[Translation by ChatGPT] Lam Research Corporation (LRCX) Q4 2025 Earnings Call Transcript

Lam Research Corporation (NASDAQ:LRCX) Q4 2025 Earnings Conference Call July 30, 2025 5:00 PM ET

Timothy M. Archer
Timothy M. Archer

Thanks, Ram, and good afternoon, everyone.
Thanks, Ram, and good afternoon, everyone.

Lam delivered another great quarter.
Lam delivered another great quarter.

Revenues and profitability came in at the upper end of our guided ranges.
Revenues and profitability came in at the upper end of our guided ranges.

Our gross margins exceeded 50% for the first time since the merger of Lam and Novellus and EPS hit a new high for the company.
Our gross margins exceeded 50% for the first time since the merger of Lam and Novellus and EPS hit a new high for the company.

We achieved record foundry revenues driven by strong performance in both gate-all-around and mature node markets.
We achieved record foundry revenues driven by strong performance in both gate-all-around and mature node markets.

And again, our upgrades business grew to a new high, up mid-teens percent over the prior quarter as NAND customers migrate to higher layer count, higher performance devices to meet the faster read write requirements and greater storage demands of AI applications.
And again, our upgrades business grew to a new high, up mid-teens percent over the prior quarter as NAND customers migrate to higher layer count, higher performance devices to meet the faster read write requirements and greater storage demands of AI applications.

In short, we are executing well on the served market expansion and share growth story we laid out at our Investor Day earlier this year.
In short, we are executing well on the served market expansion and share growth story we laid out at our Investor Day earlier this year.

3D scaling of device and advanced packaging architectures is accelerating growth in etch and deposition intensity, and Lam's new products targeting key technology inflections are winning with customers.
3D scaling of device and advanced packaging architectures is accelerating growth in etch and deposition intensity, and Lam's new products targeting key technology inflections are winning with customers.

Furthermore, in advanced services, Lam is at the forefront of realizing the vision of an autonomous fab.
Furthermore, in advanced services, Lam is at the forefront of realizing the vision of an autonomous fab.

We are gaining momentum with our Equipment Intelligence enabled Dextro cobots, which provide device makers with an unprecedented level of equipment maintenance precision and repeatability.
We are gaining momentum with our Equipment Intelligence enabled Dextro cobots, which provide device makers with an unprecedented level of equipment maintenance precision and repeatability.

The result is enhanced tool-to-tool matching, improved machine availability, lower operational costs and, in some cases, higher yield.
The result is enhanced tool-to-tool matching, improved machine availability, lower operational costs and, in some cases, higher yield.

In the June quarter, Lam expanded our Dextro capabilities to cover 3 additional tool types, and we are accelerating the road map to support more products and more shipments in coming quarters.
In the June quarter, Lam expanded our Dextro capabilities to cover 3 additional tool types, and we are accelerating the road map to support more products and more shipments in coming quarters.

Turning to the overall market environment for calendar year 2025.
Turning to the overall market environment for calendar year 2025.

We expect wafer fabrication equipment, or WFE, spending to be in the $105 billion range, up from our prior view of approximately $100 billion, predominantly due to an uptick in domestic China related spending.
We expect wafer fabrication equipment, or WFE, spending to be in the $105 billion range, up from our prior view of approximately $100 billion, predominantly due to an uptick in domestic China related spending.

We see non-China investments remaining broadly consistent with our prior view.
We see non-China investments remaining broadly consistent with our prior view.

Currently, we expect WFE in the second half of the calendar year to be roughly flat with the first half.
Currently, we expect WFE in the second half of the calendar year to be roughly flat with the first half.

Looking forward to 2026, it is still too early to comment on the overall level of WFE spending.
Looking forward to 2026, it is still too early to comment on the overall level of WFE spending.

However, our strong position in gate-all-around, advanced packaging, high-bandwidth memory and NAND layer conversions gives us confidence that Lam is well positioned to outperform.
However, our strong position in gate-all-around, advanced packaging, high-bandwidth memory and NAND layer conversions gives us confidence that Lam is well positioned to outperform.

In 2025, Lam's served available market, or SAM, is set to expand to around mid-30s percent of WFE due to these industry drivers and we expect them to work in Lam's favor again in 2026.
In 2025, due to these industry drivers, Lam's served available market (SAM) is expected to expand to around the mid-30s percent of WFE, and we expect it to work in our favor again in 2026.

Longer term, we are on a solid path to grow our SAM to the high 30% range of WFE by continuing to deliver critical solutions for atomic level device scaling, new materials innovation and advanced packaging integration.
In the long term, we are on a solid path to grow our SAM to the high 30% range of WFE by continuing to deliver critical solutions for atomic-level device scaling, new materials innovation, and advanced packaging integration.

The key R&D investments that we've made over the last several years have enabled us to create the broadest, most competitive product portfolio in the company's history, thereby putting us in a strong position to win over 50% share of the incremental SAM over time.
The R&D investments we have made over the past several years have enabled us to build the broadest and most competitive product portfolio in the company's history, establishing a strong position to capture over 50% of the incremental SAM in the future.

I'll share a couple of examples that underscore our early progress towards our SAM expansion and share gain goals.
I will share a few examples that demonstrate our initial progress toward our SAM expansion and share gain goals.

First is our Halo ALD Moly tool, which is ramping at multiple NAND customers this year.
The first is our Halo ALD Molybdenum tool, which is ramping up at multiple NAND customers this year.

We expect moly adoption to increase broadly as more customers convert NAND capacity to 200 layers and higher in the next few years.
We expect molybdenum adoption to increase significantly as more customers transition NAND capacity to 200 layers and higher over the next few years.

Lam is leading the industry transition to ALD Moly not only in NAND, but also in foundry/logic.
Lam is leading the industry transition to ALD Molybdenum not only in NAND, but also in the foundry/logic sector.

AI is driving greater transistor performance requirements and, in turn, accelerating the inflection to gate-all-around device architectures.
AI is driving higher transistor performance requirements, which in turn is accelerating the transition to gate-all-around architectures.

However, below 2 nanometers, gate-all-around structures begin to encounter significant resistance capacitance or RC challenges.
However, below 2 nanometers, gate-all-around structures begin to face significant resistance-capacitance (RC) challenges.

Narrower transistor contacts in these devices cause greater electron scattering, resulting in higher resistance of the deposited tungsten films.
In these devices, narrower transistor contacts cause increased electron scattering, resulting in higher resistance of the deposited tungsten films.

Replacing tungsten with molybdenum solves the resistance problem, but the process of depositing this higher performance material is inherently slower and more complex.
Replacing tungsten with molybdenum solves the resistance problem, but the process of depositing this high-performance material is inherently slower and more complex.

This is driving a roughly 3x increase in Lam metal deposition SAM per wafer when transitioning to advanced gate-all-around nodes.
As a result, Lam's metal deposition SAM per wafer increases by approximately 3x when transitioning to advanced gate-all-around nodes.

Today, we are the only company with ALD Moly tools already in production in foundry/logic.
Currently, we are the only company with ALD Molybdenum tools already in production for foundry/logic.

And in the June quarter, we secured a key win at another leading foundry customer for their next-generation application.
And in the June quarter, we secured a key win at another leading foundry customer for their next-generation application.

As moly adoption expands across various metal interconnect layers, the flexibility of Lam's unique multistation architecture to execute both plasma and thermal processing in the same chamber enables optimization of process conditions and process step sequencing to meet requirements for different applications and over multiple generations of future logic devices.
As molybdenum adoption expands across various metal interconnect layers, the flexibility of Lam's unique multistation architecture, which allows for both plasma and thermal processing in the same chamber, enables the optimization of process conditions and step sequencing to meet the requirements of different applications and future generations of logic devices.

Another area where we have made strong progress is advanced packaging.
Another area where we have made strong progress is advanced packaging.

Advanced packaging is critical for scaling system performance to address next-generation AI requirements and so far has enabled up to 100% improvement in memory density, 4x improvement in bandwidth and an approximate 40% gain in power efficiency.
Advanced packaging is critical for scaling system performance to meet next-generation AI requirements, and so far it has enabled up to a 100% improvement in memory density, a 4x improvement in bandwidth, and an approximate 40% gain in power efficiency.

Lam SAM is growing with greater adoption of next-generation packaging architectures for DRAM, CPUs, GPUs and ASICs used in data centers.
Lam's SAM is growing with the increased adoption of next-generation packaging architectures for DRAM, CPUs, GPUs, and ASICs used in data centers.

In 2021, leading-edge foundry/logic customers spent just 1% of WFE on advanced packaging.
In 2021, leading-edge foundry/logic customers spent only 1% of WFE on advanced packaging.

With AI's rapid adoption of advanced packaging, that number has grown more than 6x.
With the rapid adoption of advanced packaging for AI, that figure has grown more than 6x.

In the future, we expect end consumer devices like mobile application processors and laptop CPUs to also feature more complex packaging schemes as on-device AI becomes mainstream.

We are a leader in the advanced packaging inflection and are leveraging our experience to win more opportunities.

For example, Lam has built unmatched experience in copper plating hardware design and process technology over the last 20 years.

We have, by far, the largest installed base in the industry and recently achieved a significant milestone of 6,000 installed plating cells.

By incorporating our learning from the installed base into improvements in our latest SABRE 3D system, we are delivering best-in-class collinearity, uniformity and defectivity in high-volume advanced packaging environments.

The experience we have gained at the leading edge is now cascading to additional wins with next tier customers seeking to adopt a proven best-in-class solution.

SABRE 3D market share in advanced packaging is expected to grow nearly 5 points year-on-year in calendar 2025.

Finally, let me pivot to the strong momentum we're seeing with our newest generation etch tools.

In NAND, we continue to solidify our leadership in high aspect ratio dielectric etch.

Equipped with our cryo process, our Vantex system recently won a key multigeneration etch decision at a major NAND customer.

This further confirms our differentiation in both technology innovation and high-volume production worthiness in the NAND segment.

Across all device types, our state-of-the-art conductor etch tool Akara is off to a solid start since its launch earlier this year.

By combining direct power coupling with Lam's unique plasma pulsing capabilities, Akara delivers industry-leading depth uniformity and profile control that is vital for DRAM scaling.

In the June quarter, Akara secured multiple new application wins at a top DRAM maker.

So to wrap up, I'm excited by the breadth of opportunities I see ahead for the company and encouraged by the outstanding progress our team has already made for the long-term goals we communicated at our February Investor Day.

Etch and deposition intensity is rising with 3D scaling.

Our products are winning in key technology inflections.

And as a result, there is tremendous potential for Lam to continue expanding SAM and to grow share at each successive process technology node.

Now here's Doug to talk about our quarterly financial performance and the September outlook.

Douglas R. Bettinger

Excellent. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today during what I know is a busy earnings season.
Excellent. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today during what I know is a busy earnings season.

We executed well on the June 2025 quarter, including delivering a record gross margin percentage of 50.3% in the post Novellus period.
We executed well on the June 2025 quarter, including delivering a record gross margin percentage of 50.3% in the post-Novellus period.

These past two quarters represent Lam's highest gross margin percentage since we merged the companies in 2012.
These past two quarters represent Lam's highest gross margin percentage since we merged the companies in 2012.

Our June quarter financial results came in above the midpoint of all of our guidance ranges with earnings per share actually exceeding the guidance range.
Our June quarter financial results came in above the midpoint of all of our guidance ranges, with earnings per share actually exceeding the guidance range.

For our 2025 fiscal year, we had record revenue of $18.4 billion and gross margin of 48.8%.
For our 2025 fiscal year, we had record revenue of $18.4 billion and a gross margin of 48.8%.

Our free cash flow generation in fiscal '25 was 29% of revenue and approximately $5.4 billion, which was also a record for the company in dollar terms.
Our free cash flow generation in fiscal '25 was 29% of revenue and approximately $5.4 billion, which was also a record for the company in dollar terms.

We're delivering on the profitability objectives discussed at our Investor Day earlier this year through a growing top line, favorable mix and strong operational execution.
We are delivering on the profitability objectives discussed at our Investor Day earlier this year through a growing top line, favorable mix, and strong operational execution.

First, the details of our June quarter results.
First, the details of our June quarter results.

Revenue came in at $5.17 billion, which was an increase of 10% from the prior quarter.
Revenue came in at $5.17 billion, which was an increase of 10% from the prior quarter.

The deferred revenue balance at the end of the quarter was $2.68 billion, which was an increase of approximately $670 million from the March quarter.
The deferred revenue balance at the end of the quarter was $2.68 billion, which was an increase of approximately $670 million from the March quarter.

This was related to customer advance payments from several newer customers.
This was related to customer advance payments from several newer customers.

From a market segment perspective, June quarter systems revenue in the foundry segment represented 52% of our systems revenue, an increase from the percentage concentration in the March quarter of 48%.
From a market segment perspective, June quarter systems revenue in the foundry segment represented 52% of our systems revenue, an increase from the 48% concentration in the March quarter.

In dollar terms, this level represents a second consecutive record quarter, and we also set a new record from a fiscal year perspective.
In dollar terms, this level represents a second consecutive record quarter, and we also set a new record from a fiscal year perspective.

We benefited from continued momentum in leading-edge processes as well as investments in mature nodes by domestic Chinese customers.
We benefited from continued momentum in leading-edge processes as well as investments in mature nodes by domestic Chinese customers.

Foundry was 41% of systems revenue, a slight decrease from the prior quarter level of 43%.
Foundry was 41% of systems revenue, a slight decrease from the prior quarter level of 43%.

Non-volatile memory came in at 27% of our systems revenue, which was higher than the March quarter's level of 20%.
Non-volatile memory came in at 27% of our systems revenue, which was higher than the March quarter's level of 20%.

We continue to encourage you to think of NAND investments focused primarily on upgrades, which we anticipate will require an investment of roughly $40 billion over several years.
We continue to encourage you to think of NAND investments as focused primarily on upgrades, which we anticipate will require an investment of roughly $40 billion over several years.

DRAM declined from the March quarter, coming in at 14% of systems revenue compared with 23% last quarter.
DRAM declined from the March quarter, coming in at 14% of systems revenue compared with 23% last quarter.

The decline in the June quarter was related to the timing of certain customer projects.
The decline in the June quarter was related to the timing of certain customer projects.

For the 2025 fiscal year, DRAM revenue reached a new record in dollar terms, with spending focused on technology upgrades to the 1-beta and 1-gamma nodes enabling DDR5 and LPDDR5.
For the 2025 fiscal year, DRAM revenue reached a new record in dollar terms, with spending focused on technology upgrades to the 1-beta and 1-gamma nodes enabling DDR5 and LPDDR5.

High Bandwidth Memory was also a key investment area.
High Bandwidth Memory was also a key investment area.

Our logic and other segment came in at 7% of systems revenue in the June quarter, slightly lower than the prior quarter level of 9%.
The logic and other segment accounted for 7% of systems revenue in the June quarter, slightly lower than the 9% level in the previous quarter.

Now I'll go through the regional composition of our total revenue.
Now, I will explain the regional composition of our total revenue.

The China region came in at 35%, an increase from the prior quarter level of 31%.
The China region accounted for 35% of revenue, an increase from 31% in the previous quarter.

We saw increasing investment from global multinational customers in this region to the highest level since the December quarter of 2022.
In this region, we saw investment from global multinational customers increase to the highest level since the December quarter of 2022.

The majority of our China revenue, nonetheless, continued to come from domestic Chinese customers.
Nevertheless, the majority of our revenue in China continued to come from domestic Chinese customers.

The next largest geographic concentrations were Korea at 22% and Taiwan at 19% of revenue in the June quarter, both of which were a decrease from 24% concentration in the March quarter.
The next largest geographic concentrations in the June quarter were Korea at 22% and Taiwan at 19% of revenue, both of which decreased from the 24% concentration seen in the March quarter.

Japan revenue at 14% was a record for Lam in dollar terms.
Revenue from Japan at 14% was a record for Lam in dollar terms.

The Customer Support Business Group revenue in the June quarter totaled approximately $1.7 billion, consistent with the March quarter as well as the June quarter of a year ago.
Revenue for the Customer Support Business Group in the June quarter totaled approximately $1.7 billion, consistent with both the March quarter and the June quarter of the previous year.

We had a third consecutive record quarter for upgrade revenue driven by NAND technology conversions.
We achieved a third consecutive record quarter for upgrade revenue, driven by NAND technology conversions.

We also saw strength in our spares business, offset by a decline in Reliant Systems.
We also saw strength in our spares business, which was offset by a decline in Reliant Systems.

Sitting here today, we do think we will see modest growth in CSBG for the calendar year.
As we sit here today, we believe we will see modest growth in CSBG for the calendar year.

Let's look at profitability.
Let's look at profitability.

The June quarter gross margin came in at 50.3%, close to the top end of our guided range and improving from the March quarter level of 49%.
The gross margin for the June quarter was 50.3%, near the top end of our guided range and an improvement from the 49% level in the March quarter.

The increase is tied to a stronger mix and continued progress in our operational efficiencies from our close-to-customer manufacturing strategy.
The increase is tied to a stronger product mix and continued progress in operational efficiencies resulting from our close-to-customer manufacturing strategy.

Operating expenses for the June quarter were $822 million, up from the prior quarter level of $763 million.
Operating expenses for the June quarter were $822 million, up from $763 million in the previous quarter.

This was a bit higher than our original estimate coming into the quarter, primarily due to increased incentive compensation tied to the company's improved profitability.
This was slightly higher than our original estimate at the start of the quarter, primarily due to increased incentive compensation tied to the company's improved profitability.

R&D accounted for 69% of total operating expenses.
R&D accounted for 69% of total operating expenses.

The June quarter operating margin was 34.4% and near the high end of our guidance.
The operating margin for the June quarter was 34.4%, near the high end of our guidance.

This operating profit represents a record level for Lam in both dollars as well as percentage terms.
This operating profit represents a record level for Lam in both dollar and percentage terms.

Our non-GAAP tax rate for the quarter came in at 4.8%.
The non-GAAP tax rate for the quarter was 4.8%.

As I indicated on the last earnings call, the rate in the June quarter reflects a tax reserve release tied to a statute of limitations expiration.
As I mentioned in the previous earnings call, this tax rate reflects a release of tax reserves due to the expiration of the statute of limitations.

Our estimate for the September '25 quarter is for the tax rate to be back in the low- to mid-teens range.
We expect the tax rate for the September '25 quarter to return to the low- to mid-teens range.

Other income and expense for the June quarter was approximately $4 million in income compared with $7 million in expense in the March quarter.
Other income and expense for the June quarter was approximately $4 million in income, an improvement from the $7 million in expense in the March quarter.

The improvement in OI&E was primarily the result of increased interest income tied to a higher cash balance as well as gains on our venture investment portfolio.
The primary reason for the improvement was increased interest income due to a higher cash balance, as well as valuation gains on our venture investment portfolio.

As we've talked about in the past, you should expect to see variability in OI&E quarter-to-quarter.
As we have discussed in the past, please note that other income and expense will fluctuate from quarter to quarter.

For capital return in the June quarter, we allocated approximately $1.3 billion to share buybacks, through a combination of open market share repurchases and an accelerated share repurchase program that ASR will continue to execute into the September quarter.
For capital returns in the June quarter, we allocated approximately $1.3 billion to share buybacks through a combination of open market repurchases and an accelerated share repurchase program, which will continue to be executed in the September quarter.

We also paid $295 million in dividends.
We also paid $295 million in dividends.

The June quarter diluted earnings per share were $1.33, exceeding the high end of our guidance range driven by that higher revenue, stronger gross margin performance and the lower tax rate.
Diluted earnings per share for the June quarter were $1.33, exceeding the high end of our guidance due to higher revenue, improved gross margin, and a lower tax rate.

The diluted share count was 1.28 billion shares, which was a reduction from the March quarter and was consistent with our guidance.
The diluted share count was 1.28 billion shares, a decrease from the March quarter, which was in line with our guidance.

We have $7.5 billion remaining on our Board-authorized share repurchase program.
We have $7.5 billion remaining in our Board-authorized share repurchase program.

Let me pivot to the balance sheet.
Let me move on to the balance sheet.

Cash and cash equivalents totaled $6.4 billion at the end of the June quarter, an increase from $5.5 billion at the end of the March quarter.
Cash and cash equivalents totaled $6.4 billion at the end of the June quarter, an increase from $5.5 billion at the end of the March quarter.

The main reason for the cash increase was cash from operating activities, including those customer advance payments, which was partially offset by cash allocated to the share buyback, dividends and capital expenditures.
The main reason for the increase was cash from operating activities (including customer advance payments), which was partially offset by cash allocated to share buybacks, dividends, and capital expenditures.

Days sales outstanding were 59 days in the June quarter, which was down from 62 days in the March quarter.
Days sales outstanding were 59 days in the June quarter, down from 62 days in the March quarter.

June quarter inventory turns improved to 2.4x compared with 2.2x in the prior quarter.
Inventory turnover for the June quarter improved to 2.4x, compared to 2.2x in the previous quarter.

We're making progress in managing inventory levels, and we'll continue to work on this as we go forward.
We are making steady progress in managing inventory levels and will continue to work on this moving forward.

Our non-cash expenses for the June quarter included approximately $94 million in equity compensation, $86 million in depreciation and $12 million in amortization.
Non-cash expenses for the June quarter included approximately $94 million in equity compensation, $86 million in depreciation, and $12 million in amortization.

Capital expenditures were $172 million, which was down from the March quarter level of $288 million.
Capital expenditures were $172 million, down from $288 million in the March quarter.

Spending in the June quarter was mainly centered on lab investments in the United States, in Asia as well as manufacturing facilities in Asia, supporting our global strategy to be close to our customers' development and manufacturing locations.
Spending in the June quarter was mainly focused on lab investments in the United States and Asia, as well as manufacturing facilities in Asia, supporting our global strategy of being close to our customers' development and manufacturing sites.

I would point out that offsetting this capital spending, we received more than $50 million in benefits through the advanced manufacturing investment credit as well as other CHIPS Act-related programs.
To offset a portion of this capital expenditure, we received over $50 million in benefits through the advanced manufacturing investment tax credit and other CHIPS Act-related programs.

We ended the June quarter with approximately 19,000 regular full-time employees, which was an increase of approximately 400 people from the prior quarter.
We ended the June quarter with approximately 19,000 regular full-time employees, an increase of approximately 400 from the previous quarter.

We had headcount increases primarily within R&D to support the long-term product road map.
We increased headcount primarily in R&D to support our long-term product roadmap.

In addition, we had increases within factory and field organizations for increasing manufacturing activities and a higher volume of tool installations.
In addition, we increased headcount in our factory and field organizations to support expanded manufacturing activities and a higher volume of tool installations.

Let's look at our non-GAAP guidance for the September 2025 quarter.
Let's look at our non-GAAP guidance for the September 2025 quarter.

We're expecting revenue of $5.2 billion, plus or minus $300 million.
We expect revenue of $5.2 billion, plus or minus $300 million.

We expect stronger China revenue driven by foundry spending in the September quarter.
We expect stronger revenue from China in the September quarter, driven by foundry spending.

We're expecting gross margin of 50%, plus or minus 1 percentage point.
We expect a gross margin of 50%, plus or minus 1 percentage point.

This guidance includes our current assessment of the direct impact of tariffs on our business.
This guidance includes our current assessment of the direct impact of tariffs on our business.

Operating margins of 34%, plus or minus 1 percentage point.
Operating margins of 34%, plus or minus 1 percentage point.

And finally, earnings per share of $1.20, plus or minus $0.10 based on a share count of approximately 1.27 billion shares.
And finally, earnings per share of $1.20, plus or minus $0.10, based on a share count of approximately 1.27 billion shares.

So let me wrap up.
So let me wrap up.

In completing the first half of the calendar year 2025, I was pleased that we made solid progress on the objectives we shared at the beginning of the year.
As we complete the first half of calendar year 2025, I am pleased that we have made solid progress on the objectives we shared at the beginning of the year.

Sitting here today, as Tim mentioned, we now see WFE relatively balanced half-on-half.
Sitting here today, as Tim mentioned, we now see WFE as relatively balanced between the first and second halves.

We continue to prioritize strategic investments that extend our technology leadership, operational efficiencies and profitability, which reinforces our long-term value creation agenda.
We continue to prioritize strategic investments that extend our technology leadership, operational efficiency, and profitability, which reinforces our long-term value creation agenda.

Operator, that concludes our prepared remarks. Tim and I would now like to open up the call for questions.
Operator, that concludes our prepared remarks. Tim and I would now like to open the call for questions.

Operator
Operator

[Operator Instructions] At this time, we will take our first question, which will come from C.J. Muse with Cantor Fitzgerald.
[Operator Instructions] At this time, we will take our first question, which will come from C.J. Muse with Cantor Fitzgerald.

Christopher James Muse
Christopher James Muse

I guess first question, your tool business is likely growing 3x the growth rate of WFE here in calendar '25, and you indicated expectations for relative outperformance to continue in calendar '26.
I guess my first question is, your tool business is likely growing at 3x the growth rate of WFE in calendar '25, and you indicated expectations for this relative outperformance to continue in calendar '26.

Is there a framework for thinking about rank order of the key drivers of this outperformance that you could share?
Could you share a framework for thinking about the rank order of the key drivers behind this outperformance?

Timothy M. Archer
Timothy M. Archer

Sure. I think it's -- it's all the things that we've talked about in the past.
Sure. I think it's all the things we've discussed in the past.

I mean, clearly, if we look at foundry/logic, I mentioned extensively the discussion of moly today, but we're also looking at other tools around the gate-all-around structure.
I mean, clearly, if we look at foundry/logic, I mentioned the discussion of molybdenum extensively today, but we are also looking at other tools surrounding the gate-all-around structure.

It's things like selective etch, ALD.
These are things like selective etch and ALD.

We still have backside power to come.
We still have backside power delivery to come.

That will be an area we believe of outperformance for Lam given our strength in etch and deposition in the role that it plays there.
We believe that will be an area of outperformance for Lam, given our strength in etch and deposition and the role it plays there.

We continue to see ourselves gaining against WFE the more that advanced packaging is incorporated across every type of device, whether it's foundry/logic, HPM and even in NAND, we're starting to see on every NAND makers roadmap, things like cell bonded to array or cell under array.
We continue to see ourselves gaining against WFE as advanced packaging is incorporated across every type of device, whether it's foundry/logic, HPM, or even NAND; we are starting to see things like cell-bonded-to-array or cell-under-array on every NAND maker's roadmap.

And so really, as I look to the future, I mean it basically is one in which dep and etch intensity just continues to rise faster than WFE.
So really, as I look to the future, I mean it is basically a world where deposition and etch intensity just continue to rise faster than WFE.

Lam has an incredibly strong position already and a portfolio of products that are just doing great in the marketplace.
Lam already has an incredibly strong position and a portfolio of products that are performing very well in the marketplace.

And so I think if we continue to stay focused and execute, it will be those technology drivers that will carry us forward.
So I think if we continue to stay focused and execute, it will be those technology drivers that carry us forward.

Christopher James Muse
Christopher James Muse

Very helpful.
Very helpful.

And then a question for you, Doug.
And then a question for you, Doug.

In terms of gross margins, you've got -- it sounds like some tailwind from China.
In terms of gross margins, you have—it sounds like there is some tailwind from China.

So curious, does that continue into the December quarter?
So I'm curious, will that continue into the December quarter?

And is there kind of a new normalized gross margin ex kind of China that we should be thinking about?
And is there a new normalized gross margin, excluding China, that we should be thinking about?

Timothy M. Archer
Timothy M. Archer

Yes, it's Tim.
Yes, this is Tim.

We are benefiting from a favorable mix, both customer as well as a little bit of product.
We are benefiting from a favorable mix, both in terms of customers and, to a small extent, products.

We do have some level of headwinds as I look forward.
On the other hand, looking ahead, there are some headwinds.

Tariffs are ticking up a little bit.
Tariffs are rising a little bit.

I don't expect, as we get into the December quarter, we're going to continue to have quite as favorable of a level of mix.
I don't expect that we will continue to have such a favorable mix as we enter the December quarter.

And so I'll be pretty direct about how I want everybody thinking about the December gross margin.
So, I will be quite direct about how I want everyone to think about the December gross margin.

You should be kind of thinking about where consensus is today, which is about 48%.
You should think about the current consensus, which is around 48%.

I think that's what you're going to see in December.
I think that is what you will see in the December quarter.

I'm not going to get over the SKUs yet in terms of what you should be thinking about as we head into next year because I'm not exactly sure what the mix is going to be, C.J., but I'll give you a very direct guidance on December, which I just did.
I won't go into details by SKU regarding what you should think about as we head into next year because I'm not exactly sure what the mix will be, C.J., but I will give you very direct guidance for December, which I just did.

Operator
Operator

And our next question will come from Timothy Arcuri with UBS.
Our next question comes from Timothy Arcuri with UBS.

Timothy Michael Arcuri
Timothy Michael Arcuri

Doug, so taking your comment about gross margin being down does made -- and I know it doesn't have a lot to do with volume.
Doug, regarding your comment that gross margin will be down -- and I know it doesn't have much to do with volume.

And also looking at the commentary about WFE being pretty flat half-on-half.
And also looking at the commentary about WFE being fairly flat half-on-half.

I know you're going to gain share on the system side during the back half of the year for sure.
I know you will certainly gain share on the system side during the second half of the year.

But can you give us a little bit of a sense, like do you think that December revenue is down as well just like gross margin? Or do you think it's pretty flat?
But can you give us a sense of whether you think December revenue will also be down, just like the gross margin? Or do you think it will be fairly flat?

Douglas R. Bettinger
Douglas R. Bettinger

Yes, Tim, I mean, you should think about our revenue likely mirroring what we described B2B, right?
Yes, Tim, I mean, you should think of our revenue as likely mirroring what we described for B2B, right?

We told you we now think WFE is roughly flat half-on-half, flattish.
We told you that we now think WFE is roughly flat half-on-half, or flattish.

And if you think through that, you know what March was.
And if you think about that, you know what March was like.

You know that both June and September are roughly the same revenue level so that you should conclude the December quarter look largely top line wise, like March did roughly.
You know that both June and September are at roughly the same revenue level, so you should conclude that the December quarter will look largely similar to March in terms of top line.

Timothy Michael Arcuri
Timothy Michael Arcuri

Got it. Okay. So it is down.
Got it. So it is a decrease.

Okay. Okay. And then...
Okay. Okay. And then...

Douglas R. Bettinger
Douglas R. Bettinger

It will be down, and that's part of the gross margin, Tim.
It will be down, and that is part of the gross margin, Tim.

Timothy Michael Arcuri
Timothy Michael Arcuri

Yes. Okay, cool.
Yes. Okay, cool.

And then can you just talk about just there was -- there's like a lot of puts and takes for next year.
And then can you just talk about the fact that there are a lot of puts and takes for next year?

I know there was a pretty big CapEx cut from a big logic maker.
I know there was a pretty big CapEx cut from a major logic maker.

But it sounds like you still feel like the bias to next year.
But it sounds like you still feel like the bias for next year is positive.

I mean, you're not giving us the number.
I mean, you are not giving us the number.

But if you had to, you would say that the bias to next year is up, is that fair?
But if you had to, you would say that the bias for next year is up, is that fair?

Timothy M. Archer
Timothy M. Archer

Well, we're not going to give a 2026 number.
Well, we are not going to provide a 2026 number.

But I think that what we're trying to do is frame out that regardless of what WFE is, we think that the drivers of WFE spending are significantly in Lam's favor.
But I think what we are trying to do is frame it so that regardless of what WFE is, we believe the drivers of WFE spending are significantly in Lam's favor.

I think that it's just too early.
I think it is just too early.

I mean there are tremendous number of projects in play right now.
I mean, there are a tremendous number of projects in play right now.

It's hard to know exact timing.
It is hard to know the exact timing.

But if you look, what are the drivers for '26, '27, '28, it's what I just talked about in the last question, HPM, advanced packaging, gate-all-around, NAND layer scaling, moly.
But if you look at what the drivers are for '26, '27, and '28, it is what I just talked about in the last question: HPM, advanced packaging, gate-all-around, NAND layer scaling, and molybdenum.

We didn't talk about -- I think mentioned dry resist, EUV patterning.
We didn't talk about -- I think I mentioned dry resist and EUV patterning.

These are all areas where Lam has new products that have been in our customers' R&D facilities for the last several years.
These are all areas where Lam has new products that have been in our customers' R&D facilities for the last several years.

They're ready to go.
They are ready to go.

We don't control the customer's project timing, but we feel incredibly confident that when those projects go, Lam expands our SAM and gain share.
We cannot control the timing of the customer's projects, but we are strongly confident that once those projects move forward, Lam will expand our SAM and gain share.

That might be '26, it might be '27.
That might be in '26, or it might be in '27.

Our strategy doesn't change at this point based on the customers' timing.
Our strategy does not change at this point based on the customers' timing.

We're in the right position.
We are in the right position.

Operator
Operator

Our next question will come from Harlan Sur with JPMorgan.
Our next question will come from Harlan Sur with JPMorgan.

Harlan L. Sur
Harlan L. Sur

Great job on the quarterly execution.
Great job on the quarterly execution.

Your China business was strong in the June quarter.
Your China business was strong in the June quarter.

It was up about 20% sequentially.
It was up about 20% sequentially.

Is the team still embedding about a $700 million negative impact from China in the second half of this year due to the restrictions that were put in place back in December?
Is the team still factoring in about a $700 million negative impact from China in the second half of this year due to the restrictions that were put in place back in December?

But irrespective of that, on top of all of this, you're anticipating a better overall China business this year, right?
But regardless of that, on top of all this, you are anticipating a better overall China business this year, right?

So relative to 90 days ago, what has changed within your China customer base?
So relative to 90 days ago, what has changed within your China customer base?

Do you think that this is a potential pull forward of equipment ahead of any potential tariffs or just more focused on bringing manufacturing capabilities domestically just given the choppy geopolitical environment?
Do you think this is a potential pull-forward of equipment ahead of any potential tariffs, or is it just more focused on bringing manufacturing capabilities domestically, given the choppy geopolitical environment?

Douglas R. Bettinger
Douglas R. Bettinger

Well, Harlan, you stuck like three or four questions in there.
Well, Harlan, you packed about three or four questions in there.

Let me try.
Let me try.

Yes, that $700 million number that was revenue we had identified to specific customers.
Yes, that $700 million figure was revenue we had identified for specific customers.

Regulations haven't changed, so that's no different.
Regulations have not changed, so that is no different.

I think when we think about the fact that WFE is a little bit stronger, and it's driven by a little bit more spending in China, it's just a little bit more spending from a handful of customers is how I would be thinking about it.
I think that WFE is a bit stronger, and it is the result of slightly increased spending in China. The factor is just a bit more investment from a handful of customers, that is all.

It's nearly impossible for us to say it's a pull-in because of any specific reason.
It is nearly impossible for us to definitively say whether it is a pull-in due to any specific reason.

They're just spending a little bit more when we unpack it.
When we break down the details, the situation is simply that they are investing a little bit more.

Harlan L. Sur
Harlan L. Sur

Okay. Perfect.
Understood. Thank you.

And then maybe for Tim, as we track a lot of these next-generation AI, XPU and GPU programs, like many of them are moving from 2.5D to 3D packaging.
Now for Tim. Many of these next-generation AI XPU and GPU programs are moving from 2.5D to 3D packaging.

And then on the flip side, you have memory customers, as you pointed out, are gearing up for a strong migration to HPM 4 next year, some of them are actually signaling increases in spending in the second half of this year, right, versus their expectations coming into the year.
On the other hand, memory customers are preparing for a full-scale migration to HPM 4 next year, and some are even signaling an increase in investment in the second half of this year.

I think you guys did greater than $1 billion in advanced packaging and HPM last year.
I understand that you generated over $1 billion in revenue from advanced packaging and HPM last year.

You came into this year, targeting greater than $3 billion in advanced packaging and gate-all-around.
You set a target of over $3 billion for advanced packaging and gate-all-around this year.

But if you just single out advanced packaging, is that business coming in better versus your expectation of entering this year?
If we look at advanced packaging alone, is the performance exceeding your initial plan from the start of the year?

And is that what is also helping to drive maybe a slightly better second half shipment and revenue profile?
Is that a factor helping to boost shipments and revenue in the second half?

Douglas R. Bettinger
Douglas R. Bettinger

Yes. It's a little bit, Harlan.
Yes, it is contributing somewhat.

I think advanced packaging total is probably a little bit stronger than we expected.
I think advanced packaging as a whole is a bit stronger than we initially anticipated.

It's not wildly stronger.
However, it is not an extreme upside.

But HPM is strong, and there's probably a little bit of upside related to that as well as the China stuff we were talking about.
The strength in HPM and the positive factors related to China are leading to a slight increase.

Timothy M. Archer
Timothy M. Archer

And Harlan, I would just say from a technology perspective, I mean, you kind of hit it.
To add from a technical perspective, you are exactly right.

The packaging schemes are getting more complex.
Packaging schemes are becoming increasingly complex.

You mentioned 2.5D to 3D.
You mentioned the transition from 2.5D to 3D.

I've always said for years now, you hear 3D, you should think of Lam.
I have said for a long time that when you hear 3D, you should think of Lam.

And that means vertical scaling, it means more etch and deposition.
That means vertical scaling, and it means an increase in etch and deposition.

HPM 3E to 4E.
The transition from HPM 3E to 4E as well.

Obviously, those things that are beneficial for us both from an advanced packaging perspective, but also from a front-end equipment perspective.
Obviously, those things are beneficial for us both from an advanced packaging perspective and from a front-end equipment perspective.

The die size and cell size gets a little bit bigger, the die gets bigger because of increased number of TSVs to feed the higher I/O count.
The die size and cell size get a little bit bigger, and the die gets bigger due to the increased number of TSVs to support the higher I/O count.

And by our estimate, and I think some of our customers' commentary, you need approximately 30% more wafers to produce an equivalent number of bits when you move from 3D to 4D.
And by our estimate, and I think based on some of our customers' commentary, you need approximately 30% more wafers to produce an equivalent number of bits when you move from 3D to 4D.

So look, as AI performance requirements continue to demand these greater capabilities, we're just seeing increased WFE in the etch and deposition spaces.
So look, as AI performance requirements continue to demand these greater capabilities, we are simply seeing increased WFE in the etch and deposition spaces.

Similarly, SSD speeds when you talk -- I mentioned CBA, which is another packaging-enabled capability, that's being directly put in for performance, gives -- it's part of the ability to create higher performance for SSDs, higher run speeds.
Similarly, regarding SSD speeds—I mentioned CBA, which is another packaging-enabled capability that is being directly implemented for performance—it is part of the ability to create higher performance for SSDs and higher run speeds.

So I think that everywhere these kind of packaging capabilities are being leveraged for performance and next-gen capabilities.
So I think that these kinds of packaging capabilities are being leveraged everywhere for performance and next-gen capabilities.

Operator
Operator

Our next question will come from Krish Sankar with Cowen & Company.
Our next question will come from Krish Sankar with Cowen & Company.

Krish Sankar
Krish Sankar

I had two of them to Doug.
I have two questions for Doug.

I just want to clarify one thing on China sales.
I just want to clarify one thing regarding China sales.

If I heard you right, you said the multinationals grew relatively more in June versus March.
If I heard you correctly, you said that multinationals grew relatively more in June compared to March.

If true, do you think was it because of potential for restrictions on tools for MNCs in China? Or do you think something else is going on?
If that is true, do you think it was because of the potential for restrictions on tools for MNCs in China? Or do you think something else is going on?

Douglas R. Bettinger
Douglas R. Bettinger

No, Krish, again, it's hard to isolate, hey, spending was a little stronger, what was the reason.
No, Krish, again, it's hard to isolate why spending was a little stronger.

I don't know that I would specifically identify it to that.
I don't know that I would specifically attribute it to that.

But yes, you picked up on the commentary exactly right, the global multinationals in China grew by more than 90% quarter-over-quarter.
But yes, you picked up on the commentary exactly right; the global multinationals in China grew by more than 90% quarter-over-quarter.

So there was a big increase in spending from that, and that contributed to part of the uptick you saw in the China regional spending.
Therefore, investment from this customer segment grew significantly, contributing to the increase in sales in the China region.

Krish Sankar
Krish Sankar

Got it. Got it, very helpful.
Understood. That was very helpful.

And then a follow-up for Tim.
Next is a follow-up for Tim.

Tim, on the 2-nanometer gate-all-around, especially the leading Taiwan foundries, are all the tool decisions already made or do you think there are still some PTORs that are still in flux?
Tim, regarding the 2-nanometer gate-all-around, especially for the leading foundries in Taiwan, have all the tool selections been finalized, or do you think there are still some procurement decisions that are in flux?

Timothy M. Archer
Timothy M. Archer

Well, Krish, any one specific customer where they are in timing.
Well, Krish, I cannot provide details regarding the timing of any specific customer.

But I would say that look, I mean, when we're not the guy in position, we're fighting right to the end until production fabs are built.
However, I would say that even when we are not in the leading position, we fight until the very end until the production fabs are built.

But I would say that from the big drivers of SAM expansion and share gains, we've been looking forward past 2 nanometers for quite some time and a number of things I talked about in terms of inflections are beyond 2-nanometer.
But in terms of the major drivers for SAM expansion and share gains, we have been looking beyond 2 nanometers for quite some time, and many of the technical inflections I mentioned are for beyond 2-nanometer.

I just highlighted moly adoption and foundry/logic, dry resist, there's a lot coming beyond and we're already well engaged with those more advanced applications.
I just highlighted molybdenum adoption, foundry/logic, and dry resist; there is a lot coming beyond that, and we are already deeply engaged with those more advanced applications.

So probably the best I can say without talking too much about one customer.
That is about as much as I can say without delving too deeply into a single customer.

Operator
Operator

And our next question will come from Stacy Rasgon with Bernstein Research.
Our next question comes from Stacy Rasgon of Bernstein Research.

Stacy Aaron Rasgon
Stacy Aaron Rasgon

First, I wanted to zero in again on China.
First, I would like to focus on China again.

So the multinational is clearly the source of the upside in the quarter.
So, the multinational was clearly the source of the upside for the quarter.

Is it the local spend that's the upside in the September quarter and the multinational you see sustaining?
Is it the local Chinese spending that is the upside factor in the September quarter, and should I understand that the multinational spending will be sustained?

And I guess given all of that, given the decline you're guiding for, for December quarter, is that pretty much just kind of normalizing into December? Is there something else going on there?
Also, regarding the sales decline guidance for the December quarter, should I understand that as those factors normalizing? Is there anything else going on?

Douglas R. Bettinger
Douglas R. Bettinger

Stacy, I'm not going to break down the specificity of the regional composition for the guide, but China is up in the quarter.
Stacy, I am not going to break down the specific regional composition for the guidance, but China will be up in the quarter.

And yes, you've got December -- you're thinking about December in the right way.
And yes, your understanding of the December quarter is generally correct.

Stacy Aaron Rasgon
Stacy Aaron Rasgon

Got it. So there's nothing else going on unusual in December. It's mostly just the China normalization? I mean the gross margin guidance seems to indicate that as well.
Got it. So there's nothing unusual going on in December. It's mostly just the China normalization, right? I mean, the gross margin guidance seems to indicate that as well.

Douglas R. Bettinger
Douglas R. Bettinger

Yes. It's -- revenue is going to be a little bit softer in December, just normal profile.
Yes. It's -- revenue is going to be a little bit softer in December, just a normal profile.

Mix is a little bit softer in December.
The mix is a little bit softer in December.

We're kind of back to a little bit of a run rate.
We're kind of back to a bit of a run rate.

And frankly, Stacy, you should also be thinking about tariffs, right? Tariffs are a little bit higher in the December quarter than they are in September.
And frankly, Stacy, you should also be thinking about tariffs, right? Tariffs are a little bit higher in the December quarter than they were in September.

So there's a lot of moving pieces, I guess, is why I'm rambling on here a little bit.
So there are a lot of moving pieces, which I guess is why I'm rambling on a little bit here.

Stacy Aaron Rasgon
Stacy Aaron Rasgon

Yes, I hear you.
Yes, I hear you.

And for my follow-up, I just wanted to ask about Taiwan.
And for my follow-up, I just wanted to ask about Taiwan.

I thought you said foundry was at a record level, but Taiwan was actually down sequentially, I guess I'm just having a little bit of trouble squaring that. What am I missing?
I thought you said foundry was at a record level, but Taiwan was actually down sequentially. I guess I'm just having a little bit of trouble squaring that. What am I missing?

Douglas R. Bettinger
Douglas R. Bettinger

No, Taiwan last quarter was 24% of revenue. This quarter, it was 19%, revenue was up.
No, Taiwan last quarter was 24% of revenue. This quarter, it was 19%, and total revenue was up.

So on a like-for-like basis, Taiwan was down a little bit.
So on a like-for-like basis, Taiwan was down a little bit.

But understand Taiwan is not the only geographic location where there's foundries in the world, right?
But understand that Taiwan is not the only geographic location where there are foundries in the world, right?

There's foundries all over the globe.
There are foundries all over the globe.

Stacy Aaron Rasgon
Stacy Aaron Rasgon

Where are you seeing the foundry spending picking up then?
Where are you seeing the foundry spending picking up then?

Douglas R. Bettinger
Douglas R. Bettinger

I'm not going to break down the geographic distribution, but there's a leading-edge foundry investing in Japan.
I won't break down the details by region, but there is investment in leading-edge foundries happening in Japan.

There's trailing edge foundry spending in China as well as globally.
There is also spending on trailing-edge foundries in China as well as in other regions.

So it's a little bit all over, Stacy.
So it's happening in a distributed manner all over the world, Stacy.

Japan, I would point out to you, I mentioned this record revenue in the Japan region.
Regarding Japan, as I mentioned earlier, our revenue in that region reached a record high.

So I think you probably know there's a large new foundry in Japan.
As you are likely aware, there is a large new foundry under construction in Japan.

Stacy Aaron Rasgon
Stacy Aaron Rasgon

Yes. That was what I'm trying to tie up.
Yes. That is what I was trying to clarify.

Operator
Operator

And our next question will come from Jim Schneider with Goldman Sachs.
Our next question comes from Jim Schneider at Goldman Sachs.

James Edward Schneider
James Edward Schneider

Relative to your outlook on 2026, I realize it's very early, and you don't want to give a view there.
I understand that it is too early to provide a specific outlook for 2026 and that you do not want to give figures.

But I mean, do you have confidence that Lam's business can actually grow in 2026 even if CapEx is not up for the broader industry?
But do you have confidence that Lam's business can grow in 2026 even if capital expenditure for the broader industry does not increase?

Douglas R. Bettinger
Douglas R. Bettinger

Jim, we're not going to give a number for next year.
Jim, we are not going to provide specific figures for next year.

The important thing—-and I think Tim described this well—-listen, etch and dep as a percent of total WFE we see growing and we feel extraordinarily good about the strength of the product portfolio right now such that we reiterated, Tim reiterated today that of this expanding SAM, we're going to gain 50% of it is our view of things.
The important thing—and I think Tim described this well—is that we see etch and deposition growing as a percentage of total WFE, and we feel extremely confident in the strength of our current product portfolio. As Tim reiterated today, our view is that we will capture 50% of this expanding SAM.

At the end of the day, we're only halfway through '25.
At the end of the day, we are only halfway through 2025.

So we're not going to quite stick our neck out about '26 yet.
So we are not going to commit to anything regarding 2026 just yet.

It will be what it will be, but we feel great about our relative outperformance into the next several years.
We will see what happens, but we feel very confident about our relative outperformance over the next several years.

That was the important message that we try to deliver.
That was the important message we wanted to convey.

James Edward Schneider
James Edward Schneider

Understand. Well, I had to give the rookie try.
Understand. Well, I had to give the rookie try.

Just a second question as a follow-up.
Just a second question as a follow-up.

Just wondering, obviously, NAND was a pretty good step-up in the quarter.
Just wondering, obviously, NAND was a pretty good step-up in the quarter.

Do you see that strength sustaining through the end of the year or the next couple of quarters from where you stand today?
Do you see that strength sustaining through the end of the year or the next couple of quarters from where you stand today?

Or is it sort of like a pop-up and pop-down potentially?
Or is it sort of like a pop-up and pop-down potentially?

Douglas R. Bettinger
Douglas R. Bettinger

See, Jim, I'm also not going to get into the quarterly breakdown of NAND spending.
See, Jim, I'm also not going to get into the quarterly breakdown of NAND spending.

The important thing, though—-and we reiterated this, and we said it back at the Investor Day—-is you should think about NAND over the next several years needing to spend roughly $40 billion to work through technology conversions, upgrades, if you will.
The important thing, though—and we reiterated this, and we said it back at the Investor Day—is you should think about NAND over the next several years needing to spend roughly $40 billion to work through technology conversions, upgrades, if you will.

Our view of that hasn't changed.
Our view of that hasn't changed.

That's the most important thing to think about.
That's the most important thing to think about.

The spending profile over the next several years, we see continuing.
The spending profile over the next several years, we see continuing.

Timothy M. Archer
Timothy M. Archer

The one thing I would add as well is, I mean, while there's this focus on upgrades, I mean, we're also significantly advancing the technologies.
The one thing I would add as well is, I mean, while there's this focus on upgrades, I mean, we're also significantly advancing the technologies.

And so I mentioned a couple of the items.
And so I mentioned a couple of the items.

I mean, the demands of AI for both storage and speed and density is driving things like the moly adoption that I talked about, it's driving the CBA that I talked about, it's also driving QLC to get density.
I mean, the demands of AI for both storage and speed and density is driving things like the moly adoption that I talked about, it's driving the CBA that I talked about, it's also driving QLC to get density.

And QLC, I talked about a win we had for cryo etching.
And QLC, I talked about a win we had for cryo etching.

Cryo produces a much more vertical high-aspect-ratio dielectric memory hole.
Cryo produces a much more vertical high-aspect-ratio dielectric memory hole.

That's a critical capability that enables—-helps enable QLC.
That's a critical capability that enables—helps enable QLC.

And so you're looking at multiple technology drivers.
And so you're looking at multiple technology drivers.

And then if you just look at layer count itself, over the last couple of years, we've been talking about all the other drivers, whether it's backside deposition, for stress management, it's our carbon gap fill for tier stacking.
And if you look at the layer count itself, over the past few years, we have been discussing other drivers as well, such as backside deposition for stress management and carbon gap fill for tier stacking.

And eventually back to advanced packaging and the question we had there, you start stacking cells on top of cells to go to very high layer counts.
And eventually, returning to advanced packaging and the question we had there, you start stacking cells on top of cells to reach very high layer counts.

And so from an etch and deposition perspective, we're going to get a lot of upgrades to the installed base, but you're also going to see a lot of new tools get pulled in, in the future to help enable these technology advancements that are needed both for performance and cost scaling.
So, from an etch and deposition perspective, we are going to see a lot of upgrades to the installed base, but you will also see many new tools being brought in in the future to help enable these technology advancements that are needed for both performance and cost scaling.

Operator
Operator

And our next question will come from Atif Malik with Citi.
And our next question will come from Atif Malik with Citi.

Atif Malik
Atif Malik

Doug, you talked about modest growth in CSBG this year.
Doug, you talked about modest growth in CSBG this year.

I understand you don't have to talk about WFE next year, but is it safe to assume that the CSBG business snaps back next year in a more meaningful way, given the restrictions and all that, that has happened in China over the years it normalizes?
I understand you don't have to talk about WFE next year, but is it safe to assume that the CSBG business will snap back in a more meaningful way next year, given the restrictions and everything that has happened in China as it normalizes over the years?

Douglas R. Bettinger
Douglas R. Bettinger

You guys all lead us to give you next year, and I'm just not going to do it, Atif.
You all keep trying to get us to give you guidance for next year, and I'm just not going to do it, Atif.

Listen, the way to think about CSBG though is consistent with how you should be thinking about it over the last several years, right?
Listen, the way to think about CSBG, however, is consistent with how you should have been thinking about it over the last several years, right?

Chamber count grows every year.
Chamber count grows every year.

So that creates incremental opportunity for us to kind of grow spares, upgrades, service and so forth.
So that creates incremental opportunity for us to grow spares, upgrades, service, and so forth.

We're really excited about the advanced servicing. Tim talked about Equipment Intelligence and cobots, that's cool stuff.
We're really excited about the advanced servicing. Tim talked about Equipment Intelligence and cobots; that's cool stuff.

We're super-jazzed about that. I'm not sure exactly how Reliant is going to play out next year.
We're super-jazzed about that. I'm not sure exactly how Reliant is going to play out next year.

It is down a good amount this year. I'm hopeful that it does better next year, but I'm just not ready to kind of give you specificity.
It is down a good amount this year. I'm hopeful that it does better next year, but I'm just not ready to give you any specifics.

But the tailwinds you've always seen in CSBG continue to be there.
But the tailwinds you've always seen in CSBG continue to be there.

Timothy M. Archer
Timothy M. Archer

And I want to — I mean basically, just to add on.
And I want to—I mean, basically, just to add on.

The strong performance in CSBG can show up in ways that aren't just CSBG revenue.
The strong performance in CSBG can show up in ways that aren't just CSBG revenue.

And I think that's —we talk about advanced services, and I mentioned all the benefits that we see coming with Equipment Intelligence and our Dextro cobots, things like better machine availability, more repeatability of maintenance cycle — the maintenance cycle.
As I mentioned earlier regarding advanced services, there are many benefits, such as improved uptime through Equipment Intelligence and Dextro cobots, and better repeatability of the maintenance cycle.

These things ultimately have an impact on how the customer feels about our tool as the most production-worthy system for not only this current generation of manufacturing, but all future.
Ultimately, these factors influence how customers perceive our tools as the most production-ready systems, not only for the current generation of manufacturing but for all future generations as well.

And so I think that we look at these two businesses, the CSBG business and our systems business as very synergistic.
Therefore, we believe that our CSBG business and our systems business are highly synergistic.

And the better we do in advanced services, the better we're going to do in terms of gaining share on the system side.
The better we perform in advanced services, the more successful we will be in gaining market share on the systems side.

And so I think we're investing in advanced services with that in mind, not just for its own revenue-generating purposes.
So, we are investing in advanced services with that in mind, rather than just for the purpose of generating revenue from the services themselves.

Operator
Operator

Our next question will come from Blayne Curtis with Jefferies.
Our next question comes from Blayne Curtis at Jefferies.

Blayne Peter Curtis
Blayne Peter Curtis

I wanted to ask on DRAM.
I would like to ask about DRAM.

Obviously, AI is super strong.
Obviously, AI demand is extremely strong.

I think there's a lot of concerns about maybe some inventory in the HPM side.
I think there are also many concerns regarding potential inventory on the HPM side.

Obviously, it's a smaller business for you and lumpy, but just kind of curious what you're seeing in DRAM and kind of any perspective for the rest of the year?
Obviously, it is a smaller and more volatile business for you, but I am curious about what you are seeing in DRAM and if you have any perspective for the remainder of the year.

Timothy M. Archer
Timothy M. Archer

Yes. I mean — I think if we look kind of to the second half of the year, I mean, maybe the only comment I'll let Doug add is we have seen some HPM-related strength.
Yes. I mean, if we look toward the second half of the year, perhaps the only comment I will let Doug add is that we have seen some HPM-related strength.

I mean HPM is definitely the hot thing in DRAM right now.
I mean, HPM is definitely the hot topic in DRAM right now.

But when we look at it, I mean, while it's been hot, I mean, we view there being a long road ahead.
However, when we look at it, while it has been hot, we see a long road of growth ahead.

I mean some of the data we looked at is always something like 7% of total DRAM bits will actually be HPM 2025.
Some of the data we have looked at suggests that about 7% of total DRAM bits will actually be HPM in 2025.

We don't know where that goes, but it looks like a long tailwind of build-out in HPM.
We don't know where that will lead, but it looks like there is a long-term tailwind for HPM build-out.

I talked about the impact of the changes from HPM 3 to HPM 4E and whatever comes beyond that, and how it's impacting number of wafers required to produce the same number of bits.
I talked about the impact of the changes from HPM 3 to HPM 4E and whatever comes after that, and how it is affecting the number of wafers required to produce the same number of bits.

And those are things that expand WFE overall.
And those are factors that expand WFE overall.

But within that, etch is becoming more critical as well as you have to execute more precision to build these more advanced DRAMs.
Within that, etch precision is becoming more critical as you have to execute with greater accuracy to build these more advanced DRAMs.

And so I think you shouldn't overlook the importance of the new Akara wins that I talked about within DRAM.
And so I think you shouldn't overlook the importance of the new Akara wins that I talked about within DRAM.

As you mentioned, we have — it hasn't been a big business for us, but we're gaining share in DRAM.
As you mentioned, we have — it hasn't been a big business for us, but we're gaining share in DRAM.

And I think that as we gained share in an expanding market, that's a great, [super].
And I think that as we gain share in an expanding market, that's great, [super].

So we're really pretty positive about DRAM momentum right now.
So we're really quite positive about DRAM momentum right now.

Blayne Peter Curtis
Blayne Peter Curtis

And then just wanted to ask, Doug, on gross margin.
And then I just wanted to ask, Doug, about gross margin.

For December, is there anything more than the geographic mix?
For December, is there anything more than the geographic mix?

I think you said product mix, but then it would seem like China falling off a headwind as well.
I think you mentioned product mix, but it would also seem like China falling off is a headwind as well.

But maybe you can just clarify what you [mentioned] the product.
But maybe you can just clarify what you [mentioned] regarding the product.

Douglas R. Bettinger
Douglas R. Bettinger

Yes. There's customer mix, there's a little bit of product mix and frankly, there's a little bit of tariff showing up incrementally in December.
Yes. There's customer mix, there's a little bit of product mix, and frankly, there's a little bit of tariff showing up incrementally in December.

Those are the things to be thinking about, Blayne, and frankly, overall revenue levels too.
Those are the things to be thinking about, Blayne, and frankly, overall revenue levels too.

I think I told you December is going to be down a little bit.
I think I told you December is going to be down a little bit.

So there's a lot of moving pieces in gross margin. All of that contributes some portion to it.
So there are a lot of moving pieces in gross margin. All of that contributes some portion to it.

Blayne Peter Curtis
Blayne Peter Curtis

Got you. So we see customers, it's related to the geographic mix.
Got you. So when we talk about customers, it's related to the geographic mix.

Douglas R. Bettinger
Douglas R. Bettinger

There's some smaller customers in China, and that tends to be what I'm describing when I say customer mix.
There are some smaller customers in China, and that tends to be what I'm describing when I say customer mix.

It's not specific to any one region. It's just they're smaller customers.
It's not specific to any one region. It's just that they are smaller customers.

Operator
Operator

Our next question will come from Vijay Rakesh with Mizuho.
Our next question will come from Vijay Rakesh with Mizuho.

Vijay Raghavan Rakesh
Vijay Raghavan Rakesh

Just wondering on the WFE side.
I have a question regarding WFE.

I think you have ITC, the investment tax rate going to 35%.
I believe you mentioned the investment tax credit (ITC) is increasing to 35%.

Do you see that driving a tailwind to WFE as you look at next year?
Do you see that acting as a tailwind for WFE as you look toward next year?

And then I've a follow-up.
And I have a follow-up.

Douglas R. Bettinger
Douglas R. Bettinger

Vijay, not that I can specifically correlate, might there be, there might be, but I've not deeply sat down and thought about this or tried to correlate, it's probably something I need to do.
Vijay, I cannot specifically correlate it. There might be an impact, but I haven't sat down to think about it deeply or tried to correlate it; it is probably something I need to do.

Vijay Raghavan Rakesh
Vijay Raghavan Rakesh

Got it. And then on the China side, obviously, good to see the pickup there.
Got it. And regarding China, it is obviously good to see the pickup there.

As you look out, do you expect that mix to kind of normalize kind of means revert to where you guys were might be early in the year or last year?
Looking ahead, do you expect that mix to normalize, meaning revert to where you were earlier in the year or last year?

Douglas R. Bettinger
Douglas R. Bettinger

Vijay, it's a good question.
Vijay, that is a good question.

I told you, I think September is up in China. I think December is probably going to lighten up a little bit.
I told you that I think September will be up in China. I think December will probably lighten up a little bit.

Previously, we described the view that last year to this year, China as a percent of total mix was going to be down.
Previously, we described the view that from last year to this year, China as a percentage of the total mix was going to be down.

I think it's probably going to be flat to maybe slightly down.
I think it will probably be flat to maybe slightly down.

It got a little bit stronger, and that was part of why Tim described an uptick in WFE.
It got a little bit stronger, and that was part of why Tim described an uptick in WFE.

Operator
Operator

Our next question will come from Edward Yang with Oppenheimer.
Our next question will come from Edward Yang with Oppenheimer.

Hoonshik Yang
Hoonshik Yang

Congrats on the strong quarter.
Congratulations on the strong quarterly results.

This is the third consecutive quarter where you've not only beat numbers, but the guidance has also exceeded consensus by double digits.
This is the third consecutive quarter where you have not only beaten the numbers, but the guidance has also exceeded consensus by double digits.

So I guess, taking that into context, I mean, if you look at that record, I mean, is it just more conservatism in your planning? Or what has kind of surprised you by this magnitude?
So I suppose, taking that into context, if you look at that record, is it just more conservatism in your planning? Or what has surprised you to this magnitude?

Douglas R. Bettinger
Douglas R. Bettinger

I guess, Ed, if you unpack it, revenue came in a little bit better.
I suppose, Ed, if you break it down, revenue came in a little bit better.

Gross margin came in a little bit better.
Gross margin came in a little bit better.

And frankly, that tax rate came in a little bit lower.
And frankly, the tax rate came in a little bit lower.

And I don't know that I would describe a conservative bias, but that's just kind of how the quarter unfolded.
And I don't know that I would describe it as a conservative bias, but that is just how the quarter unfolded.

Now you might point out that, hey, that happens at Lam more often than not.
Now you might point out that, hey, that happens at Lam more often than not.

Yes, maybe but that tax rate was lower than we expected for sure.
Yes, maybe, but that tax rate was certainly lower than we expected.

Timothy M. Archer
Timothy M. Archer

Yes, I think that also — not to say much about the conservatism piece.
Yes, I think that also — not to say much about the conservatism aspect.

But I think that in general, we're also in an environment where a lot of the markets and we're selling to, I mean, look at the number — I hate to say it a number of times, I had to mention AI, but the reality is you've seen AI and demand kind of generally exceeding expectations here and it's driving demand for chips.
But I think that in general, we are also in an environment where many of the markets we are selling to — I hate to say it a number of times, I have to mention AI, but the reality is you have seen AI and demand generally exceeding expectations here, and it is driving demand for chips.

And because so much of the more advanced requirements are for etch and deposition, we're outperforming that.
And because so many of the more advanced requirements are for etch and deposition, we are outperforming that.

And I think maybe it's just us like one thing to see it before we really commit to it.
And I think maybe it is just us wanting to see it before we really commit to it.

But I think we're getting a better and better view of how these technology transitions are occurring, and I think that's what's giving us confidence that we, I think, we all telegraphed at our Investor Day earlier this year where we talked about a pretty aggressive 2028 and $1 trillion semiconductor industry goals for the company.
But I think we are getting a better and better view of how these technology transitions are occurring, and I think that is what is giving us confidence, which we all signaled at our Investor Day earlier this year when we talked about a pretty aggressive 2028 and $1 trillion semiconductor industry goals for the company.

Hoonshik Yang
Hoonshik Yang

Thanks for that perspective, Tim.
Thanks for that perspective, Tim.

And my next question is just on mobile.
And my next question is just about mobile.

The carriers have been reporting really strong handset sales lately.
Recently, carriers have been reporting strong handset sales.

Verizon, AT&T, their upgrades were up 20%.
Upgrades at Verizon and AT&T were up 20%.

And this is after a long stretch of flat.
And this is after a long period of stagnation.

So hard to know what's behind it.
It's hard to know what's behind it, but

I think one of the carriers called it [tariff] pull-ins, the other denied it.
I think one of the carriers called it [tariff] pull-ins, while the other denied it.

But it feels like maybe we're starting a meaningful shift there.
But it feels like maybe we are starting a meaningful shift there.

And if we are in the early stages of a broader handset refresh cycle, how would that affect Lam across logic, DRAM and NAND?
And if we are in the early stages of a broader handset refresh cycle, how would that affect Lam across logic, DRAM, and NAND?

And can you size your exposure? And are your ASPs in that segment above or below your corporate average?
And can you size your exposure? And are your ASPs in that segment above or below your corporate average?

Douglas R. Bettinger
Douglas R. Bettinger

Yes, it's a great question.
Yes, that's a great question.

We're one step removed from kind of smartphones and PC sales.
We are one step removed from smartphone and PC sales.

But the way it shows up for us though, at the end of the day, yes, I do see a little bit of growth in mobile.
But the way it shows up for us, at the end of the day, yes, I do see a little bit of growth in mobile.

I see a little bit of growth in client — PC client.
I see a little bit of growth in client—PC client.

But frankly, content is growing, right?
But frankly, content is growing, right?

When you look at the new phones coming out this year, there's more DRAM, there's more NAND, there's bigger baseband chips as AI becomes a thing, and that happens in PCs as well, right?
When you look at the new phones coming out this year, there's more DRAM, there's more NAND, and there are bigger baseband chips as AI becomes a thing, and that happens in PCs as well, right?

There's not a huge unit story in PCs, although they're up, I don't know, low single digits this year, there's a content story there with terabyte in fact, I'm starting to see 2-terabyte PCs.
There isn't a huge unit story in PCs, although they are up, I don't know, low single digits this year; there is a content story there with terabytes—in fact, I'm starting to see 2-terabyte PCs.

That's what shows up for us, and it will show up with our large foundry customers at the leading edge and the DRAM customers that are selling HPM and frankly, the NAND customers that are selling SSDs.
That's what shows up for us, and it will show up with our large foundry customers at the leading edge, the DRAM customers that are selling HPM, and frankly, the NAND customers that are selling SSDs.

Operator
Operator

And our next question will come from Brian Chin with Stifel.
And our next question will come from Brian Chin with Stifel.

Brian Edward Chin
Brian Edward Chin

Let me ask a few questions. Maybe first, is the Vantex [indiscernible] when you referenced, is that for a 400-layer application?
Let me ask a few questions. Maybe first, is the Vantex [indiscernible] when you referenced, is that for a 400-layer application?

Timothy M. Archer
Timothy M. Archer

I'm not going to comment on it, it's exactly which technology node it is, but it's — when I said multigeneration, you can interpret that as being everything from current generation through the next couple of generations.
I'm not going to comment on it, it's exactly which technology node it is, but it's — when I said multigeneration, you can interpret that as being everything from current generation through the next couple of generations.

It's an important win because, again, customers tend to pick a new type of tool with the idea that, though we use that tool, they'll upgrade that tool for multiple technology nodes.
It's an important win because, again, customers tend to pick a new type of tool with the idea that, though we use that tool, they'll upgrade that tool for multiple technology nodes.

So yes, it's a significant win for us.
So yes, it's a significant win for us.

Brian Edward Chin
Brian Edward Chin

And maybe just a quick follow-up on that. So Tim, do you think that the selection of it's to be implemented at more recent node suggest maybe like a faster ramp upward in terms of vertical scaling?
And maybe just a quick follow-up on that. So Tim, do you think that the selection of it's to be implemented at more recent node suggest maybe like a faster ramp upward in terms of vertical scaling?

Timothy M. Archer
Timothy M. Archer

Well, I mean, Vantex has been in the marketplace for quite a while.
Well, I mean, Vantex has been in the marketplace for quite a while.

I think as you know, there's been a lot of talk over the last couple of years about leadership within the dielectric high-aspect-ratio etch space, particularly in NAND.
I think as you know, there's been a lot of talk over the last couple of years about leadership within the dielectric high-aspect-ratio etch space, particularly in NAND.

And so I think that you've seen a tremendous amount of innovation from Lam.
And so I think that you've seen a tremendous amount of innovation from Lam.

And what I would just say is that we can't — our performance doesn't necessarily drive whether the customer scales faster or doesn't scale faster. That's driven by their own end-market needs.
And what I would just say is that we can't — our performance doesn't necessarily drive whether the customer scales faster or doesn't scale faster. That's driven by their own end-market needs.

But what I would point out is what the key markets within NAND right now, one of them, of course, is QLC.
But what I would point out is what the key markets within NAND right now, one of them, of course, is QLC.

And if you have a very good cryo etch process that produces a very vertical high-aspect-ratio memory hole, you're more likely to be successful creating a QLC device.
And if you have a very good cryo etch process that produces a very vertical high-aspect-ratio memory hole, you're more likely to be successful creating a QLC device.

So Lam does with our customers, and we're engaged so closely with them is we try to create the technologies that allow them to create the devices to make them successful.
So Lam does with our customers, and we're engaged so closely with them is we try to create the technologies that allow them to create the devices to make them successful.

And when they're successful, then they move quickly.
And when they're successful, then they move quickly.

Brian Edward Chin
Brian Edward Chin

Great. So maybe like SSD-worthy. Maybe a follow-up — a quick follow-up question. On CSBG, just to slightly decompose it, upgrades likely up Q-on-Q. This is overall up a little Q-on-Q.
Great. So maybe like SSD-worthy. Maybe a follow-up — a quick follow-up question. On CSBG, just to slightly decompose it, upgrades likely up Q-on-Q. This is overall up a little Q-on-Q.

Do you think that off the June quarter that Reliant has maybe largely bounded out or stabilized here?
Do you think that off the June quarter that Reliant has maybe largely bounded out or stabilized here?

Even if you're not necessarily wanting to signal for some recovery in that part of the business?
Even if you're not necessarily wanting to signal for some recovery in that part of the business?

Douglas R. Bettinger
Douglas R. Bettinger

Yes, Brian, I'm not going to get in the habit of decomposing a forward-looking statement on CSBG.
Yes, Brian, I'm not going to get in the habit of decomposing a forward-looking statement on CSBG.

It is stronger than we previously thought about in total, right?
It is stronger than we previously thought about in total, right?

Previously, we've been describing, we thought it was going to be flattish. I know we said it — we think it would be modestly up.
Previously, we've been describing, we thought it was going to be flattish. I know we said it — we think it would be modestly up.

So that's good.
So that's good.

Upgrades are extremely strong, servicing spares are doing well and Reliant is down right now.
Upgrades are extremely strong, servicing spares are doing well and Reliant is down right now.

That's kind of how to think about it.
That's kind of how to think about it.

Operator
Operator

And our next question will come from Tom O'Malley with Barclays.
And our next question will come from Tom O'Malley with Barclays.

Thomas James O'Malley
Thomas James O'Malley

Doug, you mentioned the tariff environment is very different in the December quarter versus the September quarter.
Doug, you mentioned the tariff environment is very different in the December quarter versus the September quarter.

I was curious if you could unpack that a little.
I was curious if you could unpack that a little.

Are you referring specifically to 232, any of the country-specific tariffs?
Are you referring specifically to 232, any of the country-specific tariffs?

What are you seeing as the most impactful quarter-over-quarter, September, December?
What are you seeing as the most impactful quarter-over-quarter, September, December?

Douglas R. Bettinger
Douglas R. Bettinger

I didn't really say it was — I forget what word you used.
I didn't really say it was — I forget what word you used.

There are more tariff headwinds in December than are in September. That's all we communicated.
There are more tariff headwinds in December than are in September. That's all we communicated.

Thomas James O'Malley
Thomas James O'Malley

Got you. And then on the customers in China, I think Stacy went through it with you guys, but more specifically, like going into September, you obviously felt like there would be a falloff.
Got you. And then on the customers in China, I think Stacy went through it with you guys, but more specifically, like going into September, you obviously felt like there would be a falloff.

And in a very short window, those customers came back.
And in a very short window, those customers came back.

Is December really a view of conservatism as you expect this as a onetime kind of come back from the China up?
Is the outlook for the December quarter a conservative one that incorporates a temporary recovery in China?

Or in Q4, is this more of a conservative outlook? Or do you think that you could see customers stepping back in?
Do you think customers might return in the fourth quarter? Or is this a cautious outlook?

Because obviously, the lead time here seems like it's relatively short to service these guys.
Because obviously, the lead time to service these customers seems relatively short.

Douglas R. Bettinger
Douglas R. Bettinger

Tom, when we describe the business, we don't try to be conservative or aggressive, we call it like we see it, and that's exactly what we're doing right now.
Tom, when we describe the business, we don't try to be conservative or aggressive; we call it as we see it, and that is exactly what we are doing right now.

Operator
Operator

Our next question will come from Charles Shi with Needham.
Our next question comes from Charles Shi at Needham.

Yu Shi
Yu Shi

Want to double click on some of your China guidance numbers there.
I would like to drill down into some of your China guidance numbers.

So maybe this is for Doug.
So perhaps this is for Doug.

I think based on your guidance for the next two quarters, it looks like you have China.
Looking at your guidance for the next two quarters, it seems that China sales...

I know we have to back out some of the multinational numbers from your China revenue.
I know we need to back out some of the multinational numbers from your China revenue.

It looks that domestic China revenue, looks like it's tracking flattish year-over-year.
It looks like domestic China revenue is tracking roughly flat year-over-year.

And is that right?
Is that correct?

And I think the prevailing view for China WFE, this is still a down year.
And I believe the prevailing view for China WFE is that this is still a down year.

So is it really about outperformance companies, you're seeing credit factor?
So is it really about some companies outperforming, or are you seeing a credit factor?

Or is that because you did add $5 billion to WFE number forecast for this year, maybe your view on China WFE is kind of shifting towards maybe this is not really a down year for China WFE?
Or is it because you added $5 billion to the WFE forecast for this year, and perhaps your view on China WFE is shifting toward the idea that this might not actually be a down year for China WFE?

Douglas R. Bettinger
Douglas R. Bettinger

Yes. Boy, you put a lot in there, Charles.
Yes. Boy, you packed a lot in there, Charles.

Listen, I'm not going to get into global multinationals year-over-year, blah, blah, blah.
Listen, I'm not going to get into the details of global multinationals year-over-year, blah, blah, blah.

It was up decently in the current quarter.
It increased significantly in the current quarter.

We upsided China WFE in total a little bit and then described the view that it's flat to maybe slightly down in the composition of what we're seeing.
We slightly revised our total China WFE forecast upward, and explained that, based on the composition of what we are seeing, it is flat to perhaps slightly down.

That's the color we provided.
That is the perspective we provided.

Operator, we'll do one more question.
Operator, we will take one more question.

Operator
Operator

Of course. Our last question here will come from Tim Schulz Mellander with [indiscernible].
Certainly. Our final question comes from Tim Schulz Mellander with [indiscernible].

Unidentified Analyst
Unidentified Analyst

I think maybe there are questions for Tim.
I believe there are questions for Tim.

So the first one was on moly. Impressive that you already have positions in production.
So, the first question is regarding molybdenum. It is impressive that you already have positions in production.

Just wanted to ask for some color maybe how should we think about your share?
I just wanted to ask for some insight into how we should think about your market share.

Or how do you think about your share in moly kind of what is that going to look like on maybe a one- to three-year view?
Or how do you view your share in molybdenum, and what might that look like over a one- to three-year horizon?

And then the second one was on advanced packaging.
And the second question was regarding advanced packaging.

And it was really just to ask about how do you think about the size and the profitability of that opportunity for Lam when you compare hybrid bonding with other 3D packaging technologies.
It was really just to ask how you view the size and profitability of that opportunity for Lam when comparing hybrid bonding to other 3D packaging technologies.

Timothy M. Archer
Timothy M. Archer

Okay. Great. Well, I'll take the moly one first.
Okay. Great. Well, I will address the molybdenum question first.

I guess we haven't put out a share projection for moly.
I suppose we haven't released a market share projection for molybdenum.

But I guess if you look at where we are right now, and where we've been, I mean, we've been the leader in ALD metallization like in the tungsten space for many, many years.
But if you look at where we are right now and where we have been, I mean, we have been the leader in ALD metallization, such as in the tungsten space, for many, many years.

In many cases, it's tungsten that is transitioning to moly, so we would expect to lead in that as well.
In many cases, it is tungsten that is transitioning to molybdenum, so we would expect to lead in that area as well.

We're the only company with ALD Moly in production and foundry/logic.
We are the only company with ALD Molybdenum in production for foundry/logic.

I mentioned a number of places where we're already running in NAND.
I mentioned a number of areas where we are already running in NAND.

Those are the two markets that are adopting moly at this point.
Those are the two markets that are adopting molybdenum at this point.

So I think that from a share perspective, at this point, we're doing quite well, and we would expect to continue to do so as we gain more experience.
So I think that from a share perspective, at this point, we're doing quite well, and we would expect to continue to do so as we gain more experience.

There's a first-mover benefit in any of these markets.
There's a first-mover benefit in any of these markets.

You get experience, you build that in, next applications and tools are better, and you just kind of keep building on that.
You get experience, you build that in, next applications and tools are better, and you just kind of keep building on that.

So it's been our recipe for many, many years.
So it's been our recipe for many, many years.

On advanced packaging, what I would say is, the only thing we've sized up in the past, we said $1 billion last year.
On advanced packaging, what I would say is, the only thing we've sized up in the past, we said $1 billion last year.

We said bigger this year.
We said bigger this year.

We didn't put out a specific advanced packaging number other than to lump it with gate-all-around at $3 billion — more than $3 billion total.
We didn't put out a specific advanced packaging number other than to lump it with gate-all-around at $3 billion — more than $3 billion total.

But we're doing well.
But we're doing well.

You think about our position, we have a very strong position in key applications like copper plating, many of the dielectric deposition processes.
You think about our position, we have a very strong position in key applications like copper plating, many of the dielectric deposition processes.

And so almost regardless of the advanced packaging scheme, the more complex it is or 3D it gets.
And so almost regardless of the advanced packaging scheme, the more complex it is or 3D it gets.

And I think you asked about gross margin. We aim for it to be similar gross margins to all of our technology-enabling applications.
And I think you asked about gross margin. We aim for it to be similar gross margins to all of our technology-enabling applications.

Douglas R. Bettinger
Douglas R. Bettinger

Thanks for the question. Operator, that concludes our prepared — our Q&A. Thank you, everyone, for joining the call today. We'll see you later in the quarter, I'm sure.
Thanks for the question. Operator, that concludes our prepared — our Q&A. Thank you, everyone, for joining the call today. We'll see you later in the quarter, I'm sure.

Operator
Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.