Executive Summary
Lam Research Corporation reported a strong start to its QQ1 2025 results, delivering revenue of $4.167B, up 7.6-8% QoQ, and net income of $1.116B with diluted EPS of $0.86. The quarter featured a gross margin of 48.2% and operating margin of 30.9%, topping guidance on both gross margin and operating margin as Lam benefited from favorable product mix and ongoing efficiency programs. The company generated $1.568B of operating cash flow and $1.458B in free cash flow, supporting diligent capital returns (approximately $1B in open-market share repurchases and $261M in dividends) and a stock split adjustment from a 10-for-1 split completed in 2024. Lam’s strategy remains anchored in AI-driven architectural transitions, including NAND technology upgrades (1-alpha/1-beta/1-gamma, moly migration), gate-all-around (GAA) improvements, backside power distribution, and advanced packaging leadership via SABRE 3D. Management asserts Lam is well positioned to outpace overall WFE growth in 2025, driven by etch/deposition intensity across multiple inflections, including NAND, leading-edge logic, and advanced packaging. While near-term China WFE intensity is forecast to normalize to a lower share of revenue, Lam expects 2025 to be a growth year for WFE and for Lam’s top line, with China contributing a smaller percentage as investments shift to other regions. The following report synthesizes the QQ1 2025 results with management commentary, assesses investment factors, and outlines the outlook for investors.
Key Performance Indicators
Key Insights
Lam reported QQ1 2025 revenue of $4.167B, up 19.7% YoY and 7.66% QoQ per the company's earnings metrics. Gross profit was $2.0027B with a gross margin of 48.05% (rounded to 48.2% in guidance), reflecting favorable mix and utilization. Operating income reached $1.264B for a 30.3% operating margin, while net income was $1.116B and diluted EPS $0.86, up 25.8% YoY and 9.4% QoQ in net income terms and 28.6% YoY in EPS. Cash flow remained robust: operating cash flow of $1.568B and free cash flow ...
Financial Highlights
Lam reported QQ1 2025 revenue of $4.167B, up 19.7% YoY and 7.66% QoQ per the company's earnings metrics. Gross profit was $2.0027B with a gross margin of 48.05% (rounded to 48.2% in guidance), reflecting favorable mix and utilization. Operating income reached $1.264B for a 30.3% operating margin, while net income was $1.116B and diluted EPS $0.86, up 25.8% YoY and 9.4% QoQ in net income terms and 28.6% YoY in EPS. Cash flow remained robust: operating cash flow of $1.568B and free cash flow of $1.458B (FFO margin ~35%). The company ended the quarter with $6.07B in cash and equivalents and a negative net debt of about $1.08B, supported by ongoing buybacks (~$1B) and a dividend of $261M in the quarter. Deferred revenue rose to $2.05B, up $495M QoQ, driven by customer prepayments. The quarter also featured a workforce expansion to ~17,700 employees. December 2024 guidance set revenue at $4.3B ±$0.3B, gross margin at 47% ±1pp, operating margin at 30% ±1pp, and EPS at $0.87 ±$0.10, with a share count of ~1.29B. Management reinforced confidence in Lam’s ability to outgrow WFE in 2025, citing a multi-inflection demand environment (NAND upgrades, GAA, backside power distribution, advanced packaging).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.17B |
19.70% |
7.66% |
| Gross Profit |
2.00B |
21.03% |
8.26% |
| Operating Income |
1.26B |
23.57% |
11.25% |
| Net Income |
1.12B |
25.81% |
9.43% |
| EPS |
0.86 |
28.55% |
10.26% |
Key Financial Ratios
operatingProfitMargin
30.3%
operatingCashFlowPerShare
$1.21
freeCashFlowPerShare
$1.12
dividendPayoutRatio
23.4%
Management Commentary
Themes from management conference call: Strategy and growth trajectory: “Lam posted a strong September quarter with revenues and earnings per share higher than the midpoint and profitability above the high-end of the guided ranges.” Tim Archer emphasized Lam’s positioning to outperform WFE in 2025 driven by etch and deposition intensity across multiple technology inflections (NAND upgrades, GAA, backside power distribution, dry EUV resist processing, and advanced packaging). Operations and monetization: Doug Bettinger highlighted strong CSBG execution and Reliant Systems’ contribution, with CSBG revenue up and a notable upgrade cycle in the installed base driving productivity improvements. The company also underscored the robust cash generation and balance sheet flexibility, including a stock split and substantial buybacks. Market conditions and China exposure: Management noted that China WFE is expected to be down as a percentage of Lam’s revenue in 2025, while other regions and technology inflections remain robust. The team framed 2025 as a growth year for both WFE and Lam’s top line, with NAND upgrades and AI-driven demand underpinning the outlook. Operational outlook and strategic technology: Lam highlighted moly ALD migrations for NAND and DRAM as a material long-term upgrade, SABRE 3D’s market leadership in advanced packaging, and the expansion of ALD/etch capabilities as core differentiators. Quotes from the call include: “Lam posted a strong September quarter with revenues and earnings per share higher than the midpoint and profitability above the high-end of the guided ranges.” (Tim Archer) and “We delivered strong results in the September 2024 quarter. Our revenue and earnings per share came in above the midpoint of our guided range, while both gross margin and operating income percentage exceeded our guidance range.” (Doug Bettinger).
Lam posted a strong September quarter with revenues and earnings per share higher than the midpoint and profitability above the high-end of the guided ranges.
— Tim Archer, President and CEO
We delivered strong results in the September 2024 quarter. Our revenue and earnings per share came in above the midpoint of our guided range, while both gross margin and operating income percentage exceeded our guidance range.
— Doug Bettinger, EVP & Chief Financial Officer
Forward Guidance
Near-term outlook: December 2024 quarter guidance calls for revenue of $4.3B ±$0.3B, gross margin of 47% ±1pp, operating margin of 30% ±1pp, and EPS of $0.87 ±$0.10, with a ~1.29B share count. The company remains committed to investing in growth initiatives (critical R&D and technology inflections) while pursuing operational efficiencies to support margin resilience. Medium-term outlook: Lam expects 2025 to be a growth year, with WFE projected to grow year over year and Lam positioned to outperform WFE through higher contribution from NAND technology upgrades, GAA-driven opportunities, backside power distribution, and advanced packaging (SABRE 3D). China is expected to contribute a smaller percentage of total revenue, with growth concentrated outside China in NAND, foundry/logic, DRAM upgrades, and packaging. Key monitoring factors include: the pace of NAND technology adoption and conversion to higher layers (256/384-layer class devices and moly transition), advancement of gate-all-around nodes, the trajectory of advanced packaging demand (2.5D/3D), the evolution of China WFE policy and export controls, and the effectiveness of the installed-base productivity initiatives and CSBG offerings (Reliant, upgrades, and services). Overall, investors should monitor: (1) WFE demand signals by segment (NAND, leading-edge logic, advanced packaging), (2) China revenue mix and its effect on gross margin, (3) progress on moly ALD deployments and EUV/DirectDrive-driven etch opportunities, (4) CSBG growth beyond Reliant, and (5) cash generation and capital allocation including buybacks and dividends.