Lam Research (NASDAQ:LRCX) shares rebounded in after-hours trading on Tuesday after the company issued a September revenue forecast of $8.1 billion, significantly exceeding analyst estimates. The stock gained 2.6% to $259 in extended trading, partially recovering from a 6.4% decline during the regular session.
Forecast Exceeds Expectations
The semiconductor equipment maker's revenue midpoint for the September quarter came in 14.2% above the consensus estimate compiled by LSEG. The outlook implies sequential growth of 20.5% from the June quarter, signaling an acceleration in demand for wafer fabrication equipment.
June quarter revenue of $6.72 billion beat forecasts by just 0.8%, while adjusted earnings per share of $1.82 exceeded consensus by 8.3%. The modest beat in the reported quarter was overshadowed by the strong guidance, which analysts said indicates they had underestimated the pace of the current recovery in spending.
Support Revenue Surges
A key highlight of the report was the 43% year-over-year increase in support revenue, which reached $2.47 billion. This segment, which includes services, spare parts, upgrades, and mature-node equipment, grew faster than systems revenue, which rose 24% to $4.25 billion. Support revenue now accounts for 36.8% of total sales, up from 33.5% a year earlier, reflecting the growing importance of Lam's installed base.
Chief Executive Tim Archer noted that AI-driven demand continues to reshape the semiconductor industry. NAND revenue more than doubled from the previous quarter, and management estimates advanced-packaging revenue will climb over 70% in the current calendar year.
Geographic Diversification
Asia remains the dominant market for Lam Research. In the June quarter, Taiwan contributed 27% of revenue, China 26%, and Korea 20%, together accounting for nearly 75% of total sales. The company's updated forecast for 2026 wafer-fabrication equipment spending is in the low $150 billion range, up from its previous estimate of $140 billion with an upside bias.
Margin Improvement
Higher revenues are boosting profitability. Adjusted operating margin improved to 38.4% in the June quarter, up 340 basis points from the prior quarter. The September outlook suggests further expansion to 39.5% at the midpoint, a sequential increase of 110 basis points.
For fiscal 2026, revenue climbed 26% to $23.23 billion, with adjusted earnings up 41% at $5.82 per share. The guidance for September signals an acceleration in growth as the new fiscal year begins.
Market Context and Risks
Investor sentiment ahead of the report was subdued, with Lam shares declining 21% over the five sessions ending Wednesday. At $259 in after-hours trading, the stock remained roughly 19% below its July 22 close. The stock trades at nearly 48 times trailing earnings, reflecting the high expectations baked into the valuation.
Risks remain, including export limits, tariffs, supply shortages, and potential shipment delays from customers. The coming days will provide the first complete liquidity reading as normal trading resumes on Thursday.
