Why Lam Research Remains an Attractive Play Despite 109% Surge

Lam Research Corporation [LRCX] has delivered an impressive 109% return year-to-date, significantly outpacing both the Electronics-Semiconductors industry average of 33.5% and key competitors. To put this in perspective, KLA Corporation [KLAC], ASML Holding [ASML], and Applied Materials, Inc. [AMAT] have climbed 80.4%, 42.5%, and 42% respectively—substantial moves that still lag behind Lam Research’s trajectory. This divergence reflects growing investor conviction in the company’s ability to navigate an uncertain geopolitical landscape and capitalize on emerging semiconductor trends.

Financial Strength Amid Macro Headwinds

Despite persistent macroeconomic uncertainties and trade tensions, Lam Research’s balance sheet tells a compelling story. The company’s most recent fiscal Q1 2026 results showcased total revenues of $5.32 billion, representing a 28% year-over-year increase and surpassing analyst consensus by 2%. The growth was anchored by robust demand within its Systems and Customer Support segments.

What’s equally noteworthy is the bottom-line performance: non-GAAP earnings per share hit $1.26, beating expectations by 4.1% and climbing 46.5% year-over-year. This profitability expansion came alongside margin improvement—non-GAAP operating margins expanded to 35% in the quarter, up 410 basis points from the prior year. Such margin expansion in a challenging environment underscores management’s operational discipline and cost optimization initiatives, particularly from its expanded Asia manufacturing footprint.

These results demonstrate that Lam Research possesses the operational leverage to sustain profitability even when semiconductor end-market demand fluctuates.

The AI and Datacenter Tailwind

The semiconductor industry’s pivot toward artificial intelligence and high-performance computing infrastructure has created substantial opportunities for Lam Research. The company’s specialized etch and deposition solutions are foundational for producing high-bandwidth memory (HBM) and advanced packaging architectures—both critical for powering AI applications.

Management disclosed that fiscal 2024 shipments targeting gate-all-around nodes and next-generation packaging reached $1 billion in revenue. Looking ahead, executives project this segment will triple to $3 billion+ by 2025, signaling accelerating demand for Lam Research’s differentiated technology. Beyond HBM, emerging trends like backside power distribution and advanced dry-resist processing present incremental growth vectors aligned with the company’s core competencies.

The analyst community reflects this optimism: consensus estimates peg fiscal 2026 and 2027 revenue growth at 14.1% and 12.1% year-over-year, respectively, while earnings per share is forecast to expand 15.7% and 15.8% across the same periods.

Valuation Remains Reasonable

After a substantial rally, Lam Research trades at a forward price-to-earnings multiple of 29.52—a meaningful discount to the broader semiconductor equipment sector’s 34.89 multiple. This valuation gap suggests the market has yet to fully price in the company’s AI-driven growth narrative.

Compared to peers: ASML trades at 32.19x forward earnings, KLA at 29.28x, and Applied Materials at 23.33x. While Lam Research commands a modest premium to Applied Materials, it sits well below both ASML and near parity with KLA—reasonable positioning given its faster projected growth trajectory.

The Takeaway

Lam Research merits consideration for growth-oriented investors seeking exposure to the semiconductor equipment space. The combination of steady financial execution, a favorable industry backdrop driven by AI infrastructure buildout, and an undemanding valuation multiple creates an asymmetric risk-reward proposition. LRCX currently carries a Zacks Rank #2 (Buy) designation, reflecting this constructive outlook.