Lam Research Corporation

(NASDAQ Global Select)
Back to all articles
Somewhat Bullish +35

The Case For Lam Research Stock Rests On One Thing

Financial outlook Supply chain changes AI-generated analysis

πŸ“ˆ Lam Research trades at 35.7x trailing earnings, implying investors expect fast growth to continue despite supply chain headwinds.

⚠️ Management warns that shortages in clean room space and components are holding back sales through calendar year 2027.

πŸ’° The company expects December quarter revenue of $8.6 billion plus or minus $400 million, following a 54.4% YoY jump to $8.22 billion in September.

πŸ“‰ China is expected to be a smaller share of December revenue due to reduced orders from domestic customers in that region.

πŸ”„ Delayed equipment shipments from the December quarter are anticipated to ship in the March 2027 quarter instead.

🀝 Lam Research is working with well-capitalized suppliers to speed up expansion and remains open to investing if needed.

πŸ“… The next quarterly report in January 2027 will reveal actual December sales versus the forecast for the March quarter.

πŸ’Ό Management expects total industry equipment spending in 2027 to exceed $200 billion, though unmet demand figures remain undisclosed.

Bullish Signals
  • Lam Research achieved a 54.4% year-over-year revenue increase in the September quarter, posting $8.22 billion in sales.
  • The company's suppliers are described as well-capitalized and capable of funding their own expansion to meet demand.
  • Management is actively working with suppliers to speed up capacity expansion and is open to investing if necessary.
Risk Factors
  • Supply chain constraints, including shortages in clean room space and components, are limiting the company's ability to ship all requested tools.
  • These supply bottlenecks are expected to persist into calendar year 2027, potentially capping revenue growth below potential.
  • Management has not yet quantified how much of current sales are being held back by these specific shortages.
Full Analysis
Lam Research (LRCX) currently trades at a forward multiple of 35.7 times trailing earnings, significantly higher than the S&P 500 average, reflecting investor expectations for sustained high growth. However, management acknowledges that supply chain constraints, including shortages in clean room space and specific components, are limiting the company's ability to ship all requested tools from chipmakers. These bottlenecks are expected to persist through calendar year 2027, creating a risk that current stock valuations may not fully account for the revenue held back by these operational limits. During the fiscal first-quarter 2027 earnings call on October 21, 2026, Lam Research provided guidance for the December quarter revenue of $8.6 billion plus or minus $400 million. This forecast follows a September quarter result of $8.22 billion, which represented a 54.4% year-over-year increase. Management noted that while sales are projected to rise, the growth rate is lower than potential due to supply constraints, and they expect China's share of revenue to decrease as domestic customers in that region reduce orders. Regarding the recovery of lost sales, Lam Research indicated that equipment delayed from the December quarter would likely ship in the subsequent March quarter instead. While many suppliers are well-capitalized to fund their own expansion, management stated it is working with them to speed up capacity and remains open to investing if necessary. The company has not provided a specific number for the total demand without these limits but expects total industry equipment spending in 2027 to exceed $200 billion. The next significant data point for Lam Research will be its January 2027 report, which is expected to reveal the actual December sales figures alongside the forecast for the March 2027 quarter. Investors will be closely watching whether the company can successfully recover the revenue shortfall caused by supply chain issues in the upcoming quarter. Management plans to provide more detailed information regarding the magnitude of unmet demand and recovery efforts at the next quarterly call.