Lam Research (NASDAQ:LRCX) Q1: Beats On Revenue

Petr Huřťák /
2024/04/24 4:22 pm EDT

Semiconductor equipment maker Lam Research (NASDAQ:LCRX) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue down 2% year on year to $3.79 billion. The company expects next quarter's revenue to be around $3.8 billion, in line with analysts' estimates. It made a non-GAAP profit of $7.79 per share, improving from its profit of $6.99 per share in the same quarter last year.

Is now the time to buy Lam Research? Find out by accessing our full research report, it's free.

Lam Research (LRCX) Q1 CY2024 Highlights:

  • Revenue: $3.79 billion vs analyst estimates of $3.73 billion (1.7% beat)
  • EPS (non-GAAP): $7.79 vs analyst estimates of $7.30 (6.8% beat)
  • Revenue Guidance for Q2 CY2024 is $3.8 billion at the midpoint, roughly in line with what analysts were expecting
  • Gross Margin (GAAP): 47.5%, up from 43.2% in the same quarter last year
  • Inventory Days Outstanding: 197, down from 203 in the previous quarter
  • Free Cash Flow of $1.28 billion, similar to the previous quarter
  • Market Capitalization: $116.3 billion

"With solid revenue and earnings per share performance in the March quarter, Lam is off to a strong start in calendar 2024" said Tim Archer, Lam Research's President and Chief Executive Officer.

Founded in 1980 by David Lam, who pioneered semiconductor etching technology, Lam Research (NASDAQ:LCRX) is one of the leading providers of the wafer fabrication equipment used to make semiconductors.

Semiconductor Manufacturing

The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.

Sales Growth

Lam Research's revenue growth over the last three years has been unimpressive, averaging 5.7% annually. This quarter, its revenue declined from $3.87 billion in the same quarter last year to $3.79 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Lam Research Total Revenue

Even though Lam Research surpassed analysts' revenue estimates, this was a slow quarter for the company as its revenue dropped 2% year on year. This could mean that the current downcycle is deepening.

Lam Research looks like it's on the cusp of a rebound, as it's guiding to 18.5% year-on-year revenue growth for the next quarter. Analysts seem to agree as consesus estimates call for 16.3% growth over the next 12 months.

When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

Lam Research Inventory Days Outstanding

This quarter, Lam Research's DIO came in at 197, which is 52 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.

Key Takeaways from Lam Research's Q1 Results

We liked how Lam Research's beat on revenue and EPS as well as showing solid gross margin improvement this quarter. That the company guided revenue for next quarter in line with expectations shows that the company is on track. Overall, we think this was a fine quarter. The stock is flat after reporting and currently trades at $885 per share.

Lam Research may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.