Lam Research September 2026 Earnings: Record Margins as AI-Led WFE Spending Accelerates

Lam Research reported record quarterly revenue and earnings for the September 2026 quarter, with revenue reaching $8.22B and GAAP diluted EPS rising to $2.19. Revenue increased 22% sequentially and 54% from a year earlier, while operating margin reached 40.0%, reflecting strong systems demand, favorable mix, and operating leverage.

The investment story extends beyond the record quarter. Management now expects wafer-fabrication-equipment spending to exceed $200B in calendar 2027, following a mid-$150B estimate for 2026, although it cautioned that clean-room availability and supply-chain capacity could constrain how quickly the industry can meet demand.

Earnings Snapshot

The Bigger Story

Lam’s September results show that semiconductor-equipment demand is broadening beyond a single AI-driven segment. Systems revenue rose 35% sequentially, while the customer-support business remained near $2.5B for a fourth consecutive record quarter. Management said foundry logic and DRAM together accounted for roughly 80% of year-to-date systems revenue growth, supported by investments in advanced patterning, high-bandwidth memory, gate-all-around architectures, advanced packaging, and other increasingly deposition- and etch-intensive processes.

Management expects calendar 2026 systems revenue to grow well over 40% year over year, compared with its forecast for wafer-fabrication-equipment, or WFE, spending in the mid-$150B range. It also expects a third consecutive year of WFE outperformance.

The more consequential outlook is for 2027. Management’s preliminary view calls for WFE spending above $200B, with percentage growth led by DRAM, followed by leading-edge foundry logic and NAND. That outlook reflects customer demand extending through 2028, according to management, but it is not unconstrained demand. New fab readiness, clean-room availability, supplier capacity, and workforce scaling will determine how much of the demand can translate into equipment shipments.

Revenue and Operating Performance

Systems revenue was $5.73B, up from $4.25B in the June quarter. The sharp sequential gain drove nearly all of Lam’s company-wide revenue growth. Customer support-related revenue, which includes services, spares, upgrades, and Reliant mature-node equipment, was comparatively stable sequentially at $2.49B but increased 40% from the prior-year quarter.

Memory represented 46% of systems revenue, unchanged from the June quarter. Within memory, NAND accounted for 26% of systems revenue, up from 23% in the prior quarter, and NAND revenue increased roughly 40% sequentially. Spending was supported by conversions to 256-layer-and-above devices, with initial spending beginning on 384-layer-class devices.

DRAM represented 20% of systems revenue, down from 23% in the June quarter on a mix basis but higher sequentially in dollar terms. Management said customers are investing in technology additions and upgrades at 1α, 1β, and 1γ nodes, particularly for DDR5, LPDDR5, and high-bandwidth-memory production.

Foundry revenue also reached a record and rose to 46% of systems revenue from 44% in the June quarter. Leading-edge nodes, advanced packaging, and mature-node spending in China contributed to the result. Logic and other represented 8% of systems revenue, down from 10% in the previous quarter.

China accounted for 35% of total revenue, up from 26% in the June quarter. Management attributed the increase to strong purchases by both domestic Chinese customers and multinational manufacturers operating in the region. However, it expects China to become a “significantly lower” share of revenue in the December quarter, primarily because of lower domestic-customer revenue. That mix shift could affect quarterly revenue composition even if broader demand remains strong.

Management also pointed to progress in products addressing advanced patterning, backside power delivery, and packaging. It raised its expected cumulative Aether dry-resist revenue through the end of the decade to approximately $2.5B, about $1B above its prior outlook. The increase reflects additional customer adoption and higher expected volumes in applications such as high-bandwidth memory manufacturing.

Profitability and Margins

Lam’s GAAP gross margin increased 60 basis points sequentially to 52.3%, while GAAP operating margin expanded 260 basis points to 40.0%. Non-GAAP gross margin was 52.4%, up 40 basis points, and non-GAAP operating margin rose 180 basis points to 40.2%.

The company attributed the gross-margin improvement principally to favorable customer and product mix, along with its cost and pricing actions. Operating leverage was also substantial: revenue rose by nearly $1.5B sequentially, while GAAP operating expenses increased by $49.9M to $1.02B. The increase in spending reflected higher incentive compensation tied to profitability as well as continued investment in R&D, manufacturing infrastructure, field operations, and newer programs including Akara, Halo, panel-level packaging, and Dextro.

GAAP net income was $2.75B, compared with $2.28B in the June quarter. GAAP EPS was $2.19, while non-GAAP EPS was $2.20. The small difference partly reflects exclusions including acquired-intangible amortization, deferred-compensation valuation effects, note-discount amortization, and a $11.5M tax expense associated with a change in tax law.

Management expects gross margin to remain around current levels in the near term, though it continues to target gross margin in the mid-50% range over several years. New-product mix, manufacturing closer to customers, and pricing are the main levers it identified to support that longer-term objective.

Demand, Customers and Pricing

Lam’s customer-support business generated nearly $2.5B in revenue, rising 40% year over year. Management expects annual customer-support revenue to grow more than 30% in calendar 2026 and more than 15% in 2027.

High fab utilization is supporting demand for spares and services, while NAND conversion activity is contributing to upgrades. Management also highlighted growing adoption of Equipment Intelligence, Dextro Cobots, and performance-based service contracts among memory manufacturers. These offerings matter because they extend Lam’s participation beyond initial tool sales and could support service revenue as installed-base complexity increases.

NAND remains a developing source of upside, although timing is less predictable. Management expects the current upgrade cycle from older 128-layer devices to 200-layer-class technology to continue through 2027. It also sees potential future demand from specialized AI storage architectures, including SLC-class NAND for low-latency workloads. Management did not quantify the likely adoption rate, but noted that shifting production from TLC to SLC-class devices reduces bits per wafer and would require additional wafer capacity to meet the same bit demand.

What is Lam Research’s guidance for the December 2026 quarter?

Lam guided for December-quarter revenue of $8.60B, plus or minus $400M. It expects GAAP and non-GAAP gross margin of 52.5%, plus or minus 1 percentage point, and GAAP and non-GAAP operating margin of 40.5%, plus or minus 1 percentage point.

The company forecast GAAP and non-GAAP diluted EPS of $2.33, plus or minus $0.15, based on a diluted share count of approximately 1.253 billion shares.

Management said the December revenue outlook would have been somewhat higher absent near-term supply-chain constraints. It did not quantify the revenue impact, but said shipments delayed by component availability should move into the March quarter if they had otherwise been scheduled for December delivery.

For calendar 2027, management’s preliminary WFE outlook is for spending above $200B. It expects DRAM to lead percentage growth, followed by leading-edge foundry logic and NAND. Ten new Tier 1 fabs are expected to come online during the year, but the pace of tool deliveries will depend partly on clean-room schedules and supply-chain readiness.

Balance Sheet, Cash Flow and Capital

Lam generated $3.50B in operating cash flow during the September quarter and $3.24B in free cash flow. Cash, cash equivalents, and restricted cash rose to $7.45B from $5.60B at the end of June, despite $1.02B of share repurchases, $325M of dividends, and $258M of capital expenditures.

The company ended the quarter with $7.44B of cash and cash equivalents, while long-term debt and finance-lease obligations were $3.73B. It also said it used $750M earlier in the calendar year to repay maturing debt.

Lam returned approximately 41% of quarterly free cash flow to shareholders through repurchases and dividends. Management said it entered an accelerated share-repurchase arrangement during the quarter that will continue to execute in the December period. The company had $3B remaining under its authorized repurchase program and reiterated its longer-term objective of returning 85% of free cash flow to shareholders.

Inventory increased by $274M sequentially to $4.6B as Lam built product to support anticipated demand. Even so, inventory turns improved to 3.4 times from 3.0 times in the June quarter, the highest level in nearly seven years. Days sales outstanding declined to 63 days from 72 days.

What Investors Should Watch

1. Supply-chain constraints and March-quarter conversion

Management characterized current constraints as manageable and less severe than the industry shortages seen during the pandemic. Still, supply limitations reduced the December revenue outlook. Investors should watch whether delayed systems shipments convert into March-quarter revenue as expected and whether supplier bottlenecks broaden as industry demand rises.

2. China revenue mix

China represented 35% of September-quarter revenue, making it Lam’s largest regional market. Management expects a materially lower China contribution in December, driven by domestic customers. The extent to which other regions offset that expected decline will be important for assessing whether the shift is purely timing-related or signals a broader change in demand mix.

3. WFE growth versus execution capacity

Management’s outlook for more than $200B of 2027 WFE spending implies a substantial step-up from 2026. The key issue is not only end-market demand, but whether chipmakers can bring new clean rooms online and whether equipment suppliers can obtain enough components and staff to meet the demand.

4. Foundry, DRAM, and advanced-packaging share gains

Foundry logic and DRAM have driven approximately 80% of Lam’s systems growth year to date. Continued adoption of Aether, Akara, backside-power products, and advanced-packaging equipment would provide evidence that Lam is gaining share in higher-value process steps rather than simply benefiting from a cyclical recovery.

5. Customer-support growth durability

CSBG revenue is expected to grow more than 15% in 2027 after an expected increase of more than 30% in 2026. Investors should monitor whether high utilization, NAND upgrades, and performance-based service contracts can sustain growth after the current conversion cycle matures.

AlgovestIQ Takeaway

Lam delivered an unusually strong quarter, combining 22% sequential revenue growth with record gross margin, operating margin, and earnings. The results were not dependent on one product category: systems revenue accelerated across memory and foundry, while customer-support revenue remained at a record level and grew 40% year over year.

The operating model is also showing meaningful leverage. Revenue growth outpaced the increase in operating expenses, pushing GAAP operating margin to 40.0%. Lam is continuing to invest in R&D, manufacturing capacity, field support, and new product platforms, but those investments have not prevented near-term margin expansion.

The central investment question has shifted from whether AI demand can support a semiconductor-equipment recovery to whether the industry can physically execute against that demand. Lam sees customer visibility through 2028 and forecasts WFE spending above $200B in 2027, but it also acknowledges that clean-room capacity and component supply may limit shipments. The December-quarter guide already reflects some of those constraints.

Evidence that delayed December shipments convert into the March quarter, that China mix normalizes without weakening total demand, and that Lam continues to gain traction in DRAM, foundry, and advanced packaging would reinforce the outperformance case. Conversely, persistent supply bottlenecks, lower-than-expected fab readiness, or a sharper change in China demand would test the durability of the current growth trajectory.