Lam Research Corporation (LRCX) 2024 Q4 Earnings Call Summary

Optimistic Highlights

• Solid Quarterly Results: Lam Research reported revenues, profitability, and earnings per share all above the midpoint of guidance for the June quarter.
• Strong CSBG Growth: The Customer Support Business Group (CSBG) revenue increased by 22% sequentially, driven by Reliant systems and spares.
• Manufacturing Milestone: Achieved a key milestone with the Malaysia factory shipping its 5,000th chamber, marking the fastest ramp of a new manufacturing facility in Lam's history.
• Strategic Investments for Future Growth: Prioritized investments in product development, global R&D infrastructure, and digital transformation to position Lam for multiyear WFE spending expansion.
• Positive NAND and DRAM Outlook: Anticipated growth in WFE spending for 2025, with strong demand for GPUs and HBM driven by AI, and significant opportunities in memory upgrades, especially in NAND.

Pessimistic Highlights

• Gross Margin Headwinds: Anticipated slight incremental headwind in gross margin in the December quarter due to unfavorable customer mix changes.
• Mature Node Spending Flat: Global spending on mature node technologies expected to be roughly flat year-on-year, with mature and specialty fabs utilization still soft outside China.

Company Outlook

• Revenue and Profitability Guidance: For the September 2024 quarter, revenue is expected to be $4.05 billion, plus or minus $300 million, with a gross margin of 47%, plus or minus 1 percentage point.
• Long-term Growth Opportunities: Lam is well-positioned to capitalize on the increase in etch and deposition intensity, delivering new capabilities at multiple new manufacturing inflections.
• Investor Day Announcement: Planning to hold an Investor Day in February 2025 to share progress and long-term financial model.

Q & A Highlights

• Q: Can you clarify the service system mix in the guidance? (Timothy Arcuri, UBS)

  A: We now expect CSBG to grow modestly for the year, particularly strong in the June quarter. Not providing individual components of the forecast. (Douglas Bettinger)

• Q: Can you discuss your leverage to DRAM and investments to gain share? (Timothy Arcuri, UBS)

  A: Highlighted progress in conductor etch for future DRAM challenges. Strong position in advanced packaging and HBM related expansion. (Timothy Archer)

• Q: How to think about China into the back half of this calendar year and into calendar 2025? (Krish Sankar, Cowen & Company)

  A: China spending up this year, somewhat first half weighted. Expect a solid year in China for 2025. (Douglas Bettinger)

• Q: Can you discuss the transition to 4F2 DRAM and quantify the opportunity for Lam? (Krish Sankar, Cowen & Company)

  A: Not prepared to quantify today, but see each technology inflection as an opportunity for SAM expansion and share gain. (Timothy Archer)

• Q: On DRAM recovery and HBM as a secular driver, why has DRAM revenue been declining? (Srinivas Pajjuri, Raymond James)

  A: Mature DRAM spending reset offset by growth in HBM. Expect DRAM demand for equipment to grow through 2025 and beyond. (Timothy Archer)

• Q: On CSBG business being up 22% sequentially, is this sustainable? (Srinivas Pajjuri, Raymond James)

  A: Long-term, CSBG will return to growth, next year likely biased towards upgrades as customers start to do fab upgrades. (Timothy Archer)

• Q: Can you focus on gross margins and the impact of Malaysia and upgrade drivers? (CJ Muse, Cantor Fitzgerald)

  A: Incremental volume will be supported from Asia factories, beneficial to gross margin. Too soon to guide for next year. (Douglas Bettinger)

• Q: On the 7,500 high aspect ratio etch chambers installed in NAND, what growth could this add to overall NAND WFE? (CJ Muse, Cantor Fitzgerald)

  A: Haven't quantified, but installed base becomes a powerful driver of revenue during upgrade cycles. (Timothy Archer)

• Q: On export controls and China customer behavior, are you seeing any changes? (Joseph Moore, Morgan Stanley)

  A: No noticeable change in behavior from China customers. Engaging in ongoing discussions with U.S. government and regulatory agencies. (Timothy Archer)

• Q: On the third-generation cryo tool, how is it fundamentally different or better than competitors? (Toshiya Hari, Goldman Sachs)

  A: Based on new surface chemistries and hardware capabilities, delivering unprecedented etch results and higher ion energy. (Timothy Archer)

• Q: On CSBG growth for the full year, has the view changed? (Toshiya Hari, Goldman Sachs)

  A: Now expect CSBG to modestly grow this year versus last year, driven by Reliant and spares improvement. (Douglas Bettinger)

• Q: On gate all around revenues in 2024, is the $1 billion target still the case? (Melissa Weathers, Deutsche Bank)

  A: The $1 billion forecast for gate all around likely to go higher next year, with additional wins in selected etch and ALD films. (Timothy Archer)