Why Lam Research (LRCX) Remains a Strong Buy Despite Recent Volatility

In the face of recent market volatility, Lam Research (LRCX) stands out as a compelling investment opportunity, driven by robust earnings growth, an undervalued stock price, and a strategic position in the semiconductor industry's most transformative trends. While short-term fluctuations may unsettle investors, the company's fundamentals-backed by strong financial performance and long-term industry tailwinds-underscore its resilience and growth potential.

Earnings Growth: A Foundation of Resilience

Lam Research's financial performance in 2025 has far exceeded expectations, with full-year non-GAAP earnings per share (EPS) reaching $4.17, a 44% increase compared to $2.91 in FY 2024. This outperformance highlights the company's ability to capitalize on surging demand for semiconductor manufacturing equipment. Looking ahead, the company projects a 40.7% year-over-year (YoY) EPS growth for 2026, aligning with its long-term strategy to leverage AI and advanced memory technologies.

Recent quarterly results further reinforce this optimism. For the quarter ending September 28, 2025, Lam reported revenue of $5.32 billion-a 3% rise from the prior quarter-and non-GAAP diluted EPS of $1.26, reflecting strong operational efficiency. While the December 2025 quarter guidance of $1.15 non-GAAP diluted EPS (±$0.10) introduces some near-term uncertainty, the company's ability to consistently exceed expectations suggests a resilient business model.

Valuation Appeal: A Discounted Leader in a Premium Sector

Lam Research's forward price-to-earnings (P/E) ratio of 33.5x is notably lower than the U.S. semiconductor industry average of 35.6x and its immediate peers' average of 37.1x according to market analysis. This discount becomes even more compelling when considering Zacks Investment Research's forward 12-month P/E of 22.32, which is significantly below the industry average of 32.9 as reported by financial analysts. Such a valuation gap suggests the market may be underappreciating Lam's strong cash flow generation and dominant market position.

For context, Lam's non-GAAP operating income as a percentage of revenue hit 35.0% in the September 2025 quarter, demonstrating its ability to convert top-line growth into profitability. With margins expanding and earnings accelerating, the current valuation offers a margin of safety for investors seeking exposure to the semiconductor sector's long-term growth.

Long-Term Tailwinds: AI and Advanced Memory as Growth Catalysts

Lam Research is uniquely positioned to benefit from two of the semiconductor industry's most critical trends: artificial intelligence (AI) and advanced memory technologies. Shipments for gate-all-around (GAA) nodes and advanced packaging-key components for next-generation AI chips-surpassed $1 billion in 2024 and are projected to triple to over $3 billion in 2025. The company's product portfolio, including advanced deposition and etch systems, is essential for building complex architectures required for AI and data center applications.

Moreover, Lam is proactively adapting to emerging industry demands. Innovations such as backside power distribution and dry-resist processing are already being integrated into its tools, ensuring its relevance in the next phase of semiconductor manufacturing. With AI-driven compute demand expected to remain a multi-year growth driver, Lam's technological leadership positions it to capture a disproportionate share of the market.

Conclusion: A Strategic Buy for the Long-Term

Despite recent volatility, Lam Research's combination of strong earnings growth, an undervalued stock price, and a leadership role in AI and advanced memory technologies makes it a standout investment. The company's ability to consistently exceed financial targets, coupled with its strategic alignment with industry tailwinds, provides a compelling case for investors to act now. For those seeking exposure to the semiconductor sector's next phase of innovation, LRCX offers a rare blend of near-term momentum and long-term potential.