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- LRCX 3Q25 - Record everything. What are you going to do next? Bull case $210 Bear case $95
LRCX 3Q25 - Record everything. What are you going to do next? Bull case $210 Bear case $95
Cheat Sheets
LAM RESEARCH CORPORATION (LRCX)
🔬 Record Q1 Revenue $5.32B (+3% QoQ) | Record Gross Margin 50.6% (Post-Novellus Record) | Record Operating Margin 35.0% | GAAP EPS $1.24 (Beat $1.19 Est) | Non-GAAP EPS $1.26
50% Affiliate Rule Impact: $200M Dec Quarter, $600M CY2026 | China Revenue to Drop Below 30% in CY2026 | Three Consecutive Quarters >$5B Revenue | Deferred Revenue $2.77B | Q2 Guidance: $5.2B Revenue, $1.15 EPS | WFE $105B+ CY2025 | Foundry 60% Systems Revenue (Record) | Combined Spares+Services Record
💰 Market Cap: $178B | 🏢 19,000 Employees | 🌍 TSMC, Samsung, Intel, Micron
👨💼 CEO Tim Archer | 🎯 #1 Etch, #2 Deposition | 🇺🇸 Fremont, CA
$140.62
📉 -$0.63 (-0.45%) After Hours
+97% YTD | Q1 FY2026 Post-Earnings
Price Targets (12-18 Months)
Current Price: $140.62 (After Hours)
$210.00
Bull Case (+49%)
FY2026 Revenue: $22B+ | Forward P/E: 30x
AI Supercycle Leader
🚀 Needs:
$8B WFE per $100B AI capex plays out • $40B NAND upgrades materialize with Lam capturing high % • HBM investments exceed expectations • Foundry holds 60%+ mix • Ether ramps beyond current customer • Panel packaging hits mainstream • Margins sustain 50%+ • China headwinds manageable
$165.00
Base Case (+17%)
FY2026 Revenue: $20B | Forward P/E: 27x
Steady AI Growth
⚖️ Needs:
Dec Q delivers $5.2B ±$300M at 48.4% margin • Three straight >$5B quarters achieved • WFE hits $105B+ CY2025 • China drops to <30% without collapse • $40B NAND upgrades stay strong into 2026 • Foundry mix 50-60% • CSBG outpaces install base • 50% affiliate rule contained to $600M • Margins hold 48-51%
$95.00
Bear Case (-33%)
FY2026 Revenue: $16B | Forward P/E: 18x
Demand Cliff
⚠️ Risk:
New export controls beyond $600M hit • China 43%→<30% disrupts more than expected • Down payments declining = demand weakening • Panel packaging premature (only 20 installs) • NAND upgrades exhaust faster • Memory pricing crashes • Foundry mix drops crushing margins • WFE contracts 2026 despite AI hype • Competition intensifies • Valuation compresses from 32x to 18x P/E
The TL;DR
💰
What Happened
RECORDS EVERYWHERE: Revenue $5.32B (beat), gross margin 50.6% (post-Novellus record), operating margin 35.0% (record)
FOUNDRY SURGE: 60% systems revenue (up from 52%), third consecutive record quarter
3 STRAIGHT >$5B: Three consecutive quarters above $5B, closing record CY2025
CHINA HIT: 50% affiliate rule = $200M Dec impact, $600M CY2026, China drops 43% → <30%
DEC GUIDANCE: $5.2B ±$300M, 48.4% margin, $1.15 EPS
FOUNDRY SURGE: 60% systems revenue (up from 52%), third consecutive record quarter
3 STRAIGHT >$5B: Three consecutive quarters above $5B, closing record CY2025
CHINA HIT: 50% affiliate rule = $200M Dec impact, $600M CY2026, China drops 43% → <30%
DEC GUIDANCE: $5.2B ±$300M, 48.4% margin, $1.15 EPS
📈
Why It Matters
AI MULTIPLIER: Tim: "$8B WFE per $100B data center capex," >50% is memory (HBM + SSDs)
$40B NAND PRIZE: Upgrade spending over several years, Lam captures "high percentage" due to install base
TECH WINS: Ether ramping in HBM production, Cryo 3.0 won SEMI Award, Low-K ALD wins
EX-CHINA STRENGTH: Strong WFE growth outside China offsets $600M regulatory hit
$40B NAND PRIZE: Upgrade spending over several years, Lam captures "high percentage" due to install base
TECH WINS: Ether ramping in HBM production, Cryo 3.0 won SEMI Award, Low-K ALD wins
EX-CHINA STRENGTH: Strong WFE growth outside China offsets $600M regulatory hit
🎯
Management Strategy
SAM EXPANSION: Tim: "billions in SAM expansion and share gain opportunity in coming years"
UPGRADES FIRST: Customers prioritize upgrades before new capacity = "fastest and lowest cost"
PANEL PUSH: 20 customer installs by year-end for emerging panel packaging tech
2026 SETUP: WFE "robust" with AI demand across all segments, CY2025 >$105B
UPGRADES FIRST: Customers prioritize upgrades before new capacity = "fastest and lowest cost"
PANEL PUSH: 20 customer installs by year-end for emerging panel packaging tech
2026 SETUP: WFE "robust" with AI demand across all segments, CY2025 >$105B
⚠️
Key Concerns
DOWN PAYMENTS DROP: Doug: $100M decline in Sept, "expect to continue in Dec" = demand weakening?
MARGIN FADE: 50.6% → 48.4% guided (210bp drop), couldn't hold record even one quarter
CLEANROOM LIMIT: Tim: "space will act as limiter to NAND growth" = $40B may stretch out
VALUATION RICH: 32x forward P/E, +97% YTD, analyst avg $131 vs $141 current
MARGIN FADE: 50.6% → 48.4% guided (210bp drop), couldn't hold record even one quarter
CLEANROOM LIMIT: Tim: "space will act as limiter to NAND growth" = $40B may stretch out
VALUATION RICH: 32x forward P/E, +97% YTD, analyst avg $131 vs $141 current
🐂 Bull Thesis
📈
Record Quarter Across All Metrics
Triple Records: Revenue $5.32B (beat est), gross margin 50.6% (post-Novellus record), operating margin 35.0% (record)
Three >$5B Quarters: Closing CY2025 with consistent execution above $5B/quarter
Services Outpacing: Spares+services record, growth faster than installed base = recurring revenue momentum
Three >$5B Quarters: Closing CY2025 with consistent execution above $5B/quarter
Services Outpacing: Spares+services record, growth faster than installed base = recurring revenue momentum
🤖
AI Supercycle Just Beginning
$8B per $100B: Tim quantified AI leverage—"$8B WFE per $100B data center investment"
Memory >50%: HBM + enterprise SSDs driving majority, NAND bit demand "trending higher than expected"
Billions in SAM: Tim: AI creating "billions in SAM expansion and share gain opportunity" over multi-year period
Memory >50%: HBM + enterprise SSDs driving majority, NAND bit demand "trending higher than expected"
Billions in SAM: Tim: AI creating "billions in SAM expansion and share gain opportunity" over multi-year period
🏆
Technology Leadership & Innovation
Ether Ramping: Dry resist EUV in HBM production, <15nm resolution, >10% dose reduction
Award Winner: Cryo 3.0 won 2025 SEMI Award, "industry standard for advanced NAND"
Recent Wins: Low-K ALD at foundry/DRAM, Halo Moly for 3 nodes including >500 layers, major NAND ALD win
Award Winner: Cryo 3.0 won 2025 SEMI Award, "industry standard for advanced NAND"
Recent Wins: Low-K ALD at foundry/DRAM, Halo Moly for 3 nodes including >500 layers, major NAND ALD win
💪
Strong Cash Generation & Shareholder Returns
$40B Upgrade TAM: NAND conversions over several years, Lam captures "high percentage" due to install base
Foundry 60%: Record systems mix (up from 52%), third consecutive record quarter = margin-rich segment
Panel Pipeline: 20 customer installs by year-end, early mover in emerging AI chip packaging tech
Foundry 60%: Record systems mix (up from 52%), third consecutive record quarter = margin-rich segment
Panel Pipeline: 20 customer installs by year-end, early mover in emerging AI chip packaging tech
🐻 Bear Thesis
🌍
Massive China Geopolitical Risk
$600M Hit Locked In: 50% affiliate rule = $200M Dec, $600M CY2026, China drops 43% → <30%
More Controls Coming?: Bipartisan pressure for additional restrictions could add hundreds of millions more
Largest Region Shrinking: 43% to <30% decline in single largest geographic segment = major shift
More Controls Coming?: Bipartisan pressure for additional restrictions could add hundreds of millions more
Largest Region Shrinking: 43% to <30% decline in single largest geographic segment = major shift
📉
Sequential Deceleration & Margin Compression
Margins Compressing: 50.6% → 48.4% guided (210bp drop), couldn't hold record even one quarter
Down Payments Falling: Doug: $100M Sept decline, "expect to continue in Dec" = weakening demand signal
Wide Range Uncertainty: $5.2B ±$300M guide = $4.9B-$5.5B, wide band shows low visibility
Down Payments Falling: Doug: $100M Sept decline, "expect to continue in Dec" = weakening demand signal
Wide Range Uncertainty: $5.2B ±$300M guide = $4.9B-$5.5B, wide band shows low visibility
🎢
Cyclical Peak & Valuation Concerns
Valuation Stretched: 32x forward P/E, +97% YTD, analyst avg $131 vs $141 = downside implied
Cyclical Peak Risk: Semicon equipment boom/bust history, AI hype mirrors past cycles that crashed
Assumes Perfection: Valuation prices in sustained 50%+ margins and >$5B revenue—any miss = multiple compression
Cyclical Peak Risk: Semicon equipment boom/bust history, AI hype mirrors past cycles that crashed
Assumes Perfection: Valuation prices in sustained 50%+ margins and >$5B revenue—any miss = multiple compression
⚡
Memory Volatility & Competition
Cleanroom Bottleneck: Tim: "space will act as limiter to NAND growth"—$40B TAM may stretch out
No Timing Clarity: Upgrades "over several years" with no phasing = binary event risk
Memory Cycles Turn Fast: History shows 30-50% capex cuts when pricing collapses, current strength reversible
No Timing Clarity: Upgrades "over several years" with no phasing = binary event risk
Memory Cycles Turn Fast: History shows 30-50% capex cuts when pricing collapses, current strength reversible
This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.
