0000707549-25-000085
SEC filingLam Research reported 3% QoQ revenue growth to $5.3B, with gross margin expanding to 50.4% on favorable customer mix.
In the September 2025 quarter (Q1 FY26), Lam Research generated revenue of $5,324 million, a 3% increase from the June 2025 quarter and a 27.7% increase from the prior year quarter. The QoQ growth was driven by sustained Foundry investments and higher customer support-related revenue. Gross margin improved to 50.4% from 50.1% QoQ and 48.0% YoY, benefiting from favorable customer mix, partially offset by reduced factory efficiencies, higher tariff costs, and increased material costs. Net income declined 8.8% QoQ to $1,569 million (from $1,720 million), primarily due to a higher effective tax rate (15.6% vs. 3.3% in the prior quarter) and a slight increase in operating expenses. Diluted EPS fell to $1.24 from $1.35 QoQ.
Systems revenue rose to $3,548 million, up 3.2% QoQ and 48.3% YoY, reflecting strong Foundry demand for mature node investments. Customer support-related revenue was essentially flat at $1,777 million, up only 0.1% YoY. From a market perspective, the Foundry segment accounted for 60% of leading- and non-leading-edge equipment revenue (up from 52% QoQ), while Memory fell to 34% (from 41%) due to weakness in non-volatile memory. Geographically, China contributed 43% of revenue (up from 35% QoQ), while Korea and Japan declined. Deferred revenue increased to $2.77 billion from $2.68 billion QoQ, signaling continued customer demand.
Management emphasized strong wafer fabrication equipment spending in 2025, driven by memory and non-memory segments. Over the long term, they expect secular demand from AI, cloud, 5G, and technology inflections (3D scaling, advanced packaging) to expand the served market. Near-term risks include trade restrictions, tariffs, and supply chain uncertainties. The company maintained a focus on R&D ($576 million, 10.8% of revenue) to support leading-edge deposition, etch, and clean processes. Liquidity remains robust with $6.7 billion in cash, generating $1.78 billion in operating cash flow. No specific numerical guidance was provided for future quarters.
Lam Research’s balance sheet remains robust as of September 28, 2025. Cash and cash equivalents stood at $6.7B, a slight increase from $6.4B at June 29, 2025. Total debt (current and long-term) was $4.5B, essentially flat period-over-period. Shareholders’ equity grew to $10.2B from $9.9B, driven by net income and partially offset by treasury stock purchases and dividends. Inventory declined by $0.2B to $4.1B, reflecting improved working capital management.
The Notes disclosed no material purchase commitments or contractual obligations beyond the ordinary course. The company reports $2.8B in deferred revenue (remaining performance obligations), of which $2.2B is expected to be recognized within one year and $0.5B in 1-3 years. Contingencies include guarantees and letters of credit up to $230.1M, but no significant liability is recorded.
During the September 2025 quarter, Lam repurchased 9.7M shares for $0.99B at an average price of $105.67, leaving $6.5B remaining under the buyback program. Dividends were declared at $0.26 per share, a 13% increase YoY, totaling $0.33B. Debt repayments were minimal at $1.4M. Capital expenditures totaled $185M, representing 3.5% of revenue, up from $111M in the prior-year quarter.
The company operates as a single reportable segment. Revenue grew 27.7% YoY to $5.32B, with systems revenue (67% of total) up 48% to $3.55B, while customer support-related revenue remained flat at $1.78B. Geographically, China represented 43% of revenue ($2.28B), followed by Taiwan (19%, $1.03B), Korea (15%, $0.78B), and Japan (10%, $0.53B). Segment gross margin improved to 52.1%, reflecting a richer systems mix.
Operating cash flow (CFO) of $1.78B exceeded net income of $1.57B, reflecting a cash conversion ratio of 113%, driven by non-cash charges (depreciation, stock compensation) and favorable working capital changes. Capital expenditures rose 67% YoY to $185M, indicating increased investment in capacity. Free cash flow (not explicitly stated) would be approximately $1.59B, but the company did not disclose it. Capital returns (share repurchases + dividends) totaled $1.27B, representing 71% of CFO, a sustainable payout. Key working capital inflows of $76M contributed to cash flow, though the prior year had a larger $387M inflow. Overall, cash generation remains strong with moderate capex intensity.