⚠ A Return on Capital Flattered by BuybacksLow threat

Lam Research (LRCX) — threat to the moat

Lam's 70.7% return on invested capital is real but partly the effect of a capital base shrunk by $31.6 billion of buybacks.

Lam's return ratios are extraordinary, and some of the reason is arithmetic. Return on invested capital was 70.7% in fiscal 2026 on invested capital of about $12,013 million1. Return on equity was 65.07%2. Both have risen as buybacks shrank the capital base.

Stockholders equity at fiscal year-end ($M)4,674FY20198,540FY20249,862FY202512,471FY2026Lam Research XBRL filings (CF) and Form 10-K FY2026
A small equity base behind large profits.

The earlier figures are also understated. The calculation does not deduct the short-term investments Lam held until fiscal 20223, so the 13.7% of fiscal 2015 and the 37.6% of fiscal 2020 are lower than the business's true return4.

Neither point means the business is weak. An equipment company that needs little capital and earns high margins will show high returns however they are measured. But a ratio of 70% says less about competitive advantage than about balance-sheet choices.

Stockanalysis computes a similar return on invested capital, 70.07%5, with its own method. Two calculations agreeing on the level does not make the level a measure of the moat; it makes it a measure of a very small capital base earning a large profit.

The base was smaller still a few years ago. Stockholders' equity was $4,673.9 million at the end of fiscal 20196, after buybacks of $3,780.6 million in that year alone7, and has since grown back as profits outran distributions.

The better test is operating margin, which does not depend on the capital base. It rose from 32.0% to 35.3% in fiscal 20268; a fall in operating margin with a rising return on capital would mean the ratio is being carried by buybacks alone.

References
  1. Moat Explorer calcReturn on invested capital was 70.7% in fiscal 2026 on invested capital of about $12,013 million.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 707549: return on invested capital 13.7% (FY2015), 20.4%, 30.7%, 41.8%, 40.9%, 37.6%, 55.6%, 56.0%, 49.7%, 42.0%, 62.6%, 70.7% (FY2026). FY2026 inputs: operating income 8,199.8; tax 997.1 on pretax 8,262.5 (12.1%); invested capital 12,013.3 (assets 23,529.7 - current liabilities 5,937.2 - cash 5,579.2) against 8,386.2 in FY2025. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL via tools_roic_edgar.py. Short-term investments held until FY2022 are not deducted, so FY2015-FY2021 are understated.
  2. ReportedReturn on equity was 65.07%.
    Lam Research (LRCX) statistics - trailing P/E 53.33, forward P/E 32.31, return on equity 65.07%, return on invested capital 70.07%. — September 2026 · publ. 24 September 2026 · source ↗
  3. Moat Explorer calcThe calculation does not deduct the short-term investments Lam held until fiscal 2022, so the 13.7% of fiscal 2015 and the 37.6% of fiscal 2020 are lower than the business's true return.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 707549: return on invested capital 13.7% (FY2015), 20.4%, 30.7%, 41.8%, 40.9%, 37.6%, 55.6%, 56.0%, 49.7%, 42.0%, 62.6%, 70.7% (FY2026). FY2026 inputs: operating income 8,199.8; tax 997.1 on pretax 8,262.5 (12.1%); invested capital 12,013.3 (assets 23,529.7 - current liabilities 5,937.2 - cash 5,579.2) against 8,386.2 in FY2025. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL via tools_roic_edgar.py. Short-term investments held until FY2022 are not deducted, so FY2015-FY2021 are understated.
  4. Moat Explorer calcThe calculation does not deduct the short-term investments Lam held until fiscal 2022, so the 13.7% of fiscal 2015 and the 37.6% of fiscal 2020 are lower than the business's true return.
    Moat Explorer calculation, tools_roic_edgar.py on SEC EDGAR XBRL for CIK 707549: return on invested capital 13.7% (FY2015), 20.4%, 30.7%, 41.8%, 40.9%, 37.6%, 55.6%, 56.0%, 49.7%, 42.0%, 62.6%, 70.7% (FY2026). FY2026 inputs: operating income 8,199.8; tax 997.1 on pretax 8,262.5 (12.1%); invested capital 12,013.3 (assets 23,529.7 - current liabilities 5,937.2 - cash 5,579.2) against 8,386.2 in FY2025. — FY2015-FY2026 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL via tools_roic_edgar.py. Short-term investments held until FY2022 are not deducted, so FY2015-FY2021 are understated.
  5. ReportedStockanalysis computes a similar return on invested capital, 70.07%, with its own method.
    Lam Research (LRCX) statistics - trailing P/E 53.33, forward P/E 32.31, return on equity 65.07%, return on invested capital 70.07%. — September 2026 · publ. 24 September 2026 · source ↗
  6. ReportedStockholders' equity was $4,673.9 million at the end of fiscal 2019, after buybacks of $3,780.6 million in that year alone, and has since grown back as profits outran distributions.
    SEC EDGAR XBRL company facts for Lam Research (CIK 707549) - revenue, gross profit, operating income, research and development, net income, diluted EPS and shares, buybacks and dividends for fiscal 2015-2026; per-share figures before fiscal 2023 are pre-split. — FY2015-FY2026 · publ. September 2026 · source ↗
  7. ReportedStockholders' equity was $4,673.9 million at the end of fiscal 2019, after buybacks of $3,780.6 million in that year alone, and has since grown back as profits outran distributions.
    SEC EDGAR XBRL company facts for Lam Research (CIK 707549) - revenue, gross profit, operating income, research and development, net income, diluted EPS and shares, buybacks and dividends for fiscal 2015-2026; per-share figures before fiscal 2023 are pre-split. — FY2015-FY2026 · publ. September 2026 · source ↗
  8. ReportedIt rose from 32.0% to 35.3% in fiscal 2026; a fall in operating margin with a rising return on capital would mean the ratio is being carried by buybacks alone.
    Lam Research fourth-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - revenue, margins, revenue by type and region, cash flow and September 2026 quarter guidance. — Q4 FY2026 · publ. 29 July 2026 · source ↗
Sources
Generated September 25, 2026