Lam Research Corporation (LRCX) Earnings & Analysis

Latest quarter

Lam Research reported Q1 FY2027 revenue of $8.2 billion, above the $8.1 billion consensus. Adjusted earnings per share of $2.20 also exceeded the $2.17 consensus. Revenue rose from $5.3 billion a year earlier, while diluted earnings per share rose to $2.19 from $1.24.

Lam’s filing attributed the year-over-year increase in systems revenue to semiconductor demand that prompted investment in both memory and non-memory equipment. Customer support-related revenue also grew, primarily as customers invested in non-leading-edge equipment and bought more spare parts. The filing said both foundry and memory revenue increased, with memory growing by more in dollar terms.

Gross margin rose to 52.3% from 50.4% a year earlier, while operating margin increased to 40.0% from 34.4%. Lam attributed the gross-margin increase mainly to product mix and efficiencies from higher business volumes. Free cash flow was $3.2 billion, compared with $1.6 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Tim Archer said AI adoption is increasing demand for computing, memory and storage, while more complex devices require additional deposition and etch steps. He said foundry logic and DRAM accounted for approximately 80% of Lam’s systems revenue growth in the calendar year to date. Archer also pointed to opportunities in advanced packaging and said Lam had shipped panel plating systems to more than 20 customers.

CFO Doug Bettinger said foundry spending in the September quarter included leading-edge investment and mature-node projects in China. He said the Customer Support Business Group generated nearly $2.5 billion in revenue, with upgrades, spares and services contributing to growth. On customer questions about support revenue, Bettinger said spares remained its largest individual component and that NAND conversions continued to support upgrades.

Asked about margin improvement, Bettinger cited new products, manufacturing closer to customers and work on pricing. He said gross margin would fluctuate around its current level in the near term, while Lam saw an opportunity to reach the mid-50s over several years. Archer said Lam was working with suppliers to expand capacity; Bettinger said the company was also investing in laboratory infrastructure and manufacturing facilities.

Bettinger said near-term supply constraints had held back the December-quarter revenue forecast. He expected China’s share of revenue to decline as domestic customer spending falls, while multinational customers there continue to invest. Archer said clean-room space and some component supplies could continue to constrain the industry in 2027. Pressed on the size of unconstrained demand, Bettinger said it would be higher but declined to put a number on it.

Guidance

Archer said Lam now expects calendar 2026 wafer-fabrication equipment spending in the mid $150 billion range, compared with the low $150 billion range in its previous outlook. He also raised Lam’s expectation for cumulative Aether-related revenue to approximately $2.5 billion by the end of the decade, roughly $1 billion above its prior expectation.