Lam Research (NASDAQ:LRCX) saw its shares surge 20.9% to $305.18 during regular U.S. trading on Thursday, following a bullish outlook that highlighted a 44.9% incremental adjusted operating margin. The forecast was based on midpoint calculations from the company's September-quarter guidance, which significantly exceeded consensus estimates.
The company's September revenue guidance of $8.10 billion at the midpoint beat LSEG consensus by 14.2%, while the adjusted EPS midpoint of $2.15 was 17.5% higher than expectations. This strong guidance implies a 44.9% incremental adjusted operating margin, meaning Lam could add approximately $619 million in adjusted operating profit on $1.38 billion in sequential sales.
Strong June Quarter Performance
Lam's June quarter results also exceeded forecasts, though revenue was only modestly ahead. The company reported revenue of $6.72 billion versus the $6.67 billion consensus, a 0.8% surprise. Adjusted EPS came in at $1.82, beating the $1.68 consensus by 8.3%. Adjusted gross margin improved 210 basis points to 52.0%, while adjusted operating margin expanded 340 basis points to 38.4%.
Sequentially, revenue grew 15.1%, and adjusted EPS rose 23.8%. The company's support revenue, which includes customer support and other services, grew 42.6% year-over-year to $2.47 billion, representing 36.8% of total sales, up from 33.5% a year earlier.
September Quarter Guidance Details
For the September quarter, Lam's revenue midpoint of $8.10 billion (range $7.70–$8.50 billion) cleared consensus by $1.01 billion. The adjusted EPS midpoint of $2.15 (range $2.00–$2.30) beat consensus by $0.32. Adjusted gross margin is expected to remain flat at 52.0%, while adjusted operating margin is projected to improve 110 basis points to 39.5%.
The guidance implies revenue growth of 20.5% sequentially, with adjusted operating income rising nearly 24%. This operating leverage indicates that expenses are growing more slowly than sales, a key driver of the margin expansion.
Market Context and Analyst Reaction
JPMorgan analyst Harlan Sur raised his price target on Lam to $340 from $315, maintaining an Overweight rating. The new target stands about 11% above the morning price. The positive sentiment spread across the semiconductor equipment group, with Applied Materials (NASDAQ:AMAT) up 15.3%, KLA (NASDAQ:KLAC) gaining 9.0%, and ASML Holding (NASDAQ:ASML) rising 7.2%. The iShares Semiconductor ETF (NASDAQ:SOXX) advanced 8.0%.
CEO Tim Archer expressed optimism about future growth, stating, "Looking into 2027, we see an extraordinary setup for WFE growth." The company also raised its 2026 wafer-fabrication-equipment estimate to the low-$150 billion range from $140 billion.
Risks and Outlook
Despite the strong performance, risks remain. China generated 26% of June revenue, though domestic Chinese customers declined sequentially. Export controls and stretched lead times could disrupt shipments. Lam now trades near 57 times trailing earnings after the jump.
The key test ahead is whether the 45% incremental margin can be sustained through the ramp. Support revenue growth must also continue to outpace systems revenue. If both hold, management's mid-50% gross-margin and mid-40% operating-margin targets become more credible.
