Lam Research (LRCX) Q1 2027 earnings review
Lam grows 54%, but China is again its largest market
Lam Research, which makes the machines that build semiconductors, sold far more equipment, and much of it went to China. Revenue rose 54% from a year ago, above the middle of the range set in July. Chief executive Tim Archer credited AI demand. For December the plan asks for $8.6 billion, about 5% more by our math.
| Revenue | $8.22B +54% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $2.20 +75% from a year ago |
| China share of revenue | 35% 26% in June |
| December revenue outlook | $8.6B ±$0.4B about 5% above this quarter by our math |
⚖️ Verdict: 🟢 Bullish
The story got better because Lam turned the jump in sales into a 40% operating margin, with costs rising far slower than revenue. The bad news: China grew most, and the release does not say which customers there bought. One caution: the support business, which led the company for a year, stood still from June.
The question now is whether Lam keeps this operating margin once sales stop rising so fast. Either pricing and support mix hold it as growth slows, or part came from a shortage and will not last. December's gross margin against the 52.5% plan will tell.
🐂 Bull Case
Equipment Sales Rose 35% in One Quarter
Chief executive Tim Archer credited "AI driving higher semiconductor demand and greater device complexity" for a quarter of "record revenue, profit, and earnings per share". The claim rests on systems revenue, Lam's sales of new tools for "deposition, etch, clean, and other wafer fabrication markets".
Systems revenue reached $5.73 billion, up 35% from the June quarter. That is 62% more than a year earlier, so new tools, not services, carried the record. Total revenue landed about $120 million above the middle of the range set in July, the smallest gap in four quarters.
This matters because the plan set in July asked for about a fifth more revenue in one quarter, and Lam's factories delivered it. But the next step is far smaller. The December plan asks for $8.6 billion, about 5% above this quarter by our math. So shipments keep rising, much more slowly, while comparison with the flat quarters of late 2025 enlarges the yearly growth figures.
What to watch: December-quarter systems revenue against the total Lam planned. A result near the plan would mean tool demand has settled at a high level rather than still climbing.
Costs Grew a Tenth While Sales Grew a Fifth
In July finance chief Doug Bettinger said Lam intends to reach an operating margin in the mid-40s over the next several years, without giving a date. Operating margin excluding one-offs reached 40.2%, up 5.2 points from a year ago, near the top of the July range.
The gain came from costs growing much more slowly than sales, on every line of the income statement, and the July plan already pointed that way.
- Cost of making the tools: 47.7% of revenue, down 1.9 points from a year ago
- Research and development: 8.1% of revenue, down 2.7 points
- Operating costs excluding one-offs: up 9.6% from June, against revenue up 22%
This matters because Lam planned the leverage rather than stumbling into it. By our math the July margin plan implied about $1.01 billion of operating costs, and Lam spent $1.00 billion. Management has named pricing among the gross margin drivers without saying how much, so the share earned in an industry shortage is unknown.
What to watch: whether gross margin holds near this level in December, when sales growth slows. Holding it would mean the margin came from mix and scale, not a shortage.
Support Revenue Up 40% but Flat Since June
Lam's customer support business sells "customer services, spares, upgrades, and non-leading-edge equipment" to installed tools. It carried the group for a year with four straight record quarters.
This quarter it earned $2.49 billion, 40% more than a year ago. From June it added only $14 million while new tool sales jumped. Its share of revenue fell to 30% from 37%.
This matters because memory-chip conversion upgrades land in this line, which moves with how hard customers run their tools. In July the company said June set a record for upgrades, so the pause may be timing rather than the end of the conversion cycle.
What to watch: December support revenue and its upgrade share. Growth returning would mean the pause was timing, not a turn in the memory cycle.
Positives This Quarter Didn't Test
Four parts of the standing case got no new numbers in the press release, because Lam reserves them for prepared remarks and the quarterly filing.
- Served market: in July finance chief Doug Bettinger put Lam's reach at about 36% of industry equipment spending; an update would show whether the high-30s goal is near.
- Advanced packaging: Archer said in July it was on track for more than 70% growth this calendar year; nothing new here.
- Panel-level packaging: Archer said Lam would ship its first 310 by 310 millimetre panel tool this calendar year; the December remarks should confirm it.
- Customer visibility: management described 2027–2028 planning talks and 8–10 new fabs opening through 2027; any change to that count would move it.
🐻 Bear Case
China Is Again Lam's Largest Market
Archer tied the record quarter to AI demand. The region that grew most, though, was China, where US export controls limit what Lam may sell. Its share of revenue had fallen for three quarters, to 26% in June, as the company described domestic Chinese customers spending less.
This quarter China supplied 35% of revenue, the most of any region, while Taiwan's share fell by a third.
- China revenue by our math: about $2.9 billion, up roughly 65% from June
- Taiwan: 18% of revenue, down from 27%; by our math about $1.5 billion, down a fifth
- Korea: 20% of revenue, unchanged in share; by our math up 22% in dollars
This matters because China revenue carries a policy risk Lam cannot hedge. Earlier this year management put the cost of one new export rule at about $600 million of calendar-2026 sales. The release does not say whether domestic chipmakers or multinationals in China bought the tools, so the exposure is unreadable.
What to watch: China's share in December and the domestic-versus-multinational split in the prepared remarks. A share above 30% again would mean the lower-risk mix of spring has not returned.
Cash Caught Up, but Receivables Keep Growing
Cash flow had fallen behind profit for two quarters because customers paid later. Receivables grew by almost $2 billion in the last fiscal year, and days sales outstanding reached 72 in June. This quarter operating cash flow reached $3.50 billion, well above net income.
Collections did not drive the turn: receivables still rose by $319 million, to $5.66 billion. By our math days sales outstanding fell to about 63 only because revenue grew faster than the balance. What moved was other current liabilities, up $1.4 billion in one quarter, and the release does not say what they are.
This matters because a balance that rose this fast can fall as fast and take the cash with it. So one quarter of cash flow at 127% of net income, by our math, does not settle the concern. Customer concentration is also unanswered, because five customers held about 72% of receivables at fiscal year-end.
What to watch: the breakdown of other current liabilities in the quarterly filing, and days sales outstanding in December. A second quarter of cash flow above net income would mean the collection problem of the spring has passed.
Risks This Quarter Didn't Answer
Three standing risks got no reading in the press release and one got a partial one; all depend on the prepared remarks, the quarterly filing or the January call.
- Memory cycle in 2027: the memory share of tool sales is not in the release; the January call should bring a first view of 2027 industry spending.
- Customer concentration: four customers made up about 55% of last fiscal year's revenue; the filing's major-customer note will show whether this quarter widened that.
- Pricing: how much of the 52.4% gross margin comes from higher prices remains unsaid; a disclosed split would move the case either way.
- Supply chain and the second Malaysia factory: the quarter delivered the step the July plan asked for, so this risk eased, but the release says nothing about the factory ramp.
👓 Other Themes
Tax Rate Rose to 16.5%
Lam's tax rate excluding one-offs rose to 16.5% from 11.0% in June by our math, a step the company had flagged in July. At the June rate, profit per share would have been about $0.15 higher. By our math the December plan assumes a similar rate, so the comparison with 2025 quarters will look worse at the profit line than at the operating line.
💲 Other KPIs
Up 9% from June, a second quarter of growth after two of decline, but still 4% below a year ago. Deferred revenue is cash customers have paid for tools not yet delivered, so it tends to lead reported revenue. Shipments to Japan awaiting acceptance, counted separately, slipped to $468 million from $490 million.
Buybacks returned to $1.02 billion from $247 million in June. The declared quarterly dividend rose by about a quarter. Together the two came to 42% of free cash flow by our math, below Lam's stated aim of at least 85%. The shortfall came because free cash flow more than doubled. Cash on hand rose to $7.45 billion.
Up 11% from a year ago while revenue rose 54%, so the toolmaker is turning stock into sales faster. The balance includes tools shipped to customers in Japan, which count as inventory until the customer accepts them. From June it rose 6%, in line with the past year's pace.
🔮 Guidance
New. The plan calls for $8.6 billion in the December quarter, about 5% above this quarter by our math. That follows a 22% step from June to September. Against the December 2025 quarter the plan means 61% growth, but export rules held that quarter flat. Revenue has landed above the middle of the range four quarters running; if the pattern holds, by our math December brings about $8.8 billion.
New. The plan has gross margin at 52.5% in the middle of the range, a tenth of a point above this quarter. In July the plan for September said 52.0%, and the quarter finished above that. Lam has landed at or above the middle of its gross margin range in each of the last four quarters.
New. The middle of the range is 40.5%, slightly above this quarter. By our math the plan leaves about $1.03 billion for operating costs, up about 3% from this quarter. So spending growth slows along with revenue. In July the plan said 39.5% for September, and the toolmaker delivered more.
New. The middle of the range is $2.33, about 6% above this quarter. That is a smaller step than the rise from June. By our math the plan assumes a tax rate near 16%, so this quarter's higher rate stays. Profit per share finished above the top of the range in each of the three quarters before this one, but inside it this quarter.
New. The company plans for 1.253 billion diluted shares, slightly fewer than this quarter. The September buyback, four times the June figure, is the reason. By our math the diluted count is down 1.1% from a year ago, so buybacks add little to profit per share next to the growth in profit.
❓ Key Questions
Which customers in China drove its share back to 35%?
Domestic Chinese chipmakers face US export limits that multinationals' China plants do not. The release gives only the regional share, so the policy exposure behind a $2.9 billion quarter is unreadable.
How much of the gross margin comes from pricing?
Management names pricing among the margin drivers but has not sized it. The split between durable mix and scale gains and prices earned in a shortage decides whether the mid-50s gross margin aim survives when supply catches up.
Why did support revenue stop growing from June?
Support revenue added $14 million in three months after four record quarters. The prepared remarks split upgrades from spares and services; a fall in upgrades would say the memory conversion cycle is past its easiest part.
What is the first view of 2027 equipment spending?
Lam gave its initial calendar-year industry spending figure on the January call in each recent year. A number at or below this year's low-$150 billion range would mean the industry pauses after this year's jump.
What sits in the $1.4 billion of new current liabilities?
The jump supplied most of the quarter's cash flow above net income by our math. If it is customer deposits or tax accruals, it reverses when paid, so the filing's breakdown decides whether cash conversion has recovered.