Lam Research earnings: September 2026 quarter

The quarter in brief

Lam Research makes the machines that chipmakers use to build chips. In the three months to September 2026 it had its biggest quarter yet. Sales were $8.22 billion, up 22% from the June quarter and about 54% from a year earlier.¹

Almost all of that rise came from selling new machines. Sales of new equipment rose about 35% from the June quarter and about 62% from a year earlier, and made up roughly 70% of the total.¹ The company credits demand for chips driven by artificial intelligence, and chips that are more complex to make. It also says its own spending on new technology and factory capacity is paying off.¹

Profit grew faster than sales. Operating profit, the profit from running the business before interest and tax, was $3.28 billion, about 80% more than a year earlier.¹ Net income, the profit after everything, was $2.75 billion, about 75% above a year ago.¹ The company expects a little more in the December quarter.

The figures, as the company printed them

Against what analysts expected

Earnings per share, which is net income divided by the number of shares, came to $2.19 under US accounting rules.¹ On the company's adjusted measure, which leaves out certain items, it was $2.20.¹ Analysts had expected $2.17 on average.² Both of the company's figures sit slightly above that, so the quarter came in a little ahead of what analysts expected. The gap was a couple of cents, not a wide margin.

What the company expects

For the quarter ending 27 December 2026, Lam expects sales of $8.60 billion, give or take $400 million.¹ It expects earnings per share of $2.33, give or take $0.15.¹ Both are above what it has just reported, $8.22 billion and $2.19, so it expects the record level to hold and rise a little.¹

It expects its gross margin to be 52.5%, give or take 1 percentage point, against 52.3% in the September quarter.¹ Gross margin is what is left of each dollar of sales after the direct cost of making what was sold. It also expects about 40.5% of sales to be left as operating profit, give or take 1 percentage point, against 40.0% this quarter.¹ Put together, it expects slightly more sales and slightly more of each dollar kept after costs.

Lam says its two ways of counting will barely differ next quarter. The gap between the figures under US accounting rules and the adjusted ones should be only about $2.7 million to $3.3 million.¹ Almost all of that gap comes from gradually writing off the cost of assets without physical form that it bought in past acquisitions.¹ Its outlook does not lean on adjustments.

Getting there needs shipments of new machines to stay around the September level or rise. It also needs running costs to keep growing more slowly than sales, as they did this quarter.

The strong points

Sales jumped to $8.22 billion, about 54% more than a year earlier and 22% more than in the June quarter.¹ Lam's sales are, in effect, its customers' spending on equipment for their factories. A rise of more than a fifth in a single quarter says chipmakers are buying machines at a faster pace, not just keeping pace. New equipment drove it, with sales of systems up about 62% on the year.¹

Earnings per share under US accounting rules were $2.19, about 77% higher than a year ago.¹ Over the year, profit per share grew faster than sales. Over the quarter it grew 21%, slightly less than sales, because of a higher tax bill.¹ The company also handed more back to shareholders. It spent about $1.02 billion buying back its own shares, against $247 million the quarter before, which trimmed the share count slightly.¹ It raised its declared dividend per share to $0.33 from $0.26.¹

Running costs rose only about 5% while sales rose 22%.¹ That lifted operating profit to 40.0% of sales, from 37.4% in the June quarter.¹ Gross margin also edged up, to 52.3% from 51.7%.¹ This matters for a business like Lam's. Much of its cost base, from research to its sales and support staff, does not grow in step with each extra machine shipped. So a large rise in volume flows heavily through to profit, which is why operating profit grew about 80% on the year while sales grew about 54%.¹

The weak points

Income from servicing, spare parts and upgrades for machines already installed was almost flat from the June quarter, at $2.49 billion, up only about 0.6%.¹ It is still about 40% higher than a year ago.¹ This is the steadier part of Lam's business, because it is tied to the machines already working in customers' factories. It added almost nothing to this quarter's jump. That leaves the record resting on shipments of new machines, the part that swings most with customers' spending plans.

Cash from running the business was $3.50 billion, more than double the June quarter and about 127% of net income.¹ But about $535 million of it came from timing rather than from profit, mainly a rise in what it owes.¹ The quarter before, the same timing effects drained $860 million.¹ Other short-term amounts owed rose to $7.31 billion from $5.93 billion, while money owed by customers and stocks of parts and machines also grew.¹ Cash that comes from owing more can flow back out. Profit alone would have produced less cash than the headline figure.

What to watch

The clearest signal is what Lam's customers, the big chip and memory makers, say they plan to spend on new factories and equipment. What matters is whether they raise or trim those plans. Lam's sales are that spending, so a cut would show up in Lam's orders before it shows in its results. A raise would point the other way, towards shipments staying near this quarter's record.

For the memory makers, contract prices for memory chips are an early clue. Rising prices give them both the cash and the reason to buy more machines. Falling prices usually come before they hold back. Because new equipment drove almost all of this quarter's growth, that spending decision is the one that counts.

Government decisions on which chip machines may be sold to China matter too. They can close off part of the demand, whatever the chipmakers elsewhere decide.

It is also worth watching whether the service business starts growing again from quarter to quarter. Renewed growth would mean the steadier income is catching up with the machines already installed. The next results are only the next check on whether the record level holds.

Our verdict on the quarter

In all, a strong report. Lam had a record quarter, with sales up about half on the year and profit per share up about three-quarters, a little above what analysts expected on average.¹² Costs grew far more slowly than sales, so more of each dollar was left as operating profit.¹ The company expects slightly more sales and profit in the December quarter.¹ The soft spots are small: a service business that stood still, and cash flattered by timing. Neither changes the picture of a quarter built on a surge in shipments of new machines.

Notes

1. Lam Research's results release, 21 October 2026: sec.gov. ↩
2. Nasdaq's earnings calendar, 21 October 2026. ↩