Lam Research Corporation 2024 Q2 10-Q 9

The following table presents the Company’s revenues disaggregated between system and its customer support-related revenue:

~~In October 2016,~~


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(In thousands)
Systems revenue	$	2,299,286	$	3,547,518	$	4,355,941	$	6,729,505
Customer support-related revenue and other	1,458,973		1,730,051		2,884,380		3,622,185
	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690

Systems revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.

Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the ~~FASB released ASU 2016-16, “Income Tax~~ – ~~Intra-Entity Transfers~~Company’s Reliant product line.

The following table presents the Company’s revenues disaggregated by geographic region:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(In thousands)
China	$	1,493,395	$	1,263,507	$	3,180,706	$	2,793,982
Korea	711,951		1,077,052		1,259,896		1,932,430
Japan	512,845		575,945		837,365		1,034,638
Taiwan	499,883		991,173		742,373		2,112,119
United States	218,789		503,238		501,013		808,215
Europe	175,767		337,818		414,236		600,406
Southeast Asia	145,629		528,836		304,732		1,069,900
	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690

The following table presents the percentages of ~~Assets Other than Inventory.”~~ leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
Memory	48	%	50	%	43	%	50	%
Foundry	38	%	31	%	37	%	33	%
Logic/integrated device manufacturing	14	%	19	%	20	%	17	%

Deferred Revenue

Revenue of $364.1 million and $925.8 million included in deferred profit at June 25, 2023 was recognized during the three and six months ended December 24, 2023, representing 20% and 50%, respectively, of the $1,837.9 million of deferred revenue as of June 25, 2023.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of December 24, 2023 and when the Company expects to recognize the amounts as revenue:


	Less than 1 Year		1-3 Years			More than 3 Years			Total
	(In thousands)
Deferred revenue	$	1,593,577	$	289,311	(1)	$	45,156	(1)	$	1,928,044

(1)This ~~standard update improves~~amount is reported in Deferred profit on the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Early adoption is permitted. The Company is required to adopt the standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The Company is currently in the process of evaluating the impact of adoption on itsCompany's Condensed Consolidated ~~Financial Statements.~~

~~In November 2016,~~Balance Sheets as the ~~FASB released ASU 2016-18, “Statement of Cash Flows~~ – ~~Restricted Cash.” This standard update requires that restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling~~customers can demand the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company is required to adopt this standard in the first quarter of fiscal year 2019, with a retrospective transition method required. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its Condensed Consolidated Financial Statements.

In August 2017, the FASB released ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The new guidance is intended to: (1) more closely align hedge accounting with an entity’s risk management strategies, (2) simplify the application of hedge accounting by eliminating the requirement to separately measure and report hedge ineffectiveness, and (3) increase transparency around the scope and results of hedging programs. The Company is required to adopt the standard in the first quarter of fiscal year 2020, using a modified-retrospective approach for any cash flow or net investment hedges that exist on the date of adoption. The presentation and disclosure requirements as defined per the standard areliability to be ~~applied prospectively. Early adoption is permitted. The Company is currently in the process~~performed at any time.

Lam Research Corporation 2024 Q2 10-Q 10

Table of ~~evaluating the impact of adoption on its Condensed Consolidated Financial Statements.~~Contents

NOTE 34 — EQUITY-BASED COMPENSATION PLANS

The Lam Research Corporation 2015 Stock Incentive Plan, as amended, ~~(the “2015 Plan”),~~ provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s ~~options,~~option, RSU, and market-based PRSU awards typically vest over a period of three years. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.

The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands)
Equity-based compensation expense	$	69,901	$	73,084	$	137,112	$	144,194
Income tax benefit recognized related to equity-based compensation expense	$	9,354	$	8,676	$	18,918	$	20,204

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Equity-based compensation expense $ 42,124
$ 32,255
$ 83,907
$ 70,850
Income tax benefit recognized related to equity-based compensation expense $ 18,089
$ 8,815
$ 31,477
$ 19,721

The estimated fair value of the Company’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting term on a straight-line basis. In the first quarter of fiscal year 2018, the Company adopted ASU 2016-9, “Compensation – ~~Stock Compensation,” as discussed further in Note 2.~~

~~ESPP~~

The 1999 Employee Stock Purchase Plan, as amended and restated (the “1999 ESPP”), allows employees to designate a portion of their base compensation to be withheld through payroll deductions and used to purchase Common Stock at a purchase price per share equal to the lower of 85% of the fair market value of Common Stock on the first or last day of the applicable purchase period. Typically, each offering period lasts up to twelve months and comprises two interim purchase dates.

~~During the three and six months ended December 24, 2017, a total of 412,469 shares of the Company’s Common Stock were sold to employees under the 1999 ESPP.~~

~~Table of Contents~~

Purchase rights under the 1999 ESPP were valued using the Black-Scholes option valuation model and the following weighted-average assumptions for the three and six months ended December 24, 2017 and December 25, 2016:

Three and Six Months Ended
December 24,
2017 December 25,
2016
Expected stock price volatility 29.13 % 33.02 %
Risk-free interest rate 0.82 % 0.43 %
Expected term (years) 0.77
0.77
Dividend yield 0.89 % 1.14 %

NOTE 45 — OTHER ~~EXPENSE,~~INCOME (EXPENSE), NET

The significant components of other ~~expense,~~income (expense), net, are as follows:


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
	(in thousands)
Interest income	$	57,595	$	26,125	$	114,159	$	41,181
Interest expense	(46,313)		(46,661)		(91,644)		(92,713)
Gains (losses) on deferred compensation plan-related assets, net	25,530		10,871		22,629		(1,855)


Foreign exchange (losses) gains, net	(568)		(10,114)		701		(3,293)
Other, net	(6,405)		(8,455)		(13,405)		(14,649)
	$	29,839	$	(28,234)	$	32,440	$	(71,329)

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Interest income $ 20,578
$ 10,945
$ 40,787
$ 23,708
Interest expense (23,317 ) (26,641 ) (47,222 ) (68,070 )
Gains on deferred compensation plan related assets, net 6,074
1,666
9,527
7,838
Loss on extinguishment of debt —
(36,325 ) —
(36,325 )
Foreign exchange (losses) gains, net 1,196
1,011
(1,804 ) 2,230
Other, net (7,683 ) (5,679 ) (9,942 ) (7,558 )
$ (3,152 ) $ (55,023 ) $ (8,654 ) $ (78,177 )

Interest income in the three and six months ended December 24, 2017, increased compared to same period in 2016 due to higher yield. Interest expense decreased in the six months ended December 24, 2017 compared to the same period in 2016 due to the termination of the Term Loan Agreement and mandatory redemption of the Senior Notes due 2023 and 2026 during the December 2016 quarter. Loss on extinguishment of debt realized in the three months ended December 25, 2016 is primarily a result of the mandatory redemption of the Senior Notes Due 2023 and 2026 as well as the termination of the Term Loan Agreement.

NOTE 56 — INCOME TAX EXPENSE

~~On December 22, 2017, the “Tax Cuts & Jobs Act” (hereafter referred to as “U.S. tax reform”) was signed into law and is effective~~The Company’s provision for the Company’s quarter which ended December 24, 2017. U.S. tax reform reduces the U.S. federal statutory tax rate from 35% to 21%, mandates payment of a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The impact on income taxes due to change in legislation is required under the authoritative guidance of Accounting Standards Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted. In conjunction, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period that is similar to the measurement period used when accounting for business combinations. As such, there is significant activity within the quarter which reflects the change in legislation. Most of that activity has provisionally been recorded in the Company’s Condensed Consolidated Financial Statements in the period ended December 24, 2017, as the Company has not yet completed the accounting for the tax effects of enactment. The Company has recorded what it believes to be a reasonable estimate and the provisional activity is subject to further adjustments under SAB 118. In addition, for significant items for which the Company could not make a reasonable estimate, no provisional activity was recorded. The activity will be recorded during the measurement period allowed under SAB 118 when a reasonable estimate can be made, or when the effect of the activity is known. The Company will continue to refine provisional balances and adjustments may be made under SAB 118 during the measurement period as a result of future changes in interpretation, information available, assumptions made by the Company and/or issuance of additional guidance; these adjustments could be material.

~~The Company recorded an income tax expense of $744.2 million and $841.2 million for the three and six months ended December 24, 2017, which yielded an~~ effective tax rate ~~of approximately 101.4% and 59.2%, respectively.~~are as follows:

As a result of U.S. tax reform, the Company revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 35% to 21%. As the Company has a fiscal year ending the last Sunday in June, it is subject to transitional tax rate rules. Therefore, a blended rate of 28.27% was computed as effective for the current fiscal year.


	Three Months Ended						Six Months Ended
	December 24, 2023			December 25, 2022			December 24, 2023			December 25, 2022
	(in thousands, except percentages)
Income tax expense	$	132,785		$	183,421		$	271,017		$	412,287
Effective tax rate	12.2		%	11.1		%	12.8		%	12.5		%

The difference between the U.S. federal statutory tax rate of ~~28.27%~~21% and the Company’s effective tax rate for the three and six months ended December 24, ~~2017, is~~2023 and December 25, 2022 was primarily due to ~~the impact of U.S. tax reform, outlined below, and~~ income in lower tax jurisdictions.

~~Revaluation~~On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the Company’s deferred tax balances to reflect the new U.S. federal statutory tax rate and computation of the one-time transition tax on accumulated unrepatriated foreign earnings, were recorded on a provisional basis in the three and six months ended December 24, 2017 andIRA are therefore subject to potential measurement period adjustments under SAB 118. The Company revalued the deferred tax balances based on the tax rates at which the balance, or a portion of the balance, is expected

~~Table of Contents~~

to reverse at in the future. Generally, this is 21%, but for certain activity which is expected to reverse at the Company’s current fiscal year blended rate. The Company has not yet completed the revaluation of the deferred tax balances due to estimates which are being used during interim periods until finalization of the balances can occur ateffective beginning with the Company’s fiscal year ~~end.~~2024, with certain exceptions. The provisional amount recorded related to the revaluation of the Company’s deferred tax balance was $42.7 million, and an associated tax liability was remeasured at $54.0 million, which is the tax effect of when the balance is expected to reverse. The one-time transition tax is based on the Company’s total post-1986 earnings and profits (“E&P”) that was previously deferred from U.S. income taxes. The Company had previously accrued deferred taxes onIRA includes a ~~portion of this E&P.~~new 15% corporate minimum tax. The Company has ~~not yet completed~~evaluated the calculation of total post-1986 E&P and related income tax pools for its foreign subsidiaries. The Company recorded a provisional amount for the one-time transition tax of $991.3 million, which was offset by the releasepotential impacts of the ~~associated previously accrued deferred taxes of $287.8 million. The net increase~~IRA and does not expect it to have a material impact on the effective tax ~~expense was $703.5 million. The one-time transition tax may be elected to be paid over a period of eight years. The Company intends to make this election.~~

Other significant items which are being evaluated by the Company but for which no estimate can currently be made and for which no provisional amounts were recorded in the Company’s Condensed Consolidated Financial Statements, include the impact of the “Global Intangible Low-Taxed Income” (“GILTI”) provision of U.S. tax reform. The GILTI provision imposes taxes on foreign earnings in excess of a deemed return on tangible assets. This tax is effective for the Company after the end of the current fiscal year.rate. However, the Company expects future guidance from the Treasury Department and will further analyze when the guidance is ~~evaluating whether deferred taxes should be recorded in relation to~~issued.

The Internal Revenue Service (“IRS”) is examining the ~~GILTI provisions or if~~Company’s U.S. federal income tax returns for the ~~tax should be recorded in~~fiscal years ended June 30, 2019, and June 28, 2020. To date, no significant adjustments have been proposed by the ~~period in which it occurs. Based on current interpretation, the Company may choose either method as an accounting policy election.~~IRS. The Company ~~has not yet decided on~~is unable to make a reasonable estimate as to when cash settlements, if any, with the ~~accounting policy related to GILTI and~~IRS will ~~only do so after completion~~occur.

Lam Research Corporation 2024 Q2 10-Q 11

Table of ~~the GILTI analysis. The provisions related to GILTI are subject to adjustment during the measurement period under SAB 118.~~Contents

The Company is in various stages of ~~examination~~examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its ~~unrecognized~~uncertain tax ~~benefits~~positions as a result of tax examinations or lapses of ~~statute~~statutes of ~~limitations.~~limitation. The ~~estimated reduction~~change in ~~unrecognized~~uncertain tax ~~benefits~~positions as a result of lapses of statutes of limitation may range up to ~~$94~~$12.4 million.

~~Table of Contents~~

NOTE 67 — NET ~~(LOSS)~~ INCOME PER SHARE

Basic net ~~(loss)~~ income per share is computed by dividing net ~~(loss)~~ income by the weighted-average number of common shares outstanding during the period. Diluted net ~~(loss)~~ income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, ~~convertible notes,~~ and ~~warrants. Dilutive shares outstanding include the effect of the convertible notes. Refer to Note 11 for additional information regarding the Company’s~~ convertible notes. The following table reconciles the ~~numerators and denominators of~~inputs to the basic and diluted computations for net ~~(loss)~~ income per share.


	Three Months Ended					Six Months Ended
	December 24, 2017			December 25, 2016		December 24, 2017		December 25, 2016
	(in thousands, except per share data)
	Three Months Ended										Three Months Ended			Six Months Ended
	December 24, 2023									December 24, 2023		December 25, 2022	December 24, 2023		December 25, 2022
	(in thousands, except per share data)												(in thousands, except per share data)
Numerator:
Net (loss) income	$	(9,955	)	$	332,791	$	580,735	$	596,626
Net income
Net income
Net income
Denominator:
Basic average shares outstanding
Basic average shares outstanding
Basic average shares outstanding	161,135			162,659		161,638		161,633
Effect of potential dilutive securities:
Employee stock plans	—			2,243		2,636		2,193
Convertible notes	—			16,640		15,287		15,930
Warrants	—			2,001		4,397		2,024
Employee stock plans
Employee stock plans

Diluted average shares outstanding	161,135			183,543		183,958		181,780
Net (loss) income per share - basic	$	(0.06	)	$	2.05	$	3.59	$	3.69
Net (loss) income per share - diluted	$	(0.06	)	$	1.81	$	3.16	$	3.28

Diluted average shares outstanding

Diluted average shares outstanding
Net income per share - basic
Net income per share - diluted

For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. The ~~following~~impact from potentially dilutive securities, ~~were excluded:~~

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Options and RSUs 7
—
20
3
Employee stock plans 2,757
—
—
—
Convertible notes 15,423
—
—
—
Warrants 4,721
—
—
—

~~Diluted shares outstanding do~~including options and RSUs, was not ~~include any effect resulting from note hedges associated with the Company’s 2018 Notes as their impact would have been anti-dilutive.~~

~~NOTE 7 — FINANCIAL INSTRUMENTS~~

The Company maintains an investment portfolio of various holdings, types, and maturities. The Company’s mutual funds, which are related to the Company’s obligations under the deferred compensation plan, are classified as trading securities. Investments classified as trading securities are recorded at fair value based upon quoted market prices. Differences between the cost and fair value of trading securities are recognized as other income (expense) in the Condensed Consolidated Statements of Operations. All of the Company’s other investments are classified as available-for-sale and consequently are recorded in the Condensed Consolidated Balance Sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of tax.

~~Fair Value~~

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurementsmaterial for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

~~Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions.~~

Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data, for substantially the full term of the assets or liabilities.

Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.

The Company’s primary financial instruments include its cash, cash equivalents, investments, restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt and capital leases, and foreign currency related derivative instruments. The estimated fair value of cash, accounts receivable, and accounts payable approximates their carrying value due to the short period of time to their maturities. The estimated fair values of capital lease obligations approximate their carrying value as the substantial majority of these obligations have interest rates that adjust to market rates on a periodic basis. Refer to Note 11 to the Condensed Consolidated Financial Statements for additional information regarding the fair value of the Company’s Senior Notes and Convertible Notes.

The following table sets forth the Company’s cash, cash equivalents, investments, restricted cash and investments, and other assets measured at fair value on a recurring basis as of December 24, 2017, and June 25, 2017:

December 24, 2017
(Reported Within)
Cost Unrealized
Gain Unrealized
(Loss) Fair Value Cash and
Cash
Equivalents Investments Restricted
Cash &
Investments Other
Assets
(in thousands)
Cash $ 594,353
$ —
$ —
$ 594,353
$ 588,396
$ —
$ 5,957
$ —
Level 1:
Time deposit 521,265
—
—
521,265
271,238
—
250,027
—
Money market funds 878,732
—
—
878,732
878,732
—
—
—
U.S. Treasury and agencies 835,112
—
(9,028 ) 826,084
2,199
823,885
—
—
Mutual funds 58,307
3,844
—
62,151
—
—
—
62,151
Level 1 Total 2,293,416
3,844
(9,028 ) 2,288,232
1,152,169
823,885
250,027
62,151
Level 2:
Municipal notes and bonds 179,475
10
(649 ) 178,836
—
178,836
—
—
Government-sponsored enterprises 47,925
—
(602 ) 47,323
—
47,323
—
—
Foreign government bonds 61,006
—
(490 ) 60,516
—
60,516
—
—
Corporate notes and bonds 2,686,080
849
(12,781 ) 2,674,148
4,608
2,669,540
—
—
Mortgage backed securities — residential 53,506
24
(325 ) 53,205
—
53,205
—
—
Mortgage backed securities — commercial 121,950
—
(729 ) 121,221
—
121,221
—
—
Level 2 Total 3,149,942
883
(15,576 ) 3,135,249
4,608
3,130,641
—
—
Total $ 6,037,711
$ 4,727
$ (24,604 ) $ 6,017,834
$ 1,745,173
$ 3,954,526
$ 255,984
$ 62,151

~~Table of Contents~~

June 25, 2017
(Reported Within)
Cost Unrealized
Gain Unrealized
(Loss) Fair Value Cash and
Cash
Equivalents Investments Restricted
Cash &
Investments Other
Assets
(in thousands)
Cash $ 551,308
$ —
$ —
$ 551,308
$ 545,130
$ —
$ 6,178
$ —
Level 1:
Time deposit 640,666
—
—
640,666
390,639
—
250,027
—
Money market funds 1,423,417
—
—
1,423,417
1,423,417
—
—
—
U.S. Treasury and agencies 783,848
684
(2,111 ) 782,421
8,297
774,124
—
—
Mutual funds 53,247
3,007
—
56,254
—
—
—
56,254
Level 1 Total 2,901,178
3,691
(2,111 ) 2,902,758
1,822,353
774,124
250,027
56,254
Level 2:
Municipal notes and bonds 194,575
308
(7 ) 194,876
—
194,876
—
—
U.S. Treasury and agencies 12,795
—
(167 ) 12,628
—
12,628
—
—
Government-sponsored enterprises 24,502
—
(6 ) 24,496
—
24,496
—
—
Foreign government bonds 62,917
219
(114 ) 63,022
—
63,022
—
—
Corporate notes and bonds 2,433,622
4,654
(1,840 ) 2,436,436
10,051
2,426,385
—
—
Mortgage backed securities — residential 102,760
87
(489 ) 102,358
—
102,358
—
—
Mortgage backed securities — commercial 65,828
9
(98 ) 65,739
—
65,739
—
—
Level 2 Total 2,896,999
5,277
(2,721 ) 2,899,555
10,051
2,889,504
—
—
Total $ 6,349,485
$ 8,968
$ (4,832 ) $ 6,353,621
$ 2,377,534
$ 3,663,628
$ 256,205
$ 56,254

The Company accounts for its investment portfolio at fair value. Realized gains (losses) for investment sales are specifically identified. Management assesses the fair value of investments in debt securities that are not actively traded through consideration of interest rates and their impact on the present value of the cash flows to be received from the investments. The Company also considers whether changes in the credit ratings of the issuer could impact the assessment of fair value. The Company did not recognize any losses on investments due to other-than-temporary impairments during the three and six months ended December 24, ~~2017 or~~2023 and December 25, ~~2016. Additionally, gross realized gains/(losses)~~2022.

NOTE 8 — FINANCIAL INSTRUMENTS

The Company’s investment strategies and investment and fair value policies are unchanged from ~~sales~~those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K. As of December 24, 2023 and June 25, 2023 the fair value of mutual funds and debt and equity investments were ~~approximately $0.2 million~~not material. The financial statement impacts to the Condensed Consolidated Statement of Operations from debt and ~~$(1.1) million, respectively, in~~equity investments were not material as of and for the three ~~months ended December 24, 2017,~~ and $0.1 million and $(0.4) million, respectively, in the three months ended December 25, 2016. Gross realized gains/(losses) from sales of investments were approximately $1.0 million and $(2.1) million, respectively, in the six months ended December 24, ~~2017 and $2.7 million and $(0.6) million, respectively, in the six months ended December 25, 2016.~~

~~The following is an analysis of the Company’s cash, cash equivalents, investments, and restricted cash and investment in unrealized loss positions:~~

December 24, 2017
Unrealized Losses
Less than 12 Months Unrealized Losses
12 Months or Greater Total
Fair Value Gross
Unrealized
Loss Fair Value Gross
Unrealized
Loss Fair Value Gross
Unrealized
Loss
(in thousands)
U.S. Treasury and agencies $ 659,453
$ (6,546 ) $ 161,386
$ (2,482 ) $ 820,839
$ (9,028 )
Municipal notes and bonds 168,189
(649 ) —
—
168,189
(649 )
Government-sponsored enterprises 27,681
(163 ) 19,533
(439 ) 47,214
(602 )
Foreign government bonds 51,879
(382 ) 8,425
(108 ) 60,304
(490 )
Corporate notes and bonds 2,160,923
(11,215 ) 152,403
(1,566 ) 2,313,326
(12,781 )
Mortgage backed securities — residential 46,771
(309 ) 1,789
(16 ) 48,560
(325 )
Mortgage backed securities — commercial 115,554
(674 ) 5,401
(55 ) 120,955
(729 )
$ 3,230,450
$ (19,938 ) $ 348,937
$ (4,666 ) $ 3,579,387
$ (24,604 )

~~Table of Contents~~

~~The amortized cost and fair value of cash equivalents, investments, and restricted investments with contractual maturities are as follows as of December 24, 2017:~~

Cost Estimated
Fair
Value
(in thousands)
Due in one year or less $ 1,995,451
$ 1,994,497
Due after one year through five years 3,217,096
3,195,218
Due in more than five years 172,504
171,615
$ 5,385,051
$ 5,361,330

The Company has the ability, if necessary, to liquidate its investments in order to meet the Company’s liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than twelve months from the date of purchase nonetheless are classified as short-term on the accompanying Condensed Consolidated Balance Sheets.

~~Derivative Instruments and Hedging~~

The Company carries derivative financial instruments (“derivatives”) on its Condensed Consolidated Balance Sheets at their fair values. The Company enters into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate fluctuations. In addition, the Company enters into interest rate swap arrangements to manage interest rate risk. The counterparties to these derivatives are large global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.

~~Cash Flow Hedges~~

The Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations on non-U.S. dollar transactions or cash flows, primarily from Japanese yen-denominated revenues and euro- denominated and Korean won-denominated expenses. The Company’s policy is to mitigate the foreign exchange risk arising from the fluctuations in the value of these non-U.S. dollar denominated transactions or cash flows through a foreign currency cash flow hedging program, using forward contracts and foreign currency options that generally expire within 12 months and no later than 24 months. These hedge contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue/expense in the same period the hedged items are recognized.

In addition, the Company has entered into interest rate swap agreements to hedge against the variability of cash flows due to changes in certain benchmark interest rates on fixed rate debt. These instruments are designated as cash flow hedges at inception and are settled in conjunction with the issuance of debt. The effective portion of the contracts’ gains or losses is included in accumulated other comprehensive (loss) and is amortized into income as the hedged item impacts earnings.

At inception and at each quarter-end, hedges are tested prospectively and retrospectively for effectiveness using regression analysis. Changes in the fair value of the forward contracts due to changes in time value are excluded from the assessment of effectiveness and are recognized in revenue or expense in the current period. The change in time value related to these contracts was not material for all reported periods. Changes in the fair value of foreign exchange options due to changes in time value are included in the assessment of effectiveness. To qualify for hedge accounting, the hedge relationship must meet criteria relating to both the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows will be measured. There were no material gains or losses during the three or six months ended December 24, 20172023 and December 25, ~~2016 associated with ineffectiveness or forecasted transactions that failed to occur.~~

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as effective cash flow hedges, the Company recognizes effective changes in the fair value of the hedging instrument within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, with the exception of excluded time value associated with the forward contracts and hedge ineffectiveness recognized, the Company’s results of operations are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are not highly effective or if the Company does not believe that the underlying hedged forecasted transactions will occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to occur, future changes in the fair values of the Company’s derivative

~~Table of Contents~~

instruments would be recognized in earnings. Additionally, related amounts previously recorded in other comprehensive income would be reclassified to income immediately. As of December 24, 2017, the Company had gains of $7.8 million accumulated in other comprehensive income, net of tax, related to foreign exchange cash flow hedges which it expects to reclassify from other comprehensive income into earnings over the next 12 months. Additionally, as of December 24, 2017, the Company had a net loss of $1.9 million accumulated in other comprehensive income, net of tax, related to interest rate contracts which it expects to reclassify from other comprehensive income into earnings over the next 7.2 years.

~~Fair Value Hedges~~2022.

The ~~Company has interest rate contracts whereby the Company receives fixed rates~~financial instruments reported within Cash and pays variable rates based on certain benchmark interest rates, resulting in a net increase or decrease to interest expense, a component of other expense, net in our Condensed Consolidated Statement of Operations. These interest rate contracts are designated as fair value hedges and hedge against changes in the fair value of our debt portfolio. The Company concluded that these interest rate contracts meet the criteria necessary to qualify for the short-cut method of hedge accounting, and as such an assumption is made that the change in the fair value of the hedged debt, due to changes in the benchmark rate, exactly offsets the change in the fair value of the interest rate swap. Therefore, the derivative is considered to be effective at achieving offsetting changes in the fair value of the hedged liability, and no ineffectiveness is recognized.

~~Balance Sheet Hedges~~

The Company also enters into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. These forward contracts are not designated for hedge accounting treatment. Therefore, the change in fair value of these derivatives is recorded as a component of other income (expense) and offsets the change in fair value of the foreign currency denominated assets and liabilities, which are also recorded in other income (expense).

~~As of December 24, 2017, the Company had the following outstanding foreign currency contracts that were entered into under its cash flow and balance sheet hedge programs:~~

Notional Value
Derivatives Designated as
Hedging Instruments: Derivatives Not Designated
as Hedging Instruments:
(in thousands)
Foreign currency forward contracts
Buy Contracts Sell Contracts Buy Contracts Sell Contracts
Japanese yen $ —
$ 512,577
$ —
$ 141,737
Euro 69,649
—
33,044
—
Korean won 33,693
—
—
73,282
Taiwan dollar —
—
20,047
—
Swiss franc —
—
15,225
—
Chinese renminbi —
—
7,529
—
Singapore dollar —
—
7,410
—
British pound sterling —
—
4,019
—
$ 103,342
$ 512,577
$ 87,274
$ 215,019
Foreign currency option contracts
Buy Put Sell Put Buy Put Sell Put
Japanese yen $ 36,036
$ —
$ —
$ —

~~Table of Contents~~

~~The fair value of derivative instruments~~Cash Equivalents in the Company’s Condensed Consolidated Balance Sheets as of December 24, ~~2017,~~2023, and June 25, ~~2017 were~~2023 consisted of the following:




		December 24, 2023		June 25, 2023
	(in thousands)

Money market funds (fair value measured on a recurring basis, level 1)		$	2,155,586	$	2,223,642














Cash		1,718,520		2,132,522
Time deposits		1,749,183		980,892
Total		$	5,623,289	$	5,337,056

In addition, as ~~follows:~~

December 24, 2017 June 25, 2017
Fair Value of Derivative Instruments (Level 2) Fair Value of Derivative Instruments (Level 2)
Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives
Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value
(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts Prepaid expense
and other assets $ 9,687
Accrued expenses and other current liabilities
$ 331
Prepaid expense
and other assets $ 8,061
Accrued expenses and other current liabilities $ 2,916
Interest rate contracts, short-term

Accrued expenses and other current liabilities 4,662

Accrued expenses and other current liabilities 2,833
Interest rate contracts, long-term

Other long-term liabilities 14,520

Other long-term liabilities 7,269
Derivatives not designated as hedging instruments:

Foreign exchange contracts Prepaid expense
and other assets 51
Accrued expenses and other current liabilities
118
Prepaid expense
and other assets 213
Accrued expenses and other current liabilities 342
Total Derivatives $ 9,738
$ 19,631
$ 8,274
$ 13,360

~~Under the master netting agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements,~~of June 25, 2023 the Company ~~is allowed~~had time deposits of $250.0 million reported within other assets in the Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging

The Company’s hedging strategies and policies are unchanged from those disclosed in Note 9, “Financial Instruments,” to ~~net settle transactions~~our Consolidated Financial Statements in Part II, Item 8 of the same currency with a single net amount payable by one party to the other. However, the Company has elected to present the derivative assets and derivative liabilities on a gross basis on its balance sheet.our 2023 Form 10-K. As of December 24, ~~2017, the potential effect of rights of offset associated with the above foreign exchange~~2023 and ~~interest rate contracts would be an offset to assets and liabilities by $4.1 million, resulting in a net derivative asset of $5.6 million and net derivative liability of $15.5 million. As of~~ June 25, ~~2017,~~2023 the ~~potential effect~~fair value of ~~rights~~outstanding cash flow and balance sheet hedges were not material. The financial statement impacts to the Condensed Consolidated Statement of offset associated with the above foreign exchange contracts would be an offset to both assets and liabilities by $5.9 million, resulting in a net derivative asset of $2.3 million and a net derivative liability of $7.4 million. The Company is not required to pledge, nor is the Company entitled to receive, cash collateral for these derivative transactions.

~~The effect of~~Operations from derivative instruments ~~designated~~and hedging activities were not material as ~~cash flow hedges on~~of and for the ~~Company’s Condensed Consolidated Statements of Operations, including accumulated other comprehensive income (“AOCI”) was as follows:~~

Three Months Ended December 24, 2017 Six Months Ended December 24, 2017
Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness
Derivatives Designated as Hedging Instruments Location of
Gain (Loss)
Recognized
in or
Reclassified
into Income Gain (Loss)
Recognized
in AOCI Gain (Loss)
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income Gain
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Revenue $ 8,194
$ 3,771
$ 1,225
$ 8,185
$ (35 ) $ 3,772
Foreign Exchange Contracts Cost of goods sold (250 ) 1,648
(139 ) 2,193

2,472

(347 )
Foreign Exchange Contracts Selling, general, and
administrative (206 ) 1,012
(49 ) 1,150

1,726

(166 )
Foreign Exchange Contracts Other expense, net —
—
(35 ) —

—

(52 )
Interest Rate Contracts Other expense, net —
(31 ) —
—

(62 )
—
$ 7,738
$ 6,400
$ 1,002
$ 11,528
$ 4,101
$ 3,207

three and six months ended December 24, 2023 and December 25, 2022.

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Three Months Ended December 25, 2016 Six Months Ended December 25, 2016
Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness
Derivatives Designated as Hedging Instruments Location of
Gain (Loss)
Recognized
in or
Reclassified
into Income Gain (Loss)
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income Gain (Loss)
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Revenue $ 18,138
$ (420 ) $ 708
$ 15,225
$ (14,025 ) $ 1,413
Foreign Exchange Contracts Cost of goods sold (786 ) (180 ) (28 ) (551 ) (7 ) (95 )
Foreign Exchange Contracts Selling, general, and
administrative (348 ) (146 ) (15 ) (372 ) (155 ) (36 )
Foreign Exchange Contracts Other expense, net —
—
3
—
—
3
Interest Rate Contracts Other expense, net —
1,778
—
—
1,787
—
$ 17,004
$ 1,032
$ 668
$ 14,302
$ (12,400 ) $ 1,285

~~The effect of derivative instruments not designated as cash flow hedges on the Company’s Condensed Consolidated Statements of Operations was as follows:~~

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
Derivatives Not Designated as Hedging Instruments: Location
of Gain Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Other
income $ 2,612
$ 4,343
$ 5,284
$ 3,960

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk ~~consist principally of cash~~ and cash equivalents, investments, restricted cash and investments, trade accounts receivable, and derivative financial instruments used in hedging activities. Cash is placed on deposit at large global financial institutions. Such deposits may be in excess of insured limits. Management believes that the financial institutions that hold the Company’s ~~cash~~mitigation strategies are ~~creditworthy and, accordingly, minimal credit risk exists with respect~~unchanged from those disclosed in Note 9, “Financial Instruments,” to ~~these balances.~~our Consolidated Financial Statements in Part II, Item 8 of our 2023 Form 10-K.

The Company’s overall portfolio of available-for-sale securities must maintain an average minimum rating of “AA-” or “Aa3” as rated by Standard and Poor’s, Fitch Ratings, or Moody’s Investor Services. To ensure diversification and minimize concentration, the Company’s policy limits the amount of credit exposure with any one financial institution or commercial issuer.

The Company is exposed to credit losses in the event of nonperformance by counterparties on foreign currency and interest rate hedge contracts that are used to mitigate the effect of exchange rate and interest rate fluctuations, and on contracts related to structured share repurchase arrangements. These counterparties are large global financial institutions and, to date, no such counterparty has failed to meet its financial obligations to the Company.

Credit risk evaluations, including trade references, bank references, and Dun & Bradstreet ratings, are performed on all new customers and the Company monitors its customers’ financial condition and payment performance. In general, the Company does not require collateral on sales.

NOTE 89 — INVENTORIES

Inventories are stated at the lower of cost ~~(first-in, first-out method)~~ or net realizable ~~value.~~value using standard costs that approximate actual costs on a first-in, first-out basis. System shipments to ~~Japanese~~ customers in Japan, for which title does not transfer until customer acceptance, are classified as finished goods inventory and carried at cost until title transfers. Inventories consist of the following:


	December 24, 2023		June 25, 2023
	(in thousands)
Raw materials	$	3,143,828	$	3,196,988
Work-in-process	225,629		325,611
Finished goods	1,060,449		1,293,591
	$	4,429,906	$	4,816,190

December 24,
2017 June 25,
2017
(in thousands)
Raw materials $ 820,157
$ 625,600
Work-in-process 263,910
213,066
Finished goods 423,368
394,250
$ 1,507,435
$ 1,232,916

NOTE 910 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

The balance of goodwill is approximately ~~$1.5 billion and $1.4~~$1.6 billion as of December 24, ~~2017,~~2023 and June 25, ~~2017, respectively.~~2023. As of December 24, ~~2017, $61.1~~2023 and June 25, 2023, $65.4 million of the goodwill balance is tax deductible and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law.

Intangible Assets

The following table provides the Company’s intangible ~~assets:~~assets, other than goodwill:


	December 24, 2017							June 25, 2017
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(in thousands)
	December 24, 2023																December 24, 2023				June 25, 2023
	Gross														Gross	Accumulated Amortization		Net	Gross			Accumulated Amortization	Net
	(in thousands)																			(in thousands)
Customer relationships	$	630,237	$	(400,189	)	$	230,048	$	615,164	$	(366,439	)	$	248,725
Existing technology	669,559		(531,632		)	137,927		643,196		(487,056		)	156,140
Patents	37,953		(32,507		)	5,446		36,553		(31,238		)	5,315
Other intangible assets	43,814		(36,306		)	7,508		36,514		(35,699		)	815
Patents and other intangible assets
Intangible assets subject to amortization
In process research and development
Total intangible assets	$	1,381,563	$	(1,000,634	)	$	380,929	$	1,331,427	$	(920,432	)	$	410,995

The Company recognized ~~$40.8~~$12.8 million and ~~$38.6~~$12.2 million in intangible asset amortization expense during the three months ended December 24, ~~2017,~~2023 and December 25, ~~2016,~~2022, respectively. ~~During the six months ended December 24, 2017 and December 25, 2016, the company~~The Company recognized ~~$80.1~~$26.8 million and ~~$77.3~~$23.8 million ~~respectively,~~ in intangible asset amortization ~~expense. Refer to Note 15 - Business Combinations for additional information regarding intangible assets acquired~~expense during the six months ended December 24, ~~2017.~~2023 and December 25, 2022, respectively.

Lam Research Corporation 2024 Q2 10-Q 13

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The estimated future amortization expense of intangible assets as of December 24, ~~2017, was as follows:~~2023, is reflected in the table below. The table excludes $22.4 million of capitalized costs for intangible assets that have not been placed into service.


Fiscal Year	Amount
	(in thousands)
2024 (remaining 6 months)	$	22,082
2025	30,938
2026	20,098
2027	15,200
2028	11,951
Thereafter	15,985
	$	116,254

Fiscal Year Amount
(in thousands)
2018 (remaining 6 months) $ 80,490
2019 123,610
2020 58,478
2021 55,792
2022 52,001
Thereafter 10,558
$ 380,929

NOTE 1011 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:


	December 24, 2023		June 25, 2023
	(in thousands)
Accrued compensation	$	571,517	$	481,354
Warranty reserves	243,152		256,781
Income and other taxes payable	307,041		460,630
Dividend payable	263,133		231,267
Restructuring	3,269		8,014
Other	587,833		572,591
	$	1,975,945	$	2,010,637

December 24,
2017 June 25,
2017
(in thousands)
Accrued compensation $ 556,110
$ 447,363
Warranty reserves 179,680
161,981
Income and other taxes payable 310,810
95,127
Dividend payable 79,743
72,738
Other 213,269
192,152
$ 1,339,612
$ 969,361

~~NOTE 11 — LONG-TERM DEBT AND OTHER BORROWINGS~~

~~As of December 24, 2017, and June 25, 2017, the Company’s outstanding debt consisted of the following:~~

December 24, 2017 June 25, 2017

Amount
(in thousands)
Effective Interest Rate
Amount
(in thousands)
Effective Interest Rate
Fixed-rate 1.25% Convertible Notes Due May 15, 2018 ("2018 Notes") $ 206,124
⁽¹⁾
5.27 % $ 447,436
⁽²⁾
5.27 %
Fixed-rate 2.75% Senior Notes Due March 15, 2020 ("2020 Notes") 500,000
2.88 % 500,000
2.88 %
Fixed-rate 2.80% Senior Notes Due June 15, 2021 ("2021 Notes") 800,000
2.95 % 800,000
2.95 %
Fixed-rate 3.80% Senior Notes Due March 15, 2025 ("2025 Notes") 500,000
3.87 % 500,000
3.87 %
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 ("2041 Notes") 526,136
⁽¹⁾
4.28 % 631,074
⁽²⁾
4.28 %
Commercial paper 800,000
1.64 %
⁽³⁾
—
—
Total debt outstanding, at par 3,332,260
2,878,510

Unamortized discount (138,651 ) (178,589 )
Fair value adjustment - interest rate contracts (19,182 ) (10,102 )
Unamortized bond issuance costs (2,434 ) (3,161 )
Total debt outstanding, at carrying value $ 3,171,993
$ 2,686,658

Reported as:
Current portion of long-term debt, and commercial paper $ 1,401,015
⁽⁴⁾
$ 907,827
⁽⁴⁾

Long-term debt 1,770,978
1,778,831

Total debt outstanding, at carrying value $ 3,171,993
$ 2,686,658

~~____________________________~~

⁽¹⁾ As of December 24, 2017, these notes were convertible at the option of the bondholder, as a result of the condition described in (4) below. Upon closure of the conversion period, the 2041 Notes not converted will be reclassified back into noncurrent liabilities and the temporary equity will be reclassified into permanent equity.

⁽²⁾ ~~As of June 25, 2017, these notes were convertible at the option of the bond holder, as a result of the condition described in (4) below.~~

⁽³⁾ ~~Represents the weighted average effective interest rate for all outstanding balances as of December 24, 2017.~~

⁽⁴⁾As of the report date, the market value of the Company’s Common Stock was greater than 130% of the convertible notes conversion price for 20 or more of the 30 consecutive trading days preceding the quarter-end. As a result, the 2041 Notes were classified in current liabilities and a portion of the equity component, associated with the convertible notes representing the unamortized discount, was classified in temporary equity on the Company’s Consolidated Balance Sheets.

~~Convertible Senior Notes~~

In May 2011, the Company issued and sold $450 million in aggregate principal amount of 1.25% Convertible Senior Notes due May 2018 (the “2018 Notes”) at par. The Company pays cash interest at an annual rate of 1.25%, on a semi-annual basis on May 15 and November 15 of each year.

In June 2012, with the acquisition of Novellus Systems, Inc. (“Novellus”), the Company assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041 Notes,” and collectively with the 2018 Notes,

~~Table of Contents~~

the “Convertible Notes”). The Company pays cash interest at an annual rate of 2.625%, on a semi-annual basis on May 15 and November 15 of each year on the 2041 Notes. The 2041 Notes also have a contingent interest payment provision that may require the Company to pay additional interest, up to 0.60% per year, based on certain thresholds, beginning with the semi-annual interest payment on May 15, 2021, and upon the occurrence of certain events, as outlined in the indenture governing the 2041 Notes.

The Company separately accounts for the liability and equity components of the Convertible Notes. The initial debt components of the Convertible Notes were valued based on the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without the conversion feature, which equals the effective interest rate on the liability component disclosed in the table below, respectively. The equity component was initially valued equal to the principle value of the notes, less the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without a conversion feature, which equated to the initial debt discount.

Under certain circumstances, the Convertible Notes may be converted into shares of the Company’s Common Stock. The number of shares each debenture is convertible into is based on conversion rates, disclosed in the table below. The principal value of Convertible Note conversions in the three and six months ended December 24, 2017, was approximately $44.6 million and $346.3 million, respectively. During the quarter ended December 24, 2017, and in the subsequent period through January 26, 2018, the Company received notice of conversion of an additional $227.8 million principal value of Convertible Notes, which will settle in the quarter ending March 25, 2018.

~~Selected additional information regarding the Convertible Notes outstanding as of December 24, 2017, and June 25, 2017, is as follows:~~

December 24, 2017 June 25, 2017
2018 Notes 2041 Notes 2018 Notes 2041 Notes
(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax $ 94,516
$ 158,007
$ 89,604
$ 156,374
Carrying amount of temporary equity component, net of tax $ 3,037
$ 127,387
$ 15,186
$ 154,675
Remaining amortization period (years) 0.3
23.3
0.8
23.8
Fair Value of Notes (Level 2) $ 642,049
$ 2,943,299

Conversion rate (shares of common stock per $1,000 principal amount of notes) 16.6603
29.8987

Conversion price (per share of common stock) $ 60.02
$ 33.45

If-converted value in excess of par value $ 434,986
$ 2,410,644

Estimated share dilution using average quarterly stock price $195.72 per share 2,381
13,042

~~Convertible Note Hedges and Warrants~~

Concurrent with the issuance of the 2018 Notes the Company purchased a convertible note hedge and sold warrants. The warrants settlement is contractually defined as net share settlement. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. As of December 24, 2017, the warrants associated with the 2018 Notes had not been exercised and remained outstanding.

In conjunction with the convertible note hedge, counterparties agreed to sell to the Company shares of Common Stock equal to the number of shares issuable upon conversion of the 2018 Notes in full. The convertible note hedge transactions will be settled in net shares and will terminate upon the earlier of the maturity date or the first day none of the respective notes remain outstanding due to conversion or otherwise. Settlement of the convertible note hedge in net shares, based on the number of shares issued upon conversion of the 2018 Notes, on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 2018 Notes. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. During the three and six months ended December 24, 2017 the note hedge was partially settled, resulting in the receipt of approximately 367,000 and 2,459,000 shares, respectively.

~~Table of Contents~~

~~The following table presents the details of the warrants and convertible note hedge arrangements as of December 24, 2017:~~



	~~2018 Notes~~
	~~(shares in thousands)~~
~~Warrants:~~
~~Underlying shares~~	~~7,497~~
~~Estimated share dilution using average quarterly stock price $195.72 per share~~	~~4,721~~
~~Exercise price~~	~~$72.48~~
~~Expiration date range~~	~~August 15 - October 24, 2018~~
~~Convertible Note Hedge:~~
~~Number of shares available from counterparties~~	~~3,434~~
~~Exercise price~~	~~$60.02~~

~~Senior Notes~~

On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March, 2020 (the “2020 Notes”) and $500 million aggregate principal amount of the Company’s Senior Notes due March, 2025 (the “2025 Notes”, together with the 2020 Notes, the “Senior Notes”). The Company pays interest at an annual rate of 2.75% and 3.80%, on the 2020 Notes and 2025 Notes, respectively, on a semi-annual basis on March 15 and September 15 of each year. During the year ended June 26, 2016, the Company entered into a series of interest rate contracts hedging the fair value of a portion of the 2025 Notes par value, whereby the Company receives a fixed rate and pays a variable rate based on a certain benchmark interest rate. Refer to Note 7 for additional information regarding these interest rate contracts.

The Company may redeem the Senior Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect of the Senior Notes and accrued and unpaid interest before February 15, 2020, for the 2020 Notes and before December 15, 2024, for the 2025 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after February 15, 2020, for the 2020 Notes and on or after December 24, 2024, for the 2025 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes, plus accrued and unpaid interest.

On June 7, 2016, The Company completed a public offering of $800 million aggregate principal amount of Senior Notes due June 2021 (the “2021 Notes”, together with the 2020 and 2025 Notes, the “Senior Notes”). The Company pays interest at an annual rate of 2.80% on the 2021 Notes on a semi-annual basis on June 15 and December 15 of each year.

The Company may redeem the 2021 Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect to the 2021 Notes and accrued and unpaid interest before May 15, 2021. The Company may redeem the 2021 Notes at par, plus accrued and unpaid interest at any time on or after May 15, 2021. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the 2021 Notes at a price equal to 101% of the principal amount of the respective note, plus accrued and unpaid interest.

~~Selected additional information regarding the Senior Notes outstanding as of December 24, 2017, is as follows:~~

Remaining Amortization period Fair Value of Notes (Level 2)
(years) (in thousands)
2020 Notes 2.2 $ 503,330
2021 Notes 3.5 $ 804,120
2025 Notes 7.2 $ 518,060

~~Commercial Paper Program~~

On November 13, 2017, the Company established a new commercial paper program (“the CP Program”) under which the Company may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate principal amount of $1.25 billion. The net proceeds from the commercial paper program will be used for general corporate purposes, including repurchases of the Company’s Common Stock from time to time and under the Company’s stock repurchase

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program. As of December 24, 2017, borrowings under the CP Program had a weighted-average interest rate of 1.64% with maturities of 30 days or less. Amounts available under the CP Program may be re-borrowed.

~~Revolving Credit Facility~~

On October 13, 2017, the Company entered into Amendment No. 2 to Amended and Restated Credit Agreement (the “2nd Amendment”), which amends the Company’s prior unsecured Credit Agreement (as amended by the 2nd Amendment, the “Amended Credit Agreement”). Among other things, the Amended Credit Agreement provides for a $500 million increase to the Company’s revolving credit facility, from $750 million to $1.25 billion with a syndicate of lenders. The Amended Credit Agreement provides for an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600 million, for a potential total commitment of $1.85 billion. The facility matures on October 13, 2022.

Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (1) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.5%, or (c) one-month LIBOR plus 1.0%, plus a spread of 0.0% to 0.5%, or (2) LIBOR multiplied by the statutory rate, plus a spread of 0.9% to 1.5% in each case as the applicable spread is determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Principal and any accrued and unpaid interest is due and payable upon maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s credit rating. The Amended and Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants and events of default. As of December 24, 2017, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

~~Interest Cost~~

The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the debt discount, issuance costs, and effective portion of interest rate contracts with respect to the Convertible Notes, the Senior Notes, the term loan agreement, commercial paper, and the revolving credit facility during the three and six months ended December 24, 2017, and December 25, 2016.

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Contractual interest coupon $ 18,627
$ 22,622
$ 36,583
$ 57,334
Amortization of interest discount 3,410
5,673
7,514
11,587
Amortization of issuance costs 544
531
1,029
1,449
Effect of interest rate contracts, net (254 ) (2,566 ) (603 ) (3,624 )
Total interest cost recognized $ 22,327
$ 26,260
$ 44,523
$ 66,746

NOTE 12 — ~~COMMITMENTS AND CONTINGENCIES~~

~~Operating Leases and Related Guarantees~~LEASES

The Company ~~leases the majority of~~elected to exercise purchase options available under its administrative, research and development (“R&D”) and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable operating leases. Certain of the Company’s facilityfinance leases for buildings located at its Fremont, California headquarters and certain other facility leases provide the Company with options to extend the leases for additional periods or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based on the general rate of inflation.

~~The Company has operating leases regarding~~ certain improved properties in Fremont and Livermore, California (the ~~“Operating~~“California Facility Leases”)~~. The~~ in the three months ended September 24, 2023. As a result, the Company ~~was required to maintain~~released cash collateral in an aggregate of approximately $250.0 million ~~in separate interest-bearing accounts as security for the Company’s obligations. These amounts are recorded with other~~of restricted cash ~~and investments~~that was reported in Other assets in the Company’s Condensed Consolidated Balance ~~Sheet as of December 24, 2017.~~

~~During the term of the Operating Leases and when the terms of the Operating Leases expire, the property subject to those Operating Leases may be remarketed. The Company has guaranteed~~Sheet. Additionally, guarantees made to the lessor that each property ~~will~~would have a certain minimum residual ~~value. The~~value totaling $298.4 million as of June 25, 2023 in the aggregate ~~guarantee made by~~were eliminated with the ~~Company under the Operating Leases is generally no more than approximately $220.4 million; however, under certain default circumstances, the guarantee with regard to an Operating Lease may be 100%~~extinguishment of the ~~lessor’s aggregate investment~~California Facilities Leases. As a result of the purchase of the improved properties, $250.5 million of additions were made to Property and Equipment, Net in the ~~applicable property, which in no case will exceed $250.0 million, in the aggregate.~~Company’s Condensed Consolidated Balance Sheets primarily comprised of land ($40.5 million) and buildings and improvements ($210.0 million).

20NOTE 13 — COMMITMENTS AND CONTINGENCIES

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~~Other~~ Guarantees

The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into ~~certain~~ insurance contracts that are intended to limit its exposure to such indemnifications. As of December 24, ~~2017,~~2023, the Company had not recorded any liability on its Condensed Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees.

Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of ~~third party~~third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees.

The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of December 24, ~~2017,~~2023, the maximum potential amount of future payments that itthe Company could be required to make under these arrangements and letters of credit was ~~$20.6~~$196.9 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.

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In addition, the Company has entered into indemnification agreements with its directors, officers, and certain other employees, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations.

Warranties

The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of December 24, 2023, warranty reserves totaling $17.7 million were reported in other long-term liabilities, the remainder were included in accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s product warranty reserves were as follows:


	Three Months Ended						Six Months Ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016
	(in thousands)
	Three Months Ended													Three Months Ended			Six Months Ended
	December 24, 2023												December 24, 2023		December 25, 2022	December 24, 2023		December 25, 2022
	(in thousands)															(in thousands)
Balance at beginning of period	$	168,337		$	103,226		$	161,981		$	100,321
Warranties issued during the period	57,698			41,544			106,488			76,399
Settlements made during the period	(44,347		)	(32,747		)	(88,400		)	(64,975		)
Changes in liability for warranties issued during the period
Changes in liability for pre-existing warranties	(2,008		)	7,311			(389		)	7,589
Balance at end of period	$	179,680		$	119,334		$	179,680		$	119,334

Under certain circumstances, our Convertible Notes may be converted into shares of our Common Stock. During the six months ended December 24, 2017, approximately $346.3 million principle value of Convertible Notes were converted and in the subsequent period through January 26, 2018, we received notice of conversion of an additional $228 million principal value of Convertible Notes, which will settle in the quarter ending March 25, 2018. We anticipate that conversions may continue in the coming quarter as the 2018 Notes approach maturity. We expect to have sufficient levels of cash, cash equivalents, and short term investments to fund the near-term settlement of these Convertible Notes.

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On October 13, 2017, we entered into Amendment No. 2 to Amended and Restated Credit Agreement (the “2nd Amendment”), among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, which amends the Company’s Credit Agreement (as amended by the 2nd Amendment, the “Amended Credit Agreement”).

Among other things, the Amended Credit Agreement provides for a $500 million increase to the Company’s revolving credit facility, from $750 million under the Credit Agreement to $1.25 billion under the Amended Credit Agreement. The Amended Credit Agreement also modifies the date of maturity of the revolving credit facility from November 10, 2020 to October 13, 2022. The Amended Credit Agreement provides for an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600 million, for a potential total commitment of $1.85

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~~billion. Other than as disclosed in this paragraph, the material terms of the Amended Credit Agreement are substantially the same as the Credit Agreement.~~

On November 13, 2017, we established a commercial paper program under which we may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $1.25 billion. Individual maturities may vary, but cannot not exceed 397 days from the date of issue. The net proceeds from the CP Program will be used for general corporate purposes, including repurchases of our Common Stock from time to time and under our stock repurchase program. If at any time, funds are not available under favorable terms under CP Program, we may utilize the Amended Credit Agreement for funding. Amounts available under the CP Program may be re-borrowed.

During the December 2017 quarter, a one-time transition tax on accumulated unrepatriated foreign earnings, estimated at $991.3 million has been recognized associated with the recent U.S. tax reform. This value is identified as provisional in our Condensed Consolidated Financial Statements for the period ended December 24, 2017, and is subject to future measurement period adjustments under SAB 118. We have elected to pay this tax over a period of eight years, with 8% of the transition tax paid to be paid each September 15, for years 2018 through 2022, and 15%, 20%, and 25%, respectively, to be paid in on September 15, 2023, 2024, and 2025.

In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services. While we have substantial cash balances, ~~in the United States and offshore,~~ we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities. We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, ~~given~~domestic and global macroeconomic and political conditions could cause disruptions to the ~~possibility of changes in market conditions or other occurrences,~~capital markets and otherwise make any financing more challenging, and there can be no ~~certainty~~assurance that ~~such funding~~we will be ~~available in needed quantities~~able to obtain such financing on commercially reasonable terms or ~~on terms favorable to us.~~at all.


~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

For financial market risks related to changes in interest rates, marketable equity security prices, and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our ~~2017~~2023 Form 10-K. ~~Other than noted below, our~~Our exposure related to market risk has not changed materially since June 25, ~~2017. All of the potential changes noted below are based on sensitivity analysis performed on our financial position as of December 24, 2017. Actual results may differ materially.~~2023.

~~Fixed Income Securities~~

Our investments in various interest earning securities carry a degree of market risk for changes in interest rates. At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our fixed income investment portfolio. Conversely, declines in interest rates could have a material adverse impact on interest income for our investment portfolio. We target to maintain a conservative investment policy, which focuses on the safety and preservation of our capital by limiting default risk, market risk, reinvestment risk, and concentration risk.

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The following table presents the hypothetical fair values of fixed income securities that would result from selected potential decreases and increases in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS. The hypothetical fair values as of December 24, 2017, were as follows:

Valuation of Securities
Given an Interest Rate
Decrease of X Basis Points

Fair Value as of
December 24, 2017

Valuation of Securities
Given an Interest Rate
Increase of X Basis Points
(150 BPS) (100 BPS) (50 BPS) 0.00% 50 BPS 100 BPS 150 BPS
(in thousands)
Time deposit $ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
U.S. Treasury and agencies 855,503
845,703
835,893
826,084
816,277
806,471
796,668
Municipal notes and bonds 181,905
180,891
179,863
178,836
177,808
176,781
175,754
Government-sponsored enterprises 48,840
48,334
47,828
47,323
46,817
46,312
45,807
Foreign government bonds 62,333
61,727
61,122
60,516
59,910
59,305
58,699
Bank and corporate notes 2,743,690
2,720,516
2,697,341
2,674,148
2,650,943
2,627,741
2,604,542
Mortgage backed securities - residential 55,161
54,511
53,858
53,205
52,551
51,898
51,244
Mortgage backed securities - commercial 123,691
122,868
122,045
121,221
120,399
119,576
118,753
Total $ 4,592,388
$ 4,555,815
$ 4,519,215
$ 4,482,598
$ 4,445,970
$ 4,409,349
$ 4,372,732

We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to achieve portfolio liquidity and maintain a prudent amount of diversification.


~~ITEM 4.~~	~~Controls and Procedures~~

ITEM 4. Controls and Procedures

Design of Disclosure Controls and Procedures and Internal Control over Financial Reporting

We maintain disclosure controls and procedures and internal control over ~~final~~financial reporting that are designed to comply with Rule 13a-15 of the Exchange Act. In designing and evaluating the controls and procedures associated with each, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and that the effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100% effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Disclosure Controls and Procedures

As required by Exchange Act Rule 13a-15(b), as of December 24, ~~2017,~~2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer, along with our Chief Financial Officer, concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our senior management has timely access to material information that could affect our business.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Effectiveness of Controls

While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting.


~~PART II.~~	~~OTHER INFORMATION~~

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PART II. OTHER INFORMATION


~~ITEM 1.~~	~~Legal Proceedings~~

~~While we are not currently a party~~ITEM 1. Legal Proceedings

Please refer to ~~any legal proceedings that we believe are material, we are either a defendant or plaintiff~~the subsection entitled “Legal Proceedings” within Note 13 “Commitments and Contingencies," to our Condensed Consolidated Financial Statements in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Basedthis quarterly report on current information, we do not believe that a material loss from known matters is probable and therefore have not recorded an accrual for litigation or other contingencies related to existing legal proceedings.Form 10-Q.


~~ITEM 1A.~~	~~Risk Factors~~

ITEM 1A. Risk Factors

In addition to the other information in this Form 10-Q, the following risk factors should be carefully considered in evaluating us and our business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.

INDUSTRY AND CUSTOMER RISKS

The Semiconductor Capital Equipment Industry Is Subject to Variability and Periods of Rapid Growth or Decline; We Therefore Face Risks Related to Our Strategic Resource Allocation Decisions

The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. ~~The industry environment has moved toward being more characterized by variability across segments and customers accentuated by consolidation within the industry.~~ Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results. The variability in our customers’ investments during any particular period is dependent on several factors, including but not limited to electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities.

During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis. If we do not adequately meet these challenges during periods of increasing or declining demand, our gross margins and earnings may be negatively impacted.

We continuously reassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resulting in excess fixed costs.

Especially during transitional periods, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.

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Future Declines in the Semiconductor Industry, and the Overall World Economic Conditions on Which It Is Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial Condition

Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the semiconductor capital equipment market may experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. The economic, regulatory, political, and business conditions occurring nationally, globally, or in any of our key sales regions, which are often unpredictable, have historically impacted customer demand for our products and services and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, changing ~~business~~economic, regulatory, political or ~~economic~~business conditions can cause material adverse changes to our results of operations and financial condition, including but not limited to:

•a decline in demand for our products or services;

•an increase in reserves on accounts receivable due to our customers’ inability to pay us;

•an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;

•valuation allowances on deferred tax assets;

•restructuring charges;

•asset impairments including the potential impairment of goodwill and other intangible assets;

•a decline in the value of our investments;

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•exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come to fruition; and

~~a decline in the value of certain facilities we lease to less than our residual value guarantee with the lessor; and~~

•challenges maintaining reliable and uninterrupted sources of supply.

Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operating results, and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.

~~Our Quarterly Revenues and Operating Results Are Variable~~

Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a small number of transactions can unfavorably affect operating results in a particular quarter. Factors that may cause our financial results to fluctuate unpredictably include but are not limited to:

~~economic conditions in the electronics and semiconductor industries in general and specifically the semiconductor equipment industry;~~

~~the size and timing of orders from customers;~~

~~consolidation of the customer base, which may result in the investment decisions of one customer or market having a significant effect on demand for our products or services;~~

~~procurement shortages;~~

~~the failure of our suppliers or outsource providers to perform their obligations in a manner consistent with our expectations;~~

~~manufacturing difficulties;~~

~~customer cancellations or delays in shipments, installations, and/or customer acceptances;~~

~~the extent that customers continue to purchase and use our products and services in their business;~~

~~our customers’ reuse of existing and installed products, to the extent that such reuse decreases their need to purchase new products or services;~~

~~changes in average selling prices, customer mix, and product mix;~~

~~our ability to develop, introduce, and market new, enhanced, and competitive products in a timely manner;~~

~~our competitors’ introduction of new products;~~

~~legal or technical challenges to our products and technologies;~~

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transportation, communication, demand, information technology, or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, and natural or man-made disasters;

~~legal, tax, accounting, or regulatory changes (including but not limited to change in import/export regulations) or changes in the interpretation or enforcement of existing requirements;~~

~~changes in our estimated effective tax rate;~~

~~foreign currency exchange rate fluctuations; and~~

~~the dilutive impact of our Convertible Notes (as defined below) and related warrants on our earnings per share.~~

~~We May Incur Impairments to Goodwill or Long-Lived Assets~~

We review our long-lived assets, including goodwill and other intangible assets, for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Negative industry or economic trends, including reduced market prices of our Common Stock, reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets. If, in any period, our stock price decreases to the point where our fair value, as determined by our market capitalization, is less than the book value of our assets, this could also indicate a potential impairment, and we may be required to record an impairment charge in that period, which could adversely affect our result of operations.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis indicates potential impairment to goodwill in one or more of our business units, we may be required to record additional charges to earnings in our financial statements, which could negatively affect our results of operations.

~~Our Leverage and Debt Service Obligations and Potential Note Conversion or Related Hedging Activities May Adversely Affect Our Financial Condition, Results of Operations, and Earnings per Share~~

We have $3.3 billion in aggregate principal amount of senior unsecured notes, convertible notes, and commercial paper instruments outstanding. Additionally, we have $1.25 billion available to us in revolving credit arrangements, with an option for us to request an increase in the facility of up to an additional $600 million, for a potential total commitment of $1.85 billion. We may, in the future, decide to borrow amounts under the revolving credit agreement, or to enter into additional debt arrangements.

In addition, we have entered, and in the future may enter, into derivative instrument arrangements to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt. We could be exposed to losses in the event of nonperformance by the counterparties to our derivative instruments.

~~Our indebtedness could have adverse consequences, including:~~

~~risk associated with any inability to satisfy our obligations;~~

a portion of our cash flows that may have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions, or general corporate or other purposes; and

~~impairing our ability to obtain additional financing in the future.~~

Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory, and other factors. Furthermore, our operations may not generate sufficient cash flows, particularly in the United States, to enable us to meet our expenses and service our debt. As a result, we may need to enter into new financing arrangements to obtain the necessary funds. If we determine it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms. If we fail to make a payment on our debt, we could be in default on such debt, and this default could cause us to be in default on our other outstanding indebtedness.

Conversion of our Convertible Notes and the exercise of the related warrants may cause dilution to our stockholders and to our earnings per share. The number of shares of our Common Stock into which the Convertible Notes are convertible and for which related warrants are exercisable for may be adjusted from time to time, including increases in such rates as a result of dividends that we pay to our stockholders. Upon conversion of any Convertible Notes, we will deliver cash in the amount of the principal amount of the Convertible Notes and, with respect to any excess conversion value greater than the principal amount of the Convertible Notes, shares of our Common Stock, which would result in dilution to our stockholders. This dilution may not be completely mitigated by the hedging transactions we entered into in connection with the sale of certain Convertible Notes or

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through share repurchases. Prior to the maturity of the Convertible Notes, if the price of our Common Stock exceeds the conversion price, U.S. generally accepted accounting principles require that we report an increase in diluted share count, which would result in lower reported earnings per share. The price of our Common Stock could also be affected by sales of our Common Stock by investors who view the Convertible Notes as a more attractive means of equity participation in our company and also by hedging activity that may develop involving our Common Stock by holders of the Convertible Notes.

~~Our Credit Agreements Contain Covenant Restrictions That May Limit Our Ability to Operate Our Business~~

We may be unable to respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, or obtain additional financing because our debt agreements contain, and any of our other future similar agreements may contain, covenant restrictions that limit our ability to, among other things:

~~incur additional debt, assume obligations in connection with letters of credit, or issue guarantees;~~

~~create liens;~~

~~enter into transactions with our affiliates;~~

~~sell certain assets; and~~

~~merge or consolidate with any person.~~

Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under the Senior Notes, the Convertible Notes, or our other debt, which could permit the holders to accelerate such debt. If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operation.

We Have a Limited Number of Key Customers

Sales to a limited number of large customers constitute a significant portion of our overall revenue, shipments, cash flows, collections, and profitability. As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict. In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased costs, and/or lower margins for ~~us; compliance with specific environmental, social, and corporate governance standards;~~us and limitations on our ability to share ~~jointly developed~~ technology with others. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.

We Face a Challenging and Complex Competitive Environment

We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.

With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell and support our existing products. 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.

We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers’ needs, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Technological changes and developing technologies have required, and are expected to continue to require, new and costly investments. 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. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, who are able to sell products for certain applications at certain customers that we are prohibited from selling to under applicable export controls, allowing the freedom of action in ways that we may be unable to match. In many cases speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives. For these reasons, we may fail to continue to compete successfully worldwide.

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. 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. Accordingly, we expect it to be more difficult to sell our products to a given customer for a product line application if that customer initially selects a competitor’s equipment for the same product line application.

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We Depend on Creating New Products and Processes and Enhancing Existing Products and Processes for Our ~~Success.~~Success; Consequently, We Are Subject to Risks Associated with Rapid Technological Change

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products or existing products have reliability, quality, design, or safety problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. We may be unable to develop and manufacture products successfully, or products that we introduce may fail in the marketplace. For more than 25 years, the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips. That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development. In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development. In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our ~~customer~~customers’ requirements. Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adversely affect our business in a material way. Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated costs, and inventory obsolescence, which would adversely affect our financial results.

In order to develop new products and processes and enhance existing products and processes, we expect to continue to make significant investments in R&D, to investigate the acquisition of ~~new~~ products and technologies, to invest in or acquire ~~such business~~businesses or technologies, and to pursue joint development relationships with customers, suppliers, or other members of the industry. Our investments and acquisitions may not be as successful as we may expect, particularly asin the event that we ~~seek to~~ invest in or acquire product lines and technologies that are new to us. We may find that acquisitions are not available to us, for regulatory or other reasons, and that we must therefore limit ourselves to collaboration and joint venture development activities ~~which~~that do not have the same benefits as acquisitions. Pursuing development through collaboration and/or joint development activities rather than through an acquisition ~~poses~~may pose substantial challenges for management, including those related to aligning business

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~~objectives,~~ objectives; sharing confidential information, ~~and~~ intellectual property and data; sharing value with third ~~parties,~~parties; and realizing synergies that might have been available in an acquisition but are not available through a joint development project. We must manage product transitions and joint development relationships successfully, as the introduction of new products could adversely affect our sales of existing products and certain jointly developed technologies may be subject to restrictions on our ability to share that technology, ~~with other customers,~~ which could limit our market for products incorporating those technologies. Future technologies, processes, or product developments may render our current product offerings obsolete, leaving us with non-competitive products, obsolete inventory, or both. Moreover, customers may adopt new technologies or processes to address the complex challenges associated with next-generation devices. This shift may result in a reduction in the size of our addressable markets or could increase the relative size of markets in which we either do not compete or have relatively low market share.

~~We Are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification~~

We derive a substantial percentage of our revenues from a limited number of products. Our products are priced up to approximately $10 million per system. As a result, the inability to recognize revenue on even a few systems can cause a significantly adverse impact on our revenues for a given quarter, and, in the longer term, the continued market acceptance of these products is critical to our future success. Our business, operating results, 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,~~

~~technological changes that we are unable to address with our products, or~~

~~a failure to release new or enhanced versions of our products on a timely basis.~~

In addition, the fact that we offer limited product lines creates the risk that our customers may view us as less important to their business than our competitors that offer additional products and/or product capabilities. This may impact our ability to maintain or expand our business with certain customers. Such product concentration may also subject us to additional risks associated with technology changes. Our business is affected by our customers’ use of our products in certain steps in their wafer fabrication processes. Should technologies change so that the manufacture of semiconductors requires fewer steps using our products, this could have a larger impact on our business than it would on the business of our less concentrated competitors.

Strategic Alliances and Customer Consolidation May Have Negative Effects on Our Business

~~Increasingly, semiconductor~~Semiconductor manufacturing companies ~~are entering~~from time to time enter into strategic alliances or ~~consolidating~~consolidate with one another to expedite the development of processes and other manufacturing technologies and/or achieve economies of scale. The outcomes of such an alliance can be the definition of a particular tool set for a certain function and/or the standardization of a series of process steps that use a specific set of manufacturing equipment, while the outcomes of consolidation can lead to an overall reduction in the market for semiconductor manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing power based on their higher volumes. In certain instances, this could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such functions or processes. Additional outcomes of such consolidation may include our customers re-evaluating their future supplier relationships to consider our competitors’ products and/or gaining additional influence over the pricing of products and the control of intellectual ~~property.~~property or data.

Similarly, our customers may partner with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. Even if they select our equipment, the institutions and the customers that follow their lead could impose conditions on acceptance of that equipment, such as adherence to standards and requirements or limitations on how we license our proprietary rights, that increase our costs or require us to take on greater risk. These actions could adversely impact our market share and financial results.

~~We Depend on~~BUSINESS AND OPERATIONAL RISKS

Our Revenues and Operating Results Are Variable

Our revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a ~~Limited Number~~number of ~~Key Suppliers and Outsource Providers, and We Run the Risk That They Might Not Perform as We Expect~~

~~Outsource providers and component suppliers have played and will continue to play a key role~~factors, not all of which are in our ~~manufacturing operations, field installation~~control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and ~~support, and many~~a certain amount of ~~our transactional and administrative functions, such as information technology, facilities management, and certain elements~~those expenses are relatively fixed, a change in the timing of our finance organization. These providers and suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity arrangements that preclude further business with us, recognition of revenue and/or be

the level of gross profit from a small number of transactions can unfavorably

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affect operating results in a particular quarter or year. Factors that may cause our financial results to fluctuate unpredictably include but are not limited to:

~~unable~~•legal, tax, accounting, or regulatory changes (including but not limited to ~~meet our requirements~~changes in import/export regulations and tariffs, such as regulations imposed by the U.S. government restricting exports to China) or ~~expectation due to their independent business decisions~~changes in the interpretation or ~~force majeure~~ ~~events that could interrupt or impair their continued ability to perform as we expect.~~enforcement of existing requirements;

~~Although we attempt to select reputable providers~~•macroeconomic, industry and ~~suppliers~~market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, bank failures; and ~~we attempt to secure their performance on terms documented~~geopolitical issues;

•changes in ~~written contracts, it is possible that one or more~~average selling prices, customer mix, and product mix;

•foreign currency exchange rate fluctuations;

•economic conditions in the electronics and semiconductor industries in general and specifically the semiconductor equipment industry;

•the size and timing of these providers or suppliers could fail to perform as we expect, or fail to secure or protect intellectual property rights, and such failure could have an adverse impact on our business. In some cases, the requirements of our business mandate that we obtain certain components and sub-assemblies includedorders from customers;

•changes in our deferred revenue balance, including as a result of factors such as volume purchase agreements, multi-year service contracts, back orders, and down payments toward purchases;

•consolidation of the customer base, which may result in the investment decisions of one customer or market having a significant effect on demand for our products ~~from a single supplier~~ or ~~a limited group of suppliers. Where practical, we endeavor to establish alternative sources to mitigate the risk that~~ services;

•procurement shortages;

•the failure of ~~any single provider~~our suppliers or ~~supplier will adversely affect~~outsource providers to perform their obligations in a manner consistent with our ~~business, but this is not feasible~~expectations;

•manufacturing difficulties;

•customer cancellations or delays in ~~all circumstances. There is therefore a risk~~shipments, installations, customer payments, and/or customer acceptances;

•the extent that ~~a prolonged inability~~customers continue to ~~obtain certain components~~purchase and use our products and services in their business;

•our customers’ reuse of existing and installed products, to the extent that such reuse decreases their need to purchase new products or ~~secure key services could impair~~ services;

•our ability to ~~manage operations, ship~~develop, introduce, and market new, enhanced, and competitive products in a timely manner;

•our competitors’ introduction of new products;

•legal or technical challenges to our products and ~~generate revenues, which could adversely affect~~technologies;

•transportation, communication, demand, information technology, or supply disruptions based on factors outside our ~~operating results and damage our customer relationships.~~

~~We Face Risks Related to the Disruption~~control, such as strikes, acts of ~~Our Primary Manufacturing Facilities~~

~~Our manufacturing facilities are concentrated in just a few locations. These locations are subject to disruption for a variety~~God, wars, terrorist activities, widespread outbreak of ~~reasons, such as~~illness, natural or man-made disasters, ~~terrorist activities, disruptions~~or climate change;

•management of ~~our information technology resources,~~supply chain risks;

•rising inflation or interest rates; and ~~utility interruptions. Such disruptions may cause delays in shipping our products, which could result in the loss of business or customer trust, adversely affecting our business and operating results.~~

Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line. 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. Accordingly, we expect it to be more difficult to sell our products to a given customer if that customer initially selects a competitor’s equipment for the same product line application.

~~We Face a Challenging and Complex Competitive Environment~~

~~We face significant competition from multiple competitors, and with increased consolidation efforts~~•changes in our industry, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell our existing products. 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.

We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers’ needs, to maintain customer service and support centers worldwide, and to invest in product and process R&D. 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. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, allowing the freedom of action in ways that we may be unable to match. In many cases speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives. For these reasons, we may fail to continue to compete successfully worldwide.

In addition, our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to

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~~compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.~~estimated effective tax rate.

Our Future Success Depends Heavily on International Sales and the Management of Global Operations

Non-U.S. sales, as reflected in Part 1I Item ~~1. Business,~~2. Results of Operations of this quarterly report on Form 10-Q, accounted for approximately ~~91%~~93%, ~~92%~~91%, and 92% of total revenue in the six months ended December 24, ~~2017~~2023 and fiscal years ~~2017,~~2023, and ~~2016,~~2022, respectively. We expect that international sales will continue to account for a substantial majority of our total revenue in future years.

We are subject to various challenges related to international sales and the management of global operations including, but not limited to:

•domestic and international trade ~~balance~~regulations, policies, practices, relations, disputes and issues;

•domestic and international tariffs, export controls and other barriers;

•developing customers and/or suppliers, who may have limited access to capital resources;

•global or national economic and political conditions;

•changes in currency controls;

•differences in the enforcement of intellectual property and contract rights in varying jurisdictions;

•our ability to respond to customer and foreign government demands for locally sourced systems, spare parts, and services and develop the necessary relationships with local suppliers;

•changes in and compliance with U.S. and international laws and regulations affecting foreign operations, including U.S. and international trade restrictions and sanctions, international data privacy regulations, such as the General Data Protection Regulation, anti-bribery, anti-corruption, anti-boycott, environmental, tax, and labor laws;

•fluctuations in interest and foreign currency exchange rates;

•the need for technical support resources in different locations; and

•our ability to secure and retain qualified people, and effectively manage people, in all necessary locations for the successful operation of our business.

Certain international sales depend on our ability to obtain export licenses from the U.S. government. Our failure or inability to obtain such licenses would substantially limit our markets and severely restrict our revenues. Many of the challenges noted above are applicable in China, which is a fast developing market for the semiconductor equipment industry and therefore an area of potential significant growth for our business. As the business volume between China and the rest of the world grows, thereThere is inherent risk, based on the complex relationships among China, Japan, Korea, Taiwan, and the United States, that political, diplomatic and ~~diplomatic~~national security influences ~~might~~can lead to trade ~~disruptions.~~disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry. This ~~would~~can adversely affect our business with China, Japan, Korea, and/or Taiwan and perhaps the entire Asia Pacific ~~region.~~region or global economy. A significant trade dispute, impact and/or disruption in ~~these areas~~any area where we do business could have a materially adverse impact on our future revenue and profits.

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Tariffs, export controls, additional taxes, trade barriers, sanctions, the termination or modification of trade agreements, trade zones, and other duty mitigation initiatives, and any reciprocal retaliatory actions, can increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, disrupt our supply chain operations, or inhibit our ability to sell products or provide services, which has had and in the future could have a material adverse effect on our business, results of operations, or financial conditions. Certain of our international sales depend on our ability to obtain export licenses from the U.S. or foreign governments, and our inability to obtain such licenses, or an expansion of the number or kinds of sales for which export licenses are required, has limited and could in the future further limit the market for our products and has had and could in the future have an adverse impact on our revenues. As is discussed below under the heading “Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China,” the U.S. government has recently imposed new controls, including expanded export license requirements, that significantly impact trade with China. In addition, the U.S. government has an ongoing process of assessing technologies that may be subject to new or additional export controls, and it is possible that such additional controls, if and when imposed, could further adversely impact our ability to sell our products outside the U.S. The implementation by the U.S. government of broad export controls restricting access to our technology (such as recent controls limiting exports to China) may cause customers with international operations to reconsider their use of and reliance on our products, which could adversely impact our future revenue and profits. Furthermore, there are risks that ~~the Chinese government~~foreign governments may, among other things, take retaliatory actions; insist on the use of local suppliers; compel companies ~~that do business in China~~ to partner with local companies to design and supply equipment on a local basis, requiring the transfer of intellectual property rights and/or local manufacturing; utilize their influence over their judicial systems to respond to intellectual property disputes or issues; and provide special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours; all of which could adversely impact our revenues and margins.

We are exposed to potentially adverse movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and ~~Korean won.~~Indian rupee. Further, in periods in which the U.S. dollar is strong relative to the local currencies of our international customers, this can potentially reduce demand for our products, which may compound the adverse effect of foreign exchange translation on our revenue. Currently, we hedge certain anticipated foreign currency cash flows, primarily anticipated revenues denominated in Japanese yen and expenses ~~dominated~~denominated in euro, Korean won, Malaysian ringgit, and ~~Korean won.~~Indian rupee. In addition, we enter into foreign currency hedge contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily third-party accounts receivables, accounts payables, and intercompany receivables and payables. We believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, for the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of the underlying exposures and our forecasts of those exposures may leave us either over or under hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, expenses, monetary assets, and liabilities, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated monetary assets and liabilities (other than those currency exposures previously discussed), and currently we do not enter into foreign currency hedge contracts against these exposures. In addition, our currency hedges do not necessarily mitigate the potential negative impact of a strong U.S. dollar on demand for our products. Therefore, we are subject to potential unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in these currencies.

The magnitude of our overseas business also affects where our cash is generated. Certain uses of cash, such as share repurchases, payment of dividends, or the repayment of our notes, can usually only be made with onshore cash balances. Since the majority of our cash is generated outside of the United States, this may impact certain business decisions and ~~adversely affect business~~ outcomes.

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Our ~~Ability to Attract, Retain,~~Business Relies on Technology, Data, Intellectual Property and ~~Motivate Key Employees Is Critical to Our Success~~

~~Our ability to compete successfully depends in large part on our ability to attract, retain, and motivate key employees with the appropriate skills, experiences and competencies. This~~Other Sensitive Information That is an ongoing challenge due to intense competition for top talent, fluctuations in industry or business economic conditions, as well as increasing geographic expansion that may require cycles of hiring activity and workforce reductions. Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall compensation and benefit programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If we are not able to successfully attract, retain, and motivate key employees, we may be unable to capitalize on market opportunities and our operating results may be materially and adversely affected.

~~Certain Critical Information Systems, That We Rely on for the Operation of Our Business, and Products That We Sell Are~~ Susceptible to Cybersecurity and Other Threats or Incidents

Our business is dependent upon the use and protection of technology, data, intellectual property and other sensitive information, which may be owned by, or licensed to, us or third parties, such as our customers and vendors. We maintain and rely upon certain critical information systems for the creation, transmission, use and storage of much of this information, and for the effective operation of our business. These information systems include but are not limited to, telecommunications, the Internet, our corporate intranet, various computer hardware and software applications, (some of which may be integrated into the products that we sell or be required in order to provide the services that we offer), network communications, and email. These information systems may be owned and maintained by us, our outsourced providers, or third parties such as vendors, contractors, customers and Cloud providers. In addition, we make use of ~~Software-As-A-Service (SAAS)~~Software-as-a-Service (SaaS) products for certain important business functions that are provided by third parties and hosted on their own networks and servers, or ~~third party~~third-party networks and servers, all of which rely on networks, email and/or the Internet for their function. ~~All of these~~

The technology, data, intellectual property and other sensitive information we seek to protect are subject to loss, release, misappropriation or misuse, and the information systems containing or transmitting such technology, data, intellectual property and other sensitive information are subject to disruption, breach or failure, ~~from~~in each case as a result of various ~~sources, including those using~~possible causes. Such causes may include mistakes or unauthorized actions by our employees or contractors, phishing schemes and other third-party attacks, and degradation or loss of service or access to data due to viruses, malware, denial of service attacks, destructive or

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inadequate code, power failures, or physical damage to computers, hard drives, communication lines, or networking equipment. Such causes may also include the use of techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, or that may continue undetected for an extended period of time. ~~Those sources~~In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may ~~include mistakes or unauthorized actions~~be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks. Further, the use of artificial intelligence by us, our ~~employees or contractors; phishing schemes~~customers, suppliers, and ~~other~~ third-party attacks, and degradation or loss of service or access to our data due to viruses, malware, denial of service attacks, destructive or inadequate code, power failures, and physical damage to computers, hard drives, communication lines, and networking equipment.providers, among others, may also introduce unique vulnerabilities.

We have experienced ~~cyber~~cybersecurity and other threats and incidents in the past. Although past threats and incidents have not resulted in a material adverse effect, we may incur material losses related to ~~cyber~~cybersecurity and other threats or incidents in the future. If we were subject to a ~~cyber~~cybersecurity or other incident, it could have a material adverse effect on our business. Such adverse effects might include:

~~Loss~~•loss of (or inability to access, e.g. through ransomware) confidential and/or sensitive information stored on these critical information systems or transmitted to or from those systems;

~~The~~•the disruption of the proper function of our products, services and/or operations;

~~The~~•the failure of our or our customers’ manufacturing processes;

~~Errors~~•errors in the output of our work or our customers’ work;

~~The~~•the loss or public exposure of the personal or other confidential information of our employees, customers or ~~customers;~~other parties;

~~The~~•the public release of customer ~~orders,~~ financial and business plans, customer orders and operational results;

~~Exposure~~•exposure to claims from our employees or third parties who are adversely impacted by such incidents;

~~Misappropriation~~•misappropriation or theft of ~~Company, customer, supplier,~~our or ~~other’s~~a customer’s, supplier’s or other party’s assets or resources, including technology, data, intellectual property or other sensitive information and costs associated therewith;

~~Diminution~~•reputational damage;

•diminution in the value of ~~Lam's~~our investment in research, development and engineering; or

~~Our~~•our failure to meet, or violation of, regulatory or other legal obligations, such as the timely publication or filing of financial statements, tax ~~forms~~information and other required communications.

While we have implemented ISO 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our ~~third party~~third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer ~~cyber-related~~cybersecurity and other incidents. It has been difficult and may continue to be difficult to hire and retain employees with substantial cybersecurity acumen. In addition, there have been and may continue to be instances of our policies and procedures not being effective in enabling us to identify risks, threats and incidents in a timely manner, or at all, or to respond expediently, appropriately and effectively when incidents occur and repair any damage caused by such incidents, and such occurrences could have a material adverse effect on our business.

We May Not Achieve the Expected Benefits of Our Restructuring Plans and Business Transformation Initiatives, and These Efforts Could Have a Material Adverse Effect on Our Business, Operations, Financial Condition, Results of Operations and Competitive Position

In January 2023, we announced that we are implementing a restructuring plan consisting of a workforce reduction, and that we anticipate undertaking, and may in the future undertake, additional business restructuring, realignment and transformation initiatives. We expect to incur material costs and charges in connection with these plans and initiatives. While the restructuring plan is intended to better align our cost structure with the current economic environment and future business opportunities, and our anticipated transformation initiatives have the goal of strengthening our operations and achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives. Implementation of these plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all. Restructuring and transformation may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods, may require a significant amount of management and other employees' time and focus, and may be distracting to employees and management, which may divert attention from operating and growing our business. Additionally, reductions in our workforce may cause a reduction in our production output capabilities which could impact our ability to manufacture or ship products to customers within a mutually beneficial timeline. If we fail to achieve some or all of the expected benefits, it could have a material adverse effect on our business, operations, financial condition, results of operations and competitive position. For more information about our restructuring plan, see Note 15 to our Condensed Consolidated Financial Statements in Part I.

Disruptions to Our Supply Chain and Outsource Providers Could Impact Our Ability to Meet Demand, Increase Our Costs, and Adversely Impact Our Revenue and Operating Results

Our ~~Financial Results May Be Adversely Impacted~~supply chain has played and will continue to play a key role in our product development, manufacturing operations, field installation and support. Our business depends on our timely supply of products and services to meet the demand from our customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by ~~Higher than Expected Tax Rates~~other companies. In addition, outsource providers have

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played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. These providers and suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity arrangements that preclude further business with us, or ~~Exposure~~be unable to ~~Additional Tax Liabilities~~meet our requirements or expectation due to their independent business decisions or force majeure events that could interrupt or impair their continued ability to perform as we expect. We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or perform services or to recognize revenue, increased costs or customer order cancellations as a result of:

As•the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a ~~global company,~~cost-effective basis;

•volatility in the availability and cost of parts, materials or services, including increased costs due to rising inflation or interest rates or other market conditions;

•difficulties or delays in obtaining required import or export approvals;

•shipment delays and increased costs of shipment due to transportation interruptions, capacity constraints, or fuel shortages;

•shortages of semiconductor or other components or materials as a result of increases in demand;

•information technology or infrastructure failures, including those of a third-party supplier or service provider; and

•transportation or supply disruptions based on factors outside our ~~effective tax rate~~control, such as strikes, acts of God, wars, terrorist activities, widespread outbreak of illness, natural or man-made disasters, or climate change.

Demand for electronic products and other factors, such as the COVID-19 pandemic, have resulted in, and may in the future result in, a shortage of parts, materials and services needed to manufacture, deliver and install our products, as well as delays in and unpredictability of shipments due to transportation interruptions. Such shortages, delays and unpredictability have adversely impacted, and may in the future impact, our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of parts, materials or services, and delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may in the future adversely impact, our manufacturing operations and our ability to meet customer demand. In addition, difficulties in obtaining parts, materials or services necessary to deliver or install products or perform services have adversely impacted, and may in the future adversely impact, our ability to recognize revenue, our gross margins on the revenue we recognize, and our other operating results. 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 operating results, such measures could be unsuccessful, or could have the effect of reducing demand, which would adversely impact our revenue.

Further, increased restrictions imposed on a class of chemicals known as per- and polyfluoroalkyl substances (“PFAS”), which are widely used in a large number of products, including parts and materials that are incorporated into our products, may negatively impact our supply chain due to the potentially decreased availability, or non-availability, of PFAS-containing products. Proposed regulations under consideration could require that we transition away from the usage of PFAS-containing products, which could adversely impact our business, operations, revenue, costs, and competitive position. There is ~~highly dependent upon~~no assurance that suitable replacements for PFAS-containing parts and materials will be available at similar costs, or at all.

Although we attempt to select reputable providers and suppliers and we attempt to secure their performance on terms documented in written contracts, it is possible that one or more of these providers or suppliers could fail to perform as we expect, or fail to secure or protect intellectual property rights, and such failure could have an adverse impact on our business. In some cases, the ~~geographic composition~~requirements of ~~worldwide earnings~~our business mandate that we obtain certain components and ~~tax regulations governing each region. We~~sub-assemblies included in our products from a single supplier or a limited group of suppliers. Where practical, we endeavor to establish alternative sources to mitigate the risk that the failure of any single provider or supplier will adversely affect our business, but this is not feasible in all circumstances. Some key parts are subject to ~~income taxes~~long lead-times or available only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers located in countries other than the ~~United States and various foreign jurisdictions, and significant judgment~~countries where we conduct our manufacturing. There is ~~required~~therefore a risk that a prolonged inability to ~~determine worldwide tax liabilities. Our effective tax rate~~obtain certain components or secure key services could ~~be adversely affected by changes in the split of earnings between countries with differing statutory tax rates, in the valuation allowance of deferred tax~~

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assets, in tax laws, by material audit assessments, or changes in or expirations of agreements with tax authorities. These factors could affect our profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent onimpair our ability to manage operations, ship products, and generate ~~future taxable income in the United States. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority~~revenues, which could ~~affect our profitability.~~

~~A Failure to Comply with Environmental Regulations May Adversely Affect Our Operating Results~~

We are subject to a variety of domestic and international governmental regulations related to the handling, discharge, and disposal of toxic, volatile, or otherwise hazardous chemicals. Failure to comply with present or future environmental regulations could result in fines being imposed on us, require us to suspend production, and/or cease operations, or cause our customers to not accept our products. These regulations could require us to alter our current operations, acquire significant additional equipment, incur substantial other expenses to comply with environmental regulations, or take other actions. Any failure to comply with regulations governing the use, handling, sale, transport, or disposal of hazardous substances could subject us to future liabilities that may adversely affect our operating results and damage our customer relationships.

We Face Risks Related to the Disruption of Our Primary Manufacturing and R&D Facilities

While we maintain business continuity plans, our manufacturing and R&D facilities are concentrated in a limited number of locations. These locations are subject to disruption for a variety of reasons, such as natural or man-made disasters, widespread outbreaks of illness, war, terrorist activities, political or governmental unrest or instability, disruptions of our information technology resources, utility interruptions, the effects of climate change, or other events beyond our control. Such disruptions may cause delays in developing or shipping our products, in engaging with customers on new product applications, or in supporting customers, which could result in the loss of business or customer trust, adversely affecting our business and operating results.

The COVID-19 Pandemic Adversely Impacted, and May in the Future Adversely Impact, Our Business, Operations, and Financial Results

The COVID-19 pandemic and efforts by national, state and local governments worldwide to control its spread resulted in measures aimed at containing the disease such as quarantines, travel bans, shutdowns, and shelter in place or “stay at home” orders, which collectively significantly restricted the movement of people and goods and the ability of businesses to operate. While the exceptional COVID-19 related challenges have mostly subsided, these restrictions and measures, incidents of confirmed or suspected infections within our workforce or those of our suppliers or other business partners, and our efforts to act in the best interests of our employees,

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customers, and suppliers, previously affected and in the future may affect our business and operations by, among other things, causing facility closures, production delays and capacity limitations; disrupting production by our supply chain; disrupting the transport of goods from our supply chain to us and from us to our customers; requiring modifications to our business processes; requiring the implementation of business continuity plans; requiring the development and qualification of alternative sources of supply; requiring the implementation of social distancing measures that impede manufacturing processes; disrupting business travel; disrupting our ability to staff our on-site manufacturing and research and development facilities; delaying capital expansion projects; and necessitating teleworking by portions of our workforce. These impacts caused and in the future may cause delays in product shipments and product development, increases in costs, and decreases in revenue, profitability and cash from operations, which caused and in the future may cause an adverse effect on our results of operations that may be material. The pandemic resulted at various times in significant disruption of global financial markets, increases in levels of unemployment, and economic uncertainty, which adversely impacted our business and may do so in the future, and may lead to significant negative impacts on customer spending, demand for our products, the ability of our customers to pay, our financial condition and the financial condition of our suppliers, and our access to external sources of financing to fund our operations and capital expenditures.

We Are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification

We derive a substantial percentage of our revenues from a limited number of products. Our products are priced up to the tens of millions of dollars per system. As a result, the inability to recognize revenue on even a few systems can cause a significantly adverse impact on our revenues for a given quarter, and, in the longer term, the continued market acceptance of these products is critical to our future success. Our business, operating results, 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 ~~operate~~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 ~~business.~~products; or

•a failure to release new or enhanced versions of our products on a timely basis.

In addition, the fact that we offer limited product lines creates the risk that our customers may view us as less important to their business than our competitors that offer additional products and/or product capabilities, including new products that take advantage of “big data” or other new technologies such as machine learning and artificial intelligence. This may impact our ability to maintain or expand our business with certain customers. Such product concentration may also subject us to additional risks associated with technology changes. Our business is affected by our customers’ use of our products in certain steps in their wafer fabrication processes. Should technologies change so that the manufacture of semiconductors requires fewer steps using our products, this could have a larger impact on our business than it would on the business of our less concentrated competitors.

We May Fail to Protect Our Critical Proprietary Technology Rights, Which Could Affect Our Business

Our success depends in part on our proprietary technology and our ability to protect key components of that technology through patents, copyrights, trade secrets and other forms of protection. Protecting our key proprietary technology helps us achieve our goals of developing technological expertise and new products and systems that give us a competitive advantage; increasing market penetration and growth of our installed base; and providing comprehensive support and service to our customers. As part of our strategy to protect our technology, we currently hold a number of U.S. and foreign patents and pending patent applications, and we keep certain information, processes, and techniques confidential and/or as trade secrets. However, we may fail to apply for or obtain sufficient patent protection for our technology, other parties may challenge or attempt to invalidate or circumvent any patents the U.S. or foreign governments issue to us; these governments may fail to issue patents for pending applications; or we may lose trade secret protection over valuable information due to our or third parties’ intentional or unintentional actions or omissions or even those of our own employees. Additionally, intellectual property litigation can be expensive and time-consuming and even when patents are issued, or trade secret processes are followed, the legal systems in certain of the countries in which we do business might not enforce patents and other intellectual property rights as rigorously or effectively as the United States or may favor local entities in their intellectual property enforcement. The rights granted or anticipated under any of our patents, pending patent applications, copyrights, or trade secrets may be narrower than we expect or, in fact, provide no competitive advantages. Moreover, because we selectively file for patent protection in different jurisdictions, we may not have adequate protection in all jurisdictions based on such filing decisions. Any of these circumstances could have a material adverse impact on our business.

Our Ability to Attract, Retain, and Motivate Key Employees Is Critical to Our Success

Our ability to compete successfully depends in large part on our ability to attract, retain, and motivate key employees with the appropriate skills, experiences and competencies. This is an ongoing challenge due to intense competition for top talent, fluctuations in industry or business economic conditions, as well as increasing geographic expansion, and these factors in combination may result in cycles of hiring activity and workforce reductions. Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to

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obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall compensation and benefit programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If we are not able to successfully attract, retain, and motivate key employees, we may be unable to capitalize on market opportunities and our operating results may be materially and adversely affected.

If We Choose to Acquire or Dispose of Businesses, Product Lines, and Technologies, We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance

An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, or enhance our technological ~~capabilities.~~capabilities, or accomplish other strategic objectives. As a result, we may seek to make acquisitions of complementary companies, products, or technologies, or we may reduce or dispose of certain product lines or technologies that no longer fit our long-term strategies. For regulatory or other reasons, we may not be successful in our attempts to acquire or dispose of businesses, products, or technologies, resulting in significant financial costs, reduced or lost opportunities, and diversion of management’s attention. Managing an acquired business, disposing of product technologies, or reducing personnel entails numerous operational and financial risks, including difficulties in assimilating acquired operations and new personnel or separating existing business or product groups, diversion of management’s attention away from other business concerns, amortization of acquired intangible assets, adverse customer reaction to our decision to cease support for a product, and potential loss of key employees or customers of acquired or disposed operations. There can be no assurance that we will be able to achieve and manage successfully any such integration of potential acquisitions, disposition of product lines or technologies, or reduction in personnel, or that our management, personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies could have a material adverse effect on our business, operating results, financial condition, and/or cash flows.

In addition, any acquisition could result in changes such as potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the amortization of related intangible assets, and goodwill impairment charges, any of which could materially adversely affect our business, financial condition, results of operations, cash flows, and/or the price of our Common Stock.

LEGAL, REGULATORY AND TAX RISKS

Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China

China represents a large and fast-developing market for the semiconductor equipment industry and therefore is important to our business. Revenue in China, which includes global customers and domestic Chinese customers with manufacturing facilities in China, represented approximately 44%, 26%, and 31% of our total revenue for the six months ended December 24, 2023 and fiscal years 2023 and 2022, respectively. The ~~Market for Our Common Stock Is Volatile, Which May Affect Our Ability to Raise Capital or Make Acquisitions or May Subject Our Business to Additional Costs~~

~~The~~U.S. and China have historically had a complex relationship that has included actions that have impacted trade between the two countries. Recently, these actions have included an expansion of export license requirements imposed by the U.S. government, which have limited the market ~~price~~ for our ~~Common Stock is volatile~~products, adversely impacted our revenues, and increased our exposure to foreign competition, and could potentially do so to an even greater extent in the future. Most recently, the U.S. government has enacted new rules aimed at restricting China’s ability to manufacture advanced semiconductors, which include restrictions on exports, reexports or transfers to, or shipping, transmitting, transferring, or facilitating such movement to, or performing services at, customer facilities in China engaged in certain technology end-uses, without appropriate authorizations obtained from U.S. authorities. In addition, the U.S. Department of Commerce has enacted new rules that have expanded export license requirements for U.S. companies to sell certain items to companies and other end-users in China that are designated as military end-users or have operations that could support military end uses; has added additional Chinese companies to its restricted entity list and unverified list under suspicion of military-civil fusion, support of Russia, or other factors associated with a broadening scope of national security concerns (including Semiconductor Manufacturing International Corporation, or SMIC, and related entities, and Yangtze Memory Technologies Co., Ltd., or YMTC, and related entities); and has ~~fluctuated significantly over~~expanded an existing rule (referred to as the ~~past years. The trading price~~foreign direct product rule) in a manner that could cause foreign-made wafers, chipsets, and certain related items produced with many of our ~~Common Stock could continue~~products to be ~~highly volatile~~subject to U.S. licensing requirements if Huawei Technologies Co. Ltd (“Huawei”) or its affiliates are parties to a transaction involving the items. These rules have required and ~~fluctuate widely~~may require us to apply for and obtain additional export licenses to supply certain of our products to customers in China, such as SMIC, YMTC and ChangXin Memory Technologies, Inc., and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all. In addition, our customers (including but not limited to Chinese customers) may require U.S. export licenses for the use of our products in order to manufacture products, including semiconductor wafers and integrated circuits, for those of their customers (i.e. Huawei and its affiliates) that are subject to the expanded foreign direct product rule, which may adversely impact the demand for our products. The U.S. Department of Commerce could in the future add additional Chinese companies to its restricted entity list or unverified list or take other actions that could expand licensing requirements or otherwise impact the market for our products and our revenue. The implementation, interpretation and impact on our business of these rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and these rules, other regulatory actions or changes, and other actions taken by the governments of either the U.S. or China, or both, that have occurred and may occur in the future could materially and adversely affect our results of operations.

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We Are Exposed to Various Risks from Our Regulatory Environment

We are subject to various risks related to (1) new, different, inconsistent, or even conflicting laws, rules, and regulations that may be enacted by legislative or executive bodies and/or regulatory agencies in the countries that we operate; (2) disagreements or disputes related to international trade; and (3) the interpretation and application of laws, rules, and regulations. As a public company with global operations, we are subject to the laws of multiple jurisdictions and the rules and regulations of various governing bodies, including those related to export controls, financial and other disclosures, corporate governance, privacy, anti-corruption, such as the Foreign Corrupt Practices Act and other local laws prohibiting corrupt payments to governmental officials, anti-boycott compliance, conflict minerals or other social responsibility legislation, immigration or travel regulations, antitrust regulations, and laws or regulations relating to carbon emissions, as well as other laws or regulations imposed in response to ~~a variety~~climate change concerns, among others. Each of ~~factors, many of which are not within~~these laws, rules, and regulations imposes costs on our ~~control or influence. These factors include but are not limited to the following:~~

~~general market, semiconductor, or semiconductor equipment industry conditions;~~

~~economic or political events, trends,~~business, including financial costs and ~~unexpected developments occurring nationally, globally, or in any~~potential diversion of our ~~key sales regions;~~management’s attention associated with compliance, and may present risks to our business, including potential fines, restrictions on our actions, and reputational damage if we do not fully comply.

~~variations in our quarterly operating results~~To maintain high standards of corporate governance and ~~financial condition, including our liquidity;~~

~~variations in our revenues, earnings, or other business and financial metrics from forecasts by us or securities analysts or from those experienced by other companies in our industry;~~

~~announcements of restructurings, reductions in force, departure of key employees, and/or consolidations of operations;~~

~~government regulations;~~

~~developments~~public disclosure, we intend to invest appropriate resources to comply with evolving standards. Changes in or ~~claims relating~~ambiguous interpretations of laws, regulations, and standards may create uncertainty regarding compliance matters. Efforts to ~~patent or other proprietary rights;~~

~~technological innovations and the introduction of new products by us or our competitors;~~

~~commercial success or failure of our~~comply with new and ~~existing products;~~

~~disruptions~~changing regulations have resulted in, and are likely to continue to result in, reduced operating income, and a diversion of ~~relationships with key customers or suppliers; or~~

~~dilutive impacts of our Convertible Notes~~management’s time and ~~related warrants.~~

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~~In addition, the stock market experiences significant price and volume fluctuations. Historically, we have witnessed significant volatility in the price of our Common Stock due in part~~attention from revenue-generating activities to the price of and markets for semiconductors. These and other factors have and may again adversely affect the price of our Common Stock, regardless of our actual operating performance. In the past, following volatile periods in the price of their stock, many companies became the object of securities class action litigation.compliance activities. If we are ~~sued~~found by a court or regulatory agency not to be in ~~a securities class action, we~~compliance with the laws and regulations, our business, financial condition, and/or results of operations could ~~incur substantial costs, and it could divert management’s attention and resources and have an unfavorable impact on our financial performance and the price for our Common Stock.~~be adversely affected.

Intellectual Property, Indemnity, and Other Claims Against Us Can Be Costly and We Could Lose Significant Rights That Are Necessary to Our Continued Business and Profitability

Third parties may assert infringement, misappropriation, unfair competition, product liability, breach of contract, or other claims against us. From time to time, other persons send us notices alleging that our products infringe or misappropriate their patent or other intellectual property rights. In addition, law enforcement authorities may seek criminal charges relating to intellectual property or other issues. We also face risks of claims arising from commercial and other relationships. In addition, our bylaws and other indemnity obligations provide that we will indemnify officers and members of our Board of Directors against losses that they may incur in legal proceedings resulting from their service to us. From time to time, in the normal course of business, we indemnify third parties with whom we enter into contractual relationships, including customers and suppliers, with respect to certain matters. We have agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that our products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. In such cases, it is our policy either to defend the claims or to negotiate licenses or other settlements on commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses or reach agreement on other settlements on commercially reasonable terms, or at all, and any litigation resulting from these claims by other parties may materially and adversely affect our business and financial results, and we may be subject to substantial damage awards and penalties. Moreover, although we have insurance to protect us from certain claims and cover certain losses to our property, such insurance may not cover us for the full amount of any losses, or at all, and may be subject to substantial exclusions and deductibles.

WeOur Financial Results May ~~Fail~~Be Adversely Impacted by Higher than Expected Tax Rates or Exposure to ~~Protect Our Critical Proprietary Technology Rights, Which Could Affect Our Business~~

Our success depends in part on our proprietary technology and our ability to protect key components of that technology through patents, copyrights, and trade secret protection. Protecting our key proprietary technology helps us to achieve our goals of developing technological expertise and new products and systems that give us a competitive advantage; increasing market penetration and growth of our installed base; and providing comprehensive support and service to our customers. As part of our strategy to protect our technology, we currently hold a number of U.S. and foreign patents and pending patent applications, and we keep certain information, processes, and techniques as trade secrets. However, other parties may challenge or attempt to invalidate or circumvent any patents the U.S. or foreign governments issue to us; these governments may fail to issue patents for pending applications; or we may lose trade secret protection over valuable information due to the intentional or unintentional actions or omissions of third parties, of ours, or even of our own employees. Additionally, intellectual property litigation can be expensive and time-consuming and even when patents are issued or trade secret processes are followed, the legal systems in certain of the countries in which we do business do not enforce patents and other intellectual property rights as rigorously as the United States. The rights granted or anticipated under any of our patents, pending patent applications, or trade secrets may be narrower than we expect or, in fact, provide no competitive advantages. Moreover, because we determine the jurisdictions in which to file patents at the time of filing, we may not have adequate protection in the future based on such previous decisions. Any of these circumstances could have a material adverse impact on our business.

~~We Are Exposed to Various Risks from Our Regulatory Environment~~Additional Tax Liabilities

We are subject to ~~various risks related to (1) new, different, inconsistent, or even conflicting laws, rules,~~income, transaction, and ~~regulations that may be enacted by legislative bodies and/or regulatory agencies~~other taxes in the ~~countries that~~United States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax liabilities. The amount of taxes we ~~operate; (2) disagreements or disputes between national or regional regulatory agencies related~~pay is subject to ~~international trade;~~ongoing audits in various jurisdictions, and ~~(3) the interpretation and application of laws, rules, and regulations.~~a material assessment by a governing tax authority could affect our profitability. As a ~~public~~global company, our effective tax rate is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region. Changes in the split of earnings between countries with differing statutory tax rates, in the valuation allowance of deferred tax assets, in tax laws, in material audit assessments, or in expirations of agreements with tax authorities could adversely affect our effective tax rate. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent upon our ability to generate future taxable income in the United States.

On August 16, 2022, the IRA was signed into law. In general, the provisions of the IRA are effective beginning with our fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. We have evaluated the potential impacts of the IRA and do not expect it to have a material impact on our effective tax rate. However, we expect future guidance from the Treasury Department and will further analyze when the guidance is issued.

Recommendations made by the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting 2.0 (“BEPS 2.0”) project have the potential to lead to changes in the tax laws in numerous countries, including the implementation of a global ~~operations,~~minimum tax. Several countries around the world have enacted or proposed changes to their existing tax laws based on these recommendations. As each country in which we operate evaluates their alignment with the recommendations and enacts minimum tax rules, the ultimate impact of any such changes on our effective tax rate remains uncertain. When fully enacted, such changes could have a material impact on our effective tax rate. We will continue to monitor the progress of the BEPS 2.0 implementation.

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In addition, the U.S. has made several corporate income tax proposals, including changes in the taxation of non-U.S. income. If enacted, such changes could have a material impact on our effective tax rate.

Increasing and Evolving Environmental Regulations May Adversely Affect Our Operating Results

We are subject to a variety of domestic and international governmental regulations related to the ~~laws~~handling, discharge, sale, and disposal of ~~multiple jurisdictions~~toxic, volatile, or otherwise hazardous or potentially hazardous substances, and the ~~rules~~regulatory environment is dynamic. Failure to comply with present or future environmental regulations (such as future regulations imposed on the use or sale of PFAS or PFAS-containing products) could result in fines being imposed on us, require us to undertake remediation activities, suspend production, and/or cease operations, or cause our customers to not accept our products. These regulations could require us to alter or discontinue our current operations in certain jurisdictions, acquire significant additional equipment, incur substantial other expenses to comply with environmental regulations, or take other actions. Compliance obligations, as well as any failure to comply with current or future regulations governing the use, handling, sale, transport, or disposal of hazardous or potentially hazardous substances (including, but not limited to, PFAS) could subject us to future costs and ~~regulations~~liabilities that may adversely affect our operating results, financial condition, and ability to operate our business.

Our Bylaws Designate the Court of ~~various governing bodies,~~Chancery of the State of Delaware as the Sole and Exclusive Judicial Forum for Certain Legal Actions Between the Company and its Stockholders, Which May Discourage Lawsuits with Respect to Such Claims

Our bylaws provide that, unless we consent otherwise, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for lawsuits asserting certain stockholder claims (including claims asserted derivatively for our benefit), such as claims against directors and officers for breach of a fiduciary duty, claims arising under any provision of the General Corporation Law of Delaware or our certificate of incorporation or our bylaws, or claims governed by the internal affairs doctrine. This is a general summary of the bylaw provision; you should refer to the language of the bylaws for details. While the forum provision does not generally apply to direct claims arising under the Securities Exchange Act of 1934 or the Securities Act of 1933, derivative lawsuits that assert legal claims arising under these statutes could fall within the provision, as recent court decisions have held.

As a Delaware corporation, Delaware law controls issues of our internal affairs, including duties that our directors, officers, employees, and others owe to the Company and its stockholders. We believe that our exclusive forum provision benefits us, and our stockholders, by permitting relatively prompt resolution of lawsuits concerning our internal affairs, promoting consistent application of Delaware law in these lawsuits, and reducing the possibility of duplicative, costly, multi-jurisdictional litigation with the potential for inconsistent outcomes. However, the forum provision limits a stockholder’s ability to bring a claim in a judicial forum that it believes may be more favorable than Delaware, and this could discourage the filing of such lawsuits.

FINANCIAL, ACCOUNTING AND CAPITAL MARKETS RISKS

The Market for Our Common Stock Is Volatile, Which May Affect Our Ability to Raise Capital or Make Acquisitions or May Subject Our Business to Additional Costs

The market price for our Common Stock is volatile and has fluctuated significantly over the past years. The trading price of our Common Stock could continue to be highly volatile and fluctuate widely in response to a variety of factors, many of which are not within our control or influence. These factors include but are not limited to the following:

•general market, semiconductor, or semiconductor equipment industry conditions;

•economic or political events, trends, and unexpected developments occurring nationally, globally, or in any of our key sales regions;

•macroeconomic, industry and market conditions, including those ~~related~~caused by the Russian invasion of Ukraine, conflict in the Middle East, or bank failures; and geopolitical issues;

•variations in our quarterly operating results and financial condition, including our liquidity;

•variations in our revenues, earnings, or other business and financial metrics from forecasts by us or securities analysts or from those experienced by other companies in our industry;

•announcements of restructurings, reductions in force, departure of key employees, and/or consolidations of operations;

•margin trading, short sales, hedging and derivative transactions involving our Common Stock;

•government regulations;

•developments in, or claims relating to, ~~financial~~patent or other proprietary rights;

•technological innovations and the introduction of new products by us or our competitors;

•commercial success or failure of our new and existing products; or

•disruptions of relationships with key customers or suppliers.

In addition, the stock market experiences significant price and volume fluctuations. Historically, we have witnessed significant volatility in the price of our Common Stock due in part to the price of and markets for semiconductors. These and other ~~disclosures, corporate governance, privacy, anti-corruption, such as~~factors have adversely affected and may again adversely affect the ~~Foreign Corrupt Practices Act~~price of our Common Stock, regardless of our actual operating performance. In the past, following volatile periods in the price of their stock, many companies became the object of securities class action litigation. If we are sued in a securities class action, we could incur substantial costs, and it could divert management’s attention and resources and have an unfavorable impact on our financial performance and the price for our Common Stock.

Lam Research Corporation 2024 Q2 10-Q 35

Table of Contents

We May Incur Impairments to Goodwill or Long-lived Assets

We review our goodwill identified in business combinations for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may exceed the fair value. We review all other long-lived assets, including finite-lived intangible assets, whenever events or changes in circumstance indicate that these assets may not be recoverable. The process of evaluating the potential impairment of goodwill and other ~~local laws prohibiting corrupt payments to governmental officials, conflict minerals~~long-lived assets requires significant judgment. Negative industry or ~~other social responsibility legislation, immigration or travel regulations, and antitrust regulations, among others. Each of these laws, rules, and regulations imposes costs on our business,~~economic trends, including ~~financial costs and potential diversion~~reduced market prices of our ~~management’s attention associated with compliance, and may present risks~~Common Stock, reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets.

When evaluating goodwill, if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed and we may be required to record an impairment charge in that period, which could adversely affect our result of operations.

When evaluating other long-lived assets, if we conclude that the estimated undiscounted cash flows attributable to the assets are less than their carrying value, we recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values, which could adversely affect our results of operations.

Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis indicates potential ~~fines, restrictions~~impairment, we may be required to record additional charges to earnings in our financial statements, which could negatively affect our results of operations.

Our Leverage and Debt Service Obligations May Adversely Affect Our Financial Condition, Results of Operations, and Earnings per Share

We have $5.0 billion in aggregate principal amount of senior unsecured notes outstanding (the “Senior Notes”). Additionally, we have funding available to us under our $1.5 billion commercial paper program and our $1.5 billion revolving credit facility, which serves as a backstop to our commercial paper program. Our revolving credit facility also includes an option to increase the amount up to an additional $600.0 million, for a potential total commitment of $2.1 billion. We may, in the future, decide to enter into additional debt arrangements.

Our indebtedness could have adverse consequences, including:

•risk associated with any inability to satisfy our obligations;

•a portion of our cash flows that may have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions, or general corporate or other purposes; and

•impairment of our ability to obtain additional financing in the future.

Our ability to meet our expenses and debt obligations will depend on our ~~actions,~~future performance, which will be affected by financial, business, economic, regulatory, and ~~reputational damage~~other factors. Furthermore, our operations may not generate sufficient cash flows to enable us to meet our expenses and service our debt. As a result, we may need to enter into new financing arrangements to obtain the necessary funds. If we determine it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms. If we ~~are~~fail to make a payment on our debt, we could be in default on such debt, and this default could cause us to be in default on our other outstanding indebtedness.

Our Credit Agreements Contain Covenant Restrictions That May Limit Our Ability to Operate Our Business

We may be unable to ~~fully comply.~~respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, or obtain additional financing because our debt agreements contain, and any of our other future similar agreements may contain, covenant restrictions that limit our ability to, among other things:

•incur additional debt, assume obligations in connection with letters of credit, or issue guarantees;

•create liens;

•enter into transactions with our affiliates;

•sell certain assets; and

•merge or consolidate with any person.

Lam Research Corporation 2024 Q2 10-Q 36

Table of Contents

~~To maintain high standards of corporate governance~~is accelerated, we may not have sufficient funds available to repay such debt, which could materially and public disclosure, we intend to invest all reasonably necessary resources to comply with all evolving standards. Changes in or ambiguous interpretations of laws, regulations, and standards may create uncertainty regarding compliance matters. Efforts to comply with new and changing regulations have resulted in, and are likely to continue to result in, increased selling, general, and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If we are found by a court or regulatory agency not to be in compliance with the laws and regulations,negatively affect our ~~business,~~ financial condition ~~and/or~~and results of ~~operations could be adversely affected.~~operation.

There Can Be No Assurance That We Will Continue to Declare Cash Dividends or Repurchase Our Shares at All or in Any Particular Amounts

Our Board of Directors has declared quarterly dividends since April 2014. Our intent to continue to pay quarterly dividends and to repurchase our shares is subject to capital availability and ~~in the case of dividends,~~ periodic determinations by our Board of Directors that cash dividends and share repurchases are in the best interest of our stockholders and are in compliance with all laws and agreements applicable to the declaration and payment of cash dividends or the repurchasing of shares by us. Future dividends and share repurchases may also be affected by, among other factors, our views on potential future capital requirements for investments in acquisitions and the funding of our research and development; legal risks; changes in federal, state, and ~~state income~~international tax laws or corporate laws; contractual restrictions, such as financial or operating covenants in our debt arrangements; availability of onshore cash flow; and changes to our business model. Our dividend payments and share repurchases may change from time to time, and we cannot provide assurance that we will continue to declare dividends or repurchase shares at all or in any particular amounts. A reduction or suspension in our dividend payments or share repurchases could have a negative effect on the price of our Common Stock.

If One or More of Our Counterparty Financial Institutions Default on Their Obligations To Us or Fail, We May Incur Significant Losses

As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward contracts, option contracts, collars and swaps with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions both in and out of the United States. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions, which may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default, or our assets deposited or held in accounts with such counterparty, may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.


~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Company Shares

In ~~November 2017,~~May 2022, the Board of Directors authorized usmanagement to repurchase up to an additional ~~$2.0~~$5.0 billion of Common Stock; this authorization supplements the remaining ~~balances~~balance from any prior ~~authorizations.~~authorization. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. ~~Repurchases will be funded using our on-shore cash, on-shore cash generation, and available credit facilities.~~ This repurchase program has no termination date and may be suspended or discontinued at any time.

Share repurchases, including those under the repurchase program, were as follows:


Period	Total Number of Shares Repurchased (1)	Average Price Paid Per Share (2)			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Amount Available Under Repurchase Program (2)
	(in thousands, except per share data)
Available balance as of June 25, 2023						$	3,537,217
Quarter ended September 24, 2023	1,266	$	659.88		1,257	2,707,343

September 25, 2023 - October 22, 2023	304	$	634.13		302	2,515,931
October 23, 2023 - November 19, 2023	403	$	630.38		400	2,263,857
November 20, 2023 - December 24, 2023	269	$	734.44		268	2,067,076
Quarter ended December 24, 2023	976	$	660.25	(3)	970	$	2,067,076

(1) During the three and six months ended December 24, 2023, we acquired 6 thousand shares at a total cost of $4.5 million, and 15 thousand shares at a total cost of $10.0 million, respectively, which we withheld through net share settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under our equity compensation plans. The shares retained by us through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under our equity compensation plan.

(2) Our net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under repurchase programs, as applicable, and is included in the cost of shares repurchased in the Condensed Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share.

(3) Average price paid per share presented is for the quarter ended December 24, 2023.

Lam Research Corporation 2024 Q2 10-Q 37

Total Number
of Shares
Repurchased ⁽¹⁾

Average Price
Paid Per Share ⁽²⁾

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs

Amount
Available
Under
Repurchase
Program
(in thousands, except share and per share data)
Amount available at June 25, 2017 $ 282,141
Quarter ended September 24, 2017 1,790
$ 158.40
1,779
124,203
September 25, 2017 - October 22, 2017 241
$ 185.85
235
80,633
Board authorization, $2.0 billion increase, November 2017 2,080,633
October 23, 2017 - November 19, 2017 213
$ 207.16
210
2,037,104
November 20, 2017 - December 24, 2017 3,352
$ 190.97
3,264
1,034,459
Quarter ended December 24, 2017 3,806
$ 194.99
3,709
$ 1,034,459

~~(1)~~

During the three and six months ended December 24, 2017, we acquired 98 thousand shares at a total cost of $18.4 million, and 109 thousand shares at a total cost of $20.2 million, respectively, which we withheld through net share settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by us through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under our equity compensation plan.


~~(2)~~	~~Average price paid per share excludes effect accelerated share repurchases; see additional disclosure below regarding our accelerated share repurchase activity during the fiscal year~~.

Table of Contents

~~Accelerated Share Repurchase Agreements Executed in December Quarter~~

On November 20, 2017, we entered into four separate accelerated share repurchase agreements (collectively, the " November 2017 ASR") with two financial institutions to repurchase a total of $1.0 billion of Common Stock. We took an initial delivery of 3,254,300 shares, which represented 70% of the prepayment amount divided by our closing stock price on November 20, 2017. The total number of shares to be received under the November 2017 ASR will be based upon the average daily volume weighted average price of our Common Stock during the repurchase period, less an agreed upon discount. Final settlement of two of the transactions is expected to be completed no later than February 22, 2018, and final settlement for the remaining transactions is expected to be completed no sooner than March 26, 2018 or no later than May 24, 2018.

~~Accelerated Share Repurchase Agreements Settled in Fiscal Year~~

On April 19, 2017, we entered into two separate accelerated share repurchase agreements (collectively, the “April 2017 ASR”) with two financial institutions to repurchase a total of $500 million of Common Stock. We took an initial delivery of approximately 2,570,000 shares, which represented 70% of the prepayment amount divided by our closing stock price on April 19, 2017. The total number of shares received under the April 2017 ASR was based upon the average daily volume weighted average price of our Common Stock during the repurchase period, less an agreed upon discount. The April 2017 ASR settled on June 30, 2017. Approximately 780,000 shares were received at final settlement, which resulted in a weighted-average share price of approximately $149.16 for the transaction period.


~~ITEM 3.~~	~~Defaults Upon Senior Securities~~

ITEM 3. Defaults Upon Senior Securities

None.


~~ITEM 4.~~	~~Mine Safety Disclosures~~

ITEM 4. Mine Safety Disclosures

Not applicable.


~~ITEM 5.~~	ITEM 5. Other Information

~~None.~~

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the Company’s fiscal quarter ended December 24, 2023, except for the following arrangements, none of the Company’s directors or officers adopted, modified, or terminated a trading arrangement for the purchase or sale of the Company’s common stock that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 Trading Arrangement”) or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K):

•On October 27, 2023, Patrick J. Lord, the Executive Vice President and Chief Operating Officer of the Company, adopted a Rule 10b5-1 Trading Arrangement. Dr. Lord’s Rule 10b5-1 Trading Arrangement provides for: (i) the potential exercise of 2,832 stock options expiring March 1, 2026 and the associated sale of up to 2,832 shares of the Company’s common stock resulting from such exercise; (ii) the potential exercise of 2,128 stock options expiring March 2, 2027 and the associated sale of up to 2,128 shares of the Company’s common stock resulting from such exercise; (iii) the potential exercise of 1,362 stock options expiring March 1, 2028 and the associated sale of up to 1,362 shares of the Company’s common stock resulting from such exercise; (iv) the potential exercise of 2,026 stock options expiring March 1, 2029 and the associated sale of up to 2,026 shares of the Company’s common stock resulting from such exercise; (v) the potential exercise of 1,407 stock options expiring March 1, 2030 and the associated sale of up to 1,407 shares of the Company’s common stock resulting from such exercise; and (vi) the potential sale of up to 10,893 shares of the Company’s common stock; in each case pursuant to the terms of the Rule 10b5-1 Trading Arrangement. Of the aggregate number of stock options to be exercised and shares of the Company’s common stock to be sold pursuant to the Rule 10b5-1 Trading Arrangement, a total of 4,960 stock options (and the shares of the Company’s common stock resulting from such exercise) and 7,381 shares were, at the time of adoption of the Rule 10b5-1 Trading Arrangement, subject to a prior trading arrangement previously adopted by Dr. Lord, and Dr. Lord’s Rule 10b5-1 Trading Arrangement provided that such options and shares would only be subject to the instructions under the Rule 10b5-1 Trading Arrangement if the instructions with respect to those options and shares under the prior trading arrangement had not previously been executed. As of December 24, 2023, all 4,960 stock options (and the associated shares of the Company’s common stock resulting from exercise of such options) and all 7,381 shares of the Company’s common stock that were subject both to the Rule 10b5-1 Trading Arrangement and to the prior trading arrangement had been transacted under the prior trading arrangement, and accordingly were no longer subject to exercise and/or sale, as applicable, under the Rule 20b5-1 Trading Arrangement. Dr. Lord’s Rule 10b5-1 Trading Arrangement has a termination date of March 7, 2025.

•On November 16, 2023, Seshasayee (Sesha) Varadarajan, the Senior Vice President, Global Products Group, of the Company, adopted a Rule 10b5-1 Trading Arrangement. Mr. Varadarajan’s Rule 10b5-1 Trading Arrangement provides for the potential sale of up to 11,000 shares of the Company’s common stock pursuant to the terms of the Rule 10b5-1 Trading Arrangement. Mr. Varadarajan’s Rule 10b5-1 Trading Arrangement has a termination date of November 29, 2024.

The Rule 10b5-1 Trading Arrangements contain pricing conditions that preclude or limit the sale of shares below predetermined minimum prices. Each of the Rule 10b5-1 Trading Arrangements will terminate on the earlier of: (a) its respective termination date indicated above; (b) execution of all trades or expiration of all the orders relating to such trades under the Rule 10b5-1 Trading Arrangement; or (c) such date as the Rule 10b5-1 Trading Arrangement is otherwise terminated according to its terms.

Lam Research Corporation 2024 Q2 10-Q 38

Table of Contents

ITEM 6. Exhibits


Exhibit Number			Description
~~ITEM 6.~~
3.1			~~Exhibits~~ Bylaws of the Registrant, as amended and restated, dated November 8, 2023 which is incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on November 9, 2023 (SEC File No. 000-12933).

10.1*			Form of Indemnification Agreement

31.1			Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)

31.2			Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)

32.1			Section 1350 Certification (Principal Executive Officer)

32.2			Section 1350 Certification (Principal Financial Officer)

101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________________________________

~~See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed~~

*Indicates management contract or ~~furnished with this report, which Exhibit Index is incorporated herein by reference.~~

compensatory plan or arrangement.

Lam Research Corporation 2024 Q2 10-Q 39

Table of Contents

LAM RESEARCH CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

January 29, 2024

~~Date:~~

~~January 30, 2018~~

LAM RESEARCH CORPORATION

(Registrant)

/s/ Douglas R. Bettinger

Douglas R. Bettinger

Executive Vice President and Chief Financial Officer ~~(Principal~~

(Principal Financial ~~Officer and Principal Accounting~~

Officer)

Lam Research Corporation 2024 Q2 10-Q 40

~~Table of Contents~~

~~EXHIBIT INDEX~~



~~Exhibit~~ ~~Number~~	~~Description~~

~~10.1(1)~~	~~Employment Agreement with Martin B. Anstice, dated January 2, 2018~~*

~~10.2(1)~~	~~Employment Agreement with Timothy M. Archer, dated January 2, 2018~~*

~~10.3(1)~~	~~Employment Agreement with Douglas R. Bettinger, dated January 2, 2018~~*

~~10.4(1)~~	~~Employment Agreement with Richard A. Gottscho, dated January 2, 2018~~*

~~10.5(1)~~	~~Form of Change in Control Agreement~~*

~~31.1~~	~~Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)~~

~~31.2~~	~~Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)~~

~~32.1~~	~~Section 1350 Certification (Principal Executive Officer)~~

~~32.2~~	~~Section 1350 Certification (Principal Financial Officer)~~

~~101.INS~~	~~XBRL Instance Document~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Indicates management contract or compensatory plan or arrangement in which executive officers of the Company are eligible to participate.~~

~~(1) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 8, 2018 (SEC File No. 000-12933).~~


Delaware			94-2634797

~~Delaware~~	~~94-2634797~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



4650 Cushing Parkway, Fremont, California						94538
(Address of principal executive offices)						(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	LRCX	The Nasdaq Stock Market
		(Nasdaq Global Select Market)


				Page No.

		~~Page No.~~
	PART I. Financial Information

Item 1.			Financial Statements (Unaudited):
			Condensed Consolidated Statements of Operations for the three and six months ended ~~December~~Dec ember 24, ~~2017,~~2023, and ~~December~~Dec ember 25, ~~2016~~2022	3
			Condensed Consolidated Statements of Comprehensive Income for the three and six months ended ~~December~~Dec ember 24, ~~2017,~~2023, and ~~December~~Dec ember 25, ~~2016~~2022	4
			Condensed Consolidated Balance Sheets as of ~~December~~Dec ember 24, ~~2017,~~2023, and June 25, ~~2017~~2023	5
			Condensed Consolidated Statements of Cash Flows for the six months ended ~~December~~Dec ember 24, ~~2017,~~2023, and ~~December~~Dec ember 25, ~~2016~~2022	6
			Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended Dec ember 24, 2023, and Dec ember 25, 2022	7
			Notes to Condensed Consolidated Financial Statements	79
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2317
Item 3.			Quantitative and Qualitative Disclosures about Market Risk	3224
Item 4.			Controls and Procedures	3324

			PART II. Other Information

Item 1.			Legal Proceedings	3425
Item 1A.			Risk Factors	3425
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4437
Item 3.			Defaults Upon Senior Securities	4538
Item 4.			Mine Safety Disclosures	4538
Item 5.			Other Information	4538
Item 6.			Exhibits	4539
Signatures				4640
~~Exhibit Index~~		47


	Three Months Ended				Six Months Ended
	December 24, 2023		December 25, 2022		December 24, 2023		December 25, 2022
Revenue	$	3,758,259	$	5,277,569	$	7,240,321	$	10,351,690
Cost of goods sold	1,985,847		2,901,220		3,805,267		5,638,506
Restructuring charges, net - cost of goods sold	14,957		—		22,897		—
Total cost of goods sold	2,000,804		2,901,220		3,828,164		5,638,506
Gross margin	1,757,455		2,376,349		3,412,157		4,713,184
Research and development	469,712		462,385		892,341		895,760
Selling, general, and administrative	228,843		233,802		435,866		439,422
Restructuring charges, net - operating expenses	1,688		—		3,709		—
Total operating expenses	700,243		696,187		1,331,916		1,335,182
Operating income	1,057,212		1,680,162		2,080,241		3,378,002
Other income (expense), net	29,839		(28,234)		32,440		(71,329)
Income before income taxes	1,087,051		1,651,928		2,112,681		3,306,673
Income tax expense	(132,785)		(183,421)		(271,017)		(412,287)
Net income	$	954,266	$	1,468,507	$	1,841,664	$	2,894,386
Net income per share:
Basic	$	7.25	$	10.80	$	13.94	$	21.21
Diluted	$	7.22	$	10.77	$	13.88	$	21.16
Number of shares used in per share calculations:
Basic	131,629		136,018		132,107		136,455
Diluted	132,220		136,339		132,693		136,774


☒
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	December 24, 2023		June 25, 2023
	(unaudited)		(1)
ASSETS
Cash and cash equivalents	$	5,623,289	$	5,337,056
Investments	14,720		37,641
Accounts receivable, less allowance of $5,322 as of December 24, 2023, and $5,344 as of June 25, 2023	2,707,458		2,823,376
Inventories	4,429,906		4,816,190
Prepaid expenses and other current assets	279,239		214,149
Total current assets	13,054,612		13,228,412
Property and equipment, net	2,147,482		1,856,672

Goodwill	1,626,512		1,622,489
Intangible assets, net	151,081		168,454
Other assets	1,804,165		1,905,616
Total assets	$	18,783,852	$	18,781,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	499,704	$	470,702
Accrued expenses and other current liabilities	1,975,945		2,010,637
Deferred profit	1,792,955		1,695,221
Current portion of long-term debt and finance lease obligations	3,779		8,358
Total current liabilities	4,272,383		4,184,918
Long-term debt and finance lease obligations, less current portion	4,980,005		5,003,183
Income taxes payable	797,556		882,084
Other long-term liabilities	511,430		501,286
Total liabilities	10,561,374		10,571,471
Commitments and contingencies (refer to Note 13)
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding	—		—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares as of December 24, 2023 and June 25, 2023; issued and outstanding, 131,278 shares as of December 24, 2023, and 133,297 shares as of June 25, 2023	131		133
Additional paid-in capital	7,997,251		7,809,002
Treasury stock, at cost; 163,472 shares as of December 24, 2023, and 161,380 shares as of June 25, 2023	(23,004,358)		(21,530,353)
Accumulated other comprehensive loss	(117,694)		(100,706)
Retained earnings	23,347,148		22,032,096
Total stockholders’ equity	8,222,478		8,210,172
Total liabilities and stockholders’ equity	$	18,783,852	$	18,781,643



	December 24, 2017			June 25, 2017
	(unaudited)			(1)
ASSETS
Cash and cash equivalents	$	1,745,173		$	2,377,534
Investments	3,954,526			3,663,628
Accounts receivable, less allowance for doubtful accounts of $5,262 as of December 24, 2017, and $5,103 as of June 25, 2017	2,279,044			1,673,398
Inventories	1,507,435			1,232,916
Prepaid expenses and other current assets	179,944			195,022
Total current assets	9,666,122			9,142,498
Property and equipment, net	807,340			685,595
Restricted cash and investments	255,984			256,205
Goodwill	1,485,230			1,385,673
Intangible assets, net	380,929			410,995
Other assets	316,660			241,799
Total assets	$	12,912,265		$	12,122,765
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	421,788		$	464,643
Accrued expenses and other current liabilities	1,339,612			969,361
Deferred profit	748,635			607,672
Current portion of convertible notes, and capital leases; and commercial paper	1,401,660			908,439
Total current liabilities	3,911,695			2,950,115
Long-term debt and capital leases, less current portion	1,789,958			1,784,974
Income taxes payable	818,880			120,178
Other long-term liabilities	118,177			280,186
Total liabilities	6,638,710			5,135,453
Commitments and contingencies
Temporary equity, convertible notes	130,424			169,861
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized - 5,000 shares, none outstanding	—			—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares; issued and outstanding, 159,451 shares at December 24, 2017, and 161,723 shares at June 25, 2017	159			162
Additional paid-in capital	5,959,945			5,845,485
Treasury stock, at cost; 110,754 shares at December 24, 2017, and 105,569 shares at June 25, 2017	(6,470,434		)	(5,216,187		)
Accumulated other comprehensive loss	(64,160		)	(61,700		)
Retained earnings	6,717,621			6,249,691
Total stockholders’ equity	6,143,131			6,817,451
Total liabilities and stockholders’ equity	$	12,912,265		$	12,122,765


	Three Months Ended
	December 24, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at September 24, 2023	132,072	$	132	$	7,879,031	$	(22,365,872)	$	(121,350)	$	22,655,389	$	8,047,330
Issuance of common stock	32	—		1,704		—		—		—		1,704
Purchase of treasury stock	(976)	(1)		—		(644,952)		—		—		(644,953)
Reissuance of treasury stock	150	—		46,615		6,466		—		—		53,081
Equity-based compensation expense	—	—		69,901		—		—		—		69,901
Net income	—	—		—		—		—		954,266		954,266
Other comprehensive income	—	—		—		—		3,656		—		3,656
Cash dividends declared ($2.00 per common share)	—	—		—		—		—		(262,507)		(262,507)
Balance at December 24, 2023	131,278	$	131	$	7,997,251	$	(23,004,358)	$	(117,694)	$	23,347,148	$	8,222,478


	Six Months Ended
	December 24, 2023
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 25, 2023	133,297	$	133	$	7,809,002	$	(21,530,353)	$	(100,706)	$	22,032,096	$	8,210,172
Issuance of common stock	73	—		4,522		—		—		—		4,522
Purchase of treasury stock	(2,242)	(2)		—		(1,480,471)		—		—		(1,480,473)
Reissuance of treasury stock	150	—		46,615		6,466		—		—		53,081
Equity-based compensation expense	—	—		137,112		—		—		—		137,112
Net income	—	—		—		—		—		1,841,664		1,841,664
Other comprehensive loss	—	—		—		—		(16,988)		—		(16,988)
Cash dividends declared ($4.00 per common share)	—	—		—		—		—		(526,612)		(526,612)
Balance at December 24, 2023	131,278	$	131	$	7,997,251	$	(23,004,358)	$	(117,694)	$	23,347,148	$	8,222,478


See Notes to Condensed Consolidated Financial Statements


	Three Months Ended
	December 25, 2022
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at September 25, 2022	136,374	$	136	$	7,492,822	$	(19,591,249)	$	(133,765)	$	19,644,623	$	7,412,567
Issuance of common stock	31	—		877		—		—		—		877
Purchase of treasury stock	(1,133)	(1)		—		(486,312)		—		—		(486,313)
Reissuance of treasury stock	131	—		39,366		5,630		—		—		44,996
Equity-based compensation expense	—	—		73,084		—		—		—		73,084
Net income	—	—		—		—		—		1,468,507		1,468,507
Other comprehensive income	—	—		—		—		24,894		—		24,894
Cash dividends declared ($1.725 per common share)	—	—		—		—		—		(233,977)		(233,977)
Balance at December 25, 2022	135,403	$	135	$	7,606,149	$	(20,071,931)	$	(108,871)	$	20,879,153	$	8,304,635


	Six Months Ended
	December 25, 2022
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 26, 2022	136,975	$	137	$	7,414,916	$	(19,481,429)	$	(109,982)	$	18,454,724	$	6,278,366
Issuance of common stock	116	—		7,673		—		—		—		7,673
Purchase of treasury stock	(1,819)	(2)		—		(596,132)		—		—		(596,134)
Reissuance of treasury stock	131	—		39,366		5,630		—		—		44,996
Equity-based compensation expense	—	—		144,194		—		—		—		144,194
Net income	—	—		—		—		—		2,894,386		2,894,386
Other comprehensive income	—	—		—		—		1,111		—		1,111
Cash dividends declared ($3.450 per common share)	—	—		—		—		—		(469,957)		(469,957)
Balance at December 25, 2022	135,403	$	135	$	7,606,149	$	(20,071,931)	$	(108,871)	$	20,879,153	$	8,304,635



	Three and Six Months Ended
	December 24, 2017		December 25, 2016
Expected stock price volatility	29.13	%	33.02	%
Risk-free interest rate	0.82	%	0.43	%
Expected term (years)	0.77		0.77
Dividend yield	0.89	%	1.14	%



	December 24, 2017
										(Reported Within)
	Cost		Unrealized Gain		Unrealized (Loss)			Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash & Investments		Other Assets
	(in thousands)
Cash	$	594,353	$	—	$	—		$	594,353	$	588,396	$	—	$	5,957	$	—
Level 1:
Time deposit	521,265		—		—			521,265		271,238		—		250,027		—
Money market funds	878,732		—		—			878,732		878,732		—		—		—
U.S. Treasury and agencies	835,112		—		(9,028		)	826,084		2,199		823,885		—		—
Mutual funds	58,307		3,844		—			62,151		—		—		—		62,151
Level 1 Total	2,293,416		3,844		(9,028		)	2,288,232		1,152,169		823,885		250,027		62,151
Level 2:
Municipal notes and bonds	179,475		10		(649		)	178,836		—		178,836		—		—
Government-sponsored enterprises	47,925		—		(602		)	47,323		—		47,323		—		—
Foreign government bonds	61,006		—		(490		)	60,516		—		60,516		—		—
Corporate notes and bonds	2,686,080		849		(12,781		)	2,674,148		4,608		2,669,540		—		—
Mortgage backed securities — residential	53,506		24		(325		)	53,205		—		53,205		—		—
Mortgage backed securities — commercial	121,950		—		(729		)	121,221		—		121,221		—		—
Level 2 Total	3,149,942		883		(15,576		)	3,135,249		4,608		3,130,641		—		—
Total	$	6,037,711	$	4,727	$	(24,604	)	$	6,017,834	$	1,745,173	$	3,954,526	$	255,984	$	62,151



	December 24, 2017
	Unrealized Losses Less than 12 Months					Unrealized Losses 12 Months or Greater					Total
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
	(in thousands)
U.S. Treasury and agencies	$	659,453	$	(6,546	)	$	161,386	$	(2,482	)	$	820,839	$	(9,028	)
Municipal notes and bonds	168,189		(649		)	—		—			168,189		(649		)
Government-sponsored enterprises	27,681		(163		)	19,533		(439		)	47,214		(602		)
Foreign government bonds	51,879		(382		)	8,425		(108		)	60,304		(490		)
Corporate notes and bonds	2,160,923		(11,215		)	152,403		(1,566		)	2,313,326		(12,781		)
Mortgage backed securities — residential	46,771		(309		)	1,789		(16		)	48,560		(325		)
Mortgage backed securities — commercial	115,554		(674		)	5,401		(55		)	120,955		(729		)
	$	3,230,450	$	(19,938	)	$	348,937	$	(4,666	)	$	3,579,387	$	(24,604	)



	Cost		Estimated Fair Value
	(in thousands)
Due in one year or less	$	1,995,451	$	1,994,497
Due after one year through five years	3,217,096		3,195,218
Due in more than five years	172,504		171,615
	$	5,385,051	$	5,361,330



	Notional Value
	Derivatives Designated as Hedging Instruments:				Derivatives Not Designated as Hedging Instruments:
	(in thousands)
Foreign currency forward contracts
	Buy Contracts		Sell Contracts		Buy Contracts		Sell Contracts
Japanese yen	$	—	$	512,577	$	—	$	141,737
Euro	69,649		—		33,044		—
Korean won	33,693		—		—		73,282
Taiwan dollar	—		—		20,047		—
Swiss franc	—		—		15,225		—
Chinese renminbi	—		—		7,529		—
Singapore dollar	—		—		7,410		—
British pound sterling	—		—		4,019		—
	$	103,342	$	512,577	$	87,274	$	215,019
Foreign currency option contracts
	Buy Put		Sell Put		Buy Put		Sell Put
Japanese yen	$	36,036	$	—	$	—	$	—



	December 24, 2017						June 25, 2017
	Fair Value of Derivative Instruments (Level 2)						Fair Value of Derivative Instruments (Level 2)
	Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts	Prepaid expense and other assets	$	9,687	Accrued expenses and other current liabilities	$	331	Prepaid expense and other assets	$	8,061	Accrued expenses and other current liabilities	$	2,916
Interest rate contracts, short-term				Accrued expenses and other current liabilities	4,662					Accrued expenses and other current liabilities	2,833
Interest rate contracts, long-term				Other long-term liabilities	14,520					Other long-term liabilities	7,269
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepaid expense and other assets	51		Accrued expenses and other current liabilities	118		Prepaid expense and other assets	213		Accrued expenses and other current liabilities	342
Total Derivatives		$	9,738		$	19,631		$	8,274		$	13,360



		Three Months Ended December 24, 2017									Six Months Ended December 24, 2017
		Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness			Effective Portion					Ineffective Portion and Amount Excluded from Effectiveness
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in or Reclassified into Income	Gain (Loss) Recognized in AOCI			Gain (Loss) Reclassified from AOCI into Income			Gain (Loss) Recognized in Income			Gain Recognized in AOCI		(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income
		(in thousands)
Foreign Exchange Contracts	Revenue	$	8,194		$	3,771		$	1,225		$	8,185	$	(35	)	$	3,772
Foreign Exchange Contracts	Cost of goods sold	(250		)	1,648			(139		)	2,193		2,472			(347		)
Foreign Exchange Contracts	Selling, general, and administrative	(206		)	1,012			(49		)	1,150		1,726			(166		)
Foreign Exchange Contracts	Other expense, net	—			—			(35		)	—		—			(52		)
Interest Rate Contracts	Other expense, net	—			(31		)	—			—		(62		)	—
		$	7,738		$	6,400		$	1,002		$	11,528	$	4,101		$	3,207



		Three Months Ended December 25, 2016									Six Months Ended December 25, 2016
		Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness			Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in or Reclassified into Income	Gain (Loss) Recognized in AOCI			(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income			Gain (Loss) Recognized in AOCI			(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income
		(in thousands)
Foreign Exchange Contracts	Revenue	$	18,138		$	(420	)	$	708		$	15,225		$	(14,025	)	$	1,413
Foreign Exchange Contracts	Cost of goods sold	(786		)	(180		)	(28		)	(551		)	(7		)	(95		)
Foreign Exchange Contracts	Selling, general, and administrative	(348		)	(146		)	(15		)	(372		)	(155		)	(36		)
Foreign Exchange Contracts	Other expense, net	—			—			3			—			—			3
Interest Rate Contracts	Other expense, net	—			1,778			—			—			1,787			—
		$	17,004		$	1,032		$	668		$	14,302		$	(12,400	)	$	1,285



	December 24, 2017							June 25, 2017
	Amount (in thousands)				Effective Interest Rate			Amount (in thousands)				Effective Interest Rate
Fixed-rate 1.25% Convertible Notes Due May 15, 2018 ("2018 Notes")	$	206,124		⁽¹⁾	5.27	%		$	447,436		⁽²⁾	5.27	%
Fixed-rate 2.75% Senior Notes Due March 15, 2020 ("2020 Notes")	500,000				2.88	%		500,000				2.88	%
Fixed-rate 2.80% Senior Notes Due June 15, 2021 ("2021 Notes")	800,000				2.95	%		800,000				2.95	%
Fixed-rate 3.80% Senior Notes Due March 15, 2025 ("2025 Notes")	500,000				3.87	%		500,000				3.87	%
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 ("2041 Notes")	526,136			⁽¹⁾	4.28	%		631,074			⁽²⁾	4.28	%
Commercial paper	800,000				1.64	%	⁽³⁾	—				—
Total debt outstanding, at par	3,332,260							2,878,510
Unamortized discount	(138,651		)					(178,589		)
Fair value adjustment - interest rate contracts	(19,182		)					(10,102		)
Unamortized bond issuance costs	(2,434		)					(3,161		)
Total debt outstanding, at carrying value	$	3,171,993						$	2,686,658
Reported as:
Current portion of long-term debt, and commercial paper	$	1,401,015		⁽⁴⁾				$	907,827		⁽⁴⁾
Long-term debt	1,770,978							1,778,831
Total debt outstanding, at carrying value	$	3,171,993						$	2,686,658



	December 24, 2017				June 25, 2017
	2018 Notes		2041 Notes		2018 Notes		2041 Notes
	(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax	$	94,516	$	158,007	$	89,604	$	156,374
Carrying amount of temporary equity component, net of tax	$	3,037	$	127,387	$	15,186	$	154,675
Remaining amortization period (years)	0.3		23.3		0.8		23.8
Fair Value of Notes (Level 2)	$	642,049	$	2,943,299
Conversion rate (shares of common stock per $1,000 principal amount of notes)	16.6603		29.8987
Conversion price (per share of common stock)	$	60.02	$	33.45
If-converted value in excess of par value	$	434,986	$	2,410,644
Estimated share dilution using average quarterly stock price $195.72 per share	2,381		13,042



	Remaining Amortization period	Fair Value of Notes (Level 2)
	(years)	(in thousands)
2020 Notes	2.2	$	503,330
2021 Notes	3.5	$	804,120
2025 Notes	7.2	$	518,060



Period	Total Number of Shares Repurchased	Total Cost of Repurchase		Average Price Paid Per Share ⁽¹⁾		Amount Available Under Repurchase Program
	(in thousands, except per share data)
Available balance as of June 25, 2017						$	282,141
Quarter ended September 24, 2017	1,779	$	157,938	$	158.40	$	124,203
Board authorization $2.0 billion increase, November 2017						$	2,124,203
Quarter ended December 24, 2017	3,709	$	1,089,744	$	196.28	$	1,034,459


Period	Total Number of Shares Repurchased	Total Cost of Repurchase (1)		Average Price Paid Per Share (1)		Amount Available Under Repurchase Program
	(in thousands, except per share data)
Available balance as of June 25, 2023						$	3,537,217
Quarter ended September 24, 2023	1,257	$	829,874	$	660.01	$	2,707,343
Quarter ended December 24, 2023	970	$	640,267	$	660.04	$	2,067,076



	Accumulated Foreign Currency Translation Adjustment				Accumulated Unrealized Holding Gain (Loss) on Cash flow hedges				Accumulated Unrealized Holding Gain (Loss) on Available-For-Sale Investments				Accumulated Unrealized Components of Defined Benefit Plans			Total
	(in thousands)
Balance as of June 25, 2017	$	(42,371	)		$	(811	)		$	1,106			$	(19,624	)	$	(61,700	)
Other comprehensive income (loss) before reclassifications	9,174				9,992				(20,066		)		(2,184		)	(3,084		)
Losses (income) reclassified from accumulated other comprehensive income (loss) to net (loss) income	3,934			₍₁₎	(3,271		)	₍₂₎	(39		)	₍₁₎	—			624
Net current-period other comprehensive income (loss)	$	13,108			$	6,721			$	(20,105	)		$	(2,184	)	$	(2,460	)
Balance as of December 24, 2017	$	(29,263	)		$	5,910			$	(18,999	)		$	(21,808	)	$	(64,160	)



	Preliminary Purchase Price Allocation
	(In thousands)
Intangible assets	$	48,500
Assets acquired (including cash of $8.7 million)	11,484
Goodwill	99,144
Liabilities assumed	(21,517		)
Fair value of net assets acquired	$	137,611


	Severance and Benefits		Other		Total
	(in thousands)
Restructuring liability as of June 25, 2023	$	7,989	$	246	$	8,235
Restructuring expense	7,256		19,350		26,606
Cash payments	(12,475)		(11,799)		(24,274)
Non-cash activities	53		(6,923)		(6,870)
Restructuring liability as of December 24, 2023	$	2,823	$	874	$	3,697



	Fair Value		Weighted-Average Estimated Useful Life
	(In thousands)		(In years)
Existing technology	$	26,200	6.0
Customer relationships	15,000		6.0
Trade names and other intangible assets	7,300		6.4
Total identified intangible assets	$	48,500	6.0


~~ITEM 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~


	Three Months Ended
	December 24, 2023			September 24, 2023
	(in thousands, except per share data and percentages)
Revenue	$	3,758,259		$	3,482,062
Gross margin	$	1,757,455		$	1,654,702
Gross margin as a percent of total revenue	46.8		%	47.5		%
Total operating expenses	$	700,243		$	631,673
Net income	$	954,266		$	887,398
Diluted net income per share	$	7.22		$	6.66



	Three Months Ended
	December 24, 2017			September 24, 2017			December 25, 2016
	(in thousands, except per share data and percentages)
Revenue	$	2,580,815		$	2,478,140		$	1,882,299
Gross margin	$	1,205,567		$	1,149,343		$	846,797
Gross margin as a percent of total revenue	46.7		%	46.4		%	45.0		%
Total operating expenses	$	468,196		$	456,121		$	406,969
Net (loss) income	$	(9,955	)	$	590,690		$	332,791
Diluted net (loss) income per share	$	(0.06	)	$	3.21		$	1.81



Net income	$	580.7
Non-cash charges:
Depreciation and amortization	159.0
Equity-based compensation	83.9
Deferred income taxes	(228.3		)
Amortization of note discounts and issuance costs	9.1
Changes in operating asset and liability accounts	277.0
Other	5.6
	$	887.0



	Valuation of Securities Given an Interest Rate Decrease of X Basis Points						Fair Value as of December 24, 2017		Valuation of Securities Given an Interest Rate Increase of X Basis Points
	(150 BPS)		(100 BPS)		(50 BPS)		0.00%		50 BPS		100 BPS		150 BPS
	(in thousands)
Time deposit	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265
U.S. Treasury and agencies	855,503		845,703		835,893		826,084		816,277		806,471		796,668
Municipal notes and bonds	181,905		180,891		179,863		178,836		177,808		176,781		175,754
Government-sponsored enterprises	48,840		48,334		47,828		47,323		46,817		46,312		45,807
Foreign government bonds	62,333		61,727		61,122		60,516		59,910		59,305		58,699
Bank and corporate notes	2,743,690		2,720,516		2,697,341		2,674,148		2,650,943		2,627,741		2,604,542
Mortgage backed securities - residential	55,161		54,511		53,858		53,205		52,551		51,898		51,244
Mortgage backed securities - commercial	123,691		122,868		122,045		121,221		120,399		119,576		118,753
Total	$	4,592,388	$	4,555,815	$	4,519,215	$	4,482,598	$	4,445,970	$	4,409,349	$	4,372,732



	Total Number of Shares Repurchased ⁽¹⁾	Average Price Paid Per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Amount Available Under Repurchase Program
	(in thousands, except share and per share data)
Amount available at June 25, 2017					$	282,141
Quarter ended September 24, 2017	1,790	$	158.40	1,779	124,203
September 25, 2017 - October 22, 2017	241	$	185.85	235	80,633
Board authorization, $2.0 billion increase, November 2017					2,080,633
October 23, 2017 - November 19, 2017	213	$	207.16	210	2,037,104
November 20, 2017 - December 24, 2017	3,352	$	190.97	3,264	1,034,459
Quarter ended December 24, 2017	3,806	$	194.99	3,709	$	1,034,459