Portfolio: Zacks Focus List

Lam Research is a leading supplier of wafer fabrication equipment — the process steps that define chip geometry — plus a services arm (Customer Support Business Group) that generated $8.35 billion in FY2026, up 20.2%, from spares, upgrades, and service on its installed base. Its moat rests on process leadership in etch and deposition, where tools become designed into customers’ production flows and are costly to displace, and on a large installed base that converts each system sale into years of recurring, high-margin service revenue.

Fundamentals are accelerating: FY2026 revenue rose 26% to a record $23.23 billion, gross margin expanded from 48.7% to 50.5%, and EPS grew 38.8% to $5.76. Q2 revenue hit a record $6.72 billion (+30% YoY) at a 37.4% GAAP operating margin. Order visibility is improving: deferred revenue — Lam’s closest backlog proxy — rose to $2.43 billion from $2.22 billion sequentially, with roughly $490 million more in Japan shipments awaiting acceptance. Growth is AI-driven: memory reached 46% of systems revenue as HBM/DRAM and NAND upgrades raise etch and deposition intensity per wafer, and management guided September-quarter revenue to $8.1 billion. We view the current environment as an attractive buying opportunity with business fundamentals clearly bullish while shares have pulled back a healthy -25%. As a result, valuation risk has mostly been mitigated, in our view.