Analysis
Lam Research has identified the U.S. reciprocal and "Liberation Day" tariffs introduced in April 2025 as a persistent headwind to its gross margin and overall profitability. While the company has not provided a precise total dollar amount for the tariff cost, management explicitly stated that the June 2025 gross margin guidance of 49.5% included its assessment of the direct impacts of these tariffs. By late 2025, the company noted that tariff impacts were "ticking up" and expected to increase further in the December quarter. This cost pressure contributed to a sequential decline in non-GAAP gross margin from a peak of 50.6% in the September 2025 quarter to 49.7% in the December 2025 quarter, with further compression to 49.0% (at the midpoint) guided for the March 2026 quarter.
The company employs a diversified global manufacturing and supply chain strategy to mitigate the direct financial impact of these tariffs. Lam Research operates factories in the United States, Malaysia, Taiwan, Korea, and Austria, providing the flexibility to adjust its manufacturing footprint and source components from regions not subject to the highest reciprocal rates. Management has emphasized that while they cannot reduce the impact to zero, they are leveraging "agile manufacturing" and "operational velocity" to lessen the burden. This strategy of being close to customers has historically provided a roughly 200 basis point uplift to gross margins, which helps buffer the current tariff-related headwinds.
Beyond the reciprocal tariffs, Lam Research is navigating significant top-line headwinds from separate trade-related restrictions. In October 2025, the company disclosed a new "affiliate rule" restricting shipments to certain domestic customers in China, which resulted in a approximately $200 million revenue impact in the December 2025 quarter alone. For calendar year 2026, the company anticipates this rule will create a $600 million revenue headwind, contributing to an expected decline in China's contribution to total revenue to less than 30%. Despite these challenges, the company expects overall revenue to grow in 2026, driven by record demand for AI-related semiconductor equipment.
The following data summarizes the margin and revenue trends associated with these tariff and trade developments. The cost impact estimates are based on the observed and guided gross margin compression of roughly 90 to 160 basis points from the 2025 peak, applied to the company's $20.6 billion calendar year 2025 revenue run rate. Revenue impacts primarily reflect the specific guidance provided for the October 2025 export restrictions.
Data
Tariff and Trade Impact Summary
| Period | Revenue Headwind (Net) | Gross Margin Trend | Primary Driver |
|---|---|---|---|
| June 2025 Quarter | Included in Guidance | 49.5% (Guidance) | Direct impact of April 2025 tariffs included |
| September 2025 Quarter | — | 50.6% (Actual) | Mix benefit partially offset by tariffs |
| December 2025 Quarter | -$200 Million | 49.7% (Actual) | Tariffs "ticking up" and customer mix |
| March 2026 Quarter | — | 49.0% (Guidance) | Continued headwind from customer mix |
| CY 2026 (Full Year) | -$600 Million | — | Affiliate Rule export restrictions (China) |
Note: Cost impact estimates reflect the annualized money amount equivalent of the 90-160 basis point gross margin pressure observed relative to 2025 peaks.
Financial Impact
- Revenue Impact (Historic): $200M
- Cost Impact (Historic): $185M–$330M
- Revenue Impact (Forward-Looking): $600M
- Cost Impact (Forward-Looking): $200M–$365M
Sources
This guidance includes our current assessment of the direct impacts of tariffs on our business.
By exercising the flexibility that we have within our manufacturing and supply chain operations, we can lessen the impact [of tariffs].
I expect the impact from tariffs to continue to increase somewhat in the December quarter.