Key Points
Lam Research reports Wednesday after the close. It guided to revenue of $8.1 billion, plus or minus $400 million, for the September quarter, a jump of more than 20% from the June quarter.
Wall Street expects earnings of about $2.17 a share on roughly $8.12 billion in revenue, up about 72% and 52% from a year ago, according to Zacks.
Lam has raised its outlook for industry chip-equipment spending three calls in a row, to the "low $150 billion range" for 2026. Yet the stock has lagged the S&P 500 since its last report, according to Earnings Whispers.
Chip stocks just suffered an eight-session losing streak, their longest since 2008, as China's memory push and AI financing fears hit the sector.
China made up 34% of Lam's revenue in the March quarter, which puts the company right in the middle of the memory-chip fight.
Every chip in every AI server starts in a factory. And almost every one of those factories runs on machines from a handful of companies.
Lam Research is one of them.
Lam makes the etch and deposition tools that carve and layer the microscopic structures inside memory and logic chips. When chipmakers build new capacity, Lam gets paid. When they upgrade old factories to make more advanced chips, Lam gets paid again.
By almost every measure, business has never been better. But the stock is trading like investors don't believe it.
On Wednesday, Lam has to change their minds.
A Forecast That Keeps Going Up
Three months ago, Lam told investors it expected global spending on wafer fab equipment, the machines used to make chips, to reach the "low $150 billion range" in 2026. That was up from its earlier outlook of $140 billion.
It was the third straight call in which Lam raised its view of industry spending, Earnings Whispers noted.
Lam also guided to $8.1 billion in revenue for the September quarter. That's more than 20% higher than the June quarter, which was already a record for revenue, operating margin and earnings per share.
Gross margin guidance has climbed from 48.5% to 52% over four quarters.
Management sounded even more confident about next year. "Looking into 2027, we see an extraordinary setup for WFE growth," CEO Tim Archer said on the July call. Customers, he said, "have signaled unprecedented long-term demand visibility."
So Why Isn't the Stock Celebrating?
Because the chip trade just had its worst stretch in nearly two decades.
The PHLX Semiconductor Index fell for eight straight sessions through Friday, its longest losing streak since 2008. Record results from TSMC and ASML couldn't stop the chip selloff, as investors started asking who is paying for the AI build-out, and with how much borrowed money.
Then there's China.
Lam's biggest growth driver right now is memory. Its revenue from NAND, the flash memory used for storage, more than doubled in the June quarter from the quarter before. Management says the move to chips with 500 or more layers roughly doubles Lam's opportunity per wafer.
But memory is also where the market just got spooked. China's leading memory maker, CXMT, said it had made key progress on a new chip design that packs more data into less space. HSBC estimates CXMT's share of the global DRAM market has climbed to around 10%, up from about 4% a year ago. As Dylan wrote this weekend, China just did what Burry warned about: it added supply to a business where supply always catches up.
For Lam, that cuts both ways. China was 34% of its revenue in the March quarter. A Chinese memory buildout means more Chinese orders for equipment, as long as U.S. export rules allow them. But if more supply pushes memory prices down, Lam's other big memory customers in Korea and the U.S. could slow their spending.
An analyst raised that exact concern on Lam's last call: the risk of a memory oversupply in 2027.
The Bar for Wednesday
The numbers Wall Street expects are big.
Analysts are looking for earnings of about $2.17 a share on revenue of about $8.12 billion. That would be growth of roughly 72% and 52% from a year ago. Lam's own guidance calls for earnings of $2.00 to $2.30 a share.
The whisper number, the unofficial figure traders actually expect, is $2.28, according to Earnings Whispers. That's near the top of Lam's range. So a result that's merely "in line" could disappoint.
The last time Lam reported, the stock jumped about 18% the next day, according to TipRanks.
Investors will be watching three things:
Memory mix. A second strong NAND quarter would support the upgrade story. A sharp drop would revive the oversupply fear.
China. Any change in the share of revenue from China, and any comment on export rules, will move the stock.
2027. Management has said next year looks even tighter than 2026. Investors want to hear that view hasn't changed after the last two weeks.
What Else Lands This Week
Tonight, Netflix, SpaceX, Intuitive Surgical, United Airlines and Capital One report after the close. General Motors reports before the bell, and analysts expect earnings per share to jump nearly 30% on flat revenue, according to LSEG.
On Wednesday, Lam shares the spotlight with Meta, Tesla, IBM and Texas Instruments. Goldman Sachs estimates five AI hyperscalers will push combined capital spending to about $1.2 trillion next year. That's the money that ultimately buys Lam's machines.
Not everyone is convinced the chip rebound will last. BTIG told clients to use any bounce in semiconductor stocks to reduce exposure, warning, "where there is smoke, there is fire."
The Federal Reserve is in its quiet period ahead of its October 27-28 meeting, with consumer prices running 3.7% higher than a year ago.
What It All Means
Lam is a picks-and-shovels play on AI. It doesn't need any single chatbot to win. It needs chipmakers to keep building.
Right now, management says they are. The market isn't so sure.
Wednesday's report will show which side has it right.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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