LAM RESEARCH CORP (LRCX) Q1 2026 Earnings Summary

Executive Summary

• Revenue and EPS exceeded Wall Street consensus: revenue $5.32B vs $5.23B consensus and non-GAAP EPS $1.26 vs $1.22 consensus; GAAP EPS was $1.24 . Values retrieved from S&P Global.*
• Sequentially, revenue rose 3% to a record, with gross margin at 50.6% (record post-Novellus) and non-GAAP operating margin at 35.0%; GAAP operating margin was 34.4% .
• December quarter (Q2 2026) guidance: revenue $5.20B ±$300M, GM% ~48.5% (±1%), operating margin ~33% (±1%), non-GAAP EPS $1.15 (±$0.10), share count ~1.26B; CFO flagged tariff and mix headwinds to margins and a slight tax rate uptick in 2026 .
• China “50% affiliate rule” is expected to reduce Q2 revenue by ~$200M and ~-$600M impact to CY2026 revenue; Lam expects China to be <30% of revenue in CY2026 with offsets from global multinationals, AI foundry/logic, HBM DRAM, and NAND upgrades .

What Went Well and What Went Wrong

What Went Well

• Record quarterly revenue ($5.32B), record gross margin (50.6%), and record operating margin (35%): “Financial results… above the midpoint of all guidance ranges” and “many financial records throughout the P&L” .
• Strong foundry momentum and CSPG strength: Foundry was 60% of systems revenue (third consecutive record quarter); CSPG revenue was ~$1.8B, with record combined spares and services .
• Clear AI-linked product wins and roadmap: CEO highlighted Ether dry resist EUV, Halo MOLE ALD for >500-layer 3D NAND, and low‑K ALD wins across foundry, logic, DRAM; “Lam’s innovations are helping our customers address major AI-driven… inflections” .

What Went Wrong

• Margin headwinds from tariffs and mix: CFO noted tariffs increased and will be a headwind to gross margin; December GM% guided down to ~48.5% (±1%) from 50.6% in September .
• China policy impact: The “50% affiliate rule” restrains shipments; ~$200M Q2 revenue impact and ~$600M CY2026 headwind expected; Lam anticipates China revenue mix down <30% in 2026 .
• EPS down QoQ despite revenue/margin improvements: GAAP diluted EPS fell to $1.24 (from $1.35), non-GAAP EPS to $1.26 (from $1.33), reflecting tax expense and mix factors .

Financial Results

Quarterly headline metrics (oldest → newest)

Q1 2026 vs Prior Year (YoY reference)

Actuals vs Consensus and Guidance

Values retrieved from S&P Global.*

Segment and geography

KPIs and balance sheet

Guidance Changes

Reference prior guidance issued for Q1 2026 (from Q4 2025): Revenue $5.20B ± $0.30B; GM ~50.0% (non-GAAP); Op margin ~34.0%; EPS $1.20 ± $0.10; shares ~1.27B .

Earnings Call Themes & Trends

Management Commentary

• CEO (Tim Archer): “Lam's innovations are helping our customers address major AI-driven semiconductor manufacturing inflections… strongly positioned for continued growth.”
• CEO: Ether dry resist EUV “resolve features <15nm… >10% reduction in EUV exposure dose,” already ramping in HBM production lines .
• CFO (Doug Bettinger): “Gross margin… 50.6%, a record in the post‑Novellus period… financial results came in above the midpoint of all guidance ranges” .
• CFO: “Tariffs will be contributing to the sequential decline in gross margin” and “EPS of $1.15 ± $0.10” for December quarter .

Q&A Highlights

• AI data center investment intensity: Lam estimates ~$8B of WFE per $100B of incremental data center investment, with more than half of related WFE going to memory (HBM, eSSD) and growing Lam SAM at leading-edge nodes .
• China outlook: Growth in Q1 driven by domestic customers; “50% affiliate rule” reduces Q2 by ~$200M and CY2026 by ~$600M; China revenue mix to fall below 30% in 2026, offset by multinationals’ spend .
• NAND upgrades: ~$40B conversion spend over several years; acceleration likely as bit demand rises; upgrades favored near term with some capacity adds emerging .
• Margins and taxes: Customer mix/tariffs headwinds; non-GAAP tax rate low-to-mid teens near term, slight increase in 2026 with GILTI/global minimum tax .
• Capital return: ~$990M buybacks in Q1 at ~$106/share average; $292M dividends; $6.5B buyback authorization remaining .

Estimates Context

• Q1 2026 beat: Revenue $5.32B vs $5.23B consensus; non-GAAP EPS $1.26 vs $1.22 consensus. Values retrieved from S&P Global.*
• Q2 2026 guidance vs consensus: Revenue midpoint $5.20B vs $5.24B consensus; non-GAAP EPS midpoint $1.15 vs $1.16 consensus. Values retrieved from S&P Global.*
• Implications: Street models should lower near-term gross margin assumptions (to ~48.5% ±1%) and factor tariff/mix headwinds; reallocate revenue by region with China <30% CY2026 and higher contributions from multinationals, HBM-driven DRAM, and NAND upgrades .

Key Takeaways for Investors

• Strong execution with record revenue and margins; Q1 2026 was a clean beat vs consensus, driven by foundry strength and CSPG resilience .
• Near-term margin pressure from tariffs and customer mix; models should reflect GM% ~48.5% in Q2 and consider a slight tax rate uptick in 2026 .
• AI demand is a multi‑year tailwind across foundry/logic, DRAM (HBM), and NAND; Lam’s differentiated products (Ether dry resist, Halo MOLE ALD, low‑K ALD) are positioned for share gains .
• China policy headwinds are material (~$200M Q2, ~$600M CY2026), but management expects offsets from global multinationals and AI-linked investments; region mix to normalize <30% China in 2026 .
• CSPG continues to be accretive and a stabilizer; upgrades and spares/services underwrite recurring revenue and margin support .
• Watch December quarter: Guidance suggests top‑line stability vs consensus with margin compression; upside if tariff effects moderate or mix improves .
• Capital return remains robust (buybacks/dividends), reducing share count and supporting EPS over time; dividend raised to $0.26 .