The boom in AI data center construction is directly translating into orders for chip equipment manufacturers.
On April 22 Eastern Time, U.S. semiconductor equipment manufacturer and &#34;the American ASML,&#34; Lam Research, released its fiscal third-quarter 2026 financial results (ended March 29, 2026). The report showed that the company's revenue and earnings per share both hit quarterly records, exceeding Wall Street expectations, with after-hours stock prices rising by approximately 4% at one point. Key financial data includes:
<ul>
<li>Quarterly revenue reached $5.84 billion, up 24% year-over-year and 9% quarter-over-quarter, surpassing analyst expectations of $5.75 billion.</li>
<li>GAAP net profit was $1.825 billion, an increase of approximately 37% compared to $1.331 billion in the same period last year, and up approximately 14% from $1.594 billion in the previous quarter.</li>
<li>Non-GAAP diluted earnings per share were $1.47, higher than the market expectation of $1.36, representing an increase of approximately 41% from $1.04 in the same period last year.</li>
<li>Operating margin improved year-over-year from 33.1% to 35.0%, indicating continued improvement in profitability quality.</li>
<li>GAAP gross margin for the quarter was 49.8%, up 20 basis points quarter-over-quarter.</li>
</ul>
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CEO Tim Archer stated in the earnings release: &#34;Lam Research achieved record-breaking revenue and earnings per share in the March quarter. AI-driven demand is reshaping the semiconductor industry. Our strategic investments and execution efficiency are generating strong momentum, supporting our customers' AI roadmaps and driving Lam Research to consistently outperform the market during this critical growth phase.&#34;
During the earnings conference call, Archer further remarked: &#34;For Lam Research, the AI-driven demand environment is creating ideal conditions for sustained outperformance.&#34; Looking further ahead, he added, &#34;Right now, 2027 feels like it will be a quite good year.&#34;
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<h2>AI Demand Drives Continued Prosperity for &#34;Shovel Business&#34;</h2>
Lam Research's core products are etching and deposition equipment—simply put, machines that carve and stack microscopic circuits on silicon wafers, an indispensable part of the chip manufacturing process. It stands alongside Applied Materials and Tokyo Electron as one of the global top suppliers in this market.
With the acceleration of AI data center construction, chipmakers such as TSMC and Micron are significantly increasing capital expenditure, driving up equipment demand. This upward cycle began in late 2023 and has extended through the present.
In terms of revenue structure, system equipment revenue for the quarter was $3.73 billion, and customer support and services revenue was $2.11 billion, both showing growth compared to the previous quarter.
Geographically, China remains the largest market, accounting for 34% of the quarter's revenue; South Korea and Taiwan each accounted for 23%; Japan accounted for 8%; and the domestic U.S. market accounted for only 6%.
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<h2>Next Quarter Guidance Again Exceeds Expectations</h2>
For the fourth quarter of fiscal 2026 (ended June 28, 2026), Lam Research provided revenue guidance of $6.6 billion (±$400 million) and Non-GAAP diluted earnings per share of approximately $1.65 (±$0.15), both higher than market expectations derived from LSEG data tracked by analysts.
Gross margin guidance is set at 50.5% (±1%), and operating margin guidance is 36.5% (±1%), both representing improvements over the current quarter. If achieved, this would mark Lam Research's third consecutive quarter setting a revenue record.
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<h2>A Notable Detail: Decline in Customer Prepayments</h2>
Behind the bright spots of the earnings report, one detail has drawn market attention: deferred revenue at the end of the quarter stood at $2.22 billion, a slight decrease from $2.25 billion in the previous quarter, while customer prepayments fell by approximately $300 million quarter-over-quarter—a figure reaching a near-four-year low.
Deferred revenue represents orders where payment has been received but delivery has not yet occurred. A reduction in prepayments could simply reflect normal shifts in orders between quarters; alternatively, it may indicate that customers are becoming more cautious regarding the timing of their financial commitments.
Financial media outlet Finimize noted, &#34;Large chip projects often do not progress at a steady pace but rather in pulses,&#34; resulting in a wave-like characteristic for equipment orders. While the balance of deferred revenue remains at high levels, indicating ample backlogs, the decline in prepayments suggests that external investors should pay attention to changes in the short-term demand rhythm.
<h2>Cash Flow and Capital Return</h2>
On the cash front, cash and cash equivalents at the end of the quarter dropped to $4.75 billion, a decrease of over $1.4 billion from $6.18 billion at the end of the previous quarter. The primary reason was a large-scale capital return by the company this quarter: approximately $1.16 billion spent on share buybacks, about $750 million used to repay principal debt, and roughly $330 million paid in dividends.
Operating cash flow for the quarter was $1.14 billion, lower than the $1.48 billion in the previous quarter, primarily dragged down by changes in working capital (accounts receivable increased by approximately $640 million). Cumulative operating cash flow for the first three fiscal quarters totaled $4.4 billion, and the balance sheet remains robust overall.
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<h2>Cyclical Perspective: Upward Cycle Expected to Extend Through 2027</h2>
From a longer cyclical perspective, Lam Research has historically relied on cyclical demand driven by consumer electronics, but the AI era has altered this logic. Barron's notes that this upward cycle began in late 2023 and &#34;appears to extend into next year,&#34; with Lam Research poised to achieve revenue records for three consecutive quarters.
Amid the surge in AI capital expenditure, equipment manufacturers play the role of &#34;selling shovels,&#34; enjoying relatively higher visibility into demand. However, Barron's also observed that the average analyst price target is approximately $286, implying that market expectations for growth in 2026 and 2027 are already partially reflected in the stock price, with &#34;some investors even positioning themselves for the next downturn cycle.&#34;

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Lam Research reported third-quarter revenue of $5.84 billion and non-GAAP earnings per share of $1.47, both hitting historical highs and surpassing Wall Street expectations, with China remaining its largest market. The company raised its guidance for the next quarter to approximately $6.6 billion, while the CEO stated that "2027 feels like it will be a quite good year." However, customer prepayments have fallen to a near-four-year low, making short-term order rhythm changes a focal point for the market

- Lam Research reported record revenue and earnings per share for Q3 2026, driven by strong AI demand in the semiconductor industry.  
- The company anticipates fourth-quarter revenue of $6.6 billion, exceeding analyst expectations, while deferred revenue slightly declined, indicating cautious customer spending.  
- With significant capital returns and a robust operating cash flow, Lam Research is positioned for continued growth into 2027 as the AI-driven demand cycle evolves.

"American ASML" Surges with Earnings: Lam Research Sets Quarterly Revenue Record, CEO Says 2027 Will Be "Quite Good"