Melissa Weathers

Melissa Weathers asked for clarification on the Q2 outlook, seeking to understand the specific impact of China tariffs versus other cyclical factors and whether the business ex-China is performing as expected. She also inquired if macro uncertainty has altered the adoption timeline for Molybdenum (moly) by memory customers.

Answer

CEO Bertrand Loy explained that the Q2 guidance weakness is entirely due to new China tariffs, which could impact revenue by up to $50 million as customers pause U.S. shipments. He affirmed the ex-China business remains solid and is expected to grow sequentially. Loy also stated that major node transitions, including the moly ramp in 3D NAND, remain on track for the second half of the year despite the uncertain environment.

Melissa Weathers asked for details on the Q1 guidance, noting it seemed below historical seasonality, and inquired about momentum in the advanced packaging business, including key trends and growth potential.

Answer

CEO Bertrand Loy explained that the Q1 guidance aligns with normal seasonal declines in wafer starts and CapEx but represents 7% year-over-year growth. He highlighted that advanced packaging is a significant growth area, approaching $100 million in 2024 revenue and expected to grow substantially in 2025, driven by opportunities in both the Advanced Purity Solutions and Materials Solutions divisions.

Melissa Weathers asked to reconcile market weakness with strength in leading-edge AI, inquired about customer purchasing patterns during node ramps, and asked about normal seasonality post-divestitures.

Answer

CEO Bertrand Loy confirmed strong growth from advanced foundry, citing 15% year-to-date growth in Taiwan as a proxy for AI demand. He detailed that node ramps begin with filter orders for line flushing, followed by chemistries, which then normalize. Regarding seasonality, Loy noted that while recent years have been atypical, a normal year would see a slower Q1 followed by acceleration in Q2 and Q3.

Melissa Weathers asked about any acceleration in engagements for new products like Vantex CX+ and Halo MOLE ALD, introduced at the start of the year. She also inquired if anything has changed regarding the timing or magnitude of expected backside power contributions in the coming quarters or years.

Answer

Tim Archer, President and CEO, confirmed acceleration in engagements for new products like Aqara and Halo, noting their suitability for inflections in foundry, logic, DRAM, and NAND, and expressed satisfaction with the progress since February. Regarding backside power, he stated that the increasing power requirements of compute-intensive devices reinforce the need for such solutions, which are etch-depth intensive and important for Lam.

Melissa Weathers inquired about any acceleration in engagements for Lam Research's new products, Akara and ALTUS Halo, introduced at the analyst day, given the recent WFE momentum. She also asked if there were any changes in the timing or magnitude of expected contributions from backside power nodes, which are anticipated to ramp in volume soon.

Answer

President and CEO Tim Archer confirmed an acceleration in engagements for Akara and Halo, noting Akara's suitability for conductor etch in gate-all-around and DRAM, and Halo's progress in 3D NAND word line applications. He expressed confidence in the product progress since February. Regarding backside power, Tim Archer stated that the increasing power requirements in compute-intensive devices reinforce the need for such solutions, which are etch-depth intensive, and Lam Research expects to perform well as these nodes ramp.

Melissa Weathers asked about the spending outlook for second-tier leading-edge players and what assumptions about their CapEx are factored into Applied's planning.

Answer

CFO Brice Hill avoided customer-specific comments but confirmed that Applied is up-to-date with all customer forecasts, which are updated multiple times per quarter. He reiterated that their leading-edge demand has become more concentrated with fewer customers than in the past.

Melissa Weathers asked about the DRAM business, seeking to understand the balance between the cyclical dynamics of the broader DRAM market and the strong secular growth driven by High-Bandwidth Memory (HBM).

Answer

CFO Brice Hill clarified that strong HBM demand, growing at 40%, has kept the overall DRAM business at near-record levels, not a cyclical low. CEO Gary Dickerson added that Applied has gained 10 points of DRAM market share over a decade and is strongly positioned for DDR5, HBM, and the next major architecture inflection, 4F-squared.

Melissa Weathers inquired about the DRAM business, asking for insight on how to balance the cyclical dynamics of traditional DRAM against the significant growth upside being driven by High-Bandwidth Memory (HBM).

Answer

CFO Brice Hill clarified that the DRAM market is operating at very high levels, not a cyclical low, propelled by strong AI-related demand. He highlighted that HBM is a key growth driver, expected to reach 16% of DRAM wafer starts this year. CEO Gary Dickerson added that Applied has gained 10 points of market share in DRAM over the last decade and is strongly positioned for future technology inflections like 4F-squared.

Melissa Weathers from Deutsche Bank questioned if the NAND business lumpiness involves inventory replenishment or just-in-time demand, and asked why Q3 gross margins are not seeing more uplift from the higher-margin chemistry mix.

Answer

President and CEO John Lee clarified that customers are buying to need, not building inventory, due to normalized lead times. EVP and CFO Ramakumar Mayampurath explained that the gross margin benefit from a seasonal chemistry pickup is being offset by higher sales of lower-margin equipment and slightly lower overall volume compared to Q2.

Melissa Weathers of Deutsche Bank asked for more detail on the trends within the specialty industrial business, particularly the softness in automotive. She also inquired about the long-term growth rate drivers for the E&P chemistry business beyond typical seasonality, such as AI and content growth.

Answer

CEO John Lee described the automotive market as 'quite muted' and noted that the tariff environment has added 'a tremendous amount of more uncertainty,' making it volatile. For the chemistry business, Lee reiterated a long-term model of GDP plus 300 basis points, broken down by segment. He added that AI is providing an incremental growth tailwind to all PCB segments (package substrate, HDI, and MLB), similar to its effect on the chip industry.

Melissa Weathers from Deutsche Bank questioned MKS's content opportunity in NAND upgrades versus greenfield projects and the business impact from the ramp of leading-edge logic nodes like gate-all-around.

Answer

CEO John Lee clarified that while greenfield NAND fabs utilize a broad range of MKS tools, technology upgrades primarily benefit the company's RF power products as customers increase layer counts. For advanced logic, he confirmed MKS has significant content, specifically calling out its advanced ozone solutions as a key enabler for the gate-all-around technology transition.

Melissa Weathers requested more color on a back-end design win related to High-Bandwidth Memory (HBM), its potential size, and whether similar wins are expected. She also asked how MKS is positioned if the advanced logic market consolidates further.

Answer

President and CEO John Lee specified the HBM win was for lasers used in precise die cutting, a critical application for yield with multiple customers. Regarding potential consolidation in the logic market, Lee expressed confidence, citing MKS's long history of navigating such shifts. He emphasized that the value of their broad technology portfolio, reflected in their strong gross margins, ensures their position with key customers.

Melissa Weathers of Deutsche Bank asked new CFO Lorenzo Flores for his perspective on the business model and future opportunities. She also questioned if the company's 15-20% revenue growth target for 2026 remains viable.

Answer

CFO Lorenzo Flores expressed high confidence in the business, highlighting its durable revenue, strong gross margins, and disciplined operational focus on profitability. CEO Ford Tamer reaffirmed that the 15-20% revenue growth target for 2026 is 'absolutely' viable, citing the expected recovery in the industrial segment and growth in new applications like robotics.

Melissa Weathers asked for an update on the full-year 2025 revenue outlook and questioned the slight sequential decline in the Communications and Computing segment.

Answer

CEO Fouad Tamer stated that the full-year 2025 outlook remains unchanged, supported by improving demand, a higher backlog, and a book-to-bill ratio above one, though he noted caution around potential tariffs. He explained the Communications and Computing segment's decline was driven by older client platforms, while the Server and Communications sub-segments both grew sequentially.

Melissa Weathers asked for an update on the full-year 2025 revenue outlook, which was previously guided to low single-digit growth, in light of new macro caution. She also inquired about the sequential decline in the Communications and Computing segment and its growth prospects.

Answer

CEO Fouad Tamer stated that the full-year 2025 outlook remains unchanged, supported by improving demand signals like customer consumption and a book-to-bill ratio above one, though he acknowledged caution due to potential tariffs. He clarified that the Communications and Computing segment's decline was driven by older client platforms, while the Server and Communication businesses both grew sequentially.

Melissa Weathers inquired about the drivers behind the recent improvements in backlog and book-to-bill ratio, asking which end markets are performing best and whether the strength is Lattice-specific or related to channel inventory normalization. She also asked for details on the differing trends within the Communications and Computing subsegments.

Answer

CEO Ford Tamer attributed the improvement to three factors: progress in reducing channel inventory, market share gains driven by design wins for Nexus and Avant, and recovery across the industrial, automotive, and communications sectors. He noted that automotive showed a nice recovery in the quarter and that communications was slightly stronger than in Q3, with all segments expected to grow into Q1.

Melissa Weathers of Deutsche Bank inquired about the dynamics of the forecasted 'U-shaped recovery,' asking if Q4 represents the cycle's bottom and whether the company is now shipping to end demand. She also asked if pricing or competitive pressures are impacting the 2025 outlook.

Answer

CEO Ford Tamer explained that the U-shaped recovery is consistent with the broader market, driven by inventory correction in the Industrial and Automotive segment, which he expects to normalize by mid-2025. He stated the outlook is primarily due to market-wide dynamics, not competitive or pricing pressures, highlighting the stability of Lattice's gross margin as proof of its disciplined strategy.

Melissa Weathers asked about the trend of KLA's business shifting more into high-volume manufacturing (HVM) and sought to contextualize the size of this opportunity at current and future nodes.

Answer

CFO Bren Higgins explained that unlike in the past, process control intensity is now remaining high or even increasing in HVM. This is due to the complex mix of designs at leading-edge nodes, which requires more robust yield management. He noted that customers are even adding more advanced inspection to older nodes as they run more complex HPC products, expanding the HVM opportunity for KLA.