Goldman Sachs Lam Research Corp. (LRCX.US): Solid Quarter and Strong Guidance Reflect Robust WFE Expectations Through 2027; Buy
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Goldman Sachs maintains its Buy rating on Lam Research (LRCX) and raises the 12-month target price from $180 to $262, applying a 32x P/E multiple to a normalized EPS estimate of $8.25. Lam's December quarter revenue reached $5.345 billion, exceeding consensus, while non-GAAP gross margin expanded to 49.7%. Service revenue significantly outpaced expectations at $1.987 billion. The March quarter guidance also surpassed consensus, with a revenue midpoint of $5.70 billion and non-GAAP EPS midpoint of $1.35.
Management projects global wafer fab equipment (WFE) spending will reach approximately $130 billion in 2026, representing 23% year-over-year growth, followed by further expansion in 2027. While China revenue declined sequentially to 35% of the total mix, management expects continued normalization. The firm notes that Lam's substantial exposure to deposition and etching technologies, coupled with its dominant position in NAND equipment upgrades, positions the company to outperform peers. Goldman Sachs raised its 2026-2027 non-GAAP EPS forecasts by an average of 22%. Key downside risks include potential pauses in NAND supplier upgrade spending, tightened US export restrictions, and lithography intensity shifting away from deposition and etching.