Lam Research Beats Estimates, Signals Stronger NAND and Advanced Packaging Growth

Lam Research reported Q3 FY2026 revenue of $5.84 billion, a 1.6% beat over the street estimate of $5.75 billion. The company's diluted EPS came in at $1.47, surpassing the estimated $1.36 by 8.1%. This performance marks a significant sequential improvement, with revenue up 9.3% from the previous quarter and a 23.8% year-over-year increase. CFO Douglas Bettinger highlighted the strong performance: "March quarter revenue came in at $5.84 billion, which was up 9% sequentially and up 24% from the same period in 2025."

The company's gross margin also showed strength, coming in at 49.9%, at the high end of the guidance range.

A significant highlight of the quarter was the performance of the Customer Support Business Group (CSBG), which generated a record $2.1 billion in revenue, up 6% sequentially and 25% year-over-year. CEO Timothy Archer emphasized this achievement: "Revenues were at record levels, highlighted by the first $2 billion quarter from our Customer Support Business Group." This strong performance underscores the growing importance of recurring revenue streams for Lam Research, providing a stable foundation for the company's financial health.

The CSBG's success is also a testament to the company's focus on customer relationships and the quality of its after-sales services. The deferred revenue balance at the end of the quarter was $2.22 billion, flat sequentially, indicating a steady flow of future revenue.

Lam Research's advanced packaging revenue is expected to grow by more than 50% in calendar year 2026, a significant milestone that reflects the company's leadership in this emerging market. This growth is driven by the increasing demand for advanced packaging solutions, particularly in the foundry and logic segments, where the company has a strong presence.

The advanced packaging market is a key growth driver for Lam Research, as it aligns with the industry's shift towards more complex and integrated semiconductor solutions. This segment's strong performance is expected to continue, driven by the need for higher performance and lower power consumption in a wide range of applications, from mobile devices to data centers.

Lam Research's outlook for the NAND market is particularly noteworthy. The company expects growth in bit demand to drive greenfield capacity investment, especially given the expected decline in overall industry installed wafer capacity. Archer noted: "In parallel, we expect growth in bit demand will drive greenfield capacity investment, especially considering that overall industry installed wafer capacity is expected to decline more than 20% from prior highs by the end of this year."

The company's earlier forecast of $40 billion in conversion spending over several years to enable existing NAND installed wafer capacity to produce devices with more than 200 layers remains a key driver of growth.

This investment in advanced NAND technology is expected to drive significant revenue growth for Lam Research, particularly in the coming quarters as customers ramp up their capacity expansion plans.

From a market segment perspective, foundry accounted for 54% of Lam Research's systems revenue in the March quarter, down from 59% in the December quarter. This shift reflects the company's diversification efforts and the growing importance of other segments, particularly NAND and advanced packaging.

The decline in foundry revenue as a percentage of total systems revenue is not a cause for concern, as it is balanced by the strong performance in other segments. The company's broad customer base and diverse product portfolio position it well to capitalize on the growing demand for advanced semiconductor solutions across multiple markets.

Lam Research's guidance for the June quarter is optimistic, with revenue expected to be $6.6 billion, plus or minus $400 million. The company is also forecasting record earnings per share of $1.65, plus or minus $0.15, based on a share count of approximately 1.255 billion shares.

The company's capital return strategy remains a key focus, with approximately $800 million allocated to share buybacks in the March quarter. This includes a combination of open share repurchases and a $200 million accelerated share repurchase transaction. Bettinger highlighted the remaining authorization: "And I just mentioned that we have $4.3 billion remaining on our board authorized share repurchase program."

Lam Research's strong financial performance and capital return strategy are expected to continue to create value for shareholders, driven by the company's leadership in key growth segments and its focus on operational excellence.

The tone of Lam Research's earnings call was generally positive, with a sentiment score of 0.23 and a guidance tone of 0.32. The prepared sentiment score was 0.42, indicating a positive outlook in the prepared remarks, while the QA sentiment score was 0.13, reflecting a more balanced tone during the Q&A session. The AI optimism score was 0.43, suggesting a cautiously optimistic outlook.

Compared to the previous quarter, the sentiment score decreased by 0.07, the guidance tone decreased by 0.10, and the prepared sentiment score decreased by 0.20. However, the uncertainty score decreased by 8.5, and the QA evasiveness score increased by 25.1, indicating a more direct and less evasive approach to answering questions.

Full call-over-call delivery metrics are in the tone history.

Lam Research's strong performance and outlook have positive implications for its key customers and suppliers. For customers like TSMC, Samsung, and Intel, the company's leadership in etch, deposition, and advanced packaging solutions will support their capacity expansion and technology advancement plans. For Kioxia, SK Hynix, and Micron, the focus on NAND and advanced packaging will be particularly beneficial.

On the supplier side, companies like Advanced Energy, Ichor Systems, and MKS Instruments are likely to benefit from the increased demand for equipment and subsystems. The strong performance of the Customer Support Business Group also suggests increased demand for maintenance and support services, which will benefit suppliers like Ultra Clean Holdings and Ferrotec.

Compared to its peers in the Wafer Fab Equipment subsector, Lam Research's performance stands out. The company's revenue growth of 23.8% year-over-year is significantly higher than the average growth rate of its peers. For example, Tokyo Electron reported a 3.3% year-over-year revenue growth, while Screen Holdings reported a 15.8% growth. Lam Research's gross margin of 49.9% is also higher than the average gross margin of its peers, reflecting the company's strong operational efficiency and market position.

In conclusion, Lam Research's Q3 FY2026 earnings report underscores the company's strong financial performance and positive outlook. The record revenues, strong gross margins, and significant growth in advanced packaging and customer support highlight the company's leadership in the semiconductor equipment market. The guidance for the next quarter and the year ahead suggests continued momentum, driven by the growing demand for advanced semiconductor solutions and the company's strategic focus on key growth segments.