Lam Research (LRCX) shares soared approximately 17% on Thursday, reaching $295.90, after the semiconductor equipment manufacturer reported fiscal fourth-quarter results that surpassed analyst expectations and issued a stronger-than-anticipated outlook. The rally, which at one point pushed the stock up 23%, underscores growing investor confidence in artificial intelligence-driven chip demand.
For the fiscal fourth quarter, Lam posted adjusted earnings of $1.82 per share, beating the consensus estimate of $1.69. Revenue rose 30% year over year to $6.72 billion, exceeding Wall Street's forecast of $6.66 billion. The company's performance was bolstered by robust demand for memory chips and AI infrastructure, which drove significant growth in its systems revenue.
Strong Guidance Lifts Sentiment
Looking ahead, Lam forecast adjusted earnings of $2.15 per share on revenue of $8.1 billion for the fiscal first quarter of 2027, well above analyst expectations of $1.84 per share and $7.11 billion in sales. This optimistic outlook reflects sustained investment in AI-related semiconductor manufacturing, particularly in memory and advanced packaging technologies.
The positive results also lifted the broader semiconductor equipment sector. Applied Materials gained about 13%, while KLA rose roughly 7.6%, though KLA remained lower for the month after its own earnings failed to meet elevated investor expectations.
Memory and AI Drive Revenue Growth
Lam's systems revenue increased 23.6% from a year earlier to $4.25 billion, with memory accounting for 46% of that total, up from 39% in the previous quarter. Non-volatile memory represented 23% of systems revenue, driven by customer investments in converting to 256-layer-and-above devices for enterprise solid-state drives. DRAM also contributed 23%, supported by spending on wafer additions and upgrades across advanced process nodes.
The company reported improved profitability, with non-GAAP gross margin rising to 52% and operating margin expanding to 38.4%, aided by pricing actions, operational efficiencies, and a favorable product mix. Lam also raised its calendar 2026 wafer fabrication equipment spending forecast to the low-$150 billion range, up from its previous $140 billion estimate, citing continued AI-driven demand for flash storage, advanced DRAM, leading-edge foundry technologies, and advanced chip packaging.
Balance Sheet Strengthens
During the quarter, Lam strengthened its financial position. Cash, cash equivalents, and restricted cash increased to $5.6 billion from $4.77 billion in the prior quarter. Operating cash flow reached $1.46 billion, while the company invested $189 million in capital expenditures to expand U.S. laboratories and global manufacturing capacity. For fiscal 2026, Lam generated operating cash flow of $5.86 billion, repurchased $3.85 billion of shares, and paid $1.27 billion in dividends, all while continuing to invest for expected growth in AI-driven semiconductor demand.
This strong performance comes amid a broader rally in AI-related stocks, as seen in Microsoft's recent earnings that revived AI optimism. Similarly, SpaceX's stock movements have reflected market sensitivity to contract wins and earnings focus.
Analysts Remain Bullish
Wall Street analysts broadly welcomed Lam's earnings and guidance. UBS maintained its Buy rating and $435 price target, with analyst Timothy Arcuri noting that Lam's quarterly performance and guidance "were very strong, particularly the service business as NAND customers are trying to increase bit production with limited wafer volume expansion." Morgan Stanley reiterated a Buy rating with a $367 price target, while Deutsche Bank set a $320 target and Oppenheimer maintained a $400 target, both with Buy ratings.
The positive sentiment extends to other sectors, as Starbucks also saw a surge following its earnings beat and raised forecast. Meanwhile, Lloyds shares hit a 2008 high on strong H1 profit, highlighting varied market dynamics.
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