LAM RESEARCH CORP

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a description of our results of operations and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this 2025 Form 10-K. MD&A consists of the following sections:

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) generally discusses fiscal year 2026 and 2025 items and year-to-year comparisons between fiscal year 2026 and 2025 and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this 2026 Form 10-K. A discussion of fiscal year 2024 items and year-to-year comparisons between fiscal year 2025 and 2024 that are not included in this 2026 Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 29, 2025.

Previous wording

We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Current wording

We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several ongoing programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Previous wording

Wafer fabrication equipment spending levels were strong in the 2025 fiscal year driven by an increase in both the memory and non-memory market segments. In the short term, volatility in the semiconductor industry environment from trade restrictions, tariffs, as well as other direct and indirect risks and uncertainties, have had, and in the future may have, a negative impact on our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

Current wording

Wafer fabrication equipment investments were strong in the 2025 calendar year, and have continued to grow in 2026 with the AI market driving higher semiconductor industry spending across both the memory and non-memory market segments. In the short term, volatility in the semiconductor industry environment from trade restrictions, tariffs, as well as other direct and indirect risks and uncertainties discussed in Part I, Item 1A, “Risk Factors,” have had, and in the future may have, a negative impact on our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.

Previous wording

Fiscal year 2025 revenue increased 23.7% compared to fiscal year 2024, driven by strong customer demand for semiconductor equipment systems as well as customer support-related revenues from customer investments across memory and non-memory markets. Gross margin as a percentage of revenue increased in fiscal year 2025 compared to fiscal year 2024 largely due to improved factory efficiencies and favorable product mix, partially offset by increased transformational charges. The increase in operating expenses in fiscal year 2025 compared to fiscal year 2024 was driven by higher employee-related costs primarily as a result of increased headcount, increased spending on transformational activities, and higher outside service expense.

Current wording

Fiscal year 2026 revenue increased 26.0% comp ared to fiscal year 2025, driven by strong customer demand for semiconductor equipment systems, particularly from customers within the foundry market segment, as well as customer support-related revenues. Gross margin as a percentage of revenue increased in fiscal year 2026 compared to fiscal year 2025 largely due to favorable customer mix, partially offset by aluminum and steel tariff-related spend. The increasein operating expenses in fiscal year 2026 compared to fiscal year 2025 was primarily due to employee-related costs from increased headcount and higher supplies spending for research and development.

Previous wording

Our cash and cash equivalents and restricted cash balances totaled approximately $6.4 billion as of June 29, 2025, compared to $5.9 billion as of June 30, 2024. Cash flows provided from operating activities were $6.2 billion for fiscal year 2025 compared to $4.7 billion for fiscal year 2024. Cash flows provided from operating activities in fiscal year 2025 were primarily used for $3.4 billion in treasury stock purchases, including net share settlement of employee stock-based compensation; $1.1 billion in dividends paid to our stockholders; $759 million of capital expenditures; and $507 million of principal payment on debt instruments and debt issuance costs.

Current wording

Our cash and cash equivalents and restricted cash balances totaled approximately $5.60 billion as of June 28, 2026, compared to $6.41 billion as of June 29, 2025. Cash flows provided from operating activities were $5.86 billion for fiscal year 2026 compared to $6.17 billion for fiscal year 2025. Cash flows provided from operating activities in fiscal year 2026 were primarily used for $3.85 billion in treasury stock purchases, including net share settlement of employee stock-based compensation; $1.27 billion in dividends paid to our stockholders; $966.4 million of capital expenditures; and $755.4 million of principal payment on debt instruments and debt issuance costs.

Previous wording

The deferred revenue balance increased to $2.7 billion as of June 29, 2025 compared to $1.6 billion as of June 30, 2024 primarily due to an increase in advance deposits from newer customers.

Current wording

The deferred revenue balance decreased to $2.43 billion as of June 28, 2026 compared to $2.68 billion as of June 29, 2025 primarily due a decrease in customer down payments, partially offset by an increase in earned system credits.

Previous wording

The increase in gross margin as a percentage of revenue for fiscal year 2025 compared to fiscal year 2024 was largely due to improved factory efficiencies and favorable product mix, partially offset by increased transformational charges.

Current wording

The increase in gross margin as a percentage of revenue for fiscal year 2026 compared to fiscal year 2025 was largely due to favorable customer mix, partially offset by aluminum and steel tariff-related spend.

Previous wording

We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes. The increase in R&D expense during fiscal year 2025 compared to fiscal year 2024 was primarily driven by an increase of $118 million in employee-related costs mainly as a result of increased headcount and $35 million in higher outside service expense, inclusive of transformational and lab-related activities.

Current wording

We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes. Fiscal year 2026 R&D expense increased versus fiscal year 2025, due to $131.4 million in employee-related costs from increased headcount and $69.8 million in higher engineering supplies expense.

Previous wording

The increase in SG&A expense during fiscal year 2025 compared to fiscal year 2024 was primarily driven by an increase of $112 million in employee-related costs as a result of increased headcount.

Current wording

The increase in SG&A expense during fiscal year 2026 compared to fiscal year 2025 was mainly driven by an increase of $180.0 million in employee-related costs as a result of additional headcount.

Previous wording

Interest expense decreased in fiscal year 2025 compared to fiscal year 2024 primarily due to the maturity of $500 million of the Company’s senior notes in March 2025. Interest expense was flat in fiscal year 2024 compared to fiscal year 2023.

Current wording

Interest expense decreased in fiscal year 2026 compared to fiscal year 2025 primarily due to the maturity of $750.0 million of the Company’s Senior Notes in March 2026.

Previous wording

The gains on deferred compensation plan related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.

Current wording

The gains on deferred compensation plan related assets, net were driven by fluctuations in the fair market value of the underlying funds.

Previous wording

Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.

Current wording

Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures.

Previous wording

The variation in other, net for the fiscal year 2025 compared to fiscal years 2024 and 2023 was primarily driven by fluctuations in the fair market value of equity investments.

Current wording

The variation in other, net for the fiscal year 2026 compared to fiscal year 2025 was primarily driven by fluctuations in the fair market value of equity investments.

Previous wording

The decrease in the effective tax rate in fiscal year 2025 as compared to fiscal year 2024 was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation in fiscal year 2025 and the change in level and proportion of income in higher and lower tax jurisdictions.

Current wording

The increase in the effective tax rate in fiscal year 2026 as compared to fiscal year 2025 was primarily due to the recognition of previously unrecognized tax benefits from lapses of statutes of limitation in fiscal year 2025 and Global Minimum Tax (“GMT”) being fully effective in fiscal year 2026, offset by the change in level and proportion of income in higher and lower tax jurisdictions and higher stock-based compensation excess tax benefits in fiscal year 2026.

Previous wording

International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States. International pre-tax income is taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7: Income Taxes of our Consolidated Financial Statements in Part II, Item 8 of this 2025 Form 10-K.

Current wording

International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned outside the United States. International pre-tax income is generally taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7: Income Taxes to our Consolidated Financial Statements in Part II, Item 8 to this 2026 Form 10-K for additional information.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law by U.S. President Donald Trump. The impact on income taxes due to change in legislation is required, under Accounting Standards Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted, which is during our fiscal year 2026. In general, the OBBBA introduces changes to U.S. taxation, including changes in the taxation of non-U.S. income. We are currently assessing the potential implications of these changes to our fiscal year 2026 Consolidated Financial Statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law by U.S. President Donald Trump. The impact on income taxes due to change in legislation is required, under Accounting Standards Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted, which was this fiscal year. In general, the OBBBA introduced changes to U.S. taxation, including changes in the taxation of non-U.S. income. We assessed the changes and concluded that they were not material. The impact has been included within income tax expense in fiscal year 2026.

Previous wording

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Our gross deferred tax assets were $1,897 million and $1,516 million at the end of fiscal years 2025 and 2024, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of $197 million and $218 million and a valuation allowance primarily representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $424 million and $389 million at the end of fiscal years 2025 and 2024, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2025 and 2024 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries.

Current wording

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Our gross deferred tax assets were $2.26 billion and $1.90 billion at the end of fiscal years 2026 and 2025, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of $235.5 million and $197.3 million and a valuation allowance primarily representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $464.1 million and $424.3 million at the end of fiscal years 2026 and 2025, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2026 and 2025 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries.

Previous wording

Revenue Recognition: We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The transaction price for our contracts with customers is allocated among the identified performance obligations and consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. We generally invoice customers at shipment and for professional services as provided. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Current wording

Revenue Recognition: We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The transaction price for our contracts with customers is allocated among the identified performance obligations and consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. We generally invoice customers at shipment and for professional services as provided. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We elect to use the practical expedient afforded in the accounting guidance and therefore do not disclose remaining performance obligations for contracts with a

Previous wording

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 3: Recent Accounting Pronouncements of our Consolidated Financial Statements, included in Part II, Item 8 of this 2025 Form 10-K.

Current wording

See Note 3 - Recent Accounting Pronouncements, of our Consolidated Financial Statements, included in Part II, Item 8 of this 2026 Form 10-K for details of any recently adopted or effective accounting pronouncements.

Previous wording

Total gross cash, cash equivalents, and restricted cash balances were $6.4 billion at the end of fiscal year 2025 compared to $5.9 billion at the end of fiscal year 2024. This increase was primarily due to cash provided by operating activities, partially offset by Common Stock repurchases in connection with our stock repurchase program, dividends paid, capital expenditures, and principal payments on debt instruments.

Current wording

Total gross cash, cash equivalents, and restricted cash balances were $5.60 billion at the end of fiscal year 2026 compared to $6.41 billion at the end of fiscal year 2025. This decrease was primarily due to Common Stock repurchases in connection with our stock repurchase program, dividends paid, capital expenditures, and principal payments on debt instruments, partially offset by cash provided by operating activities.

Previous wording

Net cash provided by operating activities of $6.2 billion during fiscal year 2025 consisted of (in thousands):

Current wording

Net cash provided by operating activities of $5.86 billion and $6.17 billion during fiscal year 2026 and 2025, respectively, consisted of:

Previous wording

Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: increases in deferred gross profit of $1.1 billion, accrued expenses and other liabilities of $328 million, and accounts payable of $212 million. These sources of cash are offset by the following uses of cash: increases in accounts receivable of $859 million, prepaid expenses and other current assets of $207 million, and inventory of $181 million.

Current wording

Significant changes in operating asset and liability accounts, net of foreign exchange impact, during fiscal year 2025 included the following sources of cash: increases in deferred gross profit of $1.15 billion, accrued expenses and other liabilities of $328.3 million, and accounts payable of $212.0 million. These sources of cash were offset by the following uses of cash: increases in accounts receivable of $858.7 million, prepaid expenses and other current assets of $206.7 million, and inventory of $180.7 million.

Previous wording

Net cash used for investing activities during fiscal year 2025 was $708 million, primarily consisting of $759 million in capital expenditures.

Current wording

Net cash used for investing activities during fiscal years 2026 and 2025 was $922.2 million and $708.1 million, respectively, consisting primarily of capital expenditures.

Previous wording

Net cash used for financing activities during fiscal year 2025 was $4,937 million, primarily consisting of $3,422 million in Common Stock repurchases, including net share settlement on employee stock-based compensation; $1,150 million of dividends paid; and $507 million of principal payments on debt instrument and debt issuance costs, partially offset by $143 million of stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.

Current wording

Net cash used for financing activities during fiscal year 2026 was $5.72 billion, primarily consisting of $3.85 billion in Common Stock repurchases, including net share settlement on employee stock-based compensation; $1.27 billion of dividends paid; and $755.4 million of principal payments on debt instrument and debt issuance costs, partially offset by $173.4 million of stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.

Previous wording

In March 2025, $500 million principal value of our 2025 Notes were settled upon maturity using available cash on hand.

Current wording

In March 2026, $750.0 million principal value of our 2026 Senior Notes were settled upon maturity using available cash on hand.

Previous wording

In January 2025, we entered into a Third Amended and Restated Credit Agreement. The amendment increased the unsecured revolving credit facility commitment from $1.5 billion to $2.0 billion and extended the maturity of the facility from June 2026 to January 2030. The facility provides for an expansion option that will allow us, subject to certain requirements, to request an increase in the facility of up to an additional $750 million, for a potential total commitment of $2.75 billion. Please refer to Note 14, “Long-term Debt and Other Borrowings" to our Consolidated Financial Statements, included in Part II, Item 8 of this 2025 Form 10-K for additional information.

Current wording

Please refer to Note 14, “Long-term Debt and Other Borrowings" to our Consolidated Financial Statements, included in Part II, Item 8 of this 2026 Form 10-K for additional information.

Previous wording

We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not. Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases; refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2025 Form 10-K for further discussion. Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2025 Form 10-K for further discussion. In addition, in the ordinary course of business, we issue purchase orders based on estimates of our production needs, many times well in advance of delivery dates. The commitments under these open purchase orders are not included in the off-balance sheet commitments disclosed in the Notes to the Consolidated Financial Statements, as we generally have the option to cancel the purchase orders at our convenience, reschedule, and/or adjust quantities based on our business needs. As of June 29, 2025, we expect to fulfill approximately $387 million within one year related to these arrangements.

Current wording

We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not. Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases; refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2026 Form 10-K for further discussion. Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2026 Form 10-K for further discussion. In addition, in the ordinary course of business, we issue purchase orders based on estimates of our production needs, many times well in advance of delivery dates. The commitments under these open purchase orders are not included in the off-balance sheet commitments disclosed in the Notes to the Consolidated Financial Statements, as we generally have the option to cancel the purchase orders at our convenience, reschedule, and/or adjust quantities based on our business needs. As of June 28, 2026, we expect to fulfill approximately $727.9 million within one year related to these arrangements. We also periodically enter into contracts for capital expenditures related to facility and equipment investments. Certain of these arrangements represent purchase obligations with reasonably estimable future obligations and are included in our purchase obligations disclosure in the Notes of our Consolidated Financial Statements, while others are cancellable in accordance with their contractual terms and as such are excluded from the off-balance sheet commitments disclosure.