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Lam Research Expects Packaging Growth of 50%: Is It a Hidden Catalyst?
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Key Takeaways
Lam Research expects advanced packaging revenues to grow more than 50% in 2026.
AI chips need advanced packaging to boost performance, bandwidth and power efficiency.
Lam Research's Q3'26 revenues rose 24% year over year to a record $5.84 billion.
Lam Research Corporation’s (LRCX - Free Report) advanced packaging business is emerging as an important growth driver. With artificial intelligence (AI) driving major changes in chip design, this business could become a meaningful catalyst for future growth.
Unlike traditional semiconductor manufacturing, AI chips require advanced packaging techniques to connect multiple processors and memory components in a compact structure. This improves performance, bandwidth and power efficiency. As a result, chipmakers are increasing investments in packaging technologies, creating additional demand for Lam Research’s etch and deposition equipment.
The company expects advanced packaging revenues to grow more than 50% in 2026, far outpacing many other semiconductor equipment categories. Lam Research is benefiting from rising adoption of high-bandwidth memory (HBM), AI accelerators and chiplet-based architectures, all of which depend heavily on advanced packaging processes.
The company’s overall business remains strong. In the fiscal third quarter of 2026, revenues increased 24% year over year to a record $5.84 billion, while non-GAAP gross margin expanded 90 basis points to 49.9%. Systems revenues climbed 24% to $3.73 billion, reflecting healthy demand across memory and foundry customers. Customer Support Business Group revenues also rose 25% to a record $2.11 billion, providing recurring revenue support.
The long-term opportunity for advanced packaging may be even larger. As AI models become more powerful, semiconductor companies are expected to rely increasingly on advanced packaging to overcome the limits of traditional chip scaling. This shift could expand Lam Research’s served market beyond conventional wafer processing. If the company executes well in this market, packaging could evolve from a niche business into a meaningful contributor to future revenue and earnings growth.
LRCX’s Rivals Are Also Targeting Packaging Growth
Two major Lam Research competitors, Applied Materials, Inc. (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) , are also benefiting from the advanced packaging boom. Both companies are expanding their presence in technologies that support AI chips, high-bandwidth memory and chiplet-based architectures.
Applied Materials is perhaps the closest competitor to Lam Research in advanced packaging. The company has highlighted advanced packaging as a multibillion-dollar opportunity and continues to develop materials engineering solutions for 2.5D and 3D chip integration. In the last reported results for the second quarter of fiscal 2026, Applied Materials’ revenues increased 11% to $7.91 billion, with its Semiconductor Systems segment remaining the primary growth engine. Rising investments in AI accelerators and HBM are expected to drive further demand for its packaging-related tools.
KLA participates in the market through process control, inspection and metrology solutions. As advanced packages become more complex, chipmakers require additional inspection steps to improve yields and reduce defects. KLA’s second-quarter fiscal 2026 revenues increased 11.5% year over year to $3.42 billion. The company continues to benefit from growing demand for advanced packaging process control technologies. KLAC expects its semiconductor process control advanced packaging portfolio revenues to grow from about $635 million in 2025 to about $1 billion in 2026.
For Lam Research, the opportunity is significant, but competition is intense. Continued innovation in etch and deposition technologies will be critical if the company wants to capture a larger share of the rapidly expanding advanced packaging market.
LRCX’s Share Price Performance, Valuation and Estimates
Shares of Lam Research have surged 127.2% year to date compared with the Zacks Electronics – Semiconductors industry’s rise of 52.5%.
Lam Research YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 50.78, significantly higher than the industry’s average of 35.02.
Lam Research 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 37.7% and 35.8%, respectively. Estimates for fiscal 2026 have been revised upward over the past seven days, while estimates for fiscal 2027 have been raised northward over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Lam Research Expects Packaging Growth of 50%: Is It a Hidden Catalyst?
Key Takeaways
Lam Research Corporation’s (LRCX - Free Report) advanced packaging business is emerging as an important growth driver. With artificial intelligence (AI) driving major changes in chip design, this business could become a meaningful catalyst for future growth.
Unlike traditional semiconductor manufacturing, AI chips require advanced packaging techniques to connect multiple processors and memory components in a compact structure. This improves performance, bandwidth and power efficiency. As a result, chipmakers are increasing investments in packaging technologies, creating additional demand for Lam Research’s etch and deposition equipment.
The company expects advanced packaging revenues to grow more than 50% in 2026, far outpacing many other semiconductor equipment categories. Lam Research is benefiting from rising adoption of high-bandwidth memory (HBM), AI accelerators and chiplet-based architectures, all of which depend heavily on advanced packaging processes.
The company’s overall business remains strong. In the fiscal third quarter of 2026, revenues increased 24% year over year to a record $5.84 billion, while non-GAAP gross margin expanded 90 basis points to 49.9%. Systems revenues climbed 24% to $3.73 billion, reflecting healthy demand across memory and foundry customers. Customer Support Business Group revenues also rose 25% to a record $2.11 billion, providing recurring revenue support.
The long-term opportunity for advanced packaging may be even larger. As AI models become more powerful, semiconductor companies are expected to rely increasingly on advanced packaging to overcome the limits of traditional chip scaling. This shift could expand Lam Research’s served market beyond conventional wafer processing. If the company executes well in this market, packaging could evolve from a niche business into a meaningful contributor to future revenue and earnings growth.
LRCX’s Rivals Are Also Targeting Packaging Growth
Two major Lam Research competitors, Applied Materials, Inc. (AMAT - Free Report) and KLA Corporation (KLAC - Free Report) , are also benefiting from the advanced packaging boom. Both companies are expanding their presence in technologies that support AI chips, high-bandwidth memory and chiplet-based architectures.
Applied Materials is perhaps the closest competitor to Lam Research in advanced packaging. The company has highlighted advanced packaging as a multibillion-dollar opportunity and continues to develop materials engineering solutions for 2.5D and 3D chip integration. In the last reported results for the second quarter of fiscal 2026, Applied Materials’ revenues increased 11% to $7.91 billion, with its Semiconductor Systems segment remaining the primary growth engine. Rising investments in AI accelerators and HBM are expected to drive further demand for its packaging-related tools.
KLA participates in the market through process control, inspection and metrology solutions. As advanced packages become more complex, chipmakers require additional inspection steps to improve yields and reduce defects. KLA’s second-quarter fiscal 2026 revenues increased 11.5% year over year to $3.42 billion. The company continues to benefit from growing demand for advanced packaging process control technologies. KLAC expects its semiconductor process control advanced packaging portfolio revenues to grow from about $635 million in 2025 to about $1 billion in 2026.
For Lam Research, the opportunity is significant, but competition is intense. Continued innovation in etch and deposition technologies will be critical if the company wants to capture a larger share of the rapidly expanding advanced packaging market.
LRCX’s Share Price Performance, Valuation and Estimates
Shares of Lam Research have surged 127.2% year to date compared with the Zacks Electronics – Semiconductors industry’s rise of 52.5%.
Lam Research YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 50.78, significantly higher than the industry’s average of 35.02.
Lam Research 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 37.7% and 35.8%, respectively. Estimates for fiscal 2026 have been revised upward over the past seven days, while estimates for fiscal 2027 have been raised northward 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.