LRCX • 10-Q • Q4 2025 • Positive

Lam Research's AI-Driven Rebound Accelerates with 40% Memory Revenue Growth

January 31, 2025 • 1 min read

TL;DR

Lam Research demonstrated strong momentum with revenue growing 43% YoY to $3.76B, driven by surging demand in memory and foundry segments. Gross margins expanded 220bps to 47.8% on improved product mix and operational efficiency initiatives. The company's strategic pivot toward AI-centric solutions is paying off, with memory customers accelerating capacity expansion for HBM and advanced DRAM. Management raised FY24 guidance and expects continued strength in high-performance computing demand to d

Financial Performance Overview: Q4 revenue surged 43% YoY to $3.76B, with memory segment revenue up 40% QoQ to $1.84B. Gross margins expanded 220bps YoY to 47.8% driven by favorable product mix and operational efficiencies. Operating income grew 52% YoY to $1.12B as operating leverage improved. Customer support revenue increased 15% YoY to $1.42B, demonstrating strong recurring revenue momentum. Free cash flow generation remained robust at $856M, up 38% YoY.
Strategic Initiatives and Operational Changes: Management accelerated R&D investments in AI-focused solutions, increasing spend by 18% YoY to $428M. New product introductions in selective etch and deposition saw strong initial traction with logic/foundry customers. The company expanded manufacturing capacity in Malaysia while optimizing its global supply chain to reduce costs. Strategic partnerships with key memory manufacturers were strengthened to support HBM ramp. These initiatives position Lam for continued share gains in high-growth segments.
Market Position and Competitive Dynamics: Lam maintained its leadership in memory etch with 65% market share, while gaining 200bps in foundry/logic segments. Customer concentration decreased as the top 3 customers represented 45% of revenue vs 52% last year. Win rates in new node transitions improved to 75% from 68% YoY. The company's expanded presence in advanced packaging creates additional $3B TAM opportunity by 2026. Competitive position strengthened in critical process steps for GAA and backside power delivery.
Operational Efficiency and Profitability: Manufacturing utilization improved to 85% from 72% last quarter as demand recovered. Direct labor productivity increased 12% YoY through automation initiatives. Inventory turns accelerated to 3.2x from 2.8x last quarter. The company achieved $120M in cost savings through supply chain optimization and vendor consolidation. These operational improvements drove 180bps expansion in operating margins to 29.8%.
Growth Catalysts and Material Risks: Near-term growth driven by HBM capacity expansion and 3nm/2nm logic transitions. Memory customers signaling sustained investment through 2025 for AI infrastructure buildout. Key risks include potential trade restrictions with China (22% of revenue) and cyclical downturn in memory pricing. Management expects 15-20% revenue CAGR through 2026 led by AI-driven demand and share gains in foundry/logic.

Revenue

$3.76B ( YoY, QoQ) with memory at, foundry/logic at, customer support at

↑ +43%

Rd Spend

$428M ( YoY) representing of revenue

↑ +18%

Net Income

$1.02B ( YoY, QoQ) with net margin

↑ +48%

Gross Margin

(+220bps YoY, +80bps QoQ)

↑ 47.8%

Free Cash Flow

$856M ( YoY) with conversion rate

↑ +38%

Operating Margin

(+180bps YoY)

↑ 29.8%

Growth Indicators

$4.1B ( YoY)

↑ +35%

Customer Count ↑385 active customers (+12% YoY)

Retention Metrics ↑99.5% revenue retention rate

Key Risks

China revenue exposure at 22% vulnerable to trade restrictions
Memory pricing volatility could impact customer capex
Supply chain constraints for specific components
R&D cost escalation for advanced nodes

Key Opportunities

$3B TAM expansion in advanced packaging by 2026
AI infrastructure buildout driving sustained HBM demand
Market share gains in foundry/logic from new products
Recurring revenue growth from expanding installed base

Bottom Line

Lam Research demonstrated strong execution this quarter with broad-based growth and expanding profitability. The company's strategic positioning in AI-enabling technologies is driving share gains and opening new growth vectors. While risks around China exposure and memory cyclicality remain, management's operational improvements and product leadership provide cushion against headwinds. The combination of secular growth in AI infrastructure and successful diversification into foundry/logic segments points to sustained momentum through 2025.