Lam Research Corporation (LRCX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Lam Research March 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to hand over to Ram Ganesh, Vice President, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to the Lam Research Quarterly Earnings Conference Call. With me today are Tim Archer, President and Chief Executive Officer; and Doug Bettinger, Executive Vice President and Chief Financial Officer. During today's call, we will share our overview on the business environment, and we'll review our financial results for the March 2025 quarter and our outlook for the June 2025 quarter. The press release detailing our financial results was distributed a little after 1:00 p.m. Pacific Time. The release can be found on the Investor Relations section of the company's website, along with the presentation slides that accompany today's call. Today's presentation and Q&A include forward-looking statements that are subject to risks and uncertainties reflected in the risk factors disclosed in our SEC public filings. Please see the accompanying slides in the presentation for additional information. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. A detailed reconciliation between GAAP and non-GAAP results can be found in the accompanying slides in the presentation. This call is scheduled to last to 3 p.m. Pacific Time. A replay of this call will be made available later this afternoon on our website. And with that, I'll hand the call over to Tim.

Thank you, Ram, and thank you all for joining the call today. Lam's March quarter results reflect continued strong execution across the company with revenues, gross margin, operating margin and EPS, all exceeding the midpoint of our guidance. We delivered a record quarter for foundry revenues, demonstrating our solid product momentum in leading-edge technology inflections. Gross margin percentage was also a record for the company since the Novellus merger as the investments we have made over the past several years in our manufacturing and operations are contributing positive as we scale the business. As our guidance indicates, gross margins are set to expand again in the June quarter. On our January call, we laid out what we saw as the fundamental drivers of WFE spending in the year ahead. To date, these have played out largely as expected, with strength in leading-edge foundry logic, technology-driven conversions in NAND and a focus on high bandwidth memory and DDR5 in DRAM. From an overall industry perspective, we continue to forecast calendar year 2025 WFE spending in the $100 billion range. We recognize that the current tariff and global economic environment is dynamic, but thus far, we have not seen any meaningful changes for our customers' plans. We are closely monitoring the situation alongside our customers and ecosystem partners. We believe that the agile manufacturing and supply chain capability that we have developed in recent years provides us with the flexibility to lessen the direct impact of tariffs. Our strategic focus in this environment remains on delivering the new products, advanced services and digital transformation initiatives required to achieve the growth and profitability outperformance goals we described at our Investor Day in February. As a reminder, we identified 3 key drivers that underpin our ability to outperform overall WFE growth over the next several years. First, we expect to expand our served market, or SAM, faster than WFE as deposition and etch intensity rises due to greater semiconductor device complexity. Second, we expect to gain share with the strongest product portfolio in the company's history, targeted at $1 billion-plus technology inflections such as gate-all-around, backside power distribution, advanced packaging and dry EUV photoresist processing. And third, we expect to grow our CSBG revenue faster than our installed base as customers look to Lam's upgrade, automation and equipment intelligence offerings to enhance productivity and execution as they expand their global fab operations. Year-to-date, we are already witnessing incredible momentum in these areas. In deposition, Lam's atomic layer deposition or ALD products are making strong gains. Our Striker SPARC ALD tool delivers the industry's densest conformal low-k carbide [indiscernible] films. Leveraging this capability, we have secured multiple key wins for spacer applications and a leading-edge foundry. Our ALTUS Halo system enables barrierless atomic layer deposition of molybdenum, reducing the resistance of critical contact and interconnect layers by 50% compared to legacy technologies. In the case of 3D NAND, this reduction is critical to achieving the superior I/O performance needed for AI applications. As a result, Lam's Halo molybdenum process is seeing increased adoption across our leading 3D NAND customers. In etch, our new Akara system has gotten off to a great start, rapidly solidifying and expanding our market-leading position in conductor edge. Featuring a proprietary industry-first innovation for ultrafast plasma control, Akara delivers previously unachievable levels of performance in etch selectivity and profile patterning precision. We have previously announced leading-edge foundry logic momentum with this tool. And just since our Investor Day, Akara has also won multiple critical etch applications at a major DRAM manufacturer. By enabling current DRAM logic road maps with Akara, we are setting the stage for Lam to make further gains as the industry looks to implement even more challenging device architectures like 3D DRAM and CFET over next decade. Turning to CSBG. We saw record revenues in our upgrades business. While the growth in upgrades was primarily driven by NAND technology conversions as forecasted at Investor Day, key DRAM and foundry logic customers are also more actively upgrading and repurposing existing tools for new applications to optimize capital spending. Looking forward, we see the upgradable architecture of our system being a growing point of differentiation for Lam. We are enabling our customers to cost-effectively scale technology on the equipment they already own while creating revenue and share gain opportunities for us. Our collaboration with customers on operating cost optimization extends across the entirety of our installed base business and over a longer time horizon. For example, in the March quarter, we signed a new multiyear spares agreement with a large memory customer for their latest technology node. This enables us to deliver value to the customer through assured component quality, cost and availability. Finally, in specialty technologies, we achieved a couple of key milestones recently. First, we displaced a competitor and shipped multiple 20-millimeter PECVD tools for silicon carbide-based wide-bandgap power device fabrication. Second, our Pulsed Laser Deposition solutions are being extended into more use cases, and we will be shipping our latest tool this year for an advanced memory application. As customers look to accelerate R&D and scale manufacturing globally, we're finding new ways to add value. We have talked in the past about our Semiverse solutions capabilities, which apply advanced modeling, simulation, data science, machine learning and artificial intelligence to enhance equipment performance and shorten the time required for process optimization. I am pleased to report that recently, we signed new licensing agreements with 3 large customers for our virtual fabrication platform, SEMulator3D. For both its cost and performance benefits, we see virtual fabrication fast becoming a required discipline in advanced technology development and Lam is leading the industry in this evolution. So to wrap up, when I look at our solid March quarter results and strong June quarter guide, I see Lam executing at a high level on all aspects of the outperformance strategy we described at our February Investor Day. This includes new product momentum and key customer wins, value creation from the installed base business and innovation in Equipment Intelligence and virtual process development. Near term, we're taking steps to lessen the direct impact of tariffs and closely monitoring for longer-term indicators of demand changes. Our priority is to continue delivering the technological innovations and world-class support that uniquely enable our customers to scale semiconductor manufacturing faster, more productively and more cost-effectively. Simply put, our competitive differentiation is enabling our customers' competitive advantage. For this reason, we remain confident that Lam is in an excellent position to outperform overall semiconductor industry growth in the years to come. Thank you, and I'll now pass it on to Doug.

Great. Thank you, Tim. Good afternoon, everyone, and thank you for joining our call today. Lam is off to a strong in 2025. The March quarter's performance exceeded the midpoint of all of our guidance ranges that we gave on the last earnings call. I was pleased with the company's continued solid execution. We've reached the highest quarterly gross margin percentage since Lam merged with Novellus in 2012. We achieved this by proactively delivering on our operational efficiencies, our manufacturing strategy of being close to our customers. Let's look at the details of our March quarter financial results. Revenue for the March quarter was $4.72 billion, which was an increase of 8% from the prior quarter. Our deferred revenue balance at quarter end was $2 billion, which was essentially flat from the December quarter. Within this number, though, advance payments trended lower, while other components of the deferred balance trended higher. As we sit here today, I believe our deferred revenue balance will move lower by the end of 2025. From a market segment perspective, March quarter systems revenue in memory was 43%, a decrease from 50% in the prior quarter. Within memory, nonvolatile memory accounted for 20% of our systems revenue, down from 24% in the prior quarter. And just a reminder, this segment includes a domestic China customer that we classified as a nonvolatile memory producer and that we are currently limited from shipping to. On a dollar basis, NAND saw growth from non-Chinese customers, consistent with our expectations from earlier in the year. The nonvolatile memory segment is being driven by customer spending on technology conversions from 1xx layer to 256-layer class devices. We currently expect this segment to represent the biggest percentage growth in systems revenue for Lam in the June quarter. DRAM represented 23% of systems revenue compared with 26% in the December quarter. DRAM spending was focused on technology upgrades across 1-alpha, 1-beta and 1-gamma nodes to enable DDR5 LPDDR5 and high-bandwidth memory. Foundry represented 48% of our systems revenue, up from the percentage concentration in the December quarter of 35%. This level represents a new record in dollar terms for Lam. Shipments for gate-all-around nodes and advanced packaging were strong. We also benefited from mature node spending with domestic Chinese customers. I'd just like to point out that the last time we're at these revenue levels back in late 2022, foundry represented a concentration in the low to mid-30% range. We have clearly broadened and diversified our business since then. And finally, logic and other were 9% of our systems revenue in the March quarter, down from the prior quarter's level of 15%. The decrease was primarily driven by reduced leading-edge spending. Now I'll discuss the regional composition of our total revenue. The China region accounted for 31%, flat from the prior quarter. Most of our revenue from China continue to come from domestic Chinese customers. Our next largest geographic concentrations were Taiwan and Korea at 24% of revenue each in the March quarter. Taiwan represented a new record level for us in dollar terms. The Customer Support Business Group generated approximately $1.7 billion in revenue for the March quarter, down a little bit from the December quarter, however, 21% higher than the same period in 2024. Sequentially, the decline was attributable to lower Reliant Systems revenue, partly offset by record upgrade revenue. Turning to the gross margin performance. The March quarter came in at 49% at the high end of our guidance range and improving from the December quarter level of 47.5%. The increase reflects a stronger mix as well as the efficiencies we're delivering from our "close to customer" manufacturing strategy. Operating expenses in March were $763 million, up from the prior quarter level of $735 million. The increase was due to growth in R&D activities associated with our ongoing road map differentiation. R&D accounted for 70% of the total operating expenses. Operating margin in the March quarter was 32.8%, above the December quarter level of 30.7% and near the high end of our guidance range, primarily because of the higher revenue and the stronger gross margin performance. Our non-GAAP tax rate for the quarter was 13.3%, in line with our expectations. Our estimate for the June 2025 quarter is for the tax rate to be in the single-digit range due to an anticipated tax reserve release tied to a statute of limitation expiration. Beyond the June quarter, we continue to believe the tax rate will be in the low to mid-teens for the remainder of the calendar year. Other income expense for the March quarter came in at $7 million in expense compared with $11 million in income in the December quarter. The change in OI&E was due to lower gains on our equity investments and lower interest income. OI&E will continue to be susceptible to market-related fluctuations that will cause some level of volatility each quarter. I do believe OI&E will have a slight negative bias in the June quarter. On the capital return side of things, we allocated approximately $347 million to open market share repurchases, and we paid $296 million in dividends in the March quarter. As I indicated on the last earnings call, in the quarter, we retired $500 million of unsecured notes that reached maturity using cash from our balance sheet. We returned 63% of free cash flow in the quarter. This was a little lower than normal due to that cash that we allocated for the debt retirement. For the March quarter, diluted earnings per share came in at $1.04. The diluted share count was roughly 1.29 billion shares, about flat with the December quarter. We have $8.8 billion remaining on our Board-authorized share repurchase program. Let me pivot to the balance sheet. Our cash and short-term investments totaled $5.5 billion at the end of the March quarter, down slightly from $5.7 billion at the end of the December quarter. The primary factors behind the cash decrease were the repayment of those notes, our capital spending as well as our capital return activities. Total debt on the balance sheet, obviously, declined by that $500 million to $4.5 billion at quarter end. Days sales outstanding were 62 days in the March quarter, which was a decrease from 69 days in the December quarter. Inventory at March quarter end totaled $4.5 billion, a slight increase from the December quarter as we prepare for higher revenue levels in the June quarter. Inventory turns were 2.2x compared with 2.1x in the previous quarter. We will continue to manage inventory levels to align with customer demand. Our noncash expenses for the March quarter included nearly $87 million in equity compensation, $83 million in depreciation and $14 million in amortization. Capital expenditures in the March quarter were $288 million, up $100 million from the December quarter. A major driver of this increase was a purchase of land in India to enable our planned lab expansions there. Our capital spending otherwise was focused on lab investments in the United States and global growth in manufacturing. We ended the March quarter with approximately 18,600 regular full-time employees, which was an increase of approximately 300 people from the prior quarter. We had headcount growth primarily in the factory and field organizations to support increased tool installation as well as growing manufacturing activities. We also saw headcount increases within R&D to support that long-term product road map. Now let's turn to our non-GAAP guidance for the June 2025 quarter. We're expecting revenue of $5 billion, plus or minus $300 million. We expect systems revenue in foundry and NAND to be up in the June quarter. This business level is consistent with our expectations from the beginning of the year. I want to specifically point out that we don't see anything being pulled in from future quarters. We're expecting gross margin of 49.5%, plus or minus 1 percentage point. This guidance includes our current assessment of the direct impacts of tariffs on our business. Operating margin of 33.5%, 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 1.28 billion shares. This guidance for gross margin and operating margin percentage would represent record levels since our joining of Lam and Novellus. I would also just point that this would be the highest operating margin percentage that Lam has delivered since the late 1990s. These earnings would obviously represent an all-time record level of profitability. Let me wrap up, we're off to a strong start in 2025. We're executing well on our critical operational and financial objectives. While the tariff-related macro uncertainty is keeping the environment dynamic, customers are continuing to invest consistently with their planned technology road maps. At Lam, we're laser-focused on driving innovation and delivering new product and service capabilities, while at the same time, enhancing operational efficiency and managing our profitability goals. We believe we're well set up to outperform overall WFE growth in 2025 as well as in the years ahead. Operator, that concludes our prepared remarks. Tim and I would now like to open up the call for questions.

[Operator Instructions] Our first question today comes from C.J. Muse with Cantor Fitzgerald.

I guess first question I was hoping to hit on the NAND upgrade cycle that you're seeing. You talked about that being the biggest growth driver into the June quarter. Would love to hear your thoughts around the sustainability of that beyond June. Are you anticipating a broadening of spending beyond just the 1 or 2 customers in the first -- that you're seeing in the first half of the year? And as you think about the growth there, I guess, how much of that will come through tools versus CSBG upgrades? As well as is there a way to think about your share of wallet with the industry focusing so greatly on upgrades where it would appear that you're going from 30% to maybe 40% to 50%?

Yes, C.J., this is Tim. I'll go ahead and start on this. It's -- as we talked a couple of times on earnings calls recently, a significant portion, we said 2/3 of the industry's bits are still at around the 128 level. That's the 1xx generation. So we see a tremendous number of bits that ultimately have to get upgraded to 2xx plus. So we don't know exactly what the rate and pace of that this. Right now, we see a strong move in that direction. And obviously, we're watching for that. But Lam is in an incredibly good position on two fronts. One is the fact that we're the ones who upgrade our own tools. And so we capture a tremendous amount of the wallet, the spend associated with upgrading the tools that are in place. At the same time, as we described at our Investor Day, as you extend beyond the 2xx to the 3xx and 4xx layers, you begin to need additional new tooling to enable that stacking. We talked about the sacrificial carbon gap fill that helps enable tier stacking. We talked about the backside deposition tool that helps with wafer stress as we move beyond 200 layers. We talked about the need to change the means of gap fill to an ALD gap fill. These are things that are new tools. So I think you're going to see a mix. You're going to see existing tools like our etchers. Some of the old and stack depth tool be upgraded. But I think then you'll see new tools being added. And one of those most significant new tools from a technology perspective is what I talked about in my script, which is the Halo Moly, and we're seeing strong momentum there. And eventually, because of the improvement it makes in terms of resistance and that impact on device performance, we think that ultimately broadens out and is adopted across all customers.

Very helpful. I guess as my follow-up, your Taiwan revenues in the quarter were spectacular. I think the highest level that I can see over the last decade or more, and I guess, curious on kind of two fronts. One, how sustainable is that contribution to Lam? And then how does that inform your thinking about what second half tool shipments could look like versus first half?

Actually, C.J., let me just start from the standpoint of the comments we've made around leading-edge foundry logic strength. It's been our stated strategy for the last several years to invest in new tooling to increase our exposure to leading-edge foundry logic. And so I don't think it should come as any surprise. When we talk about record foundry revenues, we talk about strength in places like Taiwan. A lot of that is coming because we've been executing on the new product road maps. And I talked about the Akara conductor etch tool off to a strong start. We talked about SPARC ALD in my prepared remarks. I mean it goes well beyond that. Obviously, advanced packaging, a big portion of that as well. Lam is really well situated in the technology inflections that are coming in leading-edge foundry logic. And I think that accounts for a lot of the strength. And I'll let Doug answer kind of the second part of that.

Yes. I mean Tim covered it. It's sustainable, C.J. It's not going away. It's all about the gate-all-around now, and it's all about advanced packaging. It's all the stuff we've been talking about. So not much to add from Tim's comments.

The next question is from Timothy Arcuri with UBS.

Tim, you made a comment on the call that you were -- I think you said, "Taking steps to limit the impact of tariffs." Can you talk about that? I guess you do have a free trade zone in Fremont. And then when you make the tools in Malaysia, the country of origin is Malaysia. So you should be fine there, too. But you did say taking steps to limit the impact. So can you kind of go into some details on that?

Well, I don't know that I can go into a lot of details on -- as far as the specific steps. But what I can say is that we've worked hard over the last several years to build a very flexible manufacturing and supply chain operation that's centered around our U.S. operations, operations in Asia, as Doug said, close to our customers, close to the supply chain. And so when I say taking steps, it's no different than what we're always doing. We look at the environment. We look at the customers and then we optimize that capability that we have that exists in many different places in the world to deliver our tools most efficiently and most effectively to our customers. And so it's kind of what we're always doing. And I think that, that's a result. I mean, that flexibility is, again, part of the strategy we executed when we saw disruptions like COVID and other things over the past years to really broaden out the global capability of our supply chain and manufacturing operations.

And Tim, I'd just remind you, it's Doug, we've got factories all over the world, right? We've got factories in United States, factories in Austria, factories in Malaysia, factories in Taiwan, factories in Korea, and we've been talking about this for a while. The fact that we have that broad footprint enables us to have some level of flexibility. And I guess, I'd just leave it there.

Cool. Okay, Doug. And then I had a question for you. So it sounds like NAND upgrades you think should continue. But if we look at TSMC's CapEx, it looks like it does kind of flatten off as you get to the back half of the year. I know that you don't track and your business doesn't track to their CapEx. But I think the feeling was that your revenue bias would be a little bit lower in the back half of the year. Is that still the case? You can give us some sort of puts and takes into the back half of the year, that would be great.

Yes, Tim, you're exactly right. You remember exactly what we intimated in the last call, and that's still the right way to think about it. It's a little bit of a first half weighted year, and you'll remember, we talked last quarter about the fact that we lost some of those Chinese customers that were -- as we looked into the year, would have been second half weighted. We talked about a number of -- approximately $700 million of business that we had planned on being there that is no longer there. So thinking about it a little bit first half weighted is still the right way to have it, Tim.

The next question is from Harlan Sur with JPMorgan.

Maybe to follow up on Tim's question. So on the reciprocal tariffs that were levied on many countries, including Malaysia and Taiwan, obviously, there's a 90-day reprieve through early July, but let's assume that somehow this doesn't get resolved or you still have some residual tariffs even post-resolution, does Lam team have enough manufacturing capability in the U.S. to service your leading-edge customers that be aggressively building out plants here in the U.S.? I know before your manufacturing consolidation initiative, you did have manufacturing in Oregon and in California, but not sure how that footprint has changed as you brought on your Malaysia factory.

Yes. So I would go back to what -- it's a good thing, but go back to Doug's comment about our long-standing strategy of putting our capabilities close to our customers. And so you referred to this as, as we see customers expanding aggressively in the U.S., obviously, that will occur over a period of time in which we've already shown an ability to be agile within our manufacturing and supply chain, like I mentioned, in response to COVID, where we moved things to regions where we could meet our customers' needs more effectively. I think that if we continue to see more investment in the U.S., we still have operations, significant manufacturing capabilities and footprint in the U.S. And obviously, as each region grows, we reassess what local manufacturing we need to support that capability.

Harlan, it's Doug. I'd just add, we can't instantaneously change things. But given enough lead time, once you know what the rules are, you can adjust certain things with a period of time. So just think about that. It might take a little bit of time depending on what shows up, but we have an ability to be flexible.

Great. And good to see the very strong performance in the gross margins. I assume near term, you have spares and subsystems inventories that was there before tariffs were put in place. Just wondering if there are some basic materials that you or your subsystem partners source from China, which could quickly be a cost headwind for the team maybe beyond the June quarter, either on spare parts or subsystem side of the business could impact product costs if the tariff headwinds remain.

Listen, Harlan, I don't want to get into everything like what do you have where, in which country. We've got a global supply chain footprint. We've got a global manufacturing footprint. We have an ability to respond to different things depending on what the rules are and how they change. I guess I'll just leave it at that.

The next question is from Stacy Rasgon, Bernstein Research.

First, it does sound to me like your -- based on your comments that you still expect China revenues to be and mix to be down in the second half versus the first half. So I guess, can you just confirm that, that is correct? And if that is true, does that have any implications for the sustainability of gross margins at these levels given that China business has tended to have higher gross margins? Like how do we think about the gross margin sustainability into the back half at these levels given those dynamics?

Yes, Stacy, I'm not going to give details on mix quarter-by-quarter. I still would tell you what we said last quarter was we expect the China concentration year-over-year to be down. That's still absolutely what we expect. Quarter-by-quarter, things might bounce around a little bit. But I'm not going to give you specific details on the quarter-by-quarter amount. But you're right, gross margin will go up and down depending on customer mix, product mix, overall revenue levels. It's a very complicated calculus when you look at all the things that move it around. So there will be variability there.

I guess, so then should I not be thinking about gross margin sustainable at these levels into the back half then? Or are you talking about variability around the current level or what?

Yes, there will be variability around the current level, Stacy. It won't go up every quarter. It will bounce around a little bit.

Okay. So I mean, should I be thinking about it going down, just to be direct?

Yes. Variability means it will go up sometimes, it will go down sometimes.

Okay. Okay. So my follow-up just very quickly. I think last quarter, you said you thought services and CSBG revenues would probably be flat year-over-year in the calendar year. Is that still your expectation?

Yes, flattish is how I would describe it. Reliant will have some headwinds offset by the tailwinds that the upgrade part of the business has, Stacy, yes.

Next question is from Krish Sankar with TD Cowen & Company.

I had two questions. One is just to double-check on this overseas manufacturing. Doug, can you meet all of your non-U.S. customer demand from your non-U.S. manufacturing sites like Malaysia and Taiwan?

Krish, I'm not -- sorry, Krish, I'm not going to get into the exact details, right? We don't build every single tool at every single factory. But with enough lead time, we can adjust depending on what is where. And like I said earlier on the call, depending on what the rules end up being, we can move things around as necessary, not instantaneously though.

Got it. Got it. And then a question on China, too. I understand many of your Chinese customers are probably not -- don't have much long tenure. But I'm curious, what is the visibility into China? Because when you look at the last 3 years, it seemed like China surprised to the upside for WFE and demand. Do you think a similar scenario could play out this year or the calculus is different this time around?

I don't know that it's really all that different. Every customer, Krish, whether they're new or they've been around decades, communicates plans on what they intend to do, where they intend to go. They all have road maps. They'll tell you what they want to do. It's no different in a region like China or Korea or Taiwan, frankly.

The next question is from Srini Pajjuri with Raymond James.

A question on the foundry logic. I know you get a lot of questions on NAND. It's up 60% sequentially, and I think you're guiding for growth again. First, we all know that advanced logic spending is coming back here. But if you could maybe parse it out to what extent this just the spending coming back versus you talked about GAA being a drawer and backside power being a driver. And also, you talked about share gains in the past. If you could kind of help us understand what's driving that sequential strength and continued strength into the June quarter.

Yes. No, we obviously are like talking about the foundry logic story because you just highlighted a couple of really big drivers for us. We're talking about it as billion-dollar-plus technology inflections. You left out a couple, though. So of course, talk about gate-all-around nodes, and how we're putting a lot of new tools in to support that transition. Backside power obviously plays well for an etch and deposition company where you're looking at more metalization, interconnect layers going on to the backside and those being thicker and generally requiring more tooling. What you left out was the advanced packaging and the important role that it's playing and the role that Lam has in really a very significant leadership position in steps like TSV etch, copper plating, many of the dielectric deposition films that are required for advanced packaging. And that's an area where, from both a served market as a percent of total WFE spending, we've kind of reset the mark for us relative to foundry logic. And so advanced packaging is big. And then the one that's still small, but coming is progress we're making on dry EUV resist processing, which when you look at and you think about continued shrinking on the foundry logic road map and the challenges with lithography, we think it has a big role to play, and we are making progress there, both on the DRAM side, which we previously announced at our Investor Day, but also making progress with advanced customers on the foundry logic side as well. So it's just a lot of technology opportunity for a company like Lam.

Yes. That's helpful. And then at a high level, Tim, I know you guided for mid-single-digit WFE growth and you're kind of maintaining that. But if I look at your first quarter results and also your second quarter outlook, you're growing north of 20%. So is this the level of outperformance that you expect, I guess, for the rest of the year? I mean, how should we think about it if WFE grows 5%? And how should we kind of think about your level of outperformance expectation going forward?

Yes, I don't think we're ready to quantify that number specifically, but we have talked about outperformance of WFE overall. Obviously, the mix and where the spending is occurring, how much of that spending is on those advanced technologies where Lam's served market has stepped up and we've got new tools going in, that comes into play as well. But overall, I think I finished my prepared remarks with a comment about being highly confident in our ability to outgrow. And I think that's where we'll probably leave it.

Next question is from Atif Malik with Citi.

The first question is on WFE. I understand you guys are maintaining the $100 billion range as it's still early and there's no meaningful change in customer plan. One of your North American customers is going through some major restructuring and we get asked from investors if you guys have baked in kind of a net-neutral spending scenario for the logic customers in an event that customer tends to abandon the foundry plans or changes direction.

Atif, I guess what I would say -- I won't talk about one specific customer. I mean generally speaking, you guys hear about something, we've known about it well in advance of whatever you're hearing, right, because they got to tell us what they're doing. If we're going to have people there, we're going to have spare parts there to do installation and whatnot. So yes, to the best of our ability, we've contemplated everything we've seen in the totality of the market.