Lam Research (LRCX) Q3 2025: Foundry and China Fuel Strong Growth

Lam Research Corp. (LRCX), a major force in the semiconductor equipment industry, just released its latest quarterly report. For those unfamiliar, Lam Research builds the highly complex machines that semiconductor manufacturers use to create the chips powering everything from our phones to data centers. In this post, we'll slice into their Q3 2025 financial statements to understand their performance and the key trends shaping their business. You can read the full report filed with the SEC.

A Quarter of Impressive Growth

Lam Research reported a stellar quarter with significant year-over-year growth across the board. Total revenue for the three months ending September 28, 2025, surged to $5.32 billion, a robust 28% increase from the $4.17 billion reported in the same period last year.

This revenue growth translated directly to improved profitability. Gross margin, the profit left after accounting for the cost of goods sold, expanded to 50.4% from 48.0% a year ago. The company attributed this improvement to a "favorable change in customer mix." The bottom line saw an even more impressive leap, with net income climbing to $1.57 billion ($1.24 per diluted share), up from $1.12 billion ($0.86 per diluted share) in the prior-year quarter.

The flow diagram below provides a visual breakdown of Lam's revenues and expenses for the quarter, illustrating how the company converted its top-line sales into bottom-line profit.

Digging into the Revenue Drivers

The story behind the growth becomes clearer when we look at what Lam is selling and where.

• Systems vs. Support: The growth was overwhelmingly driven by Systems revenue—the sale of new, cutting-edge chip-making equipment. This segment jumped nearly 48% to $3.55 billion. In contrast, Customer support-related revenue, which includes spares, services, and upgrades, remained flat at $1.78 billion.

• Shifting End-Markets: A dramatic shift is underway in the types of customers buying Lam's equipment.

  • Foundry: This segment, which includes manufacturers that produce chips for other companies (like TSMC for Apple), now accounts for a massive 60% of equipment revenue, up from 41% a year ago.
  • Logic/IDM: Conversely, sales to Logic and Integrated Device Manufacturers (like Intel) plummeted, now making up only 6% of revenue, down from 24%.
  • Memory: This segment remained relatively stable at 34%.

• Geographic Concentration: Geographically, Lam's reliance on Asia, and specifically China, continues to grow. Sales to China represented 43% of total revenue this quarter ($2.28 billion), up from 37% a year ago. Meanwhile, revenue from the United States fell to just 6% of the total, down from 12% in the same quarter last year.

Strong Cash Flow and Shareholder Returns

Lam Research continues to generate substantial cash and return it to shareholders. The company produced $1.78 billion in cash from operations during the quarter. A significant portion of this was deployed for shareholder returns, with $976 million used to repurchase company stock and another $292 million paid out in dividends. The company ended the quarter with a strong balance sheet, holding nearly $6.7 billion in cash and cash equivalents.

Looking Ahead

Lam Research has delivered a powerful financial performance, fueled by soaring demand from the foundry sector and customers in China. This highlights the current strength in specific segments of the semiconductor industry.

However, this performance also underscores a growing concentration. The dramatic drop in the Logic/IDM segment and the increasing dependence on a single geographic region are key trends to monitor. As noted in the filing's risk factors, the semiconductor equipment industry is famously cyclical and subject to geopolitical tensions, making Lam's ability to navigate these shifting market dynamics crucial for its continued success.