Lam Research Guides 2027 WFE Above $200 Billion and Lifts Dry Resist Target by $1 Billion, While Pitching SLC NAND as a New Wafer Demand Driver
September 2026 quarter earnings call, October 21, 2026
Lam Research delivered a fifth consecutive record quarter and used its call to widen the debate beyond near-term wafer fab equipment (WFE) growth. Management offered a preliminary 2027 WFE outlook of "more than $200 billion," up from a mid-$150 billion estimate for 2026, and introduced a new NAND thesis: that a shift toward SLC-class devices could materially raise wafer capacity needs. It also raised its cumulative dry resist (Ether) revenue expectation to roughly $2.5 billion by the end of the decade, about $1 billion above its prior view. The December quarter guide, however, was held back by supply chain constraints that the CFO said are costing some revenue.
SLC NAND emerges as a new wafer capacity lever
The most new information on the call concerned NAND. CEO Tim Archer laid out a three-tier storage structure for AI. QLC provides cost-effective capacity, TLC serves as a high-bandwidth tier for context memory and KV cache workloads, and SLC-class NAND is emerging for low-latency access in agentic AI. Archer argued that SLC adoption "could become a meaningful driver of NAND wafer capacity." Moving from TLC to SLC-class devices cuts bits per device by roughly 3x, so each percentage point of NAND bit mix shifting to SLC would require about 2% more installed wafer capacity to meet the same bit demand. Any growth in bit demand would compound that.
Archer framed the shift as a break from the old model, in which layer count alone drove Lam's NAND demand. "Now you're really seeing this separation of storage tiers and each of the devices within NAND starting to be more specialized to different workloads within AI," he said, drawing a parallel to how HBM changed bits per wafer in DRAM. Management was careful on sizing. Asked by Mizuho what share of the market might move to SLC, Archer said it was "too early" and that customers should comment. The thesis is therefore directional, not yet quantified, and customer adoption remains unproven. Lam does hold the industry's largest installed base of NAND systems, which positions it to capture upgrades or new capacity.
The near-term NAND cycle is also active. NAND represented 26% of systems revenue, up from 23%, with dollar revenue up about 40% sequentially as customers convert to 256-layer-and-above devices. CFO Doug Bettinger noted initial spending on 384-layer-class devices. Archer said the 128-layer to 200-layer-class upgrade cycle should finish in 2027, and that scheduling tool downtime during a demand surge is a practical constraint for both customers and Lam. Bettinger told Bernstein that both new equipment purchases and installed-base upgrades were meaningful contributors to NAND growth.
Dry resist and backside power raise the foundry and DRAM content story
The $1 billion increase in cumulative Ether-related revenue to about $2.5 billion is the clearest quantified upgrade of the evening. Archer said Ether is already ramping in HBM high-volume manufacturing with low-NA EUV, and has shown sub-10-nanometer resolution with high-NA EUV while requiring 10% lower exposure dose. Responding to Stifel, he attributed the increase to "a little bit of both" new customer adoption and higher HBM volumes. Lam's Akara conductor etch is being adopted by multiple chipmakers for high aspect ratio etch, with claims of up to 50% lower wafer-to-wafer and lot-to-lot variability and up to 50% more wafer output per fab footprint.
Foundry logic and DRAM accounted for about 80% of systems revenue growth year-to-date, which management presented as validation of investments made four to five years ago. In backside power, Lam says it recently won tool-of-record positions for all four relevant products (Vector, Sabre, Flex and Halo) at a leading customer. Halo is aimed at molybdenum metallization. Asked by Morgan Stanley how far Lam has come toward the 2x foundry logic SAM-per-wafer increase outlined at its 2025 Investor Day, Archer said the company is perhaps "halfway through" that multigenerational roadmap.
On a question from UBS about a memory company's comments prioritizing 3D DRAM over 4F-squared architectures, which coincided with weakness in Lam's shares, management argued the outcome is favorable either way. Longer reliance on the current architecture is increasing demand for advanced patterning products such as Ether and Akara, while an earlier leap to 3D DRAM would raise etch and deposition intensity "even faster even sooner than we would have thought."
Advanced packaging and panel-level ambitions
Advanced packaging remains a major growth driver. Bettinger confirmed that the roughly 70% growth expected for 2026 is still the right figure and said he would be "stunned" if it did not grow nicely in 2027. Lam reported four new Syndion TSV positions across multiple customers, plus Striker ALD liner wins and additional Vector and TSV 3D wins for bonding films and gapfill.
More notable was the panel-level packaging claim. Lam has shipped panel plating systems to more than 20 customers across panel sizes from 300 by 300 millimeters to 600 by 600 millimeters, and expects its panel-level share to surpass its position in wafer-level packaging. Archer cautioned the market is in "the very, very early stages," describing the shipments as "planting the seeds." Management declined to size the opportunity for CoWoS-type capacity when asked by Mizuho.
WFE outlook: 2026 mid-$150 billion, 2027 above $200 billion
Lam sees 2026 WFE in the mid-$150 billion range, raised from a mid-$130 billion starting point at the beginning of the year as customers squeezed more from existing clean rooms and pulled projects forward. The preliminary 2027 view of more than $200 billion implies growth of roughly 30%, led by DRAM, then leading-edge foundry logic and NAND. Bettinger said the ranking is unchanged from 90 days ago and that recently publicized new logic fabs were already known to Lam. Management noted it rarely offers this much specificity this early and will sharpen the figure on the next call.
Management described the figure as constrained. Clean room availability and supply chain bottlenecks are limiting both chipmakers and equipment suppliers, with 10 new Tier 1 fabs expected to come online through 2027. Asked by Bernstein for an unconstrained number, Bettinger declined but conceded it "would be higher." Archer said demand visibility extends through 2028. Lam expects to outgrow WFE for a third consecutive year, helped by a 4-point expansion of SAM as a percentage of WFE.
Record September quarter, but supply constraints trim the December guide
September quarter revenue was $8.22 billion, up 22% sequentially and 54% year-over-year. UBS noted systems revenue grew about 35% sequentially, which it said it had never seen. Gross margin reached a record 52.4%, operating margin topped 40% for the first time at 40.2%, and EPS was $2.20. Free cash flow was a record $3.24 billion. Memory represented 46% of systems revenue, with DRAM at 20%, down from 23% in percentage terms despite a record dollar level. Foundry rose to 46% of systems revenue, and Logic and Other fell to 8%.
The December quarter guide calls for revenue of $8.6 billion plus or minus $400 million, gross margin of 52.5%, operating margin of 40.5% and EPS of $2.33 plus or minus $0.15. Bettinger said revenue "would have been a bit higher" without near-term supply chain constraints, and that anything slipping out of December would ship in the March quarter. He declined to quantify the impact, including when UBS floated $300 million to $400 million. Archer sought to separate the situation from the pandemic, saying "this is nothing like that," and that some suppliers are seeing demand from Lam grow much faster than Lam itself, particularly with advanced packaging. Management said it would consider financial support for suppliers if needed but does not expect to, and that it expects to be "caught up very shortly." Bettinger specified nothing about where the bottlenecks sit.
Several quality-of-earnings points are worth noting. China was 35% of revenue, up from 26%, and is expected to fall "significantly" in December, driven by domestic customers, with multinationals in China remaining reasonably strong. Bettinger said the September mix was "exactly as expected" and that December's WFE-implied strength has nothing episodic in it. The non-GAAP tax rate stepped up to 16.5% from 11% and is expected to stay in that range, which he urged analysts to reflect in models. Gross margin faces customer mix headwinds, and management reiterated a goal of mid-50s over several years through new products, close-to-customer manufacturing and pricing. Near-term, he expects margins to "bounce around generally where it is."
Customer support business hitting well above its long-term target
The Customer Support Business Group generated nearly $2.5 billion, up 40% year-over-year, and is expected to grow more than 30% in 2026, over twice the long-term target set at the last Analyst Day. Management guided to growth above 15% in 2027. Spares remain the largest component, with upgrades and Reliant (mature node) also strong. Archer said the area he is most excited about is Equipment Intelligence and Dextro cobots, which have helped Lam win performance-based service contracts with multiple memory manufacturers. Bettinger expects mature node spending outside China to become strong in 2027, though not meaningfully in 2026.
Balance sheet and capital return
Lam repurchased about $1 billion of stock and paid $325 million in dividends, returning 41% of free cash flow in the quarter and 59% year-to-date, short of its 85% long-term target. It entered an accelerated share repurchase that will continue through December, and $3 billion remains authorized. Cash rose to $7.5 billion. Inventory increased $274 million to $4.6 billion as Lam builds for 2027, though turns improved to 3.4x, the best in nearly 7 years. Headcount rose by about 1,900 to 24,300, and capital expenditures increased to $258 million.