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Will LRCX's China Revenue Drop Below 30% Hurt 2026 Growth Outlook?
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Key Takeaways
LRCX expects China's revenue share to drop below 30% in 2026 versus roughly 43% in Q1 fiscal 2026.
LRCX estimates shipment limits could cut China sales by $600M in 2026, affecting near-term systems revenues.
LRCX sees AI-driven foundry and memory spending in Taiwan, Korea and the U.S. boosting demand for its tools.
Lam Research Corporation (LRCX - Free Report) expects China’s share of its total revenues to fall below 30% in 2026 as new export restrictions limit shipments to certain domestic customers. In recent quarters, China has been a meaningful contributor to Lam’s growth, supported by strong spending from local chipmakers.
In the first quarter of fiscal 2026, revenues from China grew 46.5% year over year to $2.28 billion and accounted for approximately 43% of total revenues. In fiscal 2025, China contributed 37.4% to total sales. A reduction in this exposure raises concerns about whether overall revenue growth could slow in 2026.
The potential decline in China’s revenues is likely to create a near-term headwind, especially for systems sales. Domestic Chinese customers have been active buyers of equipment for mature and some advanced nodes, and tighter rules could delay or cancel orders. The company estimates that the current shipment restrictions to certain domestic Chinese customers could negatively impact sales in the region by $200 million in the second quarter and $600 million in 2026.
However, Lam Research is positioning itself to offset this impact through stronger demand from global customers outside China. Artificial intelligence (AI)-driven investments in foundry logic and high-bandwidth memory are increasing in regions such as Taiwan, Korea and the United States. These advanced manufacturing areas require more etch and deposition steps, supporting higher tool demand where LRCX has strong capabilities.
Analysts’ projections for fiscal 2026 and 2027 also suggest that revenues will grow despite sales headwinds in China. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates that revenues will increase 14.1% and 12.5%, respectively, year over year.
How Chinese Exposure Impacts LRCX’s Competitors
Applied Materials (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) face similar challenges as Lam Research amid tightened export restrictions on advanced semiconductor technologies and equipment to China by the U.S. government.
In fiscal 2025, Applied Materials generated 30% of its total revenues from semiconductor equipment sales in China. The ongoing export restrictions have been hurting its sales in the country. In fiscal 2025, China’s revenues plunged about 16% year over year to $8.53 billion. Applied Materials anticipates that these restrictions will continue hurting its sales in the country, with an estimated revenue loss of $600 million in fiscal 2026.
For KLA Corporation, China generated revenues of $1.27 billion in the first quarter of fiscal 2026, accounting for 39.5% of total sales. Current export restrictions have already impacted KLA Corporation's sales, with management quantifying the impact at approximately $300-$350 million over a five-quarter period.
LRCX’s Share Price Performance, Valuation and Estimates
Shares of Lam Research have surged 181.6% over the past year compared with the Zacks Electronics – Semiconductors industry’s gain of 43%.
LRCX One-Year Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 41.28, significantly lower than the industry’s average of 34.61.
LRCX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 15.9% and 15.2%, respectively. Estimates for fiscal 2026 have remained unchanged over the past 60 days, while they have been revised downward by 4 cents for fiscal 2027 over the past 30 days.
Image: Bigstock
Will LRCX's China Revenue Drop Below 30% Hurt 2026 Growth Outlook?
Key Takeaways
Lam Research Corporation (LRCX - Free Report) expects China’s share of its total revenues to fall below 30% in 2026 as new export restrictions limit shipments to certain domestic customers. In recent quarters, China has been a meaningful contributor to Lam’s growth, supported by strong spending from local chipmakers.
In the first quarter of fiscal 2026, revenues from China grew 46.5% year over year to $2.28 billion and accounted for approximately 43% of total revenues. In fiscal 2025, China contributed 37.4% to total sales. A reduction in this exposure raises concerns about whether overall revenue growth could slow in 2026.
The potential decline in China’s revenues is likely to create a near-term headwind, especially for systems sales. Domestic Chinese customers have been active buyers of equipment for mature and some advanced nodes, and tighter rules could delay or cancel orders. The company estimates that the current shipment restrictions to certain domestic Chinese customers could negatively impact sales in the region by $200 million in the second quarter and $600 million in 2026.
However, Lam Research is positioning itself to offset this impact through stronger demand from global customers outside China. Artificial intelligence (AI)-driven investments in foundry logic and high-bandwidth memory are increasing in regions such as Taiwan, Korea and the United States. These advanced manufacturing areas require more etch and deposition steps, supporting higher tool demand where LRCX has strong capabilities.
Analysts’ projections for fiscal 2026 and 2027 also suggest that revenues will grow despite sales headwinds in China. The Zacks Consensus Estimate for fiscal 2026 and 2027 indicates that revenues will increase 14.1% and 12.5%, respectively, year over year.
How Chinese Exposure Impacts LRCX’s Competitors
Applied Materials (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) face similar challenges as Lam Research amid tightened export restrictions on advanced semiconductor technologies and equipment to China by the U.S. government.
In fiscal 2025, Applied Materials generated 30% of its total revenues from semiconductor equipment sales in China. The ongoing export restrictions have been hurting its sales in the country. In fiscal 2025, China’s revenues plunged about 16% year over year to $8.53 billion. Applied Materials anticipates that these restrictions will continue hurting its sales in the country, with an estimated revenue loss of $600 million in fiscal 2026.
For KLA Corporation, China generated revenues of $1.27 billion in the first quarter of fiscal 2026, accounting for 39.5% of total sales. Current export restrictions have already impacted KLA Corporation's sales, with management quantifying the impact at approximately $300-$350 million over a five-quarter period.
LRCX’s Share Price Performance, Valuation and Estimates
Shares of Lam Research have surged 181.6% over the past year compared with the Zacks Electronics – Semiconductors industry’s gain of 43%.
LRCX One-Year Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 41.28, significantly lower than the industry’s average of 34.61.
LRCX Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 15.9% and 15.2%, respectively. Estimates for fiscal 2026 have remained unchanged over the past 60 days, while they have been revised downward by 4 cents for fiscal 2027 over the past 30 days.
Image Source: Zacks Investment Research
Lam Research currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.