By Hamza Faisal
Lam Research did everything right in its September quarter — record revenue, record profit, and earnings per share up 75% from a year ago. It did not matter. Shares of the chip-equipment giant tumbled more than 8% in premarket trading on Thursday after its outlook for the December quarter failed to clear Wall Street's towering expectations, setting off a broader selloff across AI and semiconductor stocks.
The Fremont, California-based maker of wafer fabrication equipment reported late Wednesday that it earned an adjusted $2.20 a share on sales of $8.22 billion for its fiscal first quarter, which ended September 27. Both beat Wall Street forecasts — analysts had expected $2.18 a share on $8.14 billion in sales, according to Investor's Business Daily. Chief executive Tim Archer credited AI-driven semiconductor demand and greater device complexity for what he called record revenue, profit, and earnings per share.
For the current quarter ending December 27, Lam predicted adjusted earnings of $2.33 a share on sales of $8.6 billion — essentially in line with what analysts expected. That "in line" was the problem: after a run of blowout results across the chip supply chain, investors had priced in another big beat and punished the stock when it didn't arrive.
Supply constrained, not demand constrained
Wall Street analysts were quick to defend the company even as several trimmed their price targets. Bank of America argued Lam was "supply constrained, not demand constrained," saying September-quarter results came in about 1% above forecasts and that December-quarter guidance would have been stronger without industry supply bottlenecks, according to The Fly. Needham similarly pointed to supply-chain bottlenecks behind an unexpected deceleration in the December quarter, even as strength in China and NAND memory customers pushed revenue and gross margin above estimates.
The selloff fits a pattern that has haunted chip stocks all season: strong results that are merely not spectacular get treated as disappointments. The stock has now fallen roughly 38 to 40 percent since peaking near $438 in June, as valuation anxiety has replaced AI euphoria in the sector.
An AI-trade pullback, not a Lam problem
Thursday's slide was not an isolated event. The iShares Semiconductor ETF (SOXX) dropped more than 3% as Nasdaq futures fell 1.7%, with investors rotating out of growth names amid anxiety over the cost of AI infrastructure buildouts. Lam's result lands as a fresh test of whether the AI boom's factory-spending surge is becoming steady, sustainable demand — or a peak.
Still, the company's fundamentals show a supplier at the heart of the AI cycle. Gross margin reached 52.3% and operating margin 40%, with both set to push higher, and Lam expects revenue growth to accelerate in the coming quarters. Archer said strategic investments in "technology inflections and manufacturing capacity" were paying off and would help Lam outgrow the wafer fabrication equipment market as the industry expands.
What Wall Street watches next
The question now is whether supply constraints ease fast enough for Lam to convert record order momentum into growth that matches the AI narrative — and whether investors will wait. Analysts kept broadly positive ratings on the stock, but the market's message was blunt: in 2026's chip trade, merely meeting expectations is the new disappointment.
By Hamza Faisal
