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AMAT vs. LRCX: Which Stock Has an Edge in the WFE Space?
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Key Takeaways
Applied Materials' Semiconductor Systems revenues rose 27% to $7.04 billion in Q3 fiscal 2026.
LRCX's systems revenues surged 61.6% to $5.73B, driven by NAND, DRAM and foundry demand.
LRCX offers stronger growth prospects, while AMAT trades at a lower price-to-sales multiple.
Applied Materials (AMAT - Free Report) and Lam Research (LRCX - Free Report) stand out as key suppliers of wafer fabrication equipment (WFE) like Chemical Vapor Deposition, Atomic Layer Deposition (ALD), Physical Vapor Deposition, Chemical Mechanical Planarization Epitaxy and etching tools to serve various stages of chip manufacturing.
With the AI boom continuing to drive growth for the semiconductor industry, the question remains: Which WFE stock is a better investment pick today? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for AMAT Stock
Applied Materials is gaining from rising demand for advanced chips used in artificial intelligence (AI) infrastructure, especially in its Semiconductor Systems business. In the third quarter of fiscal 2026, Semiconductor Systems generated revenues of $7.04 billion, up approximately 27% year over year.
Growing investment in leading-edge foundry-logic, dynamic random-access memory (DRAM) and advanced packaging is creating opportunities for the company’s wafer fabrication equipment, while rising manufacturing complexity supports demand for differentiated process technologies.
Applied Materials is expanding its technology portfolio to capitalize on these opportunities. Its Centris Spectral SiN ALD system supports advanced logic manufacturing, while enhanced Centura Prime epitaxy and Producer Avila 2 PECVD systems target DRAM performance and higher-layer-count high-bandwidth memory.
Beyond revenue growth, Semiconductor Systems is strengthening Applied Materials’ profitability. Its non-GAAP gross margin increased to 55.4% in the third quarter from 53.5% a year earlier. The operating margin expanded to 38% from 33.2%, reflecting the value of its technology portfolio and operating leverage.
AMAT’s fourth-quarter fiscal 2026 guidance anticipates Semiconductor Systems revenues of approximately $7.9 billion, representing 62% year-over-year growth. The outlook indicates that demand across leading-edge logic, DRAM and advanced packaging could sustain strong near-term momentum.
Applied Materials expects non-GAAP earnings of $4.02 per share (+/- 20 cents), indicating 85% year-over-year growth at the midpoint. The Zacks Consensus Estimate suggests year-over-year growth of 86.6%. The estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
The Case for LRCX Stock
Lam Research is benefiting from rising demand for semiconductor manufacturing equipment as artificial intelligence (AI) infrastructure drives investment in memory, leading-edge foundry and advanced packaging. In the first quarter of fiscal 2027, systems revenues increased 61.6% year over year to $5.73 billion, reflecting stronger spending across NAND, DRAM and foundry markets.
Growing investments in higher-layer-count NAND, high-bandwidth memory (HBM) and advanced chip manufacturing are creating opportunities for Lam Research’s etch, deposition and other process technologies. NAND sales increased approximately 40% sequentially, supported by conversions to 256-layer-and-above devices and initial investments in 384-layer technology. Meanwhile, demand for DDR5 and HBM supported DRAM spending, while leading-edge chipmaking and advanced packaging helped drive record foundry revenues.
Lam Research is expanding its technology portfolio to capitalize on these opportunities. Its Akara etch and Aether dry resist products are gaining traction in foundry and DRAM manufacturing. The company has also raised its cumulative Aether revenue outlook to approximately $2.5 billion by the end of the decade, up roughly $1 billion from its previous estimate. Additionally, its panel plating systems have reached more than 20 customers, highlighting opportunities in advanced packaging.
Beyond systems growth, Lam Research’s Customer Support Business Group (CSBG) is strengthening its recurring revenue base. Customer support-related revenues and other increased 40% year over year to $2.49 billion, marking a fourth consecutive quarterly record. High equipment utilization, NAND upgrades and demand for spare parts and services supported performance. The company expects CSBG revenue growth of more than 30% in 2026 and over 15% in 2027.
Lam Research’s profitability is also improving. Non-GAAP gross margin reached a record 52.4%, up from 50.6% a year earlier, while non-GAAP operating margin expanded to 40.2% from 35%. A favorable customer and product mix contributed to the improvement, although higher operating expenses and increased investment in product development remain important considerations.
For the second quarter of fiscal 2027, LRCX forecasts a non-GAAP gross margin of 52.5%, plus or minus one percentage point, and an operating margin of 40.5% (+/- 1%). The Zacks Consensus Estimate for LRCX’s fiscal second-quarter earnings is pegged at $2.26, suggesting year-over-year growth of 78%. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of AMAT and LRCX
Year to date, shares of Applied Materials and Lam Research have gained 46.1% and 33.4%, respectively.
YTD Performance Chart
Image Source: Zacks Investment Research
From the valuation perspective, AMAT is trading at a discount. AMAT is trading at a price-to-sales (P/S) multiple of 6.57X, below LRCX’s P/S multiple of 7.92X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: LRCX vs. AMAT
Lam Research appears better positioned for growth-oriented investors, driven by rising demand for advanced memory manufacturing, AI infrastructure and innovative process technologies. Its strong customer support business and expanding technology portfolio offer attractive long-term opportunities, although its premium valuation makes Applied Materials a compelling alternative for value-conscious investors. LRCX and AMAT carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
AMAT vs. LRCX: Which Stock Has an Edge in the WFE Space?
Key Takeaways
Applied Materials (AMAT - Free Report) and Lam Research (LRCX - Free Report) stand out as key suppliers of wafer fabrication equipment (WFE) like Chemical Vapor Deposition, Atomic Layer Deposition (ALD), Physical Vapor Deposition, Chemical Mechanical Planarization Epitaxy and etching tools to serve various stages of chip manufacturing.
With the AI boom continuing to drive growth for the semiconductor industry, the question remains: Which WFE stock is a better investment pick today? Let’s break down their fundamentals, growth prospects, market challenges and valuation to determine which offers a more compelling investment case.
The Case for AMAT Stock
Applied Materials is gaining from rising demand for advanced chips used in artificial intelligence (AI) infrastructure, especially in its Semiconductor Systems business. In the third quarter of fiscal 2026, Semiconductor Systems generated revenues of $7.04 billion, up approximately 27% year over year.
Growing investment in leading-edge foundry-logic, dynamic random-access memory (DRAM) and advanced packaging is creating opportunities for the company’s wafer fabrication equipment, while rising manufacturing complexity supports demand for differentiated process technologies.
Applied Materials is expanding its technology portfolio to capitalize on these opportunities. Its Centris Spectral SiN ALD system supports advanced logic manufacturing, while enhanced Centura Prime epitaxy and Producer Avila 2 PECVD systems target DRAM performance and higher-layer-count high-bandwidth memory.
Beyond revenue growth, Semiconductor Systems is strengthening Applied Materials’ profitability. Its non-GAAP gross margin increased to 55.4% in the third quarter from 53.5% a year earlier. The operating margin expanded to 38% from 33.2%, reflecting the value of its technology portfolio and operating leverage.
AMAT’s fourth-quarter fiscal 2026 guidance anticipates Semiconductor Systems revenues of approximately $7.9 billion, representing 62% year-over-year growth. The outlook indicates that demand across leading-edge logic, DRAM and advanced packaging could sustain strong near-term momentum.
Applied Materials expects non-GAAP earnings of $4.02 per share (+/- 20 cents), indicating 85% year-over-year growth at the midpoint. The Zacks Consensus Estimate suggests year-over-year growth of 86.6%. The estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
The Case for LRCX Stock
Lam Research is benefiting from rising demand for semiconductor manufacturing equipment as artificial intelligence (AI) infrastructure drives investment in memory, leading-edge foundry and advanced packaging. In the first quarter of fiscal 2027, systems revenues increased 61.6% year over year to $5.73 billion, reflecting stronger spending across NAND, DRAM and foundry markets.
Growing investments in higher-layer-count NAND, high-bandwidth memory (HBM) and advanced chip manufacturing are creating opportunities for Lam Research’s etch, deposition and other process technologies. NAND sales increased approximately 40% sequentially, supported by conversions to 256-layer-and-above devices and initial investments in 384-layer technology. Meanwhile, demand for DDR5 and HBM supported DRAM spending, while leading-edge chipmaking and advanced packaging helped drive record foundry revenues.
Lam Research is expanding its technology portfolio to capitalize on these opportunities. Its Akara etch and Aether dry resist products are gaining traction in foundry and DRAM manufacturing. The company has also raised its cumulative Aether revenue outlook to approximately $2.5 billion by the end of the decade, up roughly $1 billion from its previous estimate. Additionally, its panel plating systems have reached more than 20 customers, highlighting opportunities in advanced packaging.
Beyond systems growth, Lam Research’s Customer Support Business Group (CSBG) is strengthening its recurring revenue base. Customer support-related revenues and other increased 40% year over year to $2.49 billion, marking a fourth consecutive quarterly record. High equipment utilization, NAND upgrades and demand for spare parts and services supported performance. The company expects CSBG revenue growth of more than 30% in 2026 and over 15% in 2027.
Lam Research’s profitability is also improving. Non-GAAP gross margin reached a record 52.4%, up from 50.6% a year earlier, while non-GAAP operating margin expanded to 40.2% from 35%. A favorable customer and product mix contributed to the improvement, although higher operating expenses and increased investment in product development remain important considerations.
For the second quarter of fiscal 2027, LRCX forecasts a non-GAAP gross margin of 52.5%, plus or minus one percentage point, and an operating margin of 40.5% (+/- 1%). The Zacks Consensus Estimate for LRCX’s fiscal second-quarter earnings is pegged at $2.26, suggesting year-over-year growth of 78%. Estimates have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Stock Price Performance and Valuation of AMAT and LRCX
Year to date, shares of Applied Materials and Lam Research have gained 46.1% and 33.4%, respectively.
YTD Performance Chart
Image Source: Zacks Investment Research
From the valuation perspective, AMAT is trading at a discount. AMAT is trading at a price-to-sales (P/S) multiple of 6.57X, below LRCX’s P/S multiple of 7.92X.
Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Conclusion: LRCX vs. AMAT
Lam Research appears better positioned for growth-oriented investors, driven by rising demand for advanced memory manufacturing, AI infrastructure and innovative process technologies. Its strong customer support business and expanding technology portfolio offer attractive long-term opportunities, although its premium valuation makes Applied Materials a compelling alternative for value-conscious investors. LRCX and AMAT carry a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.