Lam Research (NASDAQ: LRCX) posted numbers that need little embellishment. Revenue of $8.22 billion cleared the $8.14 billion consensus by roughly 1%; non-GAAP diluted EPS of $2.20 beat the $2.18 estimate by two cents. The message is simple. AI-driven semiconductor demand is pulling Lam's equipment through at a velocity few rivals can touch.
Revenue climbed 54% year over year and 22% sequentially. That acceleration reflects both the breadth of the current wafer fab equipment upcycle and Lam's placement within it. Systems revenue reached $5.73 billion, up 35% sequentially. Customer support revenue and other came in at $2.49 billion, flat quarter over quarter. The support line's steadiness matters. It offers a recurring base that doesn't gyrate with equipment orders. At $2.49 billion, it now makes up 30% of total revenue, down from 37% last quarter only because systems revenue surged so dramatically.
Gross margin expanded 40 basis points sequentially to 52.4% on a non-GAAP basis. Operating margin rose 180 basis points to 40.2%. The margin expansion here stems from operating leverage, not pricing power. Revenue grew $1.50 billion sequentially; operating expenses increased just $88 million. Six percent expense growth on 22% revenue growth. That's the mechanism. The company is capturing scale without matching overhead.
China contributed 35% of revenue, up from 32% in the prior quarter. Korea and Taiwan accounted for 20% and 18%, respectively. The China concentration warrants attention given export control risks. But the sequential increase indicates that demand from Chinese foundries and memory manufacturers persists. Lam also disclosed $468 million in shipments to Japan not yet recognized as revenue. That deferred revenue will convert in coming quarters.
Cash flow stood out. Operating cash flow hit $3.50 billion, more than double the $1.46 billion in the prior quarter and nearly double the $1.78 billion a year ago. The cash balance jumped to $7.45 billion from $5.60 billion, even after $1.02 billion in share repurchases and $325 million in dividends. The buyback pace accelerated sharply from $247 million in the June quarter. At current rates, Lam is retiring shares at an annualized pace approaching 3% of the float. Yet diluted share count barely budged: 1.256 billion versus 1.256 billion. The buyback is largely absorbing equity compensation dilution, not meaningfully shrinking the base. The real cash flow story is working capital. Changes in operating assets and liabilities generated $535 million in cash, versus an $860 million use in the prior quarter. Timing of collections and shipments.
Guidance for the December quarter implies revenue of $8.20 billion to $9.00 billion. The $8.60 billion midpoint represents 5% sequential growth. Non-GAAP EPS guidance of $2.18 to $2.48, midpoint $2.33, implies modest sequential growth from $2.20. The range is wide: $800 million on revenue. That's typical for Lam, and reflects the lumpiness of large equipment orders. Gross margin guidance midpoint of 52.5% is essentially flat with the 52.4% reported. Management sees limited near-term unit economics expansion despite higher volumes.
The quarter confirms that the AI-driven semiconductor investment cycle remains in expansion, and Lam is taking more than its share. Its claim of outgrowing the wafer fab equipment market holds up against the revenue trajectory. Flat gross margin guidance and concentrated China exposure are reminders that this cycle carries distinct risks. Whether order momentum sustains, or whether the December guidance width signals genuine uncertainty about the curve's slope, remains to be tested. For now, the trajectory reads clearly positive.