Executive Summary
Lam Research reported a strong QQ3 2025 quarter highlighted by a record gross margin and a record-foundry revenue contribution, underscoring robust product momentum across ALD/ETCH and CSBG upgrades. Revenue of $4.72 billion rose 8% sequentially and 24% year over year, with gross margin at 49.0% and operating margin at roughly 33.1%, marking the highest quarterly gross margin since the Novelis merger. Management guided to roughly $5.0 billion in revenue for the June 2025 quarter (±$0.3b) with a gross margin of about 49.5% and an operating margin near 33.5%, implying further margin expansion and an all-time profit peak in the near term. The company continues to emphasize outperformance of the broader WFE market through served market expansion, market share gains in leading-edge technology, and CSBG upgrades, while remaining attentive to tariff dynamics and macro volatility. Lam also highlighted strategic product momentum in deposition (e.g., Halo molybdenum, Stryker Spark ALD), etch (ACARA), and equipment intelligence (Simulator 3D) as pillars of its growth trajectory. The balance sheet remains exceptionally solid with about $5.45 billion of cash and equivalents against $4.48 billion of debt, producing a net cash position, and a track record of strong free cash flow generation (~$1.02 billion in the quarter) that supports ongoing capital allocation including significant share repurchases and a debt retirement in the quarter.
Key Performance Indicators
Financial Highlights
Revenue: $4.72B, up 8% QoQ and 24.4% YoY. Gross margin: 49.0% (record since Novelis merger). Operating margin: ~33.1%. Net income: $1.33B; EPS (GAAP/Non-GAAP) ~ $1.04/$1.033. Cash flow: Operating cash flow $1.309B; Capex $288M; Free cash flow $1.021B. Balance sheet: Cash & equivalents $5.45B; total debt $4.48B; net debt as of quarter-end: net cash ~$0.97B. Deferred revenue: ~$2.0B. CAS and CSBG upgrades and services contributed to Revenue mix with Foundry 48% of systems revenue, NAND/Memory 43% of systems revenue, and Logic/Other 9%. Regional mix: China ~31% of total, Taiwan and Korea ~24% each. Guidance for Q4: Revenue around $5.0B (+/-$0.3B); GM ~49.5% +/-1pp; OPM ~33.5% +/-1pp; EPS ~$1.20 +/- $0.10.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.72B |
24.43% |
7.86% |
| Gross Profit |
2.31B |
27.48% |
11.61% |
| Operating Income |
1.56B |
43.60% |
17.08% |
| Net Income |
1.33B |
37.78% |
11.73% |
| EPS |
1.04 |
40.45% |
11.45% |
Key Financial Ratios
operatingProfitMargin
33.1%
operatingCashFlowPerShare
$1.02
freeCashFlowPerShare
$0.8
dividendPayoutRatio
22.2%
Management Commentary
- Strategy and market position: Lam reiterated a clear outperformance framework focused on SAM expansion, top-tier product portfolio (including Gate All Around, backside power distribution, advanced packaging, and dry EUV processing), and CSBG-driven revenue growth. Management emphasized the acceleration in deposition and etch technology inflections and highlighted Halo molybdenum, ACARA, and ALD progress as catalysts.
- Operational execution and product momentum: Lam pointed to record foundry revenues and the highest gross margin since the Novelis deal, crediting manufacturing proximity to customers and supply-chain efficiencies. The company also highlighted deepening adoption of Halo MO and the Halo ALD process, which support higher IO in 3D NAND and broader adoption in leading-edge fabs.
- Tariffs and macro environment: Management described actions to mitigate tariff impact and preserve throughput, noting a flexible, near-to-customers manufacturing footprint and regional capacity to respond to evolving trade rules. They acknowledged tariff headwinds are reflected in guidance but remain optimistic about resilience due to multi-regional manufacturing and deployable assets.
- Customer engagement and services: Lam underscored upgrades (CSBG) as a major growth driver, including multi-year spare agreements and ongoing collaboration on operating-cost optimization. They also highlighted services, Cobots, and AI-enabled equipment intelligence as a pathway to expand CSBG revenue and installed-base monetization.
- Long-term runway and capital allocation: Executives emphasized Lam’s ability to outperform WFE by maintaining leadership in new tooling, upgrades, and automation, complemented by strategic investments (e.g., India lab expansion) and a disciplined capital-return program (significant share repurchases and note retirement).
“Lam's March quarter results reflect continued strength with revenues, gross margin, operating margin, and EPS all exceeding the midpoint of our guidance.”
— Tim Archer
“We are off to a strong start in 2025. The March quarter's performance exceeded the midpoint of all of our guidance ranges that we gave on the last earnings call.”
— Doug Bettinger
Forward Guidance
Lam maintains an assertive near-term guidance trajectory with Q4 2025 revenue of about $5.0B (±$300M) and gross margin ~49.5% (±1pp), translating to an operating margin around 33.5% (±1pp) and EPS near $1.20 (±$0.10) on ~1.28B shares. This guidance implies continued margin expansion and a high-water mark for profitability not seen since the late 1990s, supported by a favorable mix (foundry and NAND upgrades) and cost-control benefits from the close-to-customer manufacturing model. Management frames the guidance as conservative in light of tariff uncertainty but notes no anticipated pull-ins from future quarters and the belief that WFE demand will remain solid around the $100B calendar-year 2025 target. The key factors investors should monitor include: (1) tariff policy and potential regional supply-chain adjustments; (2) the pace of 2XX+ NAND layer upgrades and the mix shift toward CSPG upgrades and new tooling (Halo/Mo, backside deposition, ALD gap fill); (3) foundry demand dynamics particularly from GAA adoption and advanced packaging; (4) CSBG upgrade cycle and demand for spare parts under a shifting China/domestic demand profile; (5) China revenue mix versus other regions and its impact on gross margins; and (6) the durability of the AI/data-center spend cycle that Lam seeks to capitalize on through Simulator 3D licensing and semi-verse offerings.