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Lam Research

LRCX · Nasdaq

Operating costs grew a third as fast as sales

Revenue rose 54.4% but operating expenses only 18.6%, so operating income grew 79.5% and nearly 40 cents of each sales dollar became operating profit.

Q1 FY2027, the quarter to Sep 27, 2026 (Lam Research's fiscal 2027 ends in June 2027) · 10-Q filed Oct 22, 2026

Q1 FY2027 · revenue
$8.2B+54.4% on the year
Operating margin
40.0%
Net income
$2.8B
Free cash flow, quarter
$3.2B

Largest source of revenue: Systems revenue, 69.8% of the total.

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Where Lam Research's money goes

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Key insights · Q1 FY2027
  1. 01

    Operating costs grew a third as fast as sales

    Revenue rose 54.4% but operating expenses only 18.6%, so operating income grew 79.5% and nearly 40 cents of each sales dollar became operating profit.

    Why it matters

    Total operating expenses were $1.02B against $856M a year earlier, 12.35% of revenue against 16.1%. Research and development rose 15.6% to $666M and fell to 8.11% of revenue from 10.8%. The filing attributes the cost growth mainly to higher headcount, incentive pay tied to profitability, engineering supplies and depreciation.1

    Operating margin rose 5.6 points to 39.95%. Gross margin supplied 1.87 points of that, which the filing credits to favorable product mix and efficiencies from higher volumes. The other 3.72 points came from operating costs falling as a share of revenue, so about two thirds of the gain came from costs below gross margin growing slower than sales.1

    The quarter's operating income of $3.28B equals 40.0% of the $8.20B Lam earned in all of FY2026.1

    AnalysisAnalysis: the same structure works in reverse. Research is set by multi-year programs, and the filing says research and worldwide support must continue when revenue falls. In the last downturn, revenue fell to $14.91B in FY2024 from $17.43B in FY2023, while operating income fell to $4.26B from $5.17B, so profit fell further than sales in proportion.

  2. 02

    One quarter brought two thirds of last year's free cash

    Free cash flow of $3.24B is about two thirds of FY2026's $4.89B, as operating cash flow ran 1.27 times net income after trailing it last year.

    Why it matters

    Operating cash flow was $3.50B against net income of $2.75B, and capital spending was $257.7M, 3.1% of revenue. A year earlier, operating cash flow was $1.78B against net income of $1.57B. The filing attributes the increase to higher net income and to changes in operating assets and liabilities, chiefly higher accrued expenses and payables, partly offset by more receivables and inventory.1

    Across FY2026, operating cash flow was $5.86B against net income of $7.27B, or 80.6%, and free cash flow of $4.89B was below FY2025's $5.41B. In Q3 FY2026, operating cash flow was $1.14B against net income of $1.83B, or 62.5%.1

    AnalysisAnalysis: cash conversion in this business swings with working capital. Fast growth ties cash up in inventory and receivables, while accrued liabilities and customer payments can release it. One strong quarter after a weak year may reflect timing as much as a new level, and the quarters ahead show which it is.

  3. 03

    Memory makers now match foundries in equipment spending

    Memory customers took 46% of equipment and upgrade revenue, up from 34%, while foundries fell to 46% from 60%: memory budgets now set the pace.

    Why it matters

    The filing says both the foundry and memory segments grew in dollars over the year, with the increase in memory revenue exceeding that of foundry. It ties systems growth of 61.6% to higher semiconductor demand leading to more investment in both memory and non-memory segments, and names AI as the driver of higher industry spending across both.1

    The regional mix moved as well. China's share of revenue fell to 35% from 43% while total revenue rose 54.4%. Southeast Asia brought $531.7M and Europe $301.3M, 6.5% and 3.7% of revenue. Against the prior quarter, the filing attributes a rise in the foundry share to the timing of mature node investments in China.1

    AnalysisAnalysis: the shift spreads the business across more buyers than a year ago, but it ties more of each quarter to memory capacity decisions. Those follow memory prices and AI server demand, and memory spending has tended to be the most volatile part of chip capital budgets.

Sources

  1. 1.Lam Research 10-Q for the period to 2026-09-27 (the filing), Oct 22, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $1.1B in FY2009 to $23.2B in FY2026, the operating margin from -25.2% to 35.3%, over 17 years.

  • Revenue$23.2B
  • Operating income$8.2B
  • Operating margin35.3%
Period
Q1 FY2027
Revenue
$8.2B
Operating income
$3.3B
Operating margin
40.0%
Net income
$2.8B
Free cash flow
$3.2B
Business performance

Does the profit turn into cash?

Q1 FY2027: free cash flow of $3.2B against net income of $2.8B in the quarter.

  • Operating cash flow$5.9B
  • Capital expenditure$966.4M
  • Free cash flow$4.9B
  • Net income$7.3B

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

REVENUE - Schedule of Disaggregation of Revenue (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
52.3%
Source10-Q, Derived from Gross margin and Revenue in the 10-Q filed 2026-10-22
Operating margin
40.0%
Source10-Q, Derived from Operating income and Revenue in the 10-Q filed 2026-10-22
Net margin
33.5%
Source10-Q, Derived from Net income and Revenue in the 10-Q filed 2026-10-22
Free cash flow, quarter
$3.2B
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-22
Free cash flow margin, quarter
39.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-22
Cash conversion, quarter
1.27x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-22
Capital spending, quarter
3.1%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-22
Revenue growth
+54.4%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Revenue streams

Systems revenue$5.7B69.7%
Customer support-related revenue and other$2.5B30.3%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-22

Geographic markets

Southeast Asia$531.7M6.5%
Europe$301.3M3.7%

These items do not sum to total revenue; the filing states them beside it. Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-22

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ1 FY2027Of revenueSource
Cost of goods sold$3.9B47.7%Source10-Q, lrcx:CostOfGoodsAndServicesSoldExcludingRestructuringCharges, as reported in the 10-Q filed 2026-10-22
Operating income$3.3B40.0%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-22

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

China's share of sales by customer location
35.0%
As of Sep 27, 2026
View source
China 35 % 26 % 43 %
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 22, 2026
Employee headcount
24,300 employees
As of Sep 27, 2026
View source
Employee headcount as of September 27, 2026 was approximately 24,300.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 22, 2026
Foundry customers' share of equipment and upgrade sales
46.0%
As of Sep 27, 2026
View source
Foundry 46 % 44 % 60 %
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 22, 2026
Logic and integrated device makers' share of equipment and upgrade sales
8.0%
As of Sep 27, 2026
View source
Logic/integrated device manufacturing 8 % 10 % 6 %
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 22, 2026
Memory customers' share of equipment and upgrade sales
46.0%
As of Sep 27, 2026
View source
Memory 46 % 46 % 34 %
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, 10-Q filed Oct 22, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement15 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeOf revenueSource
Income Statement
Revenue$8.22B$5.32B+54%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-22
Cost of goods sold$3.92B$2.64B+49%47.7%Source10-Q, lrcx:CostOfGoodsAndServicesSoldExcludingRestructuringCharges, as reported in the 10-Q filed 2026-10-22
Gross margin$4.30B$2.68B+60%52.3%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-10-22
Research and development$666.4M$576.4M+16%8.1%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-10-22
Selling, general, and administrative$348.7M$279.3M+25%4.2%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-22
Total operating expenses$1.02B$855.8M+19%12.4%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-10-22
Operating income$3.28B$1.83B+80%40.0%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-22
Other income (expense), net$28.5M$30.1M-5.3%0.3%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-22
Income before income taxes$3.31B$1.86B+78%40.3%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-10-22
Income tax expense (shown as a deduction)($559.1M)$290.5M+92%6.8%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-22
Net income$2.75B$1.57B+76%33.5%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-22
Net income per share:
Basic (in dollars per share)$2$1+77%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-22
Diluted (in dollars per share)$2$1+77%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-22
Number of shares used in per share calculations:
Basic (in shares)1,250,883,0001,264,446,000-1.1%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-22
Diluted (in shares)1,255,768,0001,269,313,000-1.1%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-22
Cash flow statement27 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ1 FY2027A year earlierChangeSource
Cash flows from operating activities:
Net income$2.75B$1.57B+76%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-22
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization$122.1M$101.6M+20%Source10-Q, us-gaap:DepreciationAndAmortization, as reported in the 10-Q filed 2026-10-22
Deferred income taxes-$55.3M-$62.9M-12%Source10-Q, us-gaap:DeferredIncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-22
Equity-based compensation expense$114.7M$97.2M+18%Source10-Q, us-gaap:ShareBasedCompensation, as reported in the 10-Q filed 2026-10-22
Other, net (shown as a deduction)(-$27.6M)$1.9MSource10-Q, us-gaap:OtherNoncashIncomeExpense, as reported in the 10-Q filed 2026-10-22
Changes in operating assets and liabilities (shown as a deduction)(-$535.4M)-$76.2M+603%Source10-Q, us-gaap:IncreaseDecreaseInOperatingCapital, as reported in the 10-Q filed 2026-10-22
Cash flows from operating activities:
Net cash provided by operating activities$3.50B$1.78B+97%Source10-Q, us-gaap:NetCashProvidedByUsedInOperatingActivities, as reported in the 10-Q filed 2026-10-22
Cash flows from investing activities:
Capital expenditures and intangible assets (shown as a deduction)($257.7M)$185.1M+39%Source10-Q, us-gaap:PaymentsToAcquireProductiveAssets, as reported in the 10-Q filed 2026-10-22
Other, net (shown as a deduction)($9.3M)$927.0K+902%Source10-Q, us-gaap:PaymentsForProceedsFromOtherInvestingActivities, as reported in the 10-Q filed 2026-10-22
Net cash used for investing activities-$267.0M-$186.0M+44%Source10-Q, us-gaap:NetCashProvidedByUsedInInvestingActivities, as reported in the 10-Q filed 2026-10-22
Cash flows from financing activities:
Principal payments on debt, including finance lease obligations and payments for debt issuance costs (shown as a deduction)($34.5M)$1.4M+2,334%Source10-Q, us-gaap:RepaymentsOfDebtAndCapitalLeaseObligations, as reported in the 10-Q filed 2026-10-22
Treasury stock purchases, including excise tax payments (shown as a deduction)($1.02B)$975.8M+5.0%Source10-Q, us-gaap:PaymentsForRepurchaseOfCommonStock, as reported in the 10-Q filed 2026-10-22
Dividends paid (shown as a deduction)($325.4M)$292.0M+11%Source10-Q, us-gaap:PaymentsOfDividends, as reported in the 10-Q filed 2026-10-22
Proceeds from issuance of common stock, net of issuance costs$4.3M$0Source10-Q, us-gaap:ProceedsFromIssuanceOfCommonStock, as reported in the 10-Q filed 2026-10-22
Other, net-$1.8M-$12.4M-86%Source10-Q, us-gaap:ProceedsFromPaymentsForOtherFinancingActivities, as reported in the 10-Q filed 2026-10-22
Net cash used for financing activities-$1.38B-$1.28B+7.9%Source10-Q, us-gaap:NetCashProvidedByUsedInFinancingActivities, as reported in the 10-Q filed 2026-10-22
Statement of Cash Flows
Effect of exchange rate changes on cash, cash equivalents, and restricted cash$4.7M-$7.1MSource10-Q, us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-22
Net change in cash, cash equivalents, and restricted cash$1.85B$304.2M+509%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect, as reported in the 10-Q filed 2026-10-22
Cash, cash equivalents, and restricted cash at beginning of period$5.60BSource10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-22
Cash, cash equivalents, and restricted cash at end of period$7.45B$6.71B+11%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-22
Schedule of non-cash transactions:
Accrued payables for stock repurchases, including applicable excise tax$31.5M$58.8M-46%Source10-Q, us-gaap:LiabilitiesAssumed1, as reported in the 10-Q filed 2026-10-22
Accrued payables for capital expenditures$142.0M$95.7M+48%Source10-Q, us-gaap:CapitalExpendituresIncurredButNotYetPaid, as reported in the 10-Q filed 2026-10-22
Dividends payable$412.2M$327.5M+26%Source10-Q, us-gaap:DividendsPayableCurrentAndNoncurrent, as reported in the 10-Q filed 2026-10-22
Transfers of finished goods inventory to property and equipment$37.1M$22.9M+62%Source10-Q, lrcx:TransferOfInventoryToPropertyAndEquipment, as reported in the 10-Q filed 2026-10-22
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$7.44B$6.69B+11%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-22
Restricted cash and cash equivalents$13.5M$18.8M-28%Source10-Q, us-gaap:RestrictedCashAndCashEquivalents, as reported in the 10-Q filed 2026-10-22
Total cash, cash equivalents, and restricted cash$7.45B$6.71B+11%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-22
Balance sheet26 lines, as presented in the 10-Q
LineQ1 FY2027A year earlierChangeSource
Assets
Cash and cash equivalents$7.44B$6.69B+11%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-22
Accounts receivable, less allowance of $8,358 as of September 27, 2026, and $8,071 as of June 28, 2026$5.66BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-10-22
Inventories$4.55BSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-10-22
Prepaid expenses and other current assets$477.8MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-10-22
Total current assets$18.12BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-22
Property and equipment, net$3.13BSource10-Q, us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization, as reported in the 10-Q filed 2026-10-22
Goodwill and intangible assets, net$1.91BSource10-Q, us-gaap:IntangibleAssetsNetIncludingGoodwill, as reported in the 10-Q filed 2026-10-22
Other assets$3.19BSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-22
Total assets$26.35BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-22
Liabilities and stockholders’ equity
Trade accounts payable$1.59BSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-10-22
Accrued expenses and other current liabilities$3.29BSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-22
Deferred profit$2.43BSource10-Q, us-gaap:ContractWithCustomerLiabilityCurrent, as reported in the 10-Q filed 2026-10-22
Current portion of long-term debt and finance lease obligations$3.5MSource10-Q, us-gaap:LongTermDebtAndCapitalLeaseObligationsCurrent, as reported in the 10-Q filed 2026-10-22
Total current liabilities$7.31BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-22
Long-term debt and finance lease obligations$3.73BSource10-Q, us-gaap:LongTermDebtAndCapitalLeaseObligations, as reported in the 10-Q filed 2026-10-22
Income taxes payable$684.3MSource10-Q, us-gaap:AccruedIncomeTaxesNoncurrent, as reported in the 10-Q filed 2026-10-22
Other long-term liabilities$715.9MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-22
Total liabilities$12.44BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-22
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding$0Source10-Q, us-gaap:PreferredStockValue, as reported in the 10-Q filed 2026-10-22
Common stock, at par value of $0.001 per share; authorized, 4,000,000 shares as of September 27, 2026 and June 28, 2026; issued and outstanding, 1,249,145 shares as of September 27, 2026, and 1,251,278 shares as of June 28, 2026$1.2MSource10-Q, us-gaap:CommonStockValue, as reported in the 10-Q filed 2026-10-22
Additional paid-in capital$9.36BSource10-Q, us-gaap:AdditionalPaidInCapital, as reported in the 10-Q filed 2026-10-22
Treasury stock, at cost; 1,712,490 shares as of September 27, 2026, and 1,710,109 shares as of June 28, 2026 (shown as a deduction)($32.62B)Source10-Q, us-gaap:TreasuryStockCommonValue, as reported in the 10-Q filed 2026-10-22
Accumulated other comprehensive loss-$127.3MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-22
Retained earnings$37.29BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-22
Total stockholders’ equity$13.91B$10.19B+36%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-22
Liabilities and stockholders’ equity
Total liabilities and stockholders’ equity$26.35BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-22

About this data

Source
Lam Research 10-Q, accession 0000707549-26-000054, filed Oct 22, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Lam Research's model up, and what could bend it

Competitive edge

  • A qualified tool tends to stay on the line

    Chipmakers tend to keep a qualified tool for years, and gross margin rose from 45.1% of revenue in FY2019 to 52.3% this quarter.

    The detail

    The filing says chipmakers make a substantial investment to qualify and integrate a tool into a production line, and that once a supplier is selected the manufacturer generally relies on that equipment for that line application for an extended period of time.1

    Gross margin was 45.1% of revenue in FY2019 and 50.5% in FY2026, while revenue grew from $9.65B to $23.23B. This quarter it reached 52.3% against 50.4% a year earlier, which the filing credits to favorable product mix and efficiencies from higher volumes.1

    AnalysisAnalysis: the lock-in works both ways, since the filing notes that a line first qualified on a competitor's tool is harder to win. The advantage holds while Lam keeps winning the next generation of process steps, which is what its research spending of $666M this quarter pays for.

  • Service, spares and older tools brought $2.49B

    Customer support-related revenue and other grew 40.0% to $2.49B, 30.25% of revenue, led by older-generation tools and spares for the installed fleet.

    The detail

    The line covers customer services, spares, upgrades and non-leading-edge equipment from the Reliant product line. The filing attributes its growth to customer investment in non-leading-edge equipment and higher spares revenue, and names cycles of learning from the broad installed base as a source of differentiation.1

    Support revenue lags new-system sales. With systems revenue up 61.6%, support's share of revenue fell 3.12 points even as it grew in dollars.1

    AnalysisAnalysis: each tool shipped adds to a fleet that needs parts and service for many years, so this stream tends to be steadier than system sales. The filing does not report its margin separately, so its share of profit cannot be read from these figures.

  • Capital spending took 3.1% of revenue

    Capital spending was $257.7M, 3.1% of revenue, against 4.2% across FY2026, as Lam designs and integrates tools while relying on suppliers for many parts.

    The detail

    The filing says suppliers and outsource providers play a key role in manufacturing, field installation and customer support, and that many components and subassemblies come from them. It describes capital spending as manufacturing capacity and lab infrastructure.1

    Capital spending was $966.4M in FY2026 on revenue of $23.23B, and $759.2M in FY2025. Free cash flow was 39.4% of revenue this quarter.1

    AnalysisAnalysis: a light factory footprint leaves most operating cash free to return or retain, but it shifts risk onto suppliers. The same filing warns that some key parts have long lead times or come from a single supplier.

What to watch

  • Export rules shape how much China can buy

    China was 35% of revenue against 43% a year earlier, and U.S. export licenses and Chinese rare earth controls both bear on that business.

    The detail

    The filing says U.S. export license requirements restrict sales to certain Chinese entities, and that competitors not bound by those controls, including government-backed ones, can sell where Lam cannot. It adds that broad controls may lead customers with international operations to reconsider their reliance on Lam's products.1

    China is also a supply risk. The filing says it is the primary source of certain rare earth elements critical to some of Lam's products, and that its export controls on them, now suspended in part, have reduced availability and lengthened licensing timelines.1

    AnalysisAnalysis: China's share moves by several points from quarter to quarter with the timing of Chinese investment. This quarter, growth elsewhere more than made up for the lower share. A quarter in which it does not would show directly in total revenue.

  • Demand rests on AI budgets at a few chipmakers

    The filing names AI as a significant driver of equipment spending and warns that a few large customers, in a cyclical industry, can move results quickly.

    The detail

    The filing lists what could change AI-driven demand: slower adoption of AI, gains in compute efficiency, an oversupply of AI infrastructure, the cost of capital, the availability of government subsidies and regulation of AI. It says the industry has historically been characterized by rapid changes in demand.1

    Sales to a limited number of large customers make up a significant portion of revenue and profit. The filing says the actions of even one customer can create variability and that large customers can negotiate lower prices. Memory customers' share of equipment and upgrade revenue moved to 46% from 34% within a year.1

    AnalysisAnalysis: the cost structure that lifted operating income 79.5% this quarter would amplify a pullback in the same way, because research and support spending does not fall with orders.

  • Tariffs, scarce inputs and single suppliers press on costs

    Steel and aluminum tariffs raised manufacturing costs and hurt margins in FY2026, and some key parts have long lead times or a single supplier.

    The detail

    The filing says tariffs on steel and aluminum imports into the United States increased manufacturing costs in fiscal year 2026 and adversely affected margins. Restrictions on PFAS chemicals could remove parts and materials with no assured replacement at similar cost.1

    The Middle East conflict has disrupted the supply and prices of commodities, some important to chipmaking, including helium, aluminum, bromine and sulfur. The filing says this has adversely affected its business and results.1

    AnalysisAnalysis: gross margin still rose to 52.3% from 50.4% this quarter, so mix and volume outweighed these pressures. Input costs would show in gross margin before anywhere else.

Sources

  1. 1.Lam Research 10-Q for the period to 2026-09-27 (the filing), Oct 22, 2026, read Nov 2, 2026
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Lam Research, further in

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What could change the outlook

What Lam Research's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What has to hold for a 40% operating margin

    How much of this quarter's margin comes from mix, from volume and from slow-growing costs, and how each part behaves if memory or China spending turns.

  • Reading cash quality through a fast build-up

    Why cash ran behind profit across FY2026 and ahead of it this quarter, and which working-capital lines tell timing apart from a lasting change.

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  • How much of Lam Research's operating margin gain came from gross margin, and how much from operating costs growing slower than revenue?
  • Why did Lam Research's operating cash flow run ahead of net income this quarter after trailing it across FY2026?
  • What would a pullback in memory makers' equipment budgets mean for Lam Research's revenue and margins?

Business Lens describes Lam Research from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.