AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Substantial qualification and integration requirements create a concrete incumbent advantage, corroborated by Lam's installed-base support growth. This is application-specific and also benefits incumbent competitors.
durability · 2/4 · Lifecycle upgrades and management's extended-reliance assessment support persistence within qualified applications. Technology substitution and the absence of measured retention duration limit confidence across technology generations.
customer dependency · 3/4 · Qualification investment and increased spares, upgrades and services demand support meaningful operational dependency. Repeat demand is assessed indirectly from operating evidence, without a fabricated retention rate or claim of customer exclusivity.
erosion resilience · 2/4 · Installed-base support growth shows continued relevance, but supplier alliances, competing resources and alternative processes leave resilience across future transitions unproven. Disclosed learning advantages are management assertions.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Lam reports attempting to pass through higher costs, but supplies no realized pricing outcome. Revenue growth and margins cannot isolate price from volume, mix or efficiency.
retention · 3/4 · Higher installed-base spares, upgrades and services revenue, together with substantial qualification friction, supports demonstrated repeat demand. This is indirect retention evidence and does not establish willingness to accept higher prices.
margin resilience · 3/4 · GAAP operating margins remained between 28.6% and 35.3% across fiscal 2022–2026, recovering after declines, while March 2026 gross margin held near the preceding quarter. This supports resilience across changing demand conditions, without attributing it solely to pricing.
contractual freedom · — · The passages do not establish customer price-setting rights, repricing mechanisms or restrictions on changing terms. Attempted cost pass-through alone cannot establish contractual freedom.
Predictability82
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 16.72
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 5.48
Financial strength100
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 100.00
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 0.76
- Net debt / operating income (x)
- -0.22
- Interest coverage (x)
- 52.27
- Current ratio (x)
- 2.63
Capital allocation97
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 72.86
- 3-year average dilution (%)
- -2.51
- 3-year average SBC / revenue (%)
- 1.83
- cashConversionGrade
- 88.51
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Substantial operating cash generation supported investment, shareholder returns and debt repayment. However, nine-month distributions and other capital uses exceeded operating cash generation and reduced cash reserves; commitments and equity compensation add demands. Outcomes support mixed discipline rather than proven value creation from repurchases.
incentive alignment · 2/4 · Actual market-based and service-based grants, performance-linked incentive funding, ownership guidelines and recovery provisions provide alignment. Margin-based incentive funding reached 250% of target, and ownership compliance is qualified by remaining compliance periods. Missing individual ownership balances and full award weightings limit a stronger judgment; grants are not assumed vested.
execution · 3/4 · Comparative revenue and pretax income growth, increased R&D spending, installed-base support growth and multiyear operating profitability demonstrate strong operating execution. Management contribution is inferred from company outcomes; industry investment growth also contributed.
governance · 2/4 · Current independent board and committee structures, separate independent chair and compensation recovery policy are substantive safeguards. Acknowledged instances of ineffective compliance procedures provide adverse evidence with unspecified consequences, preventing a uniformly strong effectiveness assessment.
Evidence
Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing Equipment, the Manufacturer Typically Continues to Purchase That Competitor’s Equipment, Making It More Difficult for Us to Sell Our Equipment to That Customer Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line.
Risk factors / equipment qualification and incumbent supplier purchasing · Filed 23/04/2026
We believe that once a semiconductor manufacturer selects a particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time, especially for customers that are more focused on tool reuse.
Risk factors / management assessment of application-specific equipment reliance · Filed 23/04/2026
Lam Research Corporation 2026 Q3 10-Q 18 Table of Contents The following table summarizes certain key financial information for the periods indicated below: Three Months Ended March 29, 2026 December 28, 2025 (in thousands, except per share data and percentages) Revenue $ 5,841,488 $ 5,344,791 Gross margin $ 2,910,527 $ 2,651,162 Gross margin as a percent of total revenue 49.8 % 49.6 % Total operating expenses $ 863,511 $ 840,959 Net income $ 1,825,460 $ 1,593,994 Diluted net income per share $ 1.45 $ 1.26 In the March 2026 quarter, revenue increased 9% compared to the three months ended December 28, 2025 (the “December 2025 quarter”), driven by an increase in systems revenue primarily resulting from increased customer investments in the DRAM market segment as well as an increase in customer support-related revenue mainly tied to our expanding installed base and higher spares, upgrades and services revenue, partially offset by decreased customer spend on non-leading-edge equipment.
MD&A / March 2026 revenue, profitability and installed-base support growth · Filed 23/04/2026
Many of the technical advances that we introduce in our newest products are also available as upgrades, which provide customers with a cost-effective strategy for extending the performance and capabilities of their existing wafer fabrication lines.
Business / upgrades extending existing fabrication-line capabilities · Filed 11/08/2025
Moreover, customers may adopt new technologies or processes to address the complex challenges associated with next-generation devices, or may adopt new technologies, including those based upon AI, that reduce their reliance on us for process development.
Risk factors / alternative processes potentially reducing customer reliance · Filed 07/08/2026
We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.
Risk factors / competing supplier relationships with semiconductor manufacturers · Filed 23/04/2026
Certain of our competitors, including those that are created and financially backed by foreign governments, have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to offer customers a more comprehensive array of products and/or product capabilities and to therefore achieve additional relative success in the semiconductor equipment industry.
Risk factors / competing suppliers' financial resources and product breadth · Filed 23/04/2026
Our business, results of operations, financial condition, and cash flows could therefore be adversely affected by: •a decline in demand for even a limited number of our products; •a failure to achieve continued market acceptance of our key products; •export restrictions or other regulatory or legislative actions that could limit our ability to sell those products to key customers or customers within certain markets; •an improved version of products being offered by a competitor in the markets in which we participate; •increased pressure from competitors that offer broader product lines; •increased pressure from regional competitors; •technological changes that we are unable to address with our products; •slower than anticipated development of various target markets that utilize new technologies; or •a failure to release new or enhanced versions of our products on a timely basis.
Risk factors / product concentration, competition and export restrictions · Filed 07/08/2026
Several factors create opportunity 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 Lam Research Corporation 2026 10-K 4 Table of Contents 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.
Business / asserted opportunities for sustainable differentiation · Filed 07/08/2026
Although we are endeavoring to pass along some of the impact of increased costs to our customers to counteract adverse impacts to our gross margins and other results of operations, such measures could be unsuccessful, or could have the effect of reducing demand for our products or services, which would adversely impact our revenue or market share.
Risk factors / attempted cost pass-through and uncertain customer response · Filed 07/08/2026
GAAP operating income as percent of revenue 35.3 % 32.0 % 28.6 % 29.7 % 31.2 % Non-GAAP operating income as a percent of revenue 35.8 % 32.3 % 30.3 % 30.7 % 31.3 % Calendar Year 2025 U.S.
Appendix / fiscal 2022–2026 operating margin reconciliation · Filed 24/09/2026
The decrease was primarily driven by $3.60 billion of share repurchases, including net share settlement on employee stock-based compensation and excise tax; $945.3 million in dividends paid; $777.6 million in capital expenditures, and $754.1 million of principal payments on debt instruments and debt issuance costs, partially offset by cash generated from operating activities totaling $4.40 billion.
Liquidity and capital resources / actual cash generation and uses · Filed 23/04/2026
Net cash provided by operating activities of $5.86 billion and $6.17 billion during fiscal year 2026 and 2025, respectively, consisted of:
MD&A / fiscal 2026 and 2025 operating cash flows · Filed 07/08/2026
The Company’s commitments related to these agreements as of June 28, 2026, were as follows: Payments Due by Fiscal Year: Purchase Obligations (in thousands) 2027 $ 1,056,893 2028 174,260 2029 71,719 2030 61,397 2031 37,185 Thereafter 79,741 Total $ 1,481,195 Transition Tax Liability On December 22, 2017, the “Tax Cuts & Jobs Act” was signed into law.
Commitments / purchase obligations at June 28, 2026 · Filed 07/08/2026
The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) in the Condensed Consolidated Statements of Operations: Three Months Ended Nine Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 (in thousands) Equity-based compensation expense $ 96,616 $ 87,115 $ 282,396 $ 249,085 Lam Research Corporation 2026 Q3 10-Q 10 Table of Contents NOTE 5 — OTHER INCOME (EXPENSE), NET The significant components of other income (expense), net, are as follows: Three Months Ended Nine Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 (in thousands) Interest income $ 42,639 $ 50,638 $ 159,724 $ 176,698 Interest expense (39,333) (45,184) (122,681) (135,429) (Losses) gains on deferred compensation plan-related assets, net (27,265) (16,903) 12,451 5,019 Foreign exchange losses, net (1,050) (4,702) (14,618) (19,505) Other, net (10,451) (8,884) (13,852) (7,475) $ (35,460) $ (25,035) $ 21,024 $ 19,308 NOTE 6 — INCOME TAX EXPENSE The Company’s provision for income taxes and effective tax rate are as follows: Three Months Ended Nine Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 (in thousands, except percentages) Income tax expense $ 186,096 $ 206,057 $ 719,217 $ 541,019 Effective tax rate 9.3 % 13.4 % 12.6 % 12.9 % The difference between the U.S.
Note 4 / recognized equity compensation expense · Filed 23/04/2026
dollar value. On February 27, 2026, the committee made a grant under the 2026/2028 LTIP of Market-based PRSUs and service-based RSUs, on the terms set forth in the tables titled “2026/2028 LTIP Equity Vehicles” and “2026/2028 Market-based PRSU Performance Parameters” above, with a combined value equal to the NEO’s total target award opportunity, as determined by the committee and shown below.
Executive compensation / February 2026 grants actually made · Filed 24/09/2026
Stock Ownership Guidelines (Page 43) – We have stock ownership guidelines for each of our executive officers and certain other senior executives; each of our named executive officers has met their individual ownership level under the current program or has a period of time remaining under the guidelines to do so.
Executive compensation / ownership guidelines and qualified compliance disclosure · Filed 24/09/2026
(2) The Funding Factor resulted in AIP funding at 250.0% of target award opportunity for the calendar year (based on the actual non-GAAP operating margin results and the specific goal detailed under “ – 2025 Annual Incentive Program Funding Factor, Corporate Performance Factor, and Profitability Performance Factor” above).
Executive compensation / actual calendar 2025 incentive funding outcome · Filed 24/09/2026
Our corporate governance structure includes: •Independent Board: All of the Company’s current Board members are independent except for the CEO.
Corporate governance / current board independence · Filed 24/09/2026
•Independent Committees: Each of the Board’s three key standing committees—the audit committee, the compensation and human resources committee, and the nominating and governance committee—are comprised solely of independent directors.
Corporate governance / independent standing committees · Filed 24/09/2026
•Independent Board Leadership: The Company maintains separate CEO and Board chair roles, and the Board chair is currently an independent director.
Corporate governance / separate CEO and independent chair · Filed 24/09/2026
Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to which we must recoup, on a pre-tax basis, the excess amount of incentive-based compensation granted, earned, or vested wholly or in part on the attainment of any financial reporting measure during the three completed fiscal years immediately preceding the date on which the Company is required to prepare a restatement.
Compensation recovery policy / mandatory restatement-related recoupment · Filed 24/09/2026
There have been, and may continue to be, instances of our compliance policies and procedures not being effective to ensure full compliance with all of the laws, rules and regulations to which we are subject, which non-compliance has presented and may present risks to our business, including potential fines, restrictions on our actions, and reputational damage.
Risk factors / acknowledged instances of ineffective compliance procedures · Filed 23/04/2026
The table below reconciles the Company's reportable segment to income before income taxes: Three Months Ended Nine Months Ended March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 (In thousands) Revenue $ 5,841,488 $ 4,720,175 $ 16,510,452 $ 13,264,198 Installation and warranty expense 164,334 135,170 446,139 384,265 Other cost of goods sold (COGS) (1) 2,671,667 2,224,119 7,542,513 6,308,606 Segment COGS 2,836,001 2,359,289 7,988,652 6,692,871 Segment gross margin 3,005,487 2,360,886 8,521,800 6,571,327 Reconciliation to consolidated gross margin All other COGS 94,960 47,200 275,232 181,977 Gross margin 2,910,527 2,313,686 8,246,568 6,389,350 Research and development 583,200 525,904 1,732,951 1,516,209 Selling, general, and administrative 280,311 226,023 827,310 713,301 Other income (expense), net (35,460) (25,035) 21,024 19,308 Income before income taxes $ 2,011,556 $ 1,536,724 $ 5,707,331 $ 4,179,148 (1)Other COGS is primarily comprised of the capitalized cost of inventory sold, including both direct and indirect costs, but excludes installation and warranty expense and those items not allocated to the segment.
Segment reconciliation / comparative revenue, R&D spending and pretax income · Filed 23/04/2026
