Lam Research's Latest Earnings Report Says the AI Chip Supercycle Isn't Over. Here's Why.

Lam Research (NASDAQ: LRCX), one of the world's largest semiconductor equipment makers, posted its latest earnings report on July 29. For the fourth quarter of fiscal 2026, ending on June 28, Lam's revenue rose 15% year over year to $6.72 billion and beat analysts' estimates by $50 million. Its adjusted EPS grew 24% to $1.82, beating the consensus forecast by $0.14.

For the full year, Lam's revenue and adjusted EPS rose 26% and 41%, respectively. That marked an acceleration from fiscal 2025, when its revenue and adjusted EPS grew 24% and 31%, respectively. Let's see why those numbers indicate the AI chip supercycle isn't over yet.

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Why is Lam a linchpin of the semiconductor sector?

Lam is one of the world's largest producers of wafer fabrication equipment (WFE) for manufacturing silicon wafers. That makes it a linchpin of the chip market.

Lam's tools enable the production of high-bandwidth memory (HBM) chips and packaging architectures that keep AI processors structurally sound and thermally efficient. They also support atomic-level deposition and etching techniques for the tiniest sub-3nm chips. In other words, every major advancement in AI memory stacking, chiplet packaging, and transistor scaling relies heavily on Lam's wafer manufacturing equipment.

In the past, Lam's growth followed the semiconductor market's boom-and-bust cycles. Its last bust occurred in fiscal 2024, when its revenue dropped 14% amid declining PC and smartphone sales, export curbs against China, and intensifying macro headwinds. But from 2024 to 2026, its revenue grew at a 25% CAGR as the cloud, data center, and AI markets expanded.

Why isn't the AI chip supercycle over?

For the first quarter of fiscal 2027, Lam expects its revenue to grow at a midpoint of 52% year over year, its adjusted operating margin to expand 450 basis points to 39.5%, and its EPS to rise 71%. That acceleration indicates the AI supercycle is far from over.

During the conference call, CEO Tim Archer said Lam was seeing an "extraordinary setup for WFE growth" in 2027 with the AI market's expansion driving "record revenue and profitability for our customers." Archer said its customers were signaling an "unprecedented" long-term demand for its equipment by announcing "multi-year timelines for new fab projects".

From fiscal 2026 to fiscal 2028, analysts expect Lam's revenue and EPS to grow at CAGRs of 31% and 42%, respectively. Its stock has already rallied more than 220% over the past 12 months, and it isn't a bargain at 34 times this year's earnings, but it could still have plenty of room to run as the AI chip supercycle continues.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lam Research. The Motley Fool has a disclosure policy.