Lam Research makes the machines that build computer chips. Every time a chip factory lays down a thin metal layer, carves a tiny pattern, or scrubs a wafer clean between steps, there is a good chance a Lam machine is doing that work. The company sells this equipment to the world's biggest chip makers, including Samsung and Taiwan Semiconductor Manufacturing Company. It also runs a second business alongside the equipment sales: a services and spare parts operation that keeps those machines running after they ship. That second stream, called the Customer Support Business Group, generated $6.9 billion of Lam's $18.4 billion in total revenue in fiscal year 2025, which means roughly 38 cents of every dollar comes back through parts, upgrades, and service contracts rather than brand-new machines. The diagram below traces where the money goes.
Five years of financial data tell a clear story about this business. Revenue rose from $14.6 billion in fiscal 2021 to $17.2 billion in 2022, stayed roughly flat in 2023, then fell to $14.9 billion in 2024 as chip makers cut their spending. That dip was real and significant. Then fiscal 2025 brought a sharp recovery, with revenue climbing to $18.4 billion, the highest in this five-year window. That pattern, up, flat, down hard, then up again, is exactly what cyclical businesses do. The equipment market does not grow in a straight line. It moves with chip demand, and chip demand moves with the broader economy.
What held up better than revenue during the 2024 dip was the gross margin. The percentage of each dollar Lam keeps after making its products actually improved through the downturn, rising from 44.6% in fiscal 2023 to 47.3% in fiscal 2024, and then to 48.7% in fiscal 2025. That matters because it means Lam was not forced to slash prices just to keep sales moving. The mix of customers shifted in its favor, factory costs came down, and the service business kept contributing steady, higher-margin dollars even when new equipment orders slowed.
The cash generation is also notable. Lam produced $3.6 billion in free cash flow in fiscal 2021, dipped to $3.1 billion in 2022, then climbed to $5.2 billion in 2023, $4.7 billion in 2024, and $6.2 billion in 2025. Even in the down year, cash kept flowing. The company used much of that cash to return money to shareholders, spending $3.4 billion on stock repurchases and $1.1 billion on dividends in fiscal 2025 alone. Meanwhile, net debt flipped from positive $0.6 billion in 2021 to negative $2.7 billion in 2025, meaning Lam now holds more cash than it owes in debt.
The single largest documented threat to this business is the U.S. government's export restrictions on sales to China. China accounted for 34% of Lam's revenue in fiscal 2025. That is more than one dollar in every three. The U.S. government has been adding Chinese companies to restricted lists, which means Lam cannot sell to those customers without special permission that may never arrive. Competitors based outside the U.S. are not subject to the same rules, so every new restriction hands those rivals an advantage in the Chinese market.
Customer concentration adds a second layer of risk. A small number of very large customers, including Samsung and Taiwan Semiconductor Manufacturing Company, generate most of Lam's revenue. If even one of those customers delays a major equipment order, the effect on annual results is immediate and visible. Large customers also have bargaining power that can push Lam to accept lower prices or absorb higher costs. A third risk sits in the supply chain. Some parts that go into Lam's machines come from only a single supplier. If that supplier runs into trouble, Lam cannot simply switch to another source overnight.
The shift to three-dimensional chip designs is central to why Lam believes its served market will grow over time. Three-dimensional structures like 3D NAND memory and high-bandwidth memory stacks require more deposition and etch steps than older flat designs. That means chip factories need more machines and more consumable parts per wafer produced. Lam's product lineup, from the ALTUS metal deposition systems to the Vantex dielectric etch tools to the Coronus bevel cleaners, is built around exactly those steps. The company also points to artificial intelligence server demand and ongoing cloud infrastructure spending as forces that require more advanced chips, which in turn require more sophisticated manufacturing equipment.
What the five-year record does not answer is whether the growth in three-dimensional chip manufacturing will be large enough and consistent enough to offset whatever share of the China market disappears under export controls. That is the tension the financial data cannot resolve on its own.
The technology risk compounds the regulatory one. Semiconductor manufacturing is changing rapidly, and Lam must keep developing new tools or lose ground to Applied Materials, Tokyo Electron, and others. The company spent $2.1 billion on research and development in fiscal 2025, up from $1.9 billion in fiscal 2024 and $1.7 billion in fiscal 2023. That spending is rising every year, which is necessary to stay competitive but also means costs go up even when the revenue cycle turns down, as it did in fiscal 2024.