LAM RESEARCH CORP

Annual Incentive Program Components

The components of our annual incentive program, each of which plays a role in determining actual payments made, are described in Figure 32 below.

Figure 32. Annual Incentive Program Components

The Funding Factor is set by the committee to create a maximum payout amount from which annual incentive program payouts may be made. To determine each NEO’s AIP result, the committee assesses the results of each of the performance factors. The committee maintains discretion to adjust the performance factor results upward or downward, subject to the overall maximum established by the Funding Factor, although it did not exercise any such discretion in determining CY2024 payouts.

The metrics and goals for the annual incentive program are set annually in connection with our annual business planning cycle, and are directly connected to our annual business plans and goals. The interplay between our corporate planning cycle and our compensation planning and evaluation cycle is summarized in Figure 33 below.

Figure 33. Annual Planning and Compensation Decision Cycle

We believe that, over time, outstanding business results create stockholder value. Consistent with this belief, multiple performance-based metrics (non-GAAP operating margin, non-GAAP gross margin, product market share, and strategic, operational, and organizational metrics embodied in organizational Annual Operating Plans) are established for our NEOs as part of the annual incentive program. We believe the metrics and goals set under this program have been effective to motivate our NEOs and the organizations they lead, and to achieve pay-for-performance results.

Goals are set depending on the business environment and the Company’s annual objectives and strategies, encompassed in the Annual Operating Plans for the Company and the organizations managed by each of the NEOs, to ensure that they remain stretch goals regardless of changes in the business environment, which can vary significantly from year-to-year in our industry. Accordingly, as business conditions improve, Corporate Performance Factor and Profitability Performance Factor goals are calibrated to require better performance, and if business conditions deteriorate, these goals are calibrated to incentivize stretch performance under more difficult conditions. Annual Operating Plan objectives are also reflected in the Individual Performance Factor, which is based primarily on NEOs’ performance to corporate-level Annual Operating Plan goals, as well as individual contributions during the performance period.

As shown in Figure 34, the committee establishes the Corporate Performance Factor and Profitability Performance Factor for each year to incorporate stretch goals that are challenging to achieve relative to our annual operating plan, taking into consideration our business cycle and the overall industry outlook.

Figure 34. Corporate and Profitability Performance Factor Goals for Calendar Years 2020-2024

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The specific metrics and goals and the relative weightings for the Performance Factors are determined by the committee considering the recommendation of our CEO, other than the metrics and goals for the Individual Performance Factor, which are determined by our CEO, or in the case of the CEO, by the committee. In addition, the committee establishes individual target award opportunities for each NEO as a percentage of base salary. Specific target award opportunities are determined based on job scope and responsibilities, as well as an assessment of Peer Group data. Awards have a maximum payment amount defined as a multiple of the target award opportunity.

Calendar Year 2024 Annual Incentive Program Parameters and Payout Decisions

In February 2024, the committee set the calendar year 2024 target award opportunities, established the metrics and goals for the Funding Factor, the Corporate Performance Factor, and the Profitability Performance Factor, determined that the three Performance Factors should be weighted equally, and established the metrics and goals for the Individual Performance Factors for each then-employed NEO. For Ms. Harter, who joined the Company in July 2024, the committee set the calendar year 2024 target award opportunity and determined the metrics and goals for the Individual Performance Factor in August 2024. In February 2025, the committee considered the actual results under these factors and made payout decisions for the calendar year 2024 program.

2024 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 2024 for each NEO were as set forth below in Figure 35 in accordance with the principles described above under “Executive Compensation Governance and Procedures – Peer Group Practices and Survey Data.” The target award opportunities (as a percentage of base salary) for each of our NEOs remained the same for calendar year 2024 relative to the prior year (with the exception of Ms. Harter, who was not employed by the Company in calendar year 2023). The committee also set a maximum award opportunity, which for calendar year 2024 was equal to 2.50 times the target award opportunity.

Figure 35. Annual Incentive Program Target Award Opportunities for Calendar Year 2024

2024 Annual Incentive Program Funding Factor, Corporate Performance Factor, and Profitability Performance Factor.

In February 2024, the committee set non-GAAP operating margin as the metric for the Funding Factor and Corporate Performance Factor, and set non-GAAP gross margin as the metric for the Profitability Performance Factor for calendar year 2024, with the parameters as shown in Figure 36.

Figure 36. Calendar Year 2024 Annual Incentive Program Metrics, Goals and Results

The committee set the levels of non-GAAP operating margin and non-GAAP gross margin necessary to achieve a Corporate Performance Factor and Profitability Performance Factor of 1.0, respectively, at levels higher than the Company’s Annual Operating Plan goals for both metrics. Further, the committee determined to cause Corporate Performance Factor and Profitability Performance Factor results to scale up and down more rapidly within the range of results between the levels associated with the Company’s Annual Operating Plan goals for both non-GAAP operating margin and non-GAAP gross margin, and the levels corresponding to a 1.0 result for the Corporate Performance Factor and Profitability Performance Factor. For non-GAAP operating margin and non-GAAP gross margin results that were below the 1.0 level, or above the Company’s Annual Operating Plan goals, Corporate Performance Factor and Profitability Performance Factor results were set to scale up and down less rapidly. The committee took this approach for calendar year 2024 only to reward critical outperformance for stretch achievements in pricing and cost reduction initiatives that were priorities for the year, which also includes potential offsets for the impact of the Company’s planned investments in research and development targeting key technology inflections. These changes were intended to incentivize management to achieve a stretch result that would be better than the Company’s Annual Operating Plan, by more quickly increasing the potential reward to executives for exceeding the annual operating plan.

The Company’s actual non-GAAP operating margin and non-GAAP gross margin for calendar year 2024 resulted in the achievement levels shown in Figure 36.

2024 Annual Incentive Program Individual Performance Factors. For calendar year 2024, as shown in Figure 37 below, the committee determined the Individual Performance Factor for each NEO (other than Mr. Archer) using a formula that took into consideration three elements: a weighted score for each NEO based on the Company’s performance relative to corporate-level Annual Operating Plan goals, with weightings for each NEO based on the extent to which they (and the organizations managed by them) were expected to contribute to and be accountable for that corporate-level performance; an individual score for each NEO reflecting the extent to which individual NEOs provided exceptional contributions during the year; and a corporate modifier reflecting the Company’s outperformance relative to the annual corporate-level goal for operating profitability. The committee evaluated the Company’s performance relative to corporate-level Annual Operating Plan Goals and each NEO’s individual performance. The committee combined the corporate-level scores with each NEO’s individual score to yield the Individual Performance Factors shown in Figure 37 below.

In determining Mr. Archer’s Individual Performance Factor, the independent members of the Board evaluated the Company’s performance against its corporate-level goals, Mr. Archer’s individual performance, and the performance of the other members of the management team reporting to him, and determined to assign him an Individual Performance Factor equal to the average of the Individual Performance Factors of the other NEOs, as shown in Figure 37 below.

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Figure 37. Individual Performance Factor Components for Calendar Year 2024

Calendar Year 2024 Annual Incentive Program Payout Decisions. Based on the above results and decisions, for the calendar year 2024 annual incentive program, the committee approved the payouts for each NEO as shown below in Figure 38, which were less than the maximum payout available under the Funding Factor:

Figure 38. Annual Incentive Program Payouts for Calendar Year 2024

Calendar Year 2025 Annual Incentive Program Parameters

In February 2025, the committee set the target award opportunity for each NEO as a percentage of base salary, and set a maximum award opportunity equal to 2.50 times the target award opportunity. For calendar year 2025, target award opportunities for the NEOs remained unchanged compared to the prior year. The target award opportunity for each NEO is shown below.

Figure 39. Annual Incentive Program Target Award Opportunities for Calendar Year 2025

The committee approved non-GAAP operating margin as the annual metric for the Funding Factor and the Corporate Performance Factor, approved non-GAAP gross margin as the annual metric for the Profitability Performance Factor, and set the annual goals for the Funding Factor, the Corporate Performance Factor, and the Profitability Performance Factor. Consistent with the program design, the Corporate Performance Factor and Profitability Performance Factor goals are more difficult to achieve than the Funding Factor goal. Individual Performance Factor metrics and goals were also established for each NEO, based on corporate-level Annual Operating Plan goals and individual performance. All Corporate, Profitability, and Individual Performance Factor goals were designed to be stretch goals.

In addition, the committee determined to revert to the prior linear relationship between metrics and results for both the Corporate Performance Factor and the Profitability Performance Factor for calendar year 2025, as in effect in Annual Incentive Programs prior to calendar year 2024. The committee took this approach in recognition that the calendar year 2024 program design, while effective in incentivizing outperformance relative to the Company’s particular initiatives and business objectives for calendar year 2024, introduced additional complexity to the program.

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