LRCX · Q1 2026 Earnings

Bullish

Lam Research

Reported October 22, 2025

30-second summary

Lam delivered $5.32B of revenue (+27.8% YoY, +3% QoQ) with non-GAAP EPS of $1.26 — beating the $1.00 EPS midpoint by $0.26 and exceeding the $1.10 high end by $0.16 — and a post-Novellus record 50.6% non-GAAP gross margin, 60bps above the 50.0% guided midpoint. Revenue beat the midpoint by ~$120M and landed within the guide range ($4.90B–$5.50B), below the high end. The December guide is the more important signal: revenue $5.20B ±$300M, gross margin stepping down 210bps to 48.5% ±1%, and operating margin down 200bps to 33.0% ±1%, framed by management as tariff and mix headwinds. Layered on top is a hard call that China will fall below 30% of CY2026 revenue (~$200M December-quarter impact and ~$600M CY2026 impact from the 50% affiliate rule) with non-China multinationals expected to more than offset.

Headline numbers

EPS

Q1 FY2026

$1.26

Revenue

Q1 FY2026

$5.32B

+27.8% YoY

Gross margin

Q1 FY2026

50.4%

Free cash flow

Q1 FY2026

$1.59B

Operating margin

Q1 FY2026

34.4%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q2 FY2025	QoQ
Revenue	$5.32B	+27.8%	$5.17B	+2.9%
EPS	$1.26	—	$1.33	-5.3%
Gross margin	50.4%	—	50.1%	+30bps
Operating margin	34.4%	—	33.7%	+70bps
Free cash flow	$1.59B	—	$2.38B	-33.2%

Guidance

Q1 FY2026 beat across revenue, EPS, and margins; Q2 FY2026 guidance signals sequential margin compression despite mid-single-digit revenue growth.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$4.35B – $4.95B	$5.32B	+$0.37B above guide high end	Beat
Non-GAAP EPS	Q1 FY2026	$0.90 – $1.10	$1.26	+$0.16 above guide high end	Beat
Gross margin	Q1 FY2026	49.0% – 51.0%	50.6%	+0.6pts above midpoint	Beat
Operating income as % of revenue	Q1 FY2026	33.0% – 35.0%	35.0%	+1.0pt above midpoint	Beat
Diluted share count	Q1 FY2026	1.27 Billion	1.26 Billion	in-line	Met

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$4.90B – $5.50B	-5.2% to +6.4% YoY
Non-GAAP EPS	Q2 FY2026	$1.05 – $1.25	—
Gross margin	Q2 FY2026	47.5% – 49.5%	—
Operating income as % of revenue	Q2 FY2026	32.0% – 34.0%	—
Diluted share count	Q2 FY2026	1.26 Billion	—

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Systems revenue	$3.55B	+48.2%
Customer support-related revenue and other	$1.78B	+0.1%

Capacity & utilization

Q1 FY2026

Segment	Q1 FY2026
Deferred Revenue	$2.77 billion
Japan Shipments (inventory pending acceptance)	$131 million

Profitability

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP Gross Margin	50.6%
Non-GAAP Operating Margin	35.0%
Operating Cash Flow	$1.78 billion
Capital Expenditures	$185 million

Management tone

Q2 FY2025 "deposition and etch criticality in the AI era" → Q1 FY2026 "AI as quantified, in-flight SAM expansion with embedded tariff and China headwinds."

The clearest shift across the two quarters of coverage is in how AI is framed. The June-quarter release pitched AI as a strategic positioning claim — "deposition and etch criticality intensifying in the AI era." This quarter, Archer moved to a hard quantification: "We see the surge in AI data center demand creating billions of dollars of served available market expansion and share gain opportunity for LAM in the coming years." The language migrated from posture to dollar-denominated opportunity, and the Q&A specifics — $8B of WFE per $100B of AI infrastructure, more than half flowing to memory — gave analysts something to model. This is a confidence tell, not marketing.

China commentary inverted between the two releases. Last quarter China was 35% of revenue and treated as a tailwind ("the majority of our China revenue continued to come from [domestic customers]"). This quarter China rose to 43% of revenue in the print, but management's forward framing flipped to declarative caution: "we expect the China region to represent less than 30% of our overall revenues in calendar year 2026." On the call CFO Doug Bettinger acknowledged the past forecasting pattern — "A year ago…we would have seen the same thing and then it strengthened through the year. I just right now don't see where that's going to come from next year" — which is unusually frank for a company that has typically let China guidance drift. The willingness to size the hit (~$200M in the December quarter and ~$600M for CY2026 from the affiliate rule) shows confidence in offsets from non-China multinationals.

Margin tone is the place to watch for daylight between language and numbers. Bettinger paired the record 50.6% Q1 gross margin with "I expect the impact from tariffs to continue to increase somewhat in this December quarter," then guided to 48.5%. The candor is welcome, but readers should not miss that the company just guided a 210bps gross-margin step-down and a 200bps operating-margin step-down one quarter after a record print, and the qualitative CY2026 setup remains "robust." Both can be true; the compression is real and is now embedded.

NAND moved from "$40B upgrade cycle as anchor" to "$40B cycle accelerating, capacity additions may be needed sooner than previously thought." Archer's phrasing in Q&A — "capacity additions…may be needed sooner than previously thought" — is the most forward-leaning NAND comment in recent calls, and it lines up with management's "somewhat second half weighted" CY2026 framing.

Recurring themes management leaned on this quarter:

AI-driven WFE expansion across foundry logic, DRAM, and NANDNAND upgrade cycle ($40B spend) as near-term anchorDeposition and etch as critical enablers of semiconductor scalingAdvanced packaging (panel-level) as emerging growth vectorOutperformance vs. WFE driven by product mix (etch/deposition intensity)China revenue normalization post-export restrictions

Risks management surfaced:

50% affiliate rule restricting shipments to domestic China customers (~$600M impact in 2026)Tariff headwinds increasing sequentially, pressuring gross marginsGILTI rate increase and global minimum tax regime lifting effective tax rate in 2026Customer advance down payments continuing to declineChina revenue timing and mix uncertainty despite historical strengthening

Q&A highlights

Harlan Seur · J.P. Morgan

Given data center infrastructure announcements and capacity requirements, will calendar 2026 WFE growth be limited by cleanroom space availability across NAND, DRAM, foundry, and advanced packaging?

Management acknowledged that physical infrastructure buildout takes time and could be a constraint. Lead times for equipment are generally within facility construction timelines. Suggested customers' own capital plans are the limiting factor, not equipment supply. Directed analyst to ask customers directly about their physical investment plans.

Equipment lead times generally align with facility construction timelinesPhysical space rather than equipment supply chain is likely the constraintLAM unlikely to be the bottleneck for 2026 growth

Stacy Rasgon · Bernstein Research

Can management clarify the revenue growth trajectory for 2026 given China revenue headwind of ~$1.5B and whether global multinationals will offset this decline?

Confirmed China will drop below 30% next year (~$1.5B headwind). Global multinationals will more than offset China decline driven by NAND upgrades, high bandwidth memory, and foundry node transitions. Specifics deferred to December call.

China revenue to drop below 30% in 2026Estimated $1.5B headwind from China reductionGlobal multinationals will more than offset China declineGrowth drivers: NAND upgrades, HBM, advanced foundry nodes

Jim Schneider · Goldman Sachs

What signals is LAM seeing on NAND market acceleration and is 2026 NAND growth expected to be upgrade-led or capacity-led?

Demand signal shows acceleration of the $40B conversion spend due to higher-than-expected bit demand. Business expected to remain predominantly upgrade-focused through 2026 due to large unupgraded installed base. Transition to capacity additions would occur only if sustained high demand continues and floor space constraints are overcome.

$40B NAND conversion spend accelerating due to higher bit demand2025-2026 expected to be upgrade-focusedLarge installed base not yet upgraded to 200+ layer devicesTransition to capacity additions dependent on sustained demand and physical infrastructure availability

Melissa Weathers · Dorsha Bank

Have LAM's new products introduced at analyst day (ACARA and Altus Halo) seen acceleration in engagements given recent WFE momentum?

Yes, both products seeing acceleration. ACARA (conductor-edge, high aspect ratio) aligned with gate-all-around scaling and DRAM applications with couple of wins since February. Halo making progress on 3D NAND word line applications. Management expressed confidence in product progress since February but acknowledges long way to go on full investor day model.

ACARA: multiple wins in DRAM conductor-edge applications since FebruaryHalo: progressing on 3D NAND word line applicationsProducts designed to improve Foundry Logic and DRAM performance and revenue growthLong execution timeline remains on investor day model

Brian Chin · Stifel

Of the $8B in WFE spending per $100B AI infrastructure, what is the breakdown across Advanced Logic, DRAM, and NAND on a percentage basis?

More than half comes from memory (enterprise SSDs and high bandwidth memory). GPUs, ASICs, and other accelerators represent the balance. Specific percentages not provided.

>50% of $8B WFE comes from memory productsMemory includes enterprise SSDs and high bandwidth memoryRemainder from GPUs, ASICs, and accelerators

Answers to last quarter's watch list

Sep-quarter revenue delivery vs. the $5.20B ±$300M guide — Beat the midpoint by ~$124M with $5.32B (+3% QoQ); landed within the guide range, below the $5.50B high end.

Resolved positively

Gross-margin hold at 50.0% ±1% guide — Came in at 50.6%, 60bps above midpoint and a post-Novellus record. However, the December guide steps margin down 210bps to 48.5% on tariff and mix headwinds, so the hold question rolls forward. Status: Resolved positively (for Q1 FY2026); the December guide is the new question

China revenue trajectory from $1.81B / 35% — China rose to $2.29B / 43% of revenue this quarter, the highest concentration in recent memory. But management explicitly guided China below 30% of CY2026 revenue with a ~$200M December-quarter and ~$600M CY2026 hit from the affiliate rule. The near-term print went the opposite direction from the CY2026 framing. Status: Resolved negatively (for the forward look)

Deferred revenue trajectory ($2.68B with $342M Japan-pending) — Total deferred grew to $2.77B (+$90M QoQ), but the Japan-shipment-pending-acceptance component fell sharply from $342M to $131M, indicating those shipments converted to revenue this quarter.

Resolved positively

Systems vs. CSBG mix — Systems +48.2% YoY ($3.44B → $3.55B), CSBG +0.1% YoY ($1.78B → $1.78B). CSBG did not re-accelerate; the gap widened. Status: Resolved negatively (CSBG remains flat)

What to watch into next quarter

December gross margin vs. the 48.5% ±1% guide: management framed the 210bps step-down as tariff and mix. Watch whether the print comes in at the high end (49.5%) and signals one-quarter pressure, or the low end (47.5%) and signals a structural reset.

December operating margin vs. 33.0% ±1%: the 200bps sequential compression is the more aggressive cut. If opex doesn't flex as guided, the print lands at the low end and the CY2026 margin trajectory needs to be re-underwritten.

China revenue mix sequential trajectory: China hit 43% this quarter ($2.29B). Management's <30% CY2026 framing and the ~$200M December affiliate-rule hit imply the step-down begins next quarter. Watch whether the December print already shows China declining as a share of revenue, or whether the cliff is more back-half CY2026 weighted.

CY2026 framing on the December call: management deferred specifics on the China offset bridge. Watch for whether they quantify non-China multinational growth (foundry, HBM, NAND upgrade) with enough specificity to validate the "more than offset" claim.

Deferred revenue and Japan-pending balance: $2.77B total with $131M Japan-pending (down from $342M). Watch whether Japan-pending rebuilds (signal of forward systems shipments) or stays low.

NAND capacity vs. upgrade split commentary: Archer flagged "capacity additions may be needed sooner than previously thought." Watch for any concrete capacity-add disclosure on the December call — that would be the first NAND greenfield signal in this cycle.

Sources

Lam Research Q1 FY2026 earnings press release (period ended September 28, 2025), filed with the SEC: https://www.sec.gov/Archives/edgar/data/707549/000070754925000082/lrcx_exhibitx991xq1x2026.htm
Lam Research Q1 FY2026 earnings call commentary (management prepared remarks and Q&A).
Tapebrief Q4 FY2025 brief (LRCX, reported 2025-07-30) for cross-quarter comparison.

Get the next brief, free.

We publish analyst-grade earnings briefs the same day or morning after every call — headline numbers, segment KPIs, Q&A highlights, and tone analysis. Free during beta.

This is not investment advice.