We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lam Research's Gross Margin Hits 52.4%: Can it Climb Further?
Read MoreHide Full Article
Key Takeaways
Lam Research's non-GAAP gross margin hit a record 52.4% in Q1'27, up 40 bps QoQ, as revenues grew 22%.
LRCX benefited from favorable customer and product mix, cost controls, and 40% growth in CSBG revenues.
LRCX expects a 52.5% gross margin in Q2, but customer-mix headwinds and supply constraints may limit gains.
Lam Research Corporation (LRCX - Free Report) posted a record gross margin in the first quarter of fiscal 2027, driven by stronger demand, a favorable business mix and improved operating performance. The company’s non-GAAP gross margin reached 52.4%, up from 52% in the previous quarter. Its GAAP gross margin also improved to 52.3% from 51.7%.
The improvement came alongside strong business growth. Revenues increased 22% sequentially to $8.22 billion, while the non-GAAP operating margin expanded to 40.2% from 38.4%. Management attributed the gross margin improvement partly to favorable customer and product mix, along with continued focus on costs and pricing.
Lam Research’s customer support business also provides a useful source of support. The Customer Support Business Group (“CSBG”) revenues reached $2.49 billion, rising about 40% year over year. Strong demand for services, spare parts and equipment upgrades can help support profitability as the installed equipment base expands.
The outlook remains encouraging, but further margin gains may be gradual. For the fiscal second quarter, Lam Research expects a non-GAAP gross margin of 52.5%, plus or minus 1 percentage point. Management also flagged customer-mix headwinds and near-term supply constraints. Higher investment in research and development, and manufacturing capacity could also limit margin expansion.
Overall, Lam Research has room to improve margins as AI-related chip demand and production complexity drive equipment spending. However, its guidance suggests only modest near-term progress.
Here’s How AMAT & KLAC Compare With LRCX on Margins
Applied Materials, Inc. (AMAT - Free Report) is a close competitor of Lam Research in wafer fabrication equipment, serving foundry, logic and memory chipmakers. In the third quarter of fiscal 2026, Applied Materials’ revenues increased 25% year over year to $9.12 billion, while the non-GAAP gross margin improved to 50.4% from 48.9% a year earlier.
Applied Materials achieved its 13th consecutive quarter of year-over-year gross margin expansion, reflecting the increasing value of its materials engineering solutions and continued operating leverage. Its Semiconductor Systems’ non-GAAP gross margin improved 190 basis points to 55.4%, showing the profitability of its core equipment operations.
KLA Corporation (KLAC - Free Report) competes with Lam Research in process-control and inspection equipment, which helps chipmakers identify defects and improve production yields. In the first quarter of fiscal 2027, KLA’s revenues surged 28.8% year over year to $4.14 billion, while the non-GAAP gross margin expanded 20 basis points to 62.7%.
For the second quarter, KLA projects a non-GAAP gross margin of 62.5%, plus or minus 1 percentage point. In the last reported quarter, management cited elevated memory component costs as a continuing margin headwind. Product cost reductions, improved memory efficiency and pricing initiatives are expected to help offset these pressures over time.
Lam Research shares have rallied 30.3% year to date against the Zacks Electronics – Semiconductors industry’s decline of 2.9%.
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 21.25, significantly higher than the industry’s average of 8.75.
Lam Research Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lam Research’s fiscal 2027 and 2028 earnings implies year-over-year increases of 65.1% and 23.9%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 30 days.
View the Zacks #1 Rank List
Image: Shutterstock
Lam Research's Gross Margin Hits 52.4%: Can it Climb Further?
Key Takeaways
Lam Research Corporation (LRCX - Free Report) posted a record gross margin in the first quarter of fiscal 2027, driven by stronger demand, a favorable business mix and improved operating performance. The company’s non-GAAP gross margin reached 52.4%, up from 52% in the previous quarter. Its GAAP gross margin also improved to 52.3% from 51.7%.
The improvement came alongside strong business growth. Revenues increased 22% sequentially to $8.22 billion, while the non-GAAP operating margin expanded to 40.2% from 38.4%. Management attributed the gross margin improvement partly to favorable customer and product mix, along with continued focus on costs and pricing.
Lam Research’s customer support business also provides a useful source of support. The Customer Support Business Group (“CSBG”) revenues reached $2.49 billion, rising about 40% year over year. Strong demand for services, spare parts and equipment upgrades can help support profitability as the installed equipment base expands.
The outlook remains encouraging, but further margin gains may be gradual. For the fiscal second quarter, Lam Research expects a non-GAAP gross margin of 52.5%, plus or minus 1 percentage point. Management also flagged customer-mix headwinds and near-term supply constraints. Higher investment in research and development, and manufacturing capacity could also limit margin expansion.
Overall, Lam Research has room to improve margins as AI-related chip demand and production complexity drive equipment spending. However, its guidance suggests only modest near-term progress.
Here’s How AMAT & KLAC Compare With LRCX on Margins
Applied Materials, Inc. (AMAT - Free Report) is a close competitor of Lam Research in wafer fabrication equipment, serving foundry, logic and memory chipmakers. In the third quarter of fiscal 2026, Applied Materials’ revenues increased 25% year over year to $9.12 billion, while the non-GAAP gross margin improved to 50.4% from 48.9% a year earlier.
Applied Materials achieved its 13th consecutive quarter of year-over-year gross margin expansion, reflecting the increasing value of its materials engineering solutions and continued operating leverage. Its Semiconductor Systems’ non-GAAP gross margin improved 190 basis points to 55.4%, showing the profitability of its core equipment operations.
KLA Corporation (KLAC - Free Report) competes with Lam Research in process-control and inspection equipment, which helps chipmakers identify defects and improve production yields. In the first quarter of fiscal 2027, KLA’s revenues surged 28.8% year over year to $4.14 billion, while the non-GAAP gross margin expanded 20 basis points to 62.7%.
For the second quarter, KLA projects a non-GAAP gross margin of 62.5%, plus or minus 1 percentage point. In the last reported quarter, management cited elevated memory component costs as a continuing margin headwind. Product cost reductions, improved memory efficiency and pricing initiatives are expected to help offset these pressures over time.
LRCX’s Share Price Performance, Valuation & Estimates
Lam Research shares have rallied 30.3% year to date against the Zacks Electronics – Semiconductors industry’s decline of 2.9%.
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 21.25, significantly higher than the industry’s average of 8.75.
Lam Research Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lam Research’s fiscal 2027 and 2028 earnings implies year-over-year increases of 65.1% and 23.9%, respectively. Estimates for fiscal 2027 and 2028 have been revised upward over the past 30 days.
Image Source: Zacks Investment Research
Lam Research currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.