Both Lam Research Corporation (NASDAQ:LRCX) and Applied Materials, Inc. (NASDAQ:AMAT) serve customers building more complex chips, but investors also need to know what survives a pause in new equipment orders. The companies rank seventh and eighth, respectively, in our 10 Best AI Infrastructure Stocks to Buy for the Long Term, which identifies six higher-ranked infrastructure businesses. An accounting distinction between the two adds another layer to the comparison.
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The service labels cover different businesses
Lam reported $6.722 billion of revenue for its June quarter on July 29. Customer support and other revenue contributed $2.472 billion, or 36.8%; systems supplied the balance. That support category includes mature-node Reliant equipment alongside service-related activity, so treating all of it as recurring maintenance overstates the cushion.
Applied’s August 13 release showed $9.115 billion of July-quarter revenue. Applied Global Services supplied $1.781 billion, or 19.5%, and $536 million of operating profit. Its operating margin was 30.1%, versus 27.3% a year earlier. Applied moved its 200mm equipment business into Semiconductor Systems starting in fiscal 2026 and recast the comparison periods.
The percentages therefore cannot establish that Lam has nearly twice Applied’s recurring-service protection. Both installed bases create demand for support and upgrades; customer utilization and the equipment included in each segment still matter.
A revenue cushion is not an earnings floor
If Lam’s systems revenue fell 10% while support and other revenue stayed flat, total sales would fall 6.3%. If Applied’s Semiconductor Systems sales fell 10% while all other revenue stayed flat, its total would fall 7.7%. These are mechanical scenarios using the reported segment mix, not predictions. Service and mature-node equipment demand can also decline, and fixed expenses can make profit fall faster than revenue.
Lam’s reported GAAP operating margin was 37.4%, against Applied’s 33.7%. Advanced chip complexity supports both businesses, but spending delays, export restrictions and customer concentration can impair that opportunity. Our Lam-KLA comparison examines when faster equipment growth stops justifying a higher cash-flow price.
October 15 trailing cash-flow multiples were about 71 for Lam and 61 for Applied. Such valuations require durable cash generation; the segment exercise alone cannot identify the better-priced stock. Different working-capital cycles and investment timing also affect those multiples.
Q2 2026 hedge-fund holders increased to 139 from 123 for Lam, while Applied slipped to 137 from 138. Arrowstreet reduced Lam shares 7%; Coatue cut Applied shares 20%. September 30 short interest represented 2.07% and 1.7% of float, respectively.
Lam’s reported mix provides a larger mechanical buffer against a systems-only decline. Applied offers a cleaner view of its reshaped services business. Investors should favor evidence that service profit and cash persist through weaker equipment orders; a larger category labeled support is insufficient by itself.
