Lam Research Corporation (LRCX) - Q2 2026 Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended December 28, 2025 (Fiscal Q2 2026). Lam Research is a global supplier of wafer fabrication equipment and services, serving memory, foundry, and logic/integrated device manufacturing markets. The company operates in seven geographic regions, with significant exposure to China, Taiwan, and Korea.
Key Financial Metrics
| Metric (in millions) | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $5,344.8 | $4,376.0 | $10,669.0 | $8,544.0 |
| Gross Margin | $2,651.2 | $2,073.0 | $5,336.0 | $4,075.7 |
| Gross Margin % | 49.6% | 47.4% | 50.0% | 47.7% |
| Operating Income | $1,810.2 | $1,333.9 | $3,639.3 | $2,598.1 |
| Net Income | $1,594.0 | $1,191.0 | $3,162.7 | $2,307.5 |
| Diluted EPS | $1.26 | $0.92 | $2.50 | $1.78 |
| Cash & Equivalents | $6,180.4 million (as of Dec 28, 2025) | |||
| Operating Cash Flow (6mo) | $3,259.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 22% year-over-year (YoY) for the quarter and 25% YoY for the six-month period. Growth was driven by increased Foundry equipment spending and higher customer support-related revenue.
- Margin Expansion: Gross margin percentage improved to 49.6% from 47.4% YoY, attributed to favorable customer mix, partially offset by reduced factory efficiencies due to tariff-related spend.
- Geographic Shifts: China revenue grew significantly to $1.86 billion (35% of total) for the quarter, up from $1.34 billion in the prior year. Taiwan and Japan also saw substantial increases.
- Expense Management: Operating expenses increased due to higher employee-related costs (headcount growth) and R&D investments, but remained relatively flat quarter-over-quarter.
Outlook, Risks, and Management Commentary
- Deferred Revenue: The deferred revenue balance decreased to $2.25 billion from $2.77 billion in the prior quarter, reflecting a decrease in customer down payments.
- Capital Allocation: The company remains aggressive on capital return. In the six months ended Dec 28, 2025, Lam repurchased $2.44 billion of stock and paid $619.5 million in dividends. Approximately $5.09 billion remains available under the current repurchase program.
- Tax Environment: The effective tax rate was 13.2% for the quarter. Management noted the impact of the "One Big Beautiful Bill Act" (OBBBA) signed in July 2025 and the full effectiveness of the OECD's Global Minimum Tax (GMT), though the impact was deemed not material.
- Risks: Key risks include geopolitical tensions and export controls affecting sales to China, supply chain disruptions, and the cyclical nature of the semiconductor industry. Management highlighted that volatility in the industry environment from trade restrictions and tariffs could negatively impact revenue and margins.
Investor Verification Checklist
- China Exposure: Verify the sustainability of the 35% revenue concentration in China amidst evolving U.S. export controls and potential retaliatory trade measures.
- Deferred Revenue Trend: Monitor the decline in deferred revenue ($2.25B) as a leading indicator for future booking momentum.
- Margin Sustainability: Assess whether the 49.6% gross margin is sustainable given the noted "unfavorable changes in customer mix" and tariff-related costs.
- Capital Return Policy: Confirm the Board's commitment to the current $10 billion repurchase authorization and dividend policy in light of the $6.2 billion cash balance.
- Foundry vs. Memory Mix: Track the shift in revenue mix toward Foundry (59% of leading-edge revenue) versus Memory (34%) to understand demand drivers.