Q2 FY27 · the quarter LRCX reports
Sales
PricedIn$8.65B$8.21B – $9.07B
$8.21B$8.65B$9.07B
adjusted EPS
PricedIn$2.35$2.16 – $2.54
$2.16$2.35$2.54
Middlethe forecast80% range1 in 10 chance below this bar, 1 in 10 above it. These are the low and high printed by each number.
All six anchor on the company's guide, so middles span only $8.6B to $8.8B. Grok, GLM and Muse Wonder hold the lowest, $8.6B and $2.33; Grok says 'I therefore do not put December sales above the guide' because held-back shipments move to March. Opus holds the highest, $8.8B and $2.39, because 'The company has beaten its revenue midpoint by $120-140 million and its earnings per share midpoint by 5 to 17 cents in each of the last four quarters.'
December quarter sales of about $8.7B, just above the company's own midpoint, with the six models tightly grouped.
Sales$8.65B$8.21B – $9.07B · +62% on Q2 FY26 ($5.34B)
Adjusted EPS$2.35$2.16 – $2.54 · +85% on Q2 FY26 ($1.27)
Investment and cash generation
Base case
Capital spending$318M
Free cash flow$2.58B
Free cash flow: operating cash flow less capital spending.
The September quarter set records: sales of $8.2B, up 22% on the quarter before, and $2.20 of adjusted earnings per share. Operating margin reached 40% for the first time.
For the December quarter the company guided to $8.6B of sales and $2.33 a share. It said the guide would have been a bit higher without parts shortages, and that China will be a much smaller share of sales than in September.
The six AI models put December sales between $8.6B and $8.8B and earnings per share between $2.33 and $2.39, averaging $8.7B and $2.35. Grok, GLM and Muse Wonder sit on the guide; Opus, Sol and Gemini add a small premium for the company's record of beating its midpoint.
One change works against earnings: the tax rate rose to 16.5% from 11%, and the company expects it to stay there. Ranges are narrow, $8.2B to $9.1B of sales on average, because the quarter is already guided.
Earnings per share of $2.35 on average come from sales near $8.7B, gross margin near 53%, operating margin near 41% and a 16.5% tax rate, spread over about 1.253 billion shares.
Outlook against result
Q4 FY25+3.4%$5.00B → $5.17B
Q1 FY26+2.4%$5.20B → $5.32B
Q2 FY26+2.8%$5.20B → $5.34B
Q3 FY26+2.5%$5.70B → $5.84B
Q4 FY26+1.9%$6.60B → $6.72B
Q1 FY27+1.5%$8.10B → $8.22B
Q2 FY27+0.6%$8.60B → $8.65B
Each outlook is the one the company gave before the quarter. The last row is the models' forecast.
The quarter forecast, line by line
The lines as the company's statement shows them. The forecast columns are the average of the models, line by line. Sales growth is the change on the same quarter a year earlier. Earnings per share is the headline's: the company's own for the reported quarter, and for a forecast quarter worked out from the averaged lines with the company's adjustments.
What it rests on
- December sales guide
- $8.6B at the midpoint
We're expecting revenue of $8.6 billion, plus or minus $400 million.
October earnings call - December earnings guide
- $2.33 a share on about 1.253 billion shares
earnings per share of $2.33 plus or minus 15 cents based on a share count of approximately 1.253 billion shares.
October earnings call - Supply limits
- The guide would have been a bit higher without parts shortages
I would mention that this revenue guide would have been a bit higher if not for some near-term supply chain constraints that we are actively managing.
October earnings call - China share falls
- China expected to be a much smaller share of December sales
In the December quarter, we expect China will represent a significantly lower percentage of our total revenue compared with the September quarter.
October earnings call - Higher tax rate
- 16.5% in September, up from 11% in June
The non-dap tax rate was 16.5% for the quarter compared to 11% in the June quarter and in line with our expectations.
October earnings call
Low and high
Basethe middle forecast
Key assumptions
December sales land at or just above the company's $8.6B midpoint. That is the company's guide, and it has beaten its midpoint in each of the last four quarters.6 of 6
- Opus 5.5so I put the December quarter at $8.75 billion and $2.39, a little above the $8.6 billion and $2.33 guide
- GPT-6.1 SolI forecast $8.7 billion and $2.37, a small execution premium, not a large beat.
- Grok 4.7I set next-quarter sales and adjusted earnings per share at the middle of that guide
- GLM 5.3I take the guidance midpoints directly as my next-quarter middle
- Gemini 4 Argonsetting our second quarter fiscal 2027 middle forecast slightly above management's guidance midpoint
- Muse WonderUsed company guidance as middle for Q2
The tax rate stays near 16.5%. It rose on higher U.S. tax on foreign earnings, and the company expects it to last.6 of 6
- Opus 5.5I use a 16.5% adjusted tax rate in every quarter except March
- GPT-6.1 SolI use a recurring adjusted tax rate of 16.5% through fiscal 2028
- Grok 4.7I use about 16.5 percent in every horizon
- GLM 5.3I apply 16.5 percent to every horizon
- Gemini 4 ArgonWe incorporate a 16.5 percent effective tax rate across our earnings per share forecasts
- Muse Wonderquarter plans use about 16.5% rather than prior low-teens
Gross margin near the guided 52.5% and operating margin near 40.5%. The company guided both even with a less favorable customer mix as China's share falls.4 of 6
- Grok 4.7I set the gross and operating margins at the guided 52.5 percent and 40.5 percent
- GPT-6.1 SolAdjusted gross and operating margins are 52.6% and 40.6%.
- GLM 5.3so I keep gross margin near 52.5 percent rather than assuming a faster climb
- Muse Wondergross margin 52.5%, operating margin 40.5%
No China cut beyond what the guide already holds. The company already expects China to be a much smaller share of December sales.2 of 6
- Grok 4.7which is already in the guide, so I do not add a further China cut to the December middle
- GPT-6.1 Solthe near-quarter forecast does not assume another exceptional Chinese mix
About 1.253 billion diluted shares as buybacks continue. The company runs an accelerated buyback that continues into December.2 of 6
- GPT-6.1 SolI use about 1.253 billion diluted shares in December
- GLM 5.3about 1.253 billion in December
If all of this happens
$8.65Bsales
$2.35adjusted EPS
$318MCapital spending
$2.58BFree cash flow
Cash walk not supplied by every model.
Lowabout 1 chance in 10 of worse
What the low case assumes
Parts shortages hold back more December shipments than the guide allows. The company already trimmed the guide for supply limits it is still managing.4 of 6
- Opus 5.5Supply shortages of parts cap shipments for several quarters
- GLM 5.3my low cases allow for constraints biting harder than expected
- GPT-6.1 SolFactory openings and component deliveries slip
- Muse Wondersupply constraints would worsen
Chinese domestic customers cut buying more than the guide expects. China's share of sales is already set to fall sharply in December.3 of 6
- Opus 5.5China domestic spending falls more than expected
- GPT-6.1 SolChinese domestic purchases fall after the September peak
- Muse WonderChina would drop more than expected
Margins slip on customer mix while research spending keeps rising. The guide already flags mix headwinds, and research costs cannot be cut quickly.2 of 6
- Grok 4.7profit margins slip as the customer mix worsens
- GPT-6.1 SolWeaker margins with sustained research spending
If all of this happens
$8.21Bsales · −5% vs base
$2.16EPS · −8% vs base
Sales would fall to about $8.2B, 5.1% below the base and at the bottom of the company's range, with earnings per share of $2.16, 8.1% lower. Parts shortages would have to hold back more shipments than the guide allows, Chinese domestic buying would have to drop faster, and margins would slip on a worse customer mix. Sol's earnings low is furthest, $2.10, because it holds that 'Less favorable mix and research spending that cannot fall immediately amplify the earnings decline.'
The company has beaten its sales midpoint in each of the last four quarters, and September's $8.2B topped its $8.1B guide.
The six lows run from $8.15B (GPT-6.1 Sol) to $8.35B (Opus 5.5).
First signDecember quarter sales at or below $8.2B, the bottom of the guide, when the company next reports.
Highabout 1 chance in 10 of better
What the high case assumes
Supply limits clear quickly and customers pull shipments into December. The finance chief said December's guide was held down by timing of parts, not demand.4 of 6
- Opus 5.5Supply constraints clear quickly
- Grok 4.7Parts shortages and factory-space limits ease faster than the company expects
- Gemini 4 ArgonRapid resolution of component supply constraints allowing accelerated tool shipments and customer pull-ins starting in the December 2026 and March 2027 quarters
- GLM 5.3December comes in at the top of the guide
The company beats its midpoint again, as in the last four quarters. Its guides have proved cautious each quarter this year.2 of 6
- Opus 5.5The company has beaten its revenue midpoint by $120-140 million and its earnings per share midpoint by 5 to 17 cents in each of the last four quarters
- Gemini 4 Argonto reflect consistent quarterly execution
Gross margin rises above the 52.5% guide toward the mid-50s sooner. New products and pricing drove the record margin, and management targets the mid-50s.2 of 6
- Grok 4.7gross margin climbs toward the mid-50s sooner than in the base case
- GPT-6.1 SolStrong services and pricing let gross margin approach the mid-fifties and operating margin the mid-forties earlier
If all of this happens
$9.07Bsales · +5% vs base
$2.54EPS · +8% vs base
Sales would reach about $9.1B, 4.8% above the base and at the top of the guided range, with earnings per share of $2.54, 8.0% higher. Supply limits would have to clear fast enough to ship in December what the company now expects to ship in March, the run of beats would continue, and margins would edge up. Sol goes furthest, $9.2B and $2.64, holding that 'Strong services and pricing let gross margin approach the mid-fifties and operating margin the mid-forties earlier.'
September sales rose 22% on June, and the company has topped its sales midpoint four quarters running.
The six highs run from $9.00B (GLM 5.3) to $9.15B (GPT-6.1 Sol).
First signDecember quarter sales above $9.0B when the company next reports.
Watch
At the next report, December sales near $8.6B keep the base; near $8.2B points lower and above $9.0B higher. Watch China's share of sales, gross margin against the 52.5% guide, and whether the company says the held-back shipments are on track for March.
Q3 FY27 · the quarter after
Sales
PricedIn$9.3B$8.6B – $10.1B
$8.6B$9.3B$10.1B
adjusted EPS
PricedIn$2.57$2.26 – $2.87
$2.26$2.57$2.87
Middlethe forecast80% range1 in 10 chance below this bar, 1 in 10 above it. These are the low and high printed by each number.
All six see March above December; they differ on how much. Grok and Gemini hold the lowest middle, $9.2B, and Grok the lowest earnings, $2.51; it puts March 'above December, to include the delayed shipments plus underlying demand.' Sol holds the highest, $9.5B and $2.62, because 'Management says December shipments delayed by component availability should shift into March' and it adds new demand on top. Sol's range is also widest, $8.6B to $10.5B.
March quarter sales of about $9.3B as shipments held back in December arrive and new chip plants open.
Sales$9.3B$8.6B – $10.1B · +60% on Q3 FY26 ($5.8B)
Adjusted EPS$2.57$2.26 – $2.87 · +75% on Q3 FY26 ($1.47)
Investment and cash generation
Capital spending: not supplied by every model
Free cash flow: not supplied by every model
Free cash flow: operating cash flow less capital spending.
The March quarter is the one the company will guide at its next report. It has already said that equipment it could not ship in December because of parts shortages will ship in March instead.
The models put March sales between $9.2B and $9.5B, averaging $9.3B, 7.9% above December, with earnings per share of $2.57. Sol, GLM and Muse Wonder see growth of 9.2% to 9.3%; Opus, Grok and Gemini see 6.3% to 6.9%.
Beyond the catch-up, ten new top-tier chip plants open through 2027, and deferred revenue rose in September, a sign orders are running ahead of shipments. Costs rise too, with operating spending near $1.1B as the company hires.
The range is wider than December's: $8.6B to $10.1B of sales on average. The low end has the held-back shipments slipping again; the high end has supply clearing and customers pulling orders in.
March earnings per share of $2.57 on average rest on gross margin near 53%, operating margin near 41% and a tax rate near 16%, which Opus lowers for March because share vesting cut the rate last year.
What it rests on
- Shipments move to March
- Equipment missed in December for timing will ship in the March quarter
And yeah, Tim, to the extent that it's something we would have shipped in December, because of timing, we will ship that in the March quarter.
October earnings call, finance chief - New plants in 2027
- Ten new top-tier chip plants coming online through 2027
we see 10 new Tier 1 fabs coming online between the beginning of the year and the end of the year.
October earnings call - Deferred revenue
- $2.66B at the end of September, up from June
The deferred revenue balance at quarter end was $2.66 billion, which was an increase of $227 million from the June quarter.
October earnings call - Customer support record
- Nearly $2.5B in September, a fourth straight record
The customer support business group generated a fourth consecutive quarter of record revenues at nearly $2.5 billion in the September quarter.
October earnings call
Low and high
Basethe middle forecast
Key assumptions
Shipments held back in December land in March, on top of underlying demand. The finance chief said December shipments missed for timing will ship in the March quarter.4 of 6
- GLM 5.3That is why I model March-quarter revenue of about $9.4 billion
- GPT-6.1 SolThis supports March sales of $9.5 billion
- Grok 4.7I put March sales at $9.15 billion, above December, to include the delayed shipments plus underlying demand
- Gemini 4 Argonour rebound to $9.25 billion in the March 2027 quarter
New chip plants open through 2027 and take more equipment. The company sees ten new top-tier plants coming online across 2027.3 of 6
- Opus 5.5as new clean rooms open
- Muse Wondergrowth through 2027 as new cleanrooms open
- GLM 5.3with ten new top-tier fabs coming online during 2027
Gross margin holds near 53% while operating costs rise with hiring. Management says gross margin will bounce around today's level in the near term.2 of 6
- GPT-6.1 Solgross margin of 52.8% and operating expenses of $1.12 billion
- Opus 5.5Gross margin near 52.5 to 53 percent
Orders already running ahead of shipments support the step-up. Deferred revenue rose to $2.66B at the end of September.1 of 6
- GLM 5.3This supports the March-quarter step-up in my quarter plan.
Tax rate near 16% in March, a little under the 16.5% run rate. Share vesting lowered the March quarter's tax rate last year.1 of 6
- Opus 5.5which I set at 16% because share vesting gave a lower rate in the March quarter last year
If all of this happens
$9.3Bsales
$2.57adjusted EPS
Lowabout 1 chance in 10 of worse
What the low case assumes
Supply limits last beyond December and the held-back shipments slip again. The company still expects parts and clean-room limits through 2027.3 of 6
- Opus 5.5Supply shortages of parts cap shipments for several quarters
- GLM 5.3Supply-chain and cleanroom delays push revenue out beyond March 2027
- Muse WonderCleanroom and component constraints persist and delay shipments
Customers' new clean rooms open late, pushing tool deliveries out. Equipment cannot be installed until plant space is ready.3 of 6
- Gemini 4 ArgonSlower cleanroom construction schedules at memory and foundry customers pushing tool deliveries to later periods
- GPT-6.1 SolDelayed factory capacity and component delivery
- GLM 5.3sequential growth stalls through 2027
China keeps falling after December. China is about a third of sales and exposed to export rules.2 of 6
- Muse WonderChina revenue falls sharply in December and beyond
- Grok 4.7China, about a third of last year's sales, shrinks under tighter export rules
If all of this happens
$8.6Bsales · −8% vs base
$2.26EPS · −12% vs base
Sales would stay near $8.6B, 8.4% below the base and barely above December, with earnings per share of $2.26, 12% lower. The held-back shipments would have to slip again, new plants would open late and China would keep shrinking. Opus, Grok, Gemini and Muse Wonder go furthest, $8.5B; Opus holds that 'Supply shortages of parts cap shipments for several quarters,' not just one, and Opus, Sol and Grok put earnings as low as $2.20.
Sales have risen every quarter since late 2024, from $4.4B to $8.2B, so a flat March would break the run.
The six lows run from $8.5B (Gemini 4 Argon) to $8.7B (GLM 5.3).
First signA March quarter guide below about $9.0B at the company's next report.
Highabout 1 chance in 10 of better
What the high case assumes
Supply clears and customers pull orders into March. Shipments were held back by parts timing, not by lack of demand.3 of 6
- Gemini 4 ArgonRapid resolution of component supply constraints allowing accelerated tool shipments and customer pull-ins starting in the December 2026 and March 2027 quarters
- Opus 5.5shipments held back from December land in March
- GPT-6.1 SolFaster factory openings and supply recovery
Margins rise toward the mid-50s sooner on services and pricing. Management targets mid-50s gross margin over several years.2 of 6
- GPT-6.1 SolStrong services and pricing let gross margin approach the mid-fifties and operating margin the mid-forties earlier
- Grok 4.7gross margin climbs toward the mid-50s sooner than in the base case
Sales grow close to ten percent a quarter through 2027. New plants and constrained demand leave room for faster quarterly growth.1 of 6
- GLM 5.3revenue grows close to ten percent sequentially through 2027
If all of this happens
$10.1Bsales · +8% vs base
$2.87EPS · +12% vs base
Sales would reach about $10.1B, 8.5% above the base, with earnings per share of $2.87, 12% higher. Supply would have to clear so March carries both the catch-up and pulled-in orders, with growth near ten percent a quarter and firmer margins. Sol goes furthest, $10.5B and $3.05, because its high has 'Customers find capacity sooner, supply shortages ease quickly and worldwide equipment spending exceeds the initial outlook.'
September sales rose 22% on June, so a large quarterly jump has happened recently.
The six highs run from $9.8B (Grok 4.7) to $10.5B (GPT-6.1 Sol).
First signA March quarter guide above $10B at the company's next report.
Watch
The next report gives the March guide: near $9.3B keeps the base, under $9.0B points lower, above $10B higher. Watch whether the company says the December shortfall has shipped and whether clean-room openings stay on schedule.