What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-01-29 compared with 2025-10-24 · 87 added, 67 removed, 184 unchanged (46% of the section changed)

52 unchanged sentences

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 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.

For a full understanding of our financial position and results of operations for the three and six months ended December 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 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.

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.

Wafer fabrication equipment spending levels were strong in the 2025 calendar year driven by higher levels of semiconductor demand leading to 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.

4 unchanged sentences

2025 September 28,

2025 June 29,

(in thousands, except per share data and percentages)

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Diluted net income per share $ 1.26 $ 1.24

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.

In the December 2025 quarter, revenue was up slightly compared to the three months ended September 28, 2025 (the “September 2025 quarter”), as increases in customer support-related revenue were largely offset by decreases in systems revenue due to timing of customer investments.

T he deferred revenue balance was $2.25 billion at the end of the December 2025 quarter, down relative to the balance at the end of the September 2025 quarter of $2.77 billion, due to a decrease in customer down payments.

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 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;

The decrease in gross margin as a percentage of revenue in the December 2025 quarter compared to the September 2025 quarter was primarily a result of unfavorable changes in customer mix.

The operating expenses in the December 2025 quarter were relatively flat compared to the September 2025 quarter.

Our cash, cash equivalents, and restricted cash balances decreased to $6.2 billion at the end of the December 2025 quarter compared to $6.7 billion at the end of the September 2025 quarter.

This decrease was primarily the result of $1,466.2 million of share repurchases, including net share settlement of employee stock-based compensation and excise tax;

$327.5 million of dividends paid to stockholders;

and $185.1 million of capital expenditures.

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

and $260.9 million of capital expenditures, partially offset by $1,480.0 million of cash generated from operating activities.

Employee headcount as of December 28, 2025 was approximately 19,700.

Lam Research Corporation 2025 Q3 10-Q 19

RESULTS OF OPERATIONS

Three Months Ended

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

Revenue (in millions) $ 5,345 $ 5,324 $ 10,669 $ 8,544

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Japan 10 % 10 % 10 % 8 %

United States 6 % 6 % 12 %

Southeast Asia 8 % 5 % 7 % 5 %

United States 5 % 6 % 5 % 11 %

Europe 2 % 2 % 2 % 4 %

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.

Th e increase in revenue in the six months ended December 28, 2025 compared to the same period in the prior year was predominantly driven by 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

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 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

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

Foundry 59 % 60 % 60 % 38 %

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Logic/integrated device manufacturing 7 % 6 % 6 % 19 %

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,

The decrease in the foundry market segment for the December 2025 quarter compared to the September 2025 quarter was primarily driven by mature node investments, while the memory market segment saw strengthened DRAM investments offset by lower non-volatile memory spending.

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

(in thousands, except percentages)

1 unchanged sentence

Percent of revenue 49.6 % 50.4 % 50.0 % 47.7 %

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.

Gross margin as a percentage of re venue decreased in the December 2025 quarter compared to the September 2025 quarter driven primarily by unfavorable changes in customer mix.

Lam Research Corporation 2025 Q3 10-Q 20

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.

T he increase in gross margin as a percentage of revenue in the six months ended December 28, 2025 compared to the same period in the prior year was primarily due to favorable changes in customer mix, partially offset by reduced factory efficiencies from higher tariff-related spend.

Research and Development

Three Months Ended

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

(in thousands, except percentages)

1 unchanged sentence

Percent of revenue 10.7 % 10.8 % 10.8 % 11.6 %

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.

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

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

R&D expense in the six months ended December 28, 2025 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

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

(in thousands, except percentages)

1 unchanged sentence

Percent of revenue 5.0 % 5.2 % 5.1 % 5.7 %

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.

SG&A expense during the December 2025 quarter was relatively flat compared to the September 2025 quarter.

SG&A expense in the six months ended December 28, 2025 increased compared to the same period in the prior year, primarily 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

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

(in thousands)

5 unchanged sentences

$ 26,410 $ 30,074 $ 56,484 $ 44,343

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.

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

Interest income decreased in the six months ended December 28, 2025 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 December 2025 quarter compared to the September 2025 quarter.

Interest expense decreased in the six months ended December 28, 2025 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 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.

Lam Research Corporation 2025 Q3 10-Q 21

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.

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 in the December 2025 quarter and the six months ended December 28, 2025 compared to the September 2025 quarter and to the same period in the prior year was primarily driven by fluctuations in the fair market value of equity investments.

Income Tax Expense

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

Three Months Ended

September 28,

2025 June 29,

Three Months Ended Six Months Ended

2025 September 28,

2025 December 28,

2025 December 29,

(in thousands, except percentages)

1 unchanged sentence

Effective tax rate 13.2 % 15.6 % 14.4 % 12.7 %

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.

The decrease in the effective tax rate for the December 2025 quarter compared to the September 2025 quarter was primarily due to 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.

income under OBBBA in the September 2025 quarter.

The increase in the effective tax rate for the six months ended December 28, 2025 compared to the same period in the prior year was primarily due to the income tax benefit from a change in tax law in the six months ended December 29, 2024, and the tax expense associated with 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.

income under OBBBA and GMT being fully effective in the six months ended December 28, 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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Our critical accounting policies and estimates are unchanged from those disclosed in “Critical Accounting Policies and Estimates” in Part II, Item 7 of our 2025 Form 10-K.

Lam Research Corporation 2025 Q3 10-Q 22

Recent Accounting Pronouncements

See Note 2 - Recent Accounting Pronouncements, of our Condensed Consolidated Financial Statements, included in Part 1 of this Form 10-Q.

See Note 2 - Recent Accounting Pronouncements, of our Condensed Consolidated Financial Statements, included in Part 1 of this Form 10-Q for details of any recently adopted or effective accounting pronouncements.

Updates Not Yet Effective

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is required to adopt this standard prospectively in fiscal year 2026 for the annual reporting period ending June 28, 2026.

The Company does not expect the adoption of ASU 2023-09 to have an impact on its Consolidated Financial Statements other than additional footnote disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses,” which requires disaggregation of certain expenses in the notes to the financial statements to provide enhanced transparency into the expense captions presented on the face of the income statement.

In January 2025, the FASB issued ASU 2025-01 which clarified the effective date for entities that do not have an annual reporting period that ends on December 31st.

The guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is required to adopt this standard in fiscal year 2028 for the annual reporting period ending June 25, 2028 either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements.

The Company will apply the guidance prospectively and is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.

In December 2025, the FASB issued ASU 2025-10, “Accounting for Government Grants Received by Business Entities,” which introduces guidance for recognizing, measuring, and presenting government grants, addressing diversity in practice.

The guidance is effective for annual reporting periods beginning after December 15, 2028, and interim reporting within those annual reporting periods, with early adoption permitted.

The Company is required to adopt this standard in the first quarter of fiscal year 2030.

The Company does not expect the adoption of ASU 2025-10 to have an impact on its Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

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;

Total gross cash, cash equivalents, and restricted cash balances were $6.2 billion at December 28, 2025 compared to $6.4 billion as of June 29, 2025.

The decrease was primarily driven by $2.44 billion of share repurchases, including net share settlement on employee stock-based compensation and excise tax;

$619.5 million in dividends paid;

and $185.1 million in capital expenditures.

Lam Research Corporation 2025 Q3 10-Q 21

and $446.0 million in capital expenditures, partially offset by cash generated from operating activities totaling $3.26 billion.

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 cash provided by operating activities of $3.26 billion during the six months ended December 28, 2025 consisted of (in thousands):

Net income $ 3,162,654

6 unchanged sentences

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.

decreases in inventory of $211.8 million and prepaid expenses and other current assets of $118.5 million, and increases in accounts payable of $110.7 million.

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

increases in accounts receivable of $255.0 million.

decreases in deferred gross profit of $400.8 million and accrued expenses and other liabilities of $103.5 million, and increases in accounts receivable of $116.0 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.

Net cash used for investing activities during the six months ended December 28, 2025 was $443.8 million, primarily consisting of capital expenditures.

Lam Research Corporation 2025 Q3 10-Q 23

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.

Net cash used for financing activities during the six months ended December 28, 2025 was $3.01 billion, primarily consisting of $2.44 billion in treasury stock repurchases, including net share settlement on employee stock-based compensation and excise tax and $619.5 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 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.

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

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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 2025 Form 10-K.

Our exposure related to market risk has not changed materially since June 29, 2025.

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