How the company works
What it sells, how it makes money, and the anatomy of the extremes: what has to break for the result to land far from the forecast, either way. In Lam Research's own words, from its annual report for fiscal 2026.
Lam Research builds the machines that chipmakers use to deposit, etch and clean the layers of a semiconductor wafer, and sells the spares, upgrades and service those machines need for the rest of their lives.
How it makes money
Two streams. Systems revenue, $14.9B in fiscal 2026, is new equipment sold when memory and foundry customers add or upgrade capacity; it rises and falls with their spending. Customer support revenue, $8.3B, is spares, services, upgrades and non-leading-edge tools for the installed base, and it grows as the base grows. Revenue was $23.2B, up 26.0%, with a gross margin of 50.5% and net income of $7.3B.
What it sells
| Fiscal 2026 | Revenue | A year earlier |
|---|---|---|
| Systemsdeposition (ALTUS, SABRE, VECTOR, Striker), etch (Kiyo, Flex, Vantex, Akara), clean (EOS, Coronus), dry EUV resist (Aether) | $14.9B | $11.5B |
| Customer support and otherspares, service, upgrades, Equipment Intelligence software, Reliant non-leading-edge tools | $8.3B | $6.9B |
By customer market: foundry 54%, memory 39%, logic and integrated device makers 7%. By region: China 34%, Taiwan 22%, Korea 19%, Japan 9%, United States 7%.
Unit economics
A tool, once qualified on a production line, stays: "once a semiconductor manufacturer has selected a particular supplier's equipment and qualified it for production, the manufacturer generally maintains that selection" for that process and node, so wins are sticky and losses are too. Research is $2.4B a year, 10.2% of revenue; 23,300 employees, over 26% in research. Assembly is largely outsourced, so costs flex with volume. Non-US sales are 93% of revenue, and a few customers are most of it: Micron, Samsung, SK hynix and TSMC were the largest in each of the last three years.
Competitive position
A leader in etch and deposition, the steps that matter most as chips go vertical (3D NAND, gate-all-around transistors, HBM stacking, advanced packaging). Named rivals: Applied Materials in deposition and etch; Tokyo Electron and Hitachi in etch; ASM International and Wonik IPS in atomic layer deposition; Screen, Semes and Tokyo Electron in clean. US export controls restrict sales to Chinese customers, which the company says "provides an advantage to our international competitors that are not subject to these restrictions".
Biggest cost inputs
Parts and sub-assemblies from suppliers, some single-sourced, held in inventory against shortages; steel and aluminum, on which tariffs raised manufacturing costs in fiscal 2026; outsourced manufacturing, warehousing and logistics; and people: research expense rose $131.4M this year on employee-related costs from added headcount alone. Export licenses are a cost of access, not of production.
Anatomy of a large upside
- AI chips need more etch and deposition per wafer. 3D NAND with more layers, HBM stacks, gate-all-around logic and advanced packaging all add process steps, and Lam's dry EUV resist opens a new market in lithography; the foundry share of revenue already rose from 45% to 54% in a year.
- The installed base compounds. Every system shipped adds spares, service and upgrades for years; customer support revenue grew 20.2% to $8.3B, and it keeps growing in a downturn when systems sales do not.
- A memory upcycle. Memory is 39% of revenue and its makers, Micron, Samsung and SK hynix, are Lam's largest customers; a capacity race for HBM and DRAM brings a second leg after foundry.
Anatomy of a large downside
- Chipmakers cut capital spending. "Our business depends upon the expenditures of semiconductor manufacturers"; the industry "is subject to variability and periods of rapid growth or decline", and a few customers decide most of the year.
- China closes further. China is 34% of revenue; export controls and entity listings already limit what can be sold there, and the company expects sales there "to be materially and adversely affected" by further restrictions, while local toolmakers take the gap.
- A rival wins the next node. A qualification lost at a technology inflection stays lost for that node; Applied Materials and Tokyo Electron compete on every tool, and tariffs on steel and aluminum are already in the margin.
Written from Lam Research's annual report for fiscal 2026, in its words and numbers. The extremes are the long view, what has to break for the result to land far from the forecast; the quarter's own cases, each model's, are on the quarter forecast.