Lam Research Corp. (LRCX) said it expects a revenue headwind for fiscal 2026 as a result of a U.S. Bureau of Industry and Security (BIS) export‑control update that limits the company’s ability to sell certain equipment to customers in China.
The company quantified the impact as an estimated $600 million reduction in calendar‑year 2026 revenue, with $200 million already factored into its Q1 2026 guidance. The headwind is driven by a new 50% affiliate rule that restricts shipments to specific domestic Chinese customers.
Lam’s recent quarterly results illustrate the scale of the exposure: Q4 2025 revenue was $5.17 billion, Q1 2026 revenue rose to $5.32 billion, and Q2 2026 revenue was $5.34 billion. China accounted for 43% of revenue in Q1, 35% in Q2, and the company expects the region to represent less than 30% of total revenue in FY 2026.
CEO Tim Archer said the headwind would reduce revenue by $600 million and that the China region would fall below 30% of overall sales. He also noted that demand for AI‑driven semiconductor equipment continues to strengthen, supporting the company’s growth trajectory.
Despite the revenue hit, Lam’s gross margin expanded to 50.6% in Q1 2026 from 50.3% in Q4 2025, reflecting pricing power and operational leverage. The company’s focus on advanced packaging and AI‑related equipment positions it to capture high‑margin opportunities even as China sales contract.
Investors reacted to the headwind but also highlighted the continued strength of AI demand and the company’s margin expansion, underscoring the dual impact of regulatory constraints and sector tailwinds on Lam’s outlook.
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