⚠ Designed Out for a Whole NodeModerate threat

Lam Research (LRCX) — threat to the moat

A node lost at qualification is lost for years, and with four customers at 55% of revenue each lost selection is large.

The same qualification that protects Lam works against it when it loses. The 10-K warns that Lam may find it hard to sell to a customer "if that customer has qualified a competitor's equipment"1. Losing the selection at the start of a node can cost every order for that step until the next node.

Systems revenue by end market, June 2026 quarterMemory — 46%Foundry — 44%Logic and other — 10%Lam Research Q4 FY2026 earnings call
Memory and foundry nearly level in the latest quarter.

Nodes now last longer and cost more, which raises the stakes. A single leading-edge fab can run one process for years, and Lam's four largest customers took 55% of its fiscal 2026 revenue23. One lost selection at one of them is a large number.

The risk is highest where the process is new and no tool is yet the incumbent, and the 10-K's list of primary competitors in deposition, etch and clean includes Applied Materials, Tokyo Electron, Hitachi, ASM International, Wonik IPS, Screen and Semes4.

Quarterly shares can move sharply without any lost node. Foundry fell from 59% of systems revenue in the December quarter to 54% in March5 and 44% in June6 as memory customers bought more. A lost node would look the same at first, which is why one quarter proves nothing and a full year of falling foundry share would.

The customer list shows how few selections matter. For fiscal 2023 to 2025 the 10-K named only two most significant customers, Samsung and TSMC7; for fiscal 2024 to 2026 it named four8. Losing a step at any of them would be felt in the annual figures.

A loss would show first in the end-market mix. In the June 2026 quarter memory was 46% of systems revenue, foundry 44% and logic and other 10%9. If foundry, 54% of equipment revenue for the full year10, falls sharply in a year when foundry customers are spending more, Lam will have been designed out of the new nodes.

References
  1. ReportedThe 10-K warns that Lam may find it hard to sell to a customer "if that customer has qualified a competitor's equipment".
    Lam Research Form 10-K for fiscal 2026 (year ended 28 June 2026) - Item 1 business: competition and intellectual property. — FY2026 · publ. 7 August 2026 · source ↗
  2. ReportedA single leading-edge fab can run one process for years, and Lam's four largest customers took 55% of its fiscal 2026 revenue.
    Lam Research Form 10-K for fiscal 2026 (year ended 28 June 2026) - Item 7 MD&A and revenue notes: revenue by type, region and end market, and margins. — FY2026 · publ. 7 August 2026 · source ↗
  3. Moat Explorer calcA single leading-edge fab can run one process for years, and Lam's four largest customers took 55% of its fiscal 2026 revenue.
    Moat Explorer calculation from Lam Research's reported figures ($ millions unless stated; fiscal years end in late June). Revenue growth: FY2019 9,653.6 / 11,077.0 - 1 = -12.9%; FY2020 10,044.7 / 9,653.6 - 1 = +4.1%; FY2021 14,626.2 / 10,044.7 - 1 = +45.6%; FY2022 17,227.0 / 14,626.2 - 1 = +17.8%; FY2023 17,428.5 / 17,227.0 - 1 = +1.2%; FY2024 14,905.4 / 17,428.5 - 1 = -14.5%; FY2025 18,435.6 / 14,905.4 - 1 = +23.7%; revenue FY2015-FY2026 23,232.7 / 5,259.3 = 4.4 times. Q4 FY2026 revenue 6,722.2 / 5,171.4 - 1 = +30.0%; Q4 systems 4,249.8 / 3,437.6 - 1 = +23.6%; Q4 customer support 2,472.4 / 1,733.8 - 1 = +42.6%; FY2025 quarterly systems 3,437.6 / 2,392.7 - 1 = +43.7%. Revenue by type: systems FY2023 10,695.9 / 11,322.3 - 1 = -5.5%; FY2024 8,921.6 / 10,695.9 - 1 = -16.6%; customer support FY2023 6,732.6 / 5,904.8 - 1 = +14.0%; FY2024 5,983.7 / 6,732.6 - 1 = -11.1%, a fall of 748.9; FY2021 growth systems +47.4%, support +42.2%; FY2022 systems +16.0%, support +21.5%; FY2025 systems +28.8%, support +16.1%; FY2026 systems +29.5%, support +20.2%; support less systems growth -5.2, +5.5, +19.5, +5.5, -12.7, -9.3 points (FY2021-FY2026). Multiples FY2019-FY2026: customer support 8,347.2 / 3,202.5 = 2.6 times (14.7% a year); systems 14,885.5 / 6,451.1 = 2.3 times (12.7% a year). Cumulative FY2019-FY2026 customer support 45,396.0 of 125,553.6 = 36%. Customer support share of revenue: 3,202.5 / 9,653.6 = 33.2% (FY2019); 3,419.6 / 10,044.7 = 34.0%; 4,861.3 / 14,626.2 = 33.2%; 5,904.8 / 17,227.0 = 34.3%; 6,732.6 / 17,428.5 = 38.6%; 5,983.7 / 14,905.4 = 40.1% (FY2024); 6,944.3 / 18,435.6 = 37.7%; 8,347.2 / 23,232.7 = 35.9% (FY2026). Systems share 65.7%, 61.4%, 59.9%, 62.3%, 64.1% (FY2022-FY2026). Quarterly FY2026 support share 1,776.6 / 5,324.2 = 33.4%; 1,987.3 / 5,344.8 = 37.2%; 2,110.9 / 5,841.5 = 36.1%; 2,472.4 / 6,722.2 = 36.8%. Research and development 2,375.9 / 23,232.7 = 10.2% (FY2026); 825.2 / 5,259.3 = 15.7% (FY2015); 1,033.7 / 8,013.6 = 12.9% (FY2017); 1,191.3 / 9,653.6 = 12.3% (FY2019); 1,493.4 / 14,626.2 = 10.2% (FY2021); 1,727.2 / 17,428.5 = 9.9% (FY2023); 1,902.4 / 14,905.4 = 12.8% (FY2024); 2,375.9 / 825.2 = 2.9 times. Gross margin 2,284.3 / 5,259.3 = 43.4% (FY2015); 3,603.4 / 8,013.6 = 45.0% (FY2017); 4,358.5 / 9,653.6 = 45.1% (FY2019); 6,805.3 / 14,626.2 = 46.5% (FY2021); 7,776.9 / 17,428.5 = 44.6% (FY2023); 7,052.8 / 14,905.4 = 47.3% (FY2024). Operating margin 788.0 / 5,259.3 = 15.0% (FY2015); 1,902.1 / 8,013.6 = 23.7%; 2,464.7 / 9,653.6 = 25.5%; 4,482.0 / 14,626.2 = 30.6%; 5,174.9 / 17,428.5 = 29.7%; 4,263.9 / 14,905.4 = 28.6% (FY2024). Segment gross margin 12,120.0 / 23,232.7 = 52.2%. Region FY2026: China 7,859.8 / 23,232.7 = 33.8%; Taiwan 5,222.9 / 23,232.7 = 22.5%; Korea 4,505.3 / 23,232.7 = 19.4%; Japan 2,171.1 / 23,232.7 = 9.3%; Taiwan 5,222.9 / 3,445.2 - 1 = +51.6%; Korea 2,874.0 / 4,037.5 - 1 = -28.8%. China share 1,040.0 / 5,885.9 = 17.7% (FY2016); 1,784.4 / 11,077.0 = 16.1% (FY2018); 3,083.9 / 10,044.7 = 30.7% (FY2020); 5,137.9 / 14,626.2 = 35.1% (FY2021); 4,462.7 / 17,428.5 = 25.6% (FY2023). China revenue FY2022-FY2023 5,411.5 - 4,462.7 = 948.8 lower. Foundry plus memory 54 + 39 = 93%. Long-lived assets in the United States 2,003.4 / 3,353.8 = 60%. Customer concentration (percentages of total revenue): FY2026 16 + 15 + 12 + 12 = 55%; FY2025 17 + 15 = 32%; FY2024 17%; FY2023 22 + 16 = 38%; FY2022 21 + 12 + 12 + 11 = 56%; FY2021 25 + 12 + 10 = 47%; FY2020 24 + 14 + 10 + 10 = 58%; FY2019 15 + 14 + 14 + 14 = 57%; FY2018 25 + 14 + 14 + 13 + 12 = 78%. Accounts receivable June 2026 20 + 16 + 15 + 11 + 10 = 72%. Deferred revenue within a year 1,798.1 / 2,434.0 = 74%; deferred revenue against Q4 revenue 2,434.0 / 6,722.2 = 36%. Cash and capital: free cash flow 5,857.7 - 966.4 = 4,891.3 (FY2026); 6,173.3 - 759.2 = 5,414.1 (FY2025); 4,652.3 - 396.7 = 4,255.6 (FY2024). Shareholder returns 3,851.3 + 1,270.6 = 5,121.9, 5,121.9 / 4,891.3 = 104.7%; FY2025 (3,422.3 + 1,149.5) / 5,414.1 = 84.4%; FY2024 (2,842.8 + 1,018.9) / 4,255.6 = 90.7%. Dividends 1,270.6 / 7,265.4 = 17.5% of net income; 1,270.6 / 4,891.3 = 26% of free cash flow. Net cash 5,579.2 - 3,722.1 = 1,857.1 (FY2026); 6,390.7 - 4,469.4 = 1,921.3 (FY2025); 5,847.9 - 4,967.4 = 880.5 (FY2024). Treasury stock 31,597.9 / retained earnings 34,950.3 = 0.90. Per share: diluted shares 1,261.1 / 1,770.7 - 1 = -28.8% (FY2015 177.07M pre-split x 10); EPS 5.76 / 0.37 = 15.6 times; net income 7,265.4 / 655.6 = 11.1 times. Additional: Taiwan share 1,671.8 / 14,905.4 = 11.2% (FY2024), 3,477.9 / 17,428.5 = 20.0% (FY2023); Korea 2,205.3 / 3,832.8 - 1 = -42% (FY2019); research growth 2,096.4 / 1,902.4 - 1 = +10.2% (FY2025), 2,375.9 / 2,096.4 - 1 = +13.3% (FY2026); research staff 23,300 x 26% = more than 6,000; United States and Southeast Asia (1,528.9 + 1,245.9) / 23,232.7 = 12.0%; Southeast Asia 1,245.9 / 837.2 - 1 = +48.8%; systems FY2020 6,625.1 / 6,451.1 - 1 = +2.7%, support 3,419.6 / 3,202.5 - 1 = +6.8%; FY2022 to FY2025 support 6,944.3 / 5,904.8 - 1 = +17.6%, systems 11,491.3 / 11,322.3 - 1 = +1.5%; support March 2025 quarter 1,684.9 / 4,720.2 = 35.7%, 2,472.4 / 1,684.9 - 1 = +46.7%; support Q1 to Q4 FY2026 2,472.4 / 1,776.6 - 1 = +39.2%; deferred revenue 2,681 - 2,434 = 247 lower, 2,681 / 5,171.4 = 52% of the June 2025 quarter revenue; receivables 5,339.7 / 6,722.2 = 79%; return on equity 5,358.2 / ((8,539.5 + 9,861.6) / 2) = 58.2% (FY2025), 7,265.4 / ((9,861.6 + 12,470.9) / 2) = 65.1% (FY2026); market value 57.32 / 101.26 - 1 = -43% (calendar 2022); price target 373.13 / 307.16 - 1 = +21%; revenue 23,232.7 / 4,607.3 = 5.0 times (FY2014-FY2026); lab plan 3,000 / 5 = 600 a year. Further: Europe 698.7 / 23,232.7 = 3.0%; China 7,859.8 / 623.4 = 12.6 times (FY2014-FY2026); Korea 4,505.3 / 1,127.4 = 4.0 times; Taiwan 5,222.9 / 1,049.2 = 5.0 times; dividends declared per share 0.92 / 0.80 - 1 = +15%, 1.04 / 0.92 - 1 = +13%; diluted shares (1,261.1 / 1,319.9) ^ (1/2) - 1 = -2.3% a year; buybacks FY2015-FY2026 573.2 + 158.4 + 811.7 + 2,653.2 + 3,780.6 + 1,369.6 + 2,697.7 + 3,865.7 + 2,017.0 + 2,842.8 + 3,422.3 + 3,851.3 = 28,043.5; dividends paid 116.1 + 190.4 + 243.5 + 307.6 + 678.3 + 656.8 + 727.0 + 815.3 + 907.9 + 1,018.9 + 1,149.5 + 1,270.6 = 8,081.9; net income FY2015-FY2026 = 39,567.4; (28,043.5 + 8,081.9) / 39,567.4 = 91%; customer support fell only in FY2024 among FY2020-FY2026, systems fell in FY2023 and FY2024. Cash conversion: operating cash flow / net income 6,173.3 / 5,358.2 = 115% (FY2025); 5,857.7 / 7,265.4 = 81% (FY2026). Valuation: price 307.16 / 52-week high 438.50 - 1 = -30.0%; free cash flow yield 4,891.3 / 384,360 = 1.3%; P/E 384,360 / 7,265.4 = 52.9; P/S 384,360 / 23,232.7 = 16.5 - revenue mix, geography and customer concentration. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Lam Research's Forms 10-K, quarterly results releases, XBRL filings and market data; operands shown in the source line.
  4. ReportedThe risk is highest where the process is new and no tool is yet the incumbent, and the 10-K's list of primary competitors in deposition, etch and clean includes Applied Materials, Tokyo Electron, Hitachi, ASM International, Wonik IPS, Screen and Semes.
    Lam Research Form 10-K for fiscal 2026 (year ended 28 June 2026) - Item 1 business: competition and intellectual property. — FY2026 · publ. 7 August 2026 · source ↗
  5. ReportedFoundry fell from 59% of systems revenue in the December quarter to 54% in March and 44% in June as memory customers bought more.
    The Motley Fool, Lam Research Q3 fiscal 2026 earnings call transcript - end-market mix of systems revenue in the March 2026 quarter. — Q3 FY2026 · publ. 22 April 2026 · source ↗
  6. ReportedFoundry fell from 59% of systems revenue in the December quarter to 54% in March and 44% in June as memory customers bought more.
    The Motley Fool via Yahoo Finance, Lam Research Q4 fiscal 2026 earnings call transcript - installed base, end-market mix of systems revenue, WFE outlook, served market, customer support, China and margin targets - end-market mix of systems revenue, NAND, and China and Taiwan. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  7. ReportedFor fiscal 2023 to 2025 the 10-K named only two most significant customers, Samsung and TSMC; for fiscal 2024 to 2026 it named four.
    Lam Research Form 10-K for fiscal 2025 - end-market mix for fiscal 2023-2025, the ten-for-one stock split of October 2024, and accounts receivable concentration. — FY2025 · publ. August 2025 · source ↗
  8. ReportedFor fiscal 2023 to 2025 the 10-K named only two most significant customers, Samsung and TSMC; for fiscal 2024 to 2026 it named four.
    Lam Research Form 10-K for fiscal 2026 (year ended 28 June 2026) - Item 1 business and Part III: customers, employees and management. — FY2026 · publ. 7 August 2026 · source ↗
  9. ReportedIn the June 2026 quarter memory was 46% of systems revenue, foundry 44% and logic and other 10%.
    The Motley Fool via Yahoo Finance, Lam Research Q4 fiscal 2026 earnings call transcript - installed base, end-market mix of systems revenue, WFE outlook, served market, customer support, China and margin targets - end-market mix of systems revenue, NAND, and China and Taiwan. — Q4 FY2026 · publ. 29 July 2026 · source ↗
  10. ReportedIf foundry, 54% of equipment revenue for the full year, falls sharply in a year when foundry customers are spending more, Lam will have been designed out of the new nodes.
    Lam Research Form 10-K for fiscal 2026 (year ended 28 June 2026) - Item 7 MD&A and revenue notes: revenue by type, region and end market, and margins. — FY2026 · publ. 7 August 2026 · source ↗
Sources
Generated September 25, 2026