cash used for investing activities during the three months ended September 28, 2025 was $186.0 million, primarily consisting of capital expenditures.

Cash Flows from Financing Activities

Net cash used for financing activities during the three months ended September 28, 2025 was $1.28 billion, primarily consisting of $975.8 million in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise tax and $292.0 million in dividends paid.

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 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.

Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of September 28, 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.

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.

The amendment increased the unsecured revolving credit facility commitment from $1.5 billion to $2.0 billion and extended the maturity of the facility from June 2026 to January 2030.

The facility provides for an expansion option that will allow us, subject to certain requirements, to request an increase in the facility of up to an additional $750 million, for a potential total commitment of $2.75 billion.

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.

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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.

Quantitative and Qualitative Disclosures About Market Risk

For financial market risks related to changes in interest rates and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our 2024 Form 10-K.

Our exposure related to market risk has not changed materially since June 30, 2024.

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