Can Advanced Packaging Boost Systems Sales at Lam Research in FY26?

Core Insights - Lam Research Corporation (LRCX) identifies advanced packaging as a significant growth driver for its Systems segment sales in fiscal 2026, with revenues from advanced packaging exceeding $1 billion in 2024, indicating rapid demand growth in high-bandwidth memory (HBM) and advanced logic [1][11] Group 1: Revenue Growth and Market Demand - The company's Systems segment revenues increased by 28.8% year over year to $11.49 billion in fiscal 2025, driven by the expansion of AI workloads and high-performance computing, which necessitate more efficient chip designs [2][11] - Advanced packaging revenues are projected to triple to over $3 billion in 2025, significantly boosting the Systems segment's revenues in fiscal 2026, with the Zacks Consensus Estimate for fiscal 2026 revenues at $12.57 billion, reflecting a year-over-year increase of 9.3% [5][11] Group 2: Technological Advancements and Industry Trends - The transition from 2.5D to 3D system-on-integrated-chip architectures is increasing packaging complexity, particularly with HBM moving from 8-high to 12-high and 16-high stacks, which requires advanced interconnects and precise through-silicon vias, creating substantial opportunities for Lam Research [3][4] - The need for upgrades to existing equipment and new tool purchases in each generation of advanced packaging presents recurring opportunities for Lam Research as chipmakers invest in advanced memory and logic nodes [4] Group 3: Competitive Landscape - Lam Research faces competition in advanced packaging from Applied Materials and KLA Corporation, both of which have unique strengths in deposition, etch technologies, and process control tools, respectively [6][7][8] Group 4: Financial Performance and Valuation - Lam Research's shares have increased by 45.4% year to date, outperforming the Zacks Electronics – Semiconductors industry, which gained 26.9% [9] - The company trades at a forward price-to-earnings ratio of 23.38, significantly lower than the industry's average of 35.98, indicating potential valuation upside [12] - Earnings estimates for fiscal 2026 and 2027 have been revised upward, with expected year-over-year increases of approximately 6.8% and 9.2%, respectively [15]