Lam Research Earnings: Focus on the Fundamentals

Key Morningstar Metrics for Lam Research

• Fair Value Estimate
  : $310.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

What We Thought of Lam Research’s Earnings

Lam Research’s LRCX September-quarter results were above the midpoints of guidance. Sales rose 52.0% year-on-year to $8.2 billion, and profitability hit record highs of 52.4% non-GAAP gross margin and 40.2% non-GAAP operating margin. December-quarter guidance implies further strong growth and profit.

Why it matters: Lam continues to enjoy robust artificial-intelligence-driven spending, which we see driving a huge demand surge for chip equipment through 2028. Logic and memory chipmakers are investing heavily to build new supply, and we also believe Lam is gaining share as complexity increases.

• Fears about AI spending are weighing on investor minds and Lam’s valuation, along with its peers. We’re confident in a strong outlook through 2028, given that greenfield fab buildouts are already planned and underway. Thereafter, we expect demand to decelerate, not decline.
• Calendar 2027 guidance implies at least 30% growth, and we expect meaningful upside based on regular beat-and-raises throughout calendar 2026. We see DRAM and logic as the highest growth drivers, given some of the steepest supply constraints.

The bottom line: We maintain our $310 fair value estimate for wide-moat Lam as we maintain our chip equipment growth cycle thesis through the next four years. Shares are down about 7% after hours, likely because it met and did not beat expectations. Shares look attractive to us for a high-quality name.

• Shares are down 40% since June 30 on longer-term AI spending concerns. In a pessimistic sentiment environment, we see continued momentum for Lam being taken negatively, and we disagree. Investors should focus on hugely positive fundamentals: rapid growth and improving profitability.
• Our valuation implies Lam is worth 20 times fiscal 2029 earnings, which is when we expect more normalized growth. We believe high spending levels will be durable, with growth tapering but remaining high to meet elevated long-term AI demand through the end of the decade.