Lam Research (NASDAQ: LRCX) reported results on Oct. 21, 2026 for the first quarter of fiscal 2027 (ended Sept. 27, 2026), on revenue of $8.22B. On FMP's reported basis, operating margin was 40.0% and gross margin was 52.3%. The company's own non-GAAP figures were 40.2% and 52.4%. Revenue and earnings came in slightly above analyst estimates, and the margin is the story: the company is keeping more of each sales dollar as revenue grows. Figures use the FMP basis, are current as of the Oct. 28, 2026 quote and cover that quarter unless stated otherwise. The one exception is the discounted cash flow value, which is dated Oct. 29, 2026.
Key facts
- Oct. 21, 2026: Lam reported adjusted EPS of 2.2 USD against an analyst estimate of 2.18 USD, and revenue of $8.22B against an estimate of $8.14B.
- Quarter ended Sept. 27, 2026: Operating income was $3.28B, net income was $2.75B and diluted EPS was 2.19 USD.
- Versus the year-ago quarter (ended Sept. 28, 2025): Revenue was up 54.4% and net income was up 75.5%.
- Quarter ended Sept. 27, 2026: Free cash flow (cash from operations minus capital spending) was $3.24B.
- Oct. 28, 2026: The shares closed at 253.82 USD, up 5.39% on the day, for a market cap of $317.64B. The 52-week range is 135.5 to 438.5 USD.
What happened
Lam Research makes the machines that chipmakers use to deposit thin films onto silicon wafers and etch circuit patterns into them. Those steps become more numerous as chips get more complex. Lam's customers include makers of logic chips, memory chips and advanced packaging.
In the quarter ended Sept. 27, 2026, revenue split into two parts. System revenue, the machines themselves, was $5.73B, against $3.55B a year earlier. Customer Support and Other revenue, which covers spare parts, upgrades and services on machines already installed, was $2.49B, against $1.78B a year earlier.
By region, China was the largest at $2.89B. Korea contributed $1.63B, Taiwan $1.48B, Japan $721.5M, the United States $663.1M and Europe $301.3M.
CEO Tim Archer pointed to the margin milestone on the call, saying: "Operating margin topping 40% for the first time." He also said Lam now expects cumulative revenue from its Aether dry resist product to reach approximately $2.5 billion by the end of the decade, which he described as roughly $1 billion above the company's prior expectations.
Management said the demand driver is artificial intelligence, which raises the number of deposition and etch steps across chip types. According to the call, most of this year's systems revenue growth came from foundry logic (contract chipmaking) and DRAM (the working memory in computers). Management also described a newer, faster tier of NAND flash storage that could add demand for wafer capacity, plus growth in advanced packaging.
For the December 2026 quarter, management guided to revenue of about $8.6 billion, plus or minus $400 million. Gross margin is guided to 52.5%, plus or minus 1 percentage point, and operating margin to 40.5%, plus or minus 1 percentage point. FMP shows an analyst revenue estimate of $8.64B for the next report, due Jan. 27, 2027, with an EPS estimate of 2.34 USD.
Why it matters for investors
Margins have climbed for several quarters. The trend below shows why the 40.0% operating margin is more than a one-quarter blip. The margin dipped in the December 2025 quarter, then rose in each quarter after.
| Quarter ended | Revenue | Gross margin | Operating margin | Free cash flow | |---|---|---|---|---| | Sept. 28, 2025 | $5.32B | 50.4% | 34.4% | $1.59B | | Dec. 28, 2025 | $5.34B | 49.6% | 33.9% | $1.22B | | March 29, 2026 | $5.84B | 49.8% | 35.0% | $809.8M | | June 28, 2026 | $6.72B | 51.7% | 37.4% | $1.27B | | Sept. 27, 2026 | $8.22B | 52.3% | 40.0% | $3.24B |
The table shows operating margin rising faster than gross margin. That points to operating leverage: costs such as research and administration did not grow as fast as sales. Gross margin moved from 49.6% to 52.3% over the span, while operating margin moved from 33.9% to 40.0%.
Cash flow jumped. Operating cash flow was $3.50B in the September 2026 quarter, with capital spending of $257.7M. Lam spent $1.02B on buybacks and $325.4M on dividends in the quarter. CFO Doug Bettinger said, "Our long-term plans remain to return 85% of free cash flow to shareholders." That is a long-term target, not the current pace: Lam returned about 41% of free cash flow in the September quarter and 59% in the calendar year to date. The balance sheet shows cash and short-term investments of $7.44B against total debt of $3.74B, so Lam holds more cash than debt. Debt-to-equity is 0.27.
Financial strength looks solid. The Piotroski score, a 0-to-9 health check on profitability and balance sheet, is 7. The Altman Z score, a bankruptcy-risk gauge where higher is safer, is 19.74.
Valuation versus peers. On trailing 12-month figures, Lam trades at a price-to-earnings ratio (share price divided by earnings per share) of 37.60 and has a net margin of 32.3%. Peers:
| Company | P/E | Net margin | |---|---|---| | Lam Research (LRCX) | 37.60 | 32.3% | | Applied Materials (AMAT) | 35.65 | 30.1% | | ASML (ASML) | 42.43 | 34.1% | | ASM International (ASMXF) | 38.24 | 26.8% | | ACM Research (ACMR) | 23.56 | 14.5% |
Lam sits in the middle of the large-company group: a higher net margin than Applied Materials and ASM International, a lower one than ASML. Other trailing multiples are price-to-sales of 12.16, EV/EBITDA (enterprise value to operating earnings) of 30.85 and price-to-free-cash-flow of 48.59. The dividend yield is 0.4%.
What analysts say. Of 50 ratings, 39 are Buy, 10 are Hold and 1 is Sell, for a consensus of "Buy." Analyst price targets average 375.94 USD, with a median of 367.50 USD, a high of 500.00 USD and a low of 290.00 USD. These are analysts' views, not ours. Citigroup, Needham, Mizuho, UBS and Morgan Stanley all kept their positive ratings on Oct. 22, 2026. Separately, FMP's own discounted cash flow model puts value at 59.31 USD per share as of Oct. 29, 2026. That is a mechanical estimate that depends heavily on its assumptions, and it sits far below both the share price and analyst targets.
Our MoonshotScore. Stock Expert AI's MoonshotScore V2 for Lam is 90.9, rated Exceptional. Among its sector-relative pillars, quality scores 96, growth 86 and safety 86. Momentum is 64. Valuation is the weak pillar at 30, which matches the high multiples above.
Stock reaction. Lam rose 5.39% on Oct. 28, 2026. Headlines that day linked the move to a broad rally in chip equipment stocks after SK Hynix signaled a memory shortage that could last for years.
What could go wrong
- Supply limits. Management said clean room space and supply chain components are limiting how fast chipmakers and equipment makers can meet demand into 2027. CFO Doug Bettinger said the December-quarter guidance, not reported September revenue, was affected: "this revenue guide would have been a bit higher" without near-term constraints. He added that shipments delayed by timing would go out in the March quarter.
- China. Bettinger said China revenue will be "meaningfully down" in the December quarter, driven by domestic customers. China was the largest region in the September quarter, so this matters.
- Mix and tax. Management cited customer mix as a gross margin headwind. The non-GAAP tax rate rose to 16.5% from 11%, due to U.S. tax on foreign earnings and shifts in where profit is earned.
- Technology shifts. An analyst said a memory maker plans to prioritize 3D DRAM over 4F² and that Lam's stock traded down afterward. Archer said "we don't know exactly what the reaction was or why people would have reacted in that way," and argued that rising etch and deposition intensity benefits Lam either way, including a faster move into 3D memory.
- Valuation and cyclicality. The valuation pillar is low in our score, and chip equipment demand has historically swung with customer spending.
- Insider selling. Among the 30 most recent Form 4 insider filings, 0 were open-market purchases and 8 were sales in the last 90 days. Older filings in that window may be missing, and insider sales have many possible causes.
What to watch next
- Jan. 27, 2027: Next earnings report. Compare the result with the analyst estimates of $8.64B in revenue and 2.34 USD in EPS.
- Margin guidance: Whether operating margin lands near the 40.5% guided midpoint.
- 2027 spending view: Management gave a preliminary view that industry equipment spending in 2027 will be well above 2026, and said it will refine that next quarter.
- China and shipment timing: How the drop in China sales offsets other regions, and whether the delayed shipments arrive in the March quarter.
- Buybacks: Bettinger declined to give the timing of an accelerated share repurchase, but said the "medium long-term goals remain unchanged, which is to return 85%" of free cash flow. That is a long-term goal, not the current return rate.
Frequently asked questions
Q: Did Lam Research beat earnings estimates in October 2026?
Yes, narrowly. For the quarter ended Sept. 27, 2026, Lam reported EPS of 2.2 USD against an estimate of 2.18 USD, and revenue of $8.22B against an estimate of $8.14B, according to FMP data.Q: Why is Lam Research's operating margin important?
Operating margin shows how much of each sales dollar is left after running costs. It reached 40.0% on FMP's reported basis in the quarter ended Sept. 27, 2026, up from 34.4% a year earlier. The company said it was the first time above 40%, which suggests profit is growing faster than sales.Q: Is Lam Research stock expensive?
Its absolute multiples are high, but roughly in line with large peers. The trailing P/E is 37.60, price-to-sales is 12.16 and our MoonshotScore valuation pillar is 30, the lowest of its pillars. Applied Materials has a P/E of 35.65 and ASML 42.43. This is not advice to buy or sell.Sources: Stock Expert AI market data and MoonshotScore (our own); financial figures, estimates and analyst data from Financial Modeling Prep; management comments from the Oct. 21, 2026 earnings call transcript. Headlines were used for context only.
This is educational content, not investment advice. Past performance does not guarantee future results.