Shares of Lam Research cratered 10.1% to $234.50 on October 22 after the chip-equipment giant delivered a record quarter but told investors two things they didn't want to hear: supply bottlenecks are capping near-term shipments, and China — its largest single market — is about to shrink fast. The broader semiconductor index SOXX fell 3.64% in pre-market trading , dragging the entire sector lower in sympathy.
Record Numbers Couldn't Outrun a Cautious Forecast. Lam posted $8.22 billion in September-quarter revenue, up 54% year-over-year and 22% sequentially, with a record 40.2% operating margin — the first time it crossed 40%.
Earnings of $2.20 per share topped the $2.18 consensus, and revenue beat the $8.14 billion estimate. Yet the stock dropped because the December-quarter revenue guide of $8.6 billion — implying only about 5% sequential growth — breaks a string of accelerating quarters . Investors priced in momentum, and what they got was a speed bump.
Supply Constraints Are the Bottleneck, Not Demand. CFO Doug Bettinger said the revenue guide "would have been a bit higher" without near-term supply-chain constraints.
He did not quantify the shortfall but confirmed delayed December shipments would move into March.
One analyst estimated the impact at $300–$400 million; Bettinger declined to confirm the figure. This matters because it means demand is outstripping Lam's ability to deliver — good for the long-term backlog, bad for investors who track quarterly beats.
China's Revenue Share Is About to Shrink Sharply. China accounted for 35% of September revenue, up from 26% in June , but that spike was temporary. Bettinger said September's strength was "exactly as expected," driven by both domestic and multinational customers, but he expects China to be "meaningfully down" in December, driven by domestic customers. The decline likely reflects tightening U.S. export controls on advanced chipmaking gear, which shrinks Lam's addressable market in its most volatile region.
The Long Game Still Looks Strong — If You Can Wait. Lam's preliminary 2027 outlook calls for global wafer-fabrication equipment spending exceeding $200 billion , roughly 30% above this year's estimated mid-$150 billion level. Management expects to outperform the broader equipment market for a third consecutive year, with a multi-year investment cycle extending through 2028.
The company also raised its quarterly dividend to $0.33 from $0.26. But at a trailing P/E near 39, the stock was priced for flawless execution — and today's sell-off shows how little margin for error that leaves.