Lam Research results and guidance significantly beat expectations; Bernstein raises target price to $360

Overview

This report is Bernstein's review of Lam Research's F4Q26 results. It argues that both quarterly results and next-quarter guidance were clearly stronger than expected, with record CSBG, strong sequential growth in NAND and Logic, and gross margin reaching 52.0%, together reinforcing the company's execution strength and earnings leverage in the semiconductor equipment upcycle.

Core views

The core view is that Lam Research is benefiting from multiple drivers, including strong WFE demand, easing cleanroom constraints, investment in advanced nodes and advanced packaging, HBM-related demand, NAND upgrades, and greenfield fabs. Despite the recent pullback in sector valuations, Bernstein believes the company has stronger fundamentals, higher long-term gross margin and operating margin targets, and better valuation support, and therefore maintains Outperform and raises the target price.

Analysis framework

The report uses earnings comparison, guidance comparison, business- and geography-level revenue breakdowns, margin analysis, cash flow and inventory tracking, and a P/E valuation framework. The analysis focuses on comparing actual results and management guidance with market consensus, and assessing the impact of CY26/CY27 WFE, advanced packaging, memory, and logic/foundry demand on medium-term earnings.

Methodology notes

• Earnings reviewActual versus consensus comparison

  Earnings beat analysis

  Compare metrics such as F4Q26 revenue, PF EPS, gross margin, and operating margin against Street expectations and company guidance to assess the quality of quarterly performance.

• Guidance analysisForward guidance comparison

  Gap between next-quarter guidance and market expectations

  Compare F1Q27 revenue, EPS, gross margin, and operating margin guidance against consensus expectations to gauge order, capacity, and margin momentum.

• Valuation methodsP/E multiple valuation

  Price-to-earnings multiple valuation

  Bernstein rolls its valuation perspective forward to FY28 and applies an approximately 35x multiple to FY28 non-GAAP EPS of $10.14 to derive the $360 target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LRCX.US

  Core covered name

  Strengths

  Strong F4Q26 results, F1Q27 guidance significantly above expectations, record CSBG, strong sequential growth in NAND and Logic, and higher gross margin and operating margin targets.

  Weaknesses

  Still constrained by cleanroom capacity in the short term, with weaker spending from some mature-node and China domestic customers.

  Comparison

  The report notes that, similar to KLA, Lam raised its CY26 WFE outlook; however, unlike KLA, Lam did not provide a specific CY27 WFE figure and only said CY27 would be a good year.

  Risks

  A longer or deeper industry downturn, unfavorable end-market mix, continued weakness in NAND spending, share loss, and geopolitical risk.

Key data

• F4Q26 revenue6.72B USDAbove market expectations of 6.68B USD and company guidance of 6.60B USD.
• F4Q26 PF EPS1.82 USDAbove market expectations of 1.70 USD.
• F4Q26 gross margin52.0%Above market expectations of 50.5% and guidance of 50.5%, the highest level in about 20 years.
• F1Q27 revenue guidance8.10B USDAbout 1.0B USD above market expectations of 7.13B USD.
• F1Q27 PF EPS guidance2.15 USDSignificantly above market expectations of 1.84 USD.
• CY26 WFE outlooklow-150B USD rangeRaised from approximately 140B USD previously.
• China revenue exposureapproximately 26%Down about 8 percentage points sequentially, with China revenue declining by about 240M USD sequentially.
• FY2028 PF EPS forecast10.14 USDBernstein raised its FY2028 PF EPS forecast from 8.99 USD to 10.14 USD.
• Target price360.00 USDRaised from 340.00 USD, based on approximately 35x FY28 non-GAAP EPS.

Impact & implications

In terms of investment implications, the report argues that LRCX's growth leverage and margin structure improvement are emerging simultaneously. In the short term, F1Q27 guidance materially above expectations lifts earnings forecasts; in the medium term, cleanroom constraints gradually easing in 2027/28 and stronger demand for advanced packaging and memory upgrades may support continued outperformance versus the industry; on valuation, the recent sector pullback has made the risk-reward more attractive.

Risks

• The industry downturn could be longer or deeper.
• Deterioration in end-market mix could pressure profitability.
• If NAND spending weakens further, it would affect systems revenue growth.
• The company may face market share loss risk.
• Geopolitical risk could affect China revenue exposure, the supply chain, and customer investment cadence.
• U.S. tax rate and GILTI-related factors could raise the tax rate and persist through CY26 and beyond.

What to watch

• Whether F1Q27 revenue can reach the $8.10 billion guidance level, and whether subsequent quarters continue sequential growth.
• Whether Systems revenue can deliver the implied sequential growth of more than 30%.
• Whether CSBG revenue remains stable after reaching a record high.
• Whether CY26 WFE lands in the low-$150 billion range, and whether CY27 continues the growth trend.
• The relative strength of demand across DRAM, NAND, Foundry/Logic, and advanced packaging.
• After the decline in China revenue exposure, whether the regional mix and geopolitical risk continue to change.
• Progress toward achieving the long-term targets of gross margin in the mid-50% range and operating margin in the mid-40% range.