Lam Research (LRCX) is a current holding within the value component of Rivkin’s US Growth portfolio, which reported earnings overnight that beat estimates.
In their latest earnings report, Lam Research, which manufactures semiconductor processing equipment used by foundries such as Taiwan Semiconductor Manufacturing Co., delivered results that exceeded market expectations, sparking a 3.5% uplift in after-hours trading. The renowned semiconductor capital equipment supplier posted an adjusted EPS of US$5.98 on US$3.21 billion in revenue for the quarter, surpassing the consensus analyst estimate of US$5.13 EPS on US$3.15 billion in revenue. Despite a year-on-year decrease of 31%, the reported revenue was noticeably above the estimated US$3.12 billion, demonstrating the company’s resilience in navigating market challenges.
The company’s robust earnings were anchored on two main revenue streams: systems revenue which clocked US $1.71 billion, and customer support-related revenue and others at US$1.5 billion. Both figures topped the estimated values of US$1.63 billion and US$1.5 billion, respectively.
Lam Research’s outlook for the next quarter is optimistic, projecting revenues between US$3.1 billion and US$3.7 billion, an encouraging sign given that the midpoint of this range surpasses the US$3.28 billion estimated by analysts. Furthermore, Lam expects to maintain robust adjusted gross margins and operating margins of 45.5%-47.5% and 27%-29% respectively, demonstrating superior operational efficiency.
The role of artificial intelligence (AI) in shaping the growth trajectory of Lam Research and its foundry customers is noteworthy, and with business racing to incorporate AI, companies like Lam which are essential in the chip supply chain are set to benefit. As stated by CEO Tim Archer, more complex AI servers are central to the anticipated growth from foundry customers over the next few years, with the AI boom expected to catalyse US$1 billion to US$1.5 billion of additional chip equipment investment for every 1% penetration of AI servers in data centres.
Lam Research’s earnings report highlights the company’s resilience and strategic position amidst challenging market dynamics. Robust performance, coupled with an upbeat Q1 outlook, signals an encouraging trajectory. Lam’s unique position as a supplier of vital machinery to high-profile chip manufacturers, and the emerging growth drivers such as AI, are set to further drive revenue streams. Coupled with its operational efficiency as reflected in the projected margins, these factors make a compelling case for Lam’s future.
