Can AI-Driven Foundry Demand Drive LRCX's Systems Revenue Growth?

Lam Research Corporation LRCX is seeing growing support from artificial intelligence (AI)-driven demand in the foundry market, which is becoming a key driver of its systems revenues. In the first quarter of fiscal 2026, Systems revenues surged 48.3% year over year to $3.55 billion. Of the total Systems sales, the foundry business accounted for 60%, up from 52% in the previous quarter.

Lam Research’s foundry business continues to benefit from rising investments in advanced chip manufacturing, especially for artificial intelligence (AI) and high-performance computing applications. The company’s strong position in etch and deposition tools, which are critical for smaller and more complex transistor designs, has made it a key supplier to major foundries.

Lam Research’s new technologies, such as the Aether dry resist extreme ultraviolet (EUV) 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.

Analysts’ projections for fiscal 2026 also support our views of the continued growth momentum across LRCX’s Systems business unit, at least in the near term. The Zacks Consensus Estimate for Systems’ fiscal 2026 revenues is pegged at $14.07 billion, indicating year-over-year growth of 22.3%.

LRCX’s Competitors 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 77% over the past six months compared with the Zacks Electronics – Semiconductors industry’s gain of 31%.

LRCX Six-Month Price Return Performance

From a valuation standpoint, Lam Research trades at a forward price-to-earnings ratio of 31.69, significantly lower than the industry’s average of 35.31.

LRCX Forward 12-Month P/E Ratio

The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 15.7% and 16.2%, respectively. Estimates for fiscal 2026 and 2027 earnings have been revised upward in the past 60 days and 30 days, respectively.

Lam Research currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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