Lam Research (LRCX) stock fell about 7% in after-hours trading on Wednesday, October 21, after the chip-equipment maker posted record September-quarter results and guided December revenue to $8.6 billion. Revenue rose 54% from a year earlier to $8.22 billion, and adjusted EPS climbed 75% to $2.20, up from $1.26 a year ago.
The drop erased more than $20 billion of market value over a guide that still came in slightly above consensus. Its midpoint implies growth of under 5% from September, after three quarters of acceleration. Management tied the slowdown to lower revenue from domestic Chinese customers and a parts shortage, and described AI demand as strong. It didn’t put a number on either factor.
Where Lam’s Guide Came Up Short
- Revenue: $8.6 billion, plus or minus $400 million, a range running from flat to up about 10% on September.
- EPS: $2.33, plus or minus $0.15, a penny above the $2.32 Wall Street expected.
- China: 35% of September revenue, up from 26% in June. Management expects that share to be “meaningfully down” in December as domestic Chinese customers pull back.
- Supply: CFO Doug Bettinger said on the Q1 fiscal 2027 earnings call that the guide “would have been a bit higher” without near-term supply constraints, and that delayed shipments move into the March quarter.
How Fast Lam Was Growing Before the Brake
Lam’s revenue hovered near $5.3 billion through late 2025, then took off: up 9% in the March quarter, 15% in June and 22% in September. December’s midpoint breaks that run at about 5%.
The China math changes the read. Non-China revenue was about $5.34 billion in September. If China falls back to its June share of 26%, non-China revenue at the midpoint would reach about $6.36 billion, up 19% in a quarter. Even at a 30% China share, it grows about 13%. Those scenarios show how a smaller China share can hide faster growth everywhere else.
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What Lam Stock Already Gave Back
The selling didn’t start Wednesday. Lam stock peaked near 57 times forward earnings in July. It now trades at about 27.5 times, less than half that level and about 13% above its five-year average of 24.3 times. The market stopped paying a perfection premium months ago.
The quarter’s operations held up. Adjusted operating margin hit a record 40.2%, above the 39.7% analysts expected, even as the non-GAAP tax rate rose to 16.5% from 11% in June (in line with management’s own forecast). Free cash flow hit a record $3.24 billion.
The Number Lam Holders Need in January
Lam plans to firm up its forecast for industry-wide equipment spending on its January earnings call. The preliminary figure is more than $200 billion for 2027, roughly 30% above this year’s mid-$150 billion. The March-quarter guide is the tell. If it picks up the delayed December shipments, Wednesday’s drop was a timing scare. If it stays near $8.6 billion, the timing story gets much harder to defend, whatever the cause, and at 27.5 times earnings, the stock has little room for that.
I’d treat it as a timing scare until January says otherwise.
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