Lam Research Corporation (LRCX) FY2026 10-K and 10-Q Summary: Business, Risk Factors, MD&A

Business

Source: Form 10-K for fiscal year 2026, filed August 7, 2026, accession 0000707549-26-000037.

Lam Research sells wafer fabrication equipment, and the services and spare parts that support it, to semiconductor manufacturers. Its customers are memory makers, foundries and integrated device manufacturers producing NAND (non-volatile memory), DRAM and logic chips. Its most significant customers in fiscal 2024 through 2026 were Micron Technology, Samsung Electronics, SK hynix and Taiwan Semiconductor Manufacturing Company. In fiscal 2026, four customers accounted for roughly 16%, 15%, 12% and 12% of revenue. The company has one reportable segment (manufacturing and servicing of wafer processing equipment) and splits revenue into two streams:

• Systems ($14.89 billion, 64% of fiscal 2026 revenue): sales of new leading-edge equipment for deposition, etch, clean and other wafer fabrication steps.
• Customer support-related revenue and other ($8.35 billion, 36%), run by the Customer Support Business Group (CSBG): field service, spare parts, upgrades, and new and refurbished non-leading-edge tools sold under the Reliant product line. Upgrades let customers add newer capability to tools they already own, and the spares business offers running-cost and life-extension programs.

Products. Lam's core markets are deposition, etch and clean:

• Deposition: ALTUS (tungsten and molybdenum CVD/ALD metallization), SABRE (copper electroplating, including SABRE 3D for advanced packaging and high-bandwidth memory), Striker (single-wafer dielectric ALD) and VECTOR (PECVD dielectric films).
• Etch: Akara (advanced conductor etch for gate-all-around and advanced DRAM/NAND), Argos, Prevos and Selis (selective etch), Flex (dielectric), Kiyo (conductor), Syndion (deep silicon), Vantex (high-aspect-ratio dielectric etch for 3D NAND and DRAM on the Sense.i platform) and Versys Metal.
• Clean: Coronus (plasma bevel clean), DV-Prime, Da Vinci, EOS and SP Series (wet clean).
• Dry resist: the Aether family, a vacuum-based dry photoresist and dry-development process for EUV patterning.

Lam also sells into wafer-level packaging (including fan-out panel-level packaging and 3D HBM stacking), CMOS image sensors and MEMS.

Demand drivers. Lam's case is that AI, cloud, communications, automotive and industrial demand need denser and more power-efficient chips. Because two-dimensional scaling is getting harder, chipmakers are moving to 3D architectures, more complex patterning, new materials and advanced packaging. Each of these adds deposition and etch steps and raises precision requirements. Lam says its differentiation comes from R&D, learning across its large installed base, working closely with customers, and selling multi-product solutions.

Geography. Revenue is attributed to the location of the customer's fab. In fiscal 2026 the split was China 34%, Taiwan 22%, Korea 19%, Japan 9%, United States 7%, Southeast Asia 6% and Europe 3%. Non-U.S. sales made up about 93% of revenue in each of fiscal 2024, 2025 and 2026.

Competition. Applied Materials is the main competitor in dielectric and metals deposition. ASM International and Wonik IPS also compete in ALD and PECVD. In etch the main competitors are Applied Materials, Hitachi and Tokyo Electron. In wet clean they are Screen Holdings, Semes and Tokyo Electron. Once a chipmaker qualifies a tool for a production step, it tends to keep that tool for the step and node, so design wins last a long time and losses are hard to reverse. U.S. export controls on China limit Lam's sales there, which the company says favors non-U.S. competitors. Government-backed domestic equipment makers in China are also an increasing source of competition.

Operations. Manufacturing is mainly the assembly and testing of modules and finished systems, largely in cleanrooms. Some manufacturing, warehousing and logistics is outsourced, and some components come from a single supplier. Principal operating and R&D sites are in Fremont and Livermore, California; Tualatin, Oregon; Yongin, Korea; Bengaluru, India; and Salzburg and Villach, Austria. Manufacturing and warehouse facilities are in California, Ohio, Oregon, Austria, Korea, Malaysia and Taiwan. As of August 4, 2026 Lam had about 23,300 regular full-time employees. Over 26% worked in R&D, and by location about 38% were in the United States, 56% in Asia and 6% in Europe.

Leadership. Timothy Archer has been President and CEO since December 2018 and Douglas Bettinger is CFO. Sesha Varadarajan became Chief Operating Officer in March 2026. Karthik Rammohan became Senior Vice President, Global Operations and Enterprise Solutions, in March 2026. Lam Research is a Delaware corporation headquartered in Fremont, California. Several of its senior leaders came from Novellus Systems, which Lam acquired in June 2012.

Risk factors

Source: Item 1A of the fiscal 2026 Form 10-K, accession 0000707549-26-000037, with updates from the Q3 fiscal 2026 Form 10-Q, accession 0000707549-26-000022.

The risks below are condensed to the ones specific to Lam.

• China exposure and U.S. export controls. China was about 34% of revenue in fiscal 2026 and fiscal 2025, down from 42% in fiscal 2024. China was also about 37% of revenue in the first nine months of fiscal 2026. U.S. rules restrict sales to Chinese fabs engaged in certain advanced-technology end uses and to entities on the Entity List and Unverified List. They also extend the foreign direct product rule to transactions involving Huawei and its affiliates, which can require Lam's customers to obtain licenses as well. These rules have already limited Lam's market and revenue, and more controls are possible. The company also warns that foreign governments could retaliate or favor local suppliers.
• Rare earths and critical materials. China is the primary source of certain rare earth elements Lam needs. China has imposed export controls and license requirements on those elements and on some foreign-made products that contain them. The 10-K says these controls are suspended in part until November 2026 unless extended. If they are reinstated or widened, the supply of components could be delayed or more expensive.
• Tariffs and the Middle East conflict. U.S. tariffs on steel and aluminum raised Lam's manufacturing costs in fiscal 2026 and hurt margins. The 10-K also cites the conflict that began in February 2026 between the United States, Israel, several Persian Gulf states and Iran. It has closed or restricted the Strait of Hormuz, brought threatened or actual attacks on Red Sea shipping, and pushed up prices for oil, LNG, aluminum, helium, bromine and sulfur, some of which the semiconductor industry relies on. Lam says this has already affected its business adversely.
• Cyclical demand, now driven by AI. Spending on wafer fabrication equipment rises and falls sharply. Lam calls AI infrastructure a significant driver of customer capital spending across memory and non-memory. It warns that AI-driven demand could change quickly, for example through slower AI adoption, gains in compute efficiency or overbuilt infrastructure. It also flags the opposite risk: failing to expand manufacturing and hire fast enough to meet demand could cost market share.
• Customer concentration and consolidation. A few large customers generate a large share of revenue, cash flow and credit exposure. Alliances or mergers among chipmakers can standardize on a competitor's tools or increase customers' pricing power.
• Competition and product concentration. Some competitors have more resources, including foreign-government-backed companies and customer-affiliated toolmakers, and some can sell to customers that export controls bar Lam from serving. Revenue depends on a limited number of products priced up to tens of millions of dollars per system, so missing revenue on a few systems can move a quarter. Lam also notes that if a process step it serves were eliminated by a change in technology, it would be hurt more than broader-line competitors.
• Supply chain and outsourcing. Lam depends on single or limited-source suppliers, long-lead-time parts and outsourced manufacturing and logistics. It is exposed to shortages, transport disruption and possible restrictions on PFAS chemicals used in parts and materials.
• Concentrated facilities. Manufacturing and R&D sit in a small number of locations exposed to earthquakes, wildfires, other disasters and geopolitical disruption.
• Cybersecurity and AI. Lam holds sensitive customer and proprietary data. The 10-K adds risks from AI-enabled attacks and agentic AI, and from Lam's own growing use of AI tools: errors, IP leakage and unsettled IP law.
• Intellectual property and investigations. Lam may fail to protect its IP. Third parties may bring infringement claims, and law enforcement could investigate alleged misuse of designated technology or third-party confidential information.
• Talent. Competition for field and manufacturing staff is intense. Lam is actively hiring to support growth.
• Restructuring and transformation. Lam has restructured before and may again. Such initiatives may not deliver the expected benefits, and workforce reductions can cut production output.
• Tax. The effective tax rate depends on where profits are earned and on a Malaysian tax incentive. The OECD global minimum tax took full effect for Lam in fiscal 2026. The OECD's January 2026 "side-by-side" system, which exempts U.S.-parented groups from certain minimum-tax components, applies from Lam's fiscal 2027. Tax years from 2005 through 2026 remain open to examination.
• Debt, capital return and counterparties. Lam has $3.75 billion of senior notes outstanding, a $2.00 billion commercial paper program and a $2.00 billion revolving credit facility. The debt agreements carry covenants, and dividends and buybacks are discretionary. Lam is also exposed to the failure of banks and hedge counterparties.
• Stock volatility, goodwill impairment and the Delaware exclusive-forum bylaw.

Management's discussion and analysis, fiscal year 2026

Source: Item 7 and the financial statement notes of the fiscal 2026 Form 10-K, accession 0000707549-26-000037.

Headline results.

Revenue. Management attributes the 26.0% growth to strong demand for equipment systems, especially from foundry customers, and to higher customer-support revenue.

• Systems revenue rose $3.39 billion (29.5%) to $14.89 billion, mainly from foundry equipment spending.
• Customer support-related revenue rose $1.40 billion (20.2%) to $8.35 billion, mainly from spares and non-leading-edge equipment.

Foundry's share of equipment and upgrade revenue rose 900 basis points to 54%, on both mature-node spending and leading-edge investment. Memory's share fell 300 basis points to 39%, which management attributes primarily to the timing of customer investments. Logic/IDM fell to 7% from 13%. By region, Taiwan grew from 19% to 22% of revenue and Korea fell from 22% to 19%. China stayed at 34%, or $7.86 billion, up from $6.21 billion in dollar terms. Deferred revenue fell to $2.43 billion from $2.68 billion, mainly because customer down payments declined, partly offset by more earned system credits.

Margins and expenses.

• Gross margin rose 180 basis points to 50.5%, largely because of favorable customer mix, partly offset by steel and aluminum tariff costs.
• R&D rose 13.3% to $2.38 billion but fell to 10.2% of revenue from 11.4%. The increase came from $131.4 million of employee costs tied to higher headcount and $69.8 million of engineering supplies.
• SG&A rose 17.1% to $1.15 billion (4.9% of revenue), driven by $180.0 million of additional employee costs.
• No restructuring charges were recorded in fiscal 2026 or fiscal 2025. The 2023 restructuring plan was substantially complete by June 2024 at a cumulative cost of $181.9 million.

Other income and tax.

• Other income, net was $62.7 million. Interest income fell 15.2% to $196.2 million because of lower rates and slightly lower average cash. Interest expense fell to $156.9 million after $750 million of senior notes matured in March 2026.
• The effective tax rate rose to 12.1% from 10.1%, for two main reasons: fiscal 2025 had benefited from releasing previously unrecognized tax benefits as statutes of limitation lapsed, and the global minimum tax applied in full in fiscal 2026. Changes in where income was earned and larger excess tax benefits from stock compensation partly offset these. Lam found the effects of both the global minimum tax and the July 2025 U.S. tax law (OBBBA) not material.
• A 15-year tax incentive in Malaysia, effective from fiscal 2022, reduced worldwide taxes by about $967.9 million in fiscal 2026 (about $0.77 per diluted share), up from $584.8 million ($0.45) in fiscal 2025.

Cash flow and capital allocation.

• Operating cash flow fell $315.6 million to $5.86 billion, despite higher net income. Accounts receivable grew $1.96 billion and deferred gross profit fell $286.4 million.
• Capital expenditures and intangible assets totaled $966.4 million, up from $759.2 million, for U.S. lab investment and manufacturing expansion worldwide. Lam defines free cash flow as operating cash flow less capital expenditures and intangible assets, which gives about $4.89 billion for the year.
• Lam returned $3.85 billion through share repurchases (including net share settlement of employee awards) and $1.27 billion through dividends. Dividends declared were $1.04 per share ($0.26 a quarter), up from $0.92. It also repaid $755.4 million of debt and debt issuance costs, mainly the $750 million of 3.75% notes that matured in March 2026.
• Under the program, Lam repurchased about 23.4 million shares during the year, including a $200 million accelerated share repurchase entered in March 2026 and settled in June 2026. About $4.04 billion of the May 2024 authorization remained at year-end.
• Cash, cash equivalents and restricted cash ended the year at $5.60 billion, down from $6.41 billion.

Balance sheet and obligations.

• Lam has $3.75 billion of fixed-rate senior notes due 2029 ($1.0 billion), 2030, 2049, 2050 and 2060, with a fair value of $3.16 billion. Nothing matures before March 2029.
• In March 2026 the commercial paper program was enlarged from $1.50 billion to $2.00 billion. The $2.00 billion revolving credit facility, which matures January 25, 2030, backstops it. Nothing was drawn on either at year-end.
• Goodwill was unchanged at $1.63 billion, with no impairments.
• Non-cancelable purchase obligations were $1.48 billion, and liabilities for uncertain tax positions were $762.4 million. The last installment of the 2017 U.S. transition tax was paid in fiscal 2026.
• Lam is not a party to any legal proceedings it considers material.

Outlook framing. Management says investment in wafer fabrication equipment was strong in calendar 2025 and has kept growing in 2026, with AI lifting spending in both memory and non-memory. It expects trade restrictions and tariffs to keep weighing on revenue and operating margin in the short term. Over the longer term it expects 3D scaling, multiple patterning and advanced packaging to keep expanding the market Lam serves.

Current quarter

June 2026 quarter (fourth quarter of fiscal 2026)

Source: earnings release furnished as Exhibit 99.1 to Form 8-K dated July 29, 2026, accession 0000707549-26-000033. The quarter's revenue, gross margin, operating expenses and net income equal the fiscal 2026 totals in the 10-K (accession 0000707549-26-000037) minus the nine-month totals in the Q3 10-Q (accession 0000707549-26-000022).

Lam described the quarter as setting records for revenue, operating margin and earnings per share.

• Revenue rose 15.1% from the March quarter and 30.0% from the year-earlier quarter. Systems revenue was $4.25 billion and customer support-related revenue was $2.47 billion.
• Non-GAAP gross margin was 52.0%, non-GAAP operating margin 38.4% and non-GAAP EPS $1.82. The non-GAAP figures exclude intangible amortization, elective deferred compensation effects, note-discount amortization and workforce optimization charges.
• Taiwan was the largest region at 27% of quarterly revenue, ahead of China at 26% and Korea at 20%.
• Deferred revenue rose to $2.43 billion from $2.22 billion. In addition, about $490.2 million of future revenue was tied to shipments to customers in Japan, which are held as inventory until the customer accepts them and are not counted in deferred revenue.
• Operating cash flow was $1.46 billion. Cash rose to $5.60 billion from $4.77 billion after $246.6 million of buybacks and $325.3 million of dividends.

CEO Tim Archer said AI-driven demand "continues to reshape the semiconductor industry" and that Lam is positioned for "a third consecutive year of outperformance in 2026."

Guidance for the September 2026 quarter (first quarter of fiscal 2027):

• Revenue of $8.10 billion ± $400 million.
• GAAP gross margin of 52.0% ± 1%.
• GAAP operating margin of 39.5% ± 1%.
• GAAP diluted EPS of $2.15 ± $0.15, on about 1.255 billion diluted shares.

GAAP and non-GAAP guidance differ only by about $3 million of amortization items.

March 2026 quarter (third quarter of fiscal 2026)

Source: Item 2 of the Form 10-Q for the quarter ended March 29, 2026, accession 0000707549-26-000022.

• Revenue was $5.84 billion, up 9% sequentially and up from $4.72 billion in the March 2025 quarter. Management attributed the gain to higher systems sales, chiefly from DRAM investment, and to customer-support growth from a larger installed base and more spares, upgrades and services. Lower spending on non-leading-edge equipment partly offset these.
• Foundry's share of equipment revenue fell to 54% from 59% in the December quarter, because of lower mature-node investment. Memory rose to 39% from 34%, with stronger DRAM and NAND investment.
• Gross margin edged up to 49.8% on better factory efficiency.
• Operating expenses rose on seasonal employee costs, higher headcount and workforce optimization costs.
• The effective tax rate was 9.3%, helped by stock-compensation tax benefits and the recognition of previously unrecognized tax benefits.
• Net income was $1.83 billion, or $1.45 per diluted share.
• Cash fell to $4.77 billion during the quarter, after $1.16 billion of buybacks, repayment of the $750 million 2026 notes, $331.6 million of capital expenditures and $325.8 million of dividends.
• Headcount was about 20,600 at March 29, 2026.

Subsequent events

Sources: fiscal 2026 Form 10-K, accession 0000707549-26-000037; Form 8-K dated July 29, 2026, accession 0000707549-26-000033; Form 8-K dated August 27, 2026, accession 0000707549-26-000043.

The fiscal 2026 10-K contains no subsequent-events note. Neither the 10-K nor the Form 8-Ks filed after June 28, 2026 discloses any acquisition, divestiture, new borrowing or debt issuance, or material litigation outcome after year-end. Developments after year-end:

• July 29, 2026: Lam reported fourth-quarter fiscal 2026 results and issued September 2026 quarter guidance (see above).
• August 4, 2026: 1,251,321 thousand common shares were outstanding.
• August 7, 2026: Lam filed its fiscal 2026 10-K. KPMG LLP, Lam's auditor since 2025, gave unqualified opinions on the financial statements and on internal control over financial reporting.
• August 24, 2026: Directors Sohail U. Ahmed and Michael R. Cannon told the Board they will retire effective November 2, 2026. The Board will shrink from 12 to 10 members on that date.
• On or about November 3, 2026: expected date of the annual meeting of stockholders.