Lam Research's advanced packaging business is gaining momentum as AI-driven chip complexity boosts demand in memory and logic.
Lam Research $LRCX LRCX is witnessing strong growth in its advanced packaging business, which is being driven by the need to build more complex chips on the back of strong AI demand. As chipmakers look to improve performance and memory bandwidth, advanced packaging is becoming an important area in both memory and logic production. This demand is driving LRCX's advanced packaging business to play a key role in the company's growth story.
Lam Research expects its advanced packaging business to grow more than 40% in fiscal 2026, which is faster than its expected growth in wafer fab equipment spending for this area. A major reason is the shift to newer memory products like HBM4 and HBM4E, which need more advanced packaging and stacking of up to 16 layers. This bodes well for LRCX's prospects as the company has leadership in electroplating and TSV etch, both of which are important steps in advanced packaging.
This opportunity is not limited to memory. Advanced packaging is becoming more important in foundry and logic, where chipmakers are using more complex package designs to improve performance and add more functions. Management had earlier estimated advanced packaging to be a mid-single-digit percentage of foundry/logic equipment spending, but now expects that number to move higher. This shows that advanced packaging is becoming a larger spending area across the semiconductor industry.
The above-mentioned factors show that advanced packaging is becoming a major growth driver for LRCX. As AI systems require more memory, faster data movement and tighter chip integration, spending on advanced packaging is likely to keep rising. If this trend continues, it can support Lam Research’s overall growth over the next few years. The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a year-over-year increase of around 21% and 22.1%, respectively.
Applied Materials recently expanded its partnership with Micron $MU to build better memory chips for AI. Here, the goal is to develop next-generation DRAM, high-bandwidth memory and NAND solutions to increase speed and performance while reducing power use. The work will be done at AMAT’s EPIC Center in Silicon Valley and Micron’s R&D center in Boise, ID. Teams from both companies will work together to speed up development and move ideas into production faster.
ASML is witnessing strong demand from DRAM and logic customers, which are ramping leading-edge nodes using ASML’s NXE:3800E EUV systems. ASML noted that multiple DRAM customers are adopting EUV lithography, which helps in shortening cycle time and lowering costs.
Shares of Lam Research have surged 62.7% over the past six months compared with the Zacks Electronics – Semiconductors industry’s return of 10.2%.
Image Source: Zacks Investment Research
From a valuation standpoint, Lam Research trades at a forward price-to-sales ratio of 10.21, significantly higher than the industry’s average of 7.5.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Lam Research’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 26.6% and 27%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward over the past 60 and 30 days, respectively.
Image Source: Zacks Investment Research
Lam Research currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X $TWTR Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.
