AI Boom Aids LRCX's Systems Revenue Growth: Can the Momentum Continue?

Lam Research Corporation LRCX is witnessing strong traction in its Systems business, fueled by the ongoing surge in artificial intelligence (AI)-driven semiconductor spending. As chipmakers expand capacity for high-performance computing and AI workloads, demand for LRCX’s etch and deposition tools continues to rise.

This trend is supporting steady order flows and improving visibility for Lam Research’s Systems revenues in the near term. In the second quarter of fiscal 2026, Systems revenues rose 28% year over year to $3.36 billion. The robust growth reflects rising investments in advanced nodes, high-bandwidth memory (HBM) and complex chip architectures that require more process steps and precision tools.

The broader industry backdrop indicates that the segment’s growth momentum will continue at least in the near term. On the second-quarter earnings call, management stated that it expects wafer fabrication equipment (WFE) spending to reach about $135 billion in 2026, up from nearly $110 billion in 2025, driven largely by AI infrastructure demand. This expanding spending pool directly benefits LRCX’s Systems segment, which is closely tied to leading-edge manufacturing.

Lam Research’s new technologies, such as the Aether dry resist extreme ultraviolet patterning solution and the Akara conductor etch system, are gaining traction with leading-edge chipmakers. These advanced technologies improve pattern precision and process efficiency, which is essential for the ongoing transition to next-generation nodes like gate-all-around transistors.

We believe that the company’s sustained focus on expanding technological leadership, along with the rising demand for AI and advanced computing chips, will strengthen its foundry business. This will continue driving the company’s Systems revenues in the near term. The Zacks Consensus Estimate for Systems revenues in fiscal 2026 is pegged at $14.5 billion, indicating a year-over-year increase of 26.2%.

LRCX’s Rivals in the Foundry Equipment Market

Applied Materials, Inc. AMAT and KLA Corporation KLAC are two major competitors of Lam Research in the semiconductor equipment market.

Applied Materials competes directly with LRCX in deposition and etch technologies used in foundry and logic manufacturing. Applied Materials’ large product portfolio and customer relationships with top chipmakers like TSMC and Samsung make it a key player in the chipmaking equipment space.

KLA Corporation specializes in process control and inspection tools that are essential for maintaining yield and quality in advanced chip production. While it doesn’t compete head-to-head with Lam Research in core etch or deposition, KLA Corporation’s process control and inspection tools play a crucial role in the chip-making process.

LRCX’s Share Price Performance, Valuation and Estimates

Shares of Lam Research have surged 251.2% over the past year compared with the Zacks Electronics – Semiconductors industry’s growth of 101.6%.

LRCX One-Year Price Return Performance

Image Source: Zacks Investment Research

From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 34.55, significantly higher than the industry’s average of 27.01.

Lam Research Forward 12-Month P/E Ratio

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 26.6% and 27%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward over the past 60 days.

Image Source: Zacks Investment Research

Lam Research currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Radical New Technology Could Hand Investors Huge Gains

Quantum Computing is the next technological revolution, and it could be even more advanced than AI.

While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.

Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.

Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.

See Top Quantum Stocks Now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

KLA Corporation (KLAC): Free Stock Analysis Report

Lam Research Corporation (LRCX): Free Stock Analysis Report

Applied Materials, Inc. (AMAT): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research