LAM RESEARCH CORP (LRCX) Q2 2025 Earnings Summary

Executive Summary

Q2 2025 revenue was $4.38B, with GAAP gross margin 47.4%, GAAP operating margin 30.5%, GAAP diluted EPS $0.92; non-GAAP gross margin 47.5%, operating margin 30.7%, and diluted EPS $0.91. All metrics were above midpoints of company guidance, driven by strong execution and strength in Memory, Foundry/Logic, and CSBG upgrades .
Guidance for Q3 2025 was raised to revenue $4.65B ±$300M, GM ~48% (GAAP 47.9%), operating margin ~32%, and EPS $1.00 ±$0.10, reflecting continued momentum in NAND tech upgrades, gate-all-around, backside power, and advanced packaging demand, partly offset by mix headwinds from China concentration .
Key positives: Memory systems revenue rose to 50% (NVM 24%, DRAM 26%); upgrades and advanced packaging delivered record contributions; Asia factory strategies added >100bps to gross margin exiting 2024 .
Key risk: New U.S. export controls restrict shipments to certain China customers, removing ~$700M from 2025 forecasts and putting a customer/geographic-mix headwind on margins and CSBG Reliant systems .
Catalysts: Aether dry photoresist selected as production tool of record at a leading memory maker (EUV dry resist revenue begins in 2025), Cryo 3.0 wins at leading-edge nodes, and strong advanced packaging demand (HBM, TSV, Sabre 3D) support outperformance versus WFE in 2025 .

What Went Well and What Went Wrong

What Went Well

Memory mix inflected: Systems revenue in Memory rose to 50% in Q2 (NVM 24%, DRAM 26%), driven by NAND tech conversions to ~256-layer and DRAM tech upgrades (DDR5/HBM, 1α/1β/early 1γ) .
Advanced packaging momentum: Revenue finished >$1B in 2024 and will grow again in 2025; Lam’s Sabre 3D plating tool is gaining share on performance and defectivity at high throughput .
EUV dry resist milestone: Aether dry resist selected as production tool of record for the most advanced DRAM, enabling lower dose, fewer defects, and better yield with sustainability benefits (5–10x fewer chemicals) .

What Went Wrong

Gross margin down q/q: Non-GAAP GM fell to 47.5% from 48.2% on unfavorable customer/geographic mix (China concentration), partially offset by Asia operations benefits; mix headwinds likely persist in 2025 .
China export controls: Early-December rules restrict a subset of customers, removing ~$700M of 2025 revenue (back-half weighted) and pressuring Reliant systems demand in CSBG .
Reliant softness: CSBG Reliant expected down y/y in 2025 as mature-node spending outside China is weak and restricted China customers were heavy Reliant buyers; CSBG overall guided “flattish” despite strength in upgrades .

Financial Results

P&L vs Prior Year and Prior Quarter

Metric	Q2 2024 (Dec 24, 2023)	Q1 2025 (Sep 29, 2024)	Q2 2025 (Dec 29, 2024)
Revenue ($USD Millions)	$3,758.259	$4,167.976	$4,376.047
GAAP Gross Margin %	46.8%	48.0%	47.4%
Non-GAAP Gross Margin %	N/A	48.2%	47.5%
GAAP Operating Margin %	28.1%	30.3%	30.5%
Non-GAAP Operating Margin %	N/A	30.9%	30.7%
GAAP Diluted EPS ($)	$0.72	$0.86	$0.92
Non-GAAP Diluted EPS ($)	N/A	$0.86	$0.91
Net Income ($USD Millions)	$954.266	$1,116.444	$1,191.018

Notes: Non-GAAP reconciliation items in Q2 2025 included amortization of acquired intangibles, EDC valuation effects, note discount amortization, and an income tax benefit from a change in tax law (–$20.778M) excluded from non-GAAP .

Revenue Disaggregation (Systems vs CSBG)

Metric ($USD Millions)	Q2 2024 (Dec 24, 2023)	Q1 2025 (Sep 29, 2024)	Q2 2025 (Dec 29, 2024)
Systems Revenue	$2,299.286	$2,392.730	$2,625.649
Customer Support-Related & Other (CSBG)	$1,458.973	$1,775.246	$1,750.398
Total	$3,758.259	$4,167.976	$4,376.047

KPIs and Mix

KPI	Q1 2025 (Sep 29, 2024)	Q2 2025 (Dec 29, 2024)
Geographic Revenue Mix (%)	China 37; Korea 18; Taiwan 15; US 12; Japan 7; SEA 6; Europe 5	China 31; Korea 25; Taiwan 17; US 9; Japan 8; SEA 7; Europe 3
Deferred Revenue ($USD Millions)	$2,047	$2,032
Estimated Future Revenue from Japan Shipments ($USD Millions)	$184	$453
Diluted Share Count (shares)	1,304,066	1,291,469
CSBG Revenue ($USD Millions)	$1,775.246	$1,750.398

Systems Revenue Composition (% of Systems)

Segment	Q1 2025 (Sep 2024)	Q2 2025 (Dec 2024)
Memory (Total)	35%	50%
— Nonvolatile Memory (NAND)	11%	24%
— DRAM	24%	26%
Foundry	41%	35%
Logic & Other	24%	15%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q1 2025 (Dec 2024)	$4.30B ±$0.30B	—	—
Revenue	Q3 2025 (Mar 2025)	—	$4.65B ±$0.30B	Raised (sequential)
Gross Margin (GAAP)	Q1 2025 (Dec 2024)	46.9% ±1pp	—	—
Gross Margin (GAAP)	Q3 2025 (Mar 2025)	—	47.9% ±1pp	Raised (sequential)
Operating Margin (GAAP)	Q1 2025 (Dec 2024)	29.9% ±1pp	—	—
Operating Margin (GAAP)	Q3 2025 (Mar 2025)	—	31.9% ±1pp	Raised (sequential)
Diluted EPS	Q1 2025 (Dec 2024)	$0.87 ±$0.10	—	—
Diluted EPS	Q3 2025 (Mar 2025)	—	$1.00 ±$0.10	Raised (sequential)
Diluted Share Count	Q1 2025 (Dec 2024)	~1.29B	—	—
Diluted Share Count	Q3 2025 (Mar 2025)	—	~1.29B	Maintained
Tax Rate (non-GAAP)	Q3 2025 (Mar 2025)	—	Low–mid teens (outlook)	—
OI&E	Q3 2025 (Mar 2025)	—	Slight negative bias (outlook)	—
Dividend	Q2 2025	Cash dividend declared $0.23 per share	—	Maintained

Reconciling items for Q3 guidance: GAAP→non-GAAP adjustments include amortization of intangibles (GM/OM), note discount amortization, and associated tax effects totaling $3.9M for EPS .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/Technology inflections (Cryo 3.0, dry resist, selective etch/ALD)	Introduced Cryo 3.0; direct-drive conductor etch wins; selective etch/ALD for GAA; Sabre 3D more than doubled in 2024	Aether dry resist selected as production tool of record for advanced DRAM; shipments to GAA and advanced packaging to exceed $3B in 2025	Strengthening
Supply chain/Operations	Malaysia ramp (5,000th chamber) and cost improvements; Asia factories strategy	Asia ops added >100bps to GM exiting 2024; further scale benefits expected	Tailwind
Tariffs/Macro/Regulatory	China share expected to normalize lower; domestic China WFE down H2’24	Early-Dec export controls remove ~$700M 2025 revenue (back-half weighted); China % to decline y/y in 2025	Headwind increasing
Product performance (NAND upgrades)	Cryo 3.0 profile control and sustainability; pure carbon gap fill; tech conversions to 2xx/3xx layers in 2025	NAND upgrades to ~256-layer driving NVM; adoption of moly and carbon gap fill to drive “several hundred million” NAND shipments in 2025	Accelerating
Regional mix	China 39% (Q4 2024); expected ~30% in Q1 2025	China 31% in Q2 2025; expected down y/y in 2025; Korea 25%	Declining China
R&D execution/OpEx	R&D prioritized; OpEx growth with digital transformation; leverage targeted in 2025	OpEx $735M (67% R&D); leverage planned; tax rate low–mid teens	Investing with leverage

Management Commentary

“December quarter revenue, gross margin, operating margin and EPS were all above our guidance midpoints… Our investments to win at key technology inflections are paying off.” — CEO Tim Archer .
“In 2025, Lam shipments to gate-all-around nodes and advanced packaging combined should well over $3 billion… customer migration towards backside power distribution and dry resist processing technologies will add further opportunity.” — CEO .
“Aether dry resist… selected as the production tool of record for high bandwidth DRAM at a leading memory customer.” — Technology press release .
“We delivered… approximately 160 basis points of operating margin expansion [in 2024] even as we invested heavily in new products and infrastructure.” — CEO .
“The forecast… from [restricted China] customers was probably ~$700 million… second half weighted in 2025.” — CFO Doug Bettinger .

Q&A Highlights

Gross margin trajectory: Expect a “tight range” near recent levels; mix headwinds tied to customer/geography offset by Asia manufacturing strategy (>100bps GM benefit exiting 2024) .
China outlook: New export rules cut ~$700M from 2025 revenue; China % of revenue to decline y/y; mix a margin headwind through 2025 .
CSBG outlook: Reliant down y/y (restricted China, weak mature-node ex-China); upgrades strong; CSBG “flattish” for 2025 .
NAND upgrades: Primary growth driver; transitions above 200–300 layers require additional tools (carbon gap fill, moly), underpinning several hundred million dollars in NAND shipments in 2025 .
Advanced packaging/HBM: 2024 finished >$1B; will grow in 2025 as die stacks rise (8→12→16), TSV demand robust, Lam well positioned (etch & copper plating) .
OI&E/tax: Slight negative OI&E bias in March; tax rate low–mid teens .

Estimates Context

S&P Global consensus estimates for Q2 2025 (EPS and revenue) were unavailable at time of analysis due to SPGI daily request limit errors; therefore, we cannot assess beat/miss versus Wall Street consensus. Company reported results were above management guidance midpoints for revenue, GM, OM, and EPS .
Where consensus is needed for modeling, please retrieve SPGI estimates once access limits reset.

Key Takeaways for Investors

Mix shift to Memory and advanced packaging positions Lam to outgrow WFE in 2025; watch NAND tech upgrades (256/300+ layers), moly adoption, and carbon gap fill programs for incremental systems and upgrade revenue .
Margin resilience despite mix headwinds: Asia factory scaling and cost structure improvements provide structural GM support; monitor China share/mix and customer concentration impacts each quarter .
New EUV dry resist revenue stream begins: Aether production tool-of-record decision at leading DRAM customer validates Lam’s EUV patterning stack; revenue small in 2025 but strategic for multi-year growth .
CSBG composition pivot: Expect Reliant softness offset by strong upgrades linked to Memory utilization and tech conversions; flat CSBG overall implies systems must carry growth .
Guidance raised sequentially (Q3 2025): Revenue, margins, and EPS step up; monitor execution against mix headwinds and seasonal OpEx .
China risk discount: ~$700M revenue removed by new controls; China % of revenue will decline y/y—factor into valuation and margin assumptions .
Upcoming catalysts: Investor Day (Feb 19) to update long-term model and product portfolio; continued announcements around Cryo 3.0, selective etch/ALD, backside power, and advanced packaging should support thesis .