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Should You Invest in Lam Research Stock Despite Its Premium Valuation?
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Key Takeaways
Lam Research trades at 33.83 times forward earnings, but strong growth and margins support the premium.
LRCX's Q4'26 revenues rose 30% to $6.72B, while non-GAAP EPS increased 37% to $1.82.
Lam Research expects advanced-packaging revenues to grow more than 70% in 2026 amid rising AI chip demand.
Lam Research Corporation (LRCX - Free Report) has delivered a remarkable run, but that performance has also made the stock more expensive. LRCX currently trades at a forward 12-month price-to-earnings (P/E) ratio of 33.83, well above the Zacks Electronics – Semiconductors industry average of 14.24.
Lam Research Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The stock also commands a premium over several major semiconductor equipment peers, including ASML Holding (ASML - Free Report) , Applied Materials, Inc. (AMAT - Free Report) and Onto Innovation Inc. (ONTO - Free Report) . At present, ASML Holding, Applied Materials and Onto Innovation trade at forward P/E multiples of 33.28, 29.57 and 28.88, respectively.
The premium is primarily driven by Lam Research's strong stock performance. Over the past year, shares have jumped 133.9% compared with a 39.3% gain for the industry. It has also outpaced the returns of Onto Innovation and ASML Holding. However, the stock has underperformed Applied Materials. Shares of Applied Materials, Onto Innovation and ASML Holding have surged 143.9%, 127.8% and 85.6%, respectively.
LRCX One-Year Price Return Performance
Image Source: Zacks Investment Research
The bigger question is whether Lam Research has enough growth ahead to justify its rich valuation.
LRCX’s Strong Earnings Growth Supports the Premium
Lam Research's latest results give a good reason to remain optimistic. Fourth-quarter fiscal 2026 revenues rose 30% year over year to $6.72 billion, beating the Zacks Consensus Estimate by 0.7%. Non-GAAP earnings increased 37% to $1.82 per share, surpassing the consensus mark by 7.7%.
Lam Research Corporation Price, Consensus and EPS Surprise
Profitability also improved significantly. Non-GAAP gross margin expanded 170 basis points to 35%, while non-GAAP operating margin climbed 400 basis points to 38.4%. Better pricing, operating efficiencies, scale benefits, favorable product mix and disciplined cost management helped drive the improvement.
Analysts expect this growth to continue. The Zacks Consensus Estimate calls for fiscal 2027 and 2028 revenues to increase 47.2% and 17%, respectively. Earnings per share are expected to rise 60.4% in fiscal 2027 and another 21.5% in fiscal 2028.
These estimates suggest that the current valuation is not based solely on optimism. Strong earnings growth could provide the support needed for the premium multiple.
AI Demand Strengthens Lam Research's Growth Story
Lam Research is well positioned to benefit from the rapid expansion of AI infrastructure. The company provides advanced etch and deposition equipment used by leading chipmakers, including Taiwan Semiconductor Manufacturing and Samsung.
As AI processors become more powerful, semiconductor manufacturers need more advanced processes, complex chip designs, advanced packaging and high-bandwidth memory (HBM). These trends increase the need for the type of equipment Lam Research provides.
The company's technology investments add to the growth opportunity. Its ALTUS ALD platform is aimed at improving manufacturing efficiency through molybdenum-based deposition, while the Aether platform supports the production of smaller and denser semiconductor structures.
Advanced packaging is another promising area. Lam Research expects revenues from this market to grow more than 70% in 2026 following strong growth in 2025. Emerging technologies such as backside power distribution and dry-resist processing could provide additional opportunities as semiconductor designs become increasingly complex.
The consistency of Lam Research's revenue growth is also encouraging. The company has generated more than $5 billion in quarterly revenues for five consecutive quarters, culminating in a record $6.72 billion in the latest quarter. This consistency suggests the growth story is being supported by real semiconductor spending rather than just AI-related enthusiasm.
Conclusion: LRCX Stock Is Still Worth Buying
Lam Research is undeniably expensive, but its valuation premium appears increasingly justified by its earnings growth, improving margins and strong exposure to AI-related semiconductor investment.
LRCX is benefiting from several growth drivers at the same time, including AI chips, advanced packaging, HBM and increasingly complex semiconductor manufacturing. The company’s expanding market share in AI and data center fabrication, coupled with innovative product launches, strengthens its competitive positioning.
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Should You Invest in Lam Research Stock Despite Its Premium Valuation?
Key Takeaways
Lam Research Corporation (LRCX - Free Report) has delivered a remarkable run, but that performance has also made the stock more expensive. LRCX currently trades at a forward 12-month price-to-earnings (P/E) ratio of 33.83, well above the Zacks Electronics – Semiconductors industry average of 14.24.
Lam Research Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The stock also commands a premium over several major semiconductor equipment peers, including ASML Holding (ASML - Free Report) , Applied Materials, Inc. (AMAT - Free Report) and Onto Innovation Inc. (ONTO - Free Report) . At present, ASML Holding, Applied Materials and Onto Innovation trade at forward P/E multiples of 33.28, 29.57 and 28.88, respectively.
The premium is primarily driven by Lam Research's strong stock performance. Over the past year, shares have jumped 133.9% compared with a 39.3% gain for the industry. It has also outpaced the returns of Onto Innovation and ASML Holding. However, the stock has underperformed Applied Materials. Shares of Applied Materials, Onto Innovation and ASML Holding have surged 143.9%, 127.8% and 85.6%, respectively.
LRCX One-Year Price Return Performance
Image Source: Zacks Investment Research
The bigger question is whether Lam Research has enough growth ahead to justify its rich valuation.
LRCX’s Strong Earnings Growth Supports the Premium
Lam Research's latest results give a good reason to remain optimistic. Fourth-quarter fiscal 2026 revenues rose 30% year over year to $6.72 billion, beating the Zacks Consensus Estimate by 0.7%. Non-GAAP earnings increased 37% to $1.82 per share, surpassing the consensus mark by 7.7%.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
Profitability also improved significantly. Non-GAAP gross margin expanded 170 basis points to 35%, while non-GAAP operating margin climbed 400 basis points to 38.4%. Better pricing, operating efficiencies, scale benefits, favorable product mix and disciplined cost management helped drive the improvement.
Analysts expect this growth to continue. The Zacks Consensus Estimate calls for fiscal 2027 and 2028 revenues to increase 47.2% and 17%, respectively. Earnings per share are expected to rise 60.4% in fiscal 2027 and another 21.5% in fiscal 2028.
These estimates suggest that the current valuation is not based solely on optimism. Strong earnings growth could provide the support needed for the premium multiple.
AI Demand Strengthens Lam Research's Growth Story
Lam Research is well positioned to benefit from the rapid expansion of AI infrastructure. The company provides advanced etch and deposition equipment used by leading chipmakers, including Taiwan Semiconductor Manufacturing and Samsung.
As AI processors become more powerful, semiconductor manufacturers need more advanced processes, complex chip designs, advanced packaging and high-bandwidth memory (HBM). These trends increase the need for the type of equipment Lam Research provides.
The company's technology investments add to the growth opportunity. Its ALTUS ALD platform is aimed at improving manufacturing efficiency through molybdenum-based deposition, while the Aether platform supports the production of smaller and denser semiconductor structures.
Advanced packaging is another promising area. Lam Research expects revenues from this market to grow more than 70% in 2026 following strong growth in 2025. Emerging technologies such as backside power distribution and dry-resist processing could provide additional opportunities as semiconductor designs become increasingly complex.
The consistency of Lam Research's revenue growth is also encouraging. The company has generated more than $5 billion in quarterly revenues for five consecutive quarters, culminating in a record $6.72 billion in the latest quarter. This consistency suggests the growth story is being supported by real semiconductor spending rather than just AI-related enthusiasm.
Conclusion: LRCX Stock Is Still Worth Buying
Lam Research is undeniably expensive, but its valuation premium appears increasingly justified by its earnings growth, improving margins and strong exposure to AI-related semiconductor investment.
LRCX is benefiting from several growth drivers at the same time, including AI chips, advanced packaging, HBM and increasingly complex semiconductor manufacturing. The company’s expanding market share in AI and data center fabrication, coupled with innovative product launches, strengthens its competitive positioning.
Currently, Lam Research carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.