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Lam Research's (LRCX) Q2 Earnings Beat, Revenues Down Y/Y
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Lam Research Corporation (LRCX - Free Report) delivered second-quarter fiscal 2024 non-GAAP earnings of $7.52 per share, which surpassed the Zacks Consensus Estimate by 6.5%. The figure decreased by 29.8% from the year-ago fiscal quarter’s reading.
Revenues of $3.76 billion surpassed the Zacks Consensus Estimate of $3.71 billion. The figure declined by 28.8% year over year. This was primarily attributed to weakness in the systems business due to sluggish memory spending.
Lam Research’s system revenues were $2.29 billion (61.2% of the total revenues), down 35.2% from the year-ago fiscal quarter’s figure. The reported figure surpassed the Zacks Consensus Estimate of $2.27 billion.
In the Customer Support Business Group, revenues for the reported quarter were $1.46 billion (38.8%), down 15.7% from the year-ago fiscal quarter’s number. The figure beat the consensus mark of $1.44 billion.
Although sluggish wafer fabrication equipment (“WFE”) spending remains a concern, improvement in the outlook for the same owing to modest memory recovery is a positive. For 2024, WFE spending is expected to be in the mid-high $80 billion range.
NAND is expected to benefit from technology upgrades, while DRAM is likely to benefit from node conversions and capacity additions in HBM. Foundry/logic to benefit from leading-edge investments.
Stability in domestic spending in China remains a plus.
Lam Research’s proper execution and expansion, as well as diversifying global footprints, remain positives. The company’s technological advancements, especially with AI, are noteworthy. Also, its strength in 3D DRAM and advanced packaging is a tailwind.
Coming to price performance, Lam Research has gained 72.5% over a year, outperforming the industry’s growth of 30.9%.
Lam Research Corporation Price, Consensus and EPS Surprise
China, Korea and Taiwan accounted for 40%, 19% and 13%, respectively, of Lam Research’s total revenues for the fiscal second quarter. Japan, Southeast Asia, the United States and Europe accounted for 14%, 4%, 5% and 5%, respectively.
Operating Details
The non-GAAP gross margin was 47.6%, which expanded 250 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $662.3 million, down 3.5% from the prior year's fiscal quarter’s reading. As a percentage of revenues, the figure expanded 460 bps from the year-earlier fiscal quarter’s level to 17.6%.
The non-GAAP operating margin was 30%, contracting 210 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Dec 24, 2023, cash and cash equivalents and short-term investments were $5.64 billion compared with $5.16 billion as of Sep 24, 2023.
Cash flow from operating activities was $1.45 billion for the reported quarter, up from $951.2 million in the previous fiscal quarter. Capital expenditure was $115 million in second-quarter fiscal 2024 compared with $77 million in first-quarter fiscal 2024.
In the reported quarter, Lam Research paid out dividends of $264 million and repurchased shares worth $640 million.
Guidance
For third-quarter fiscal 2024, LRCX expects revenues of $3.7 billion (+/- $300 million). The Zacks Consensus Estimate for the same is pegged at $3.71 billion.
The non-GAAP gross margin is projected at 48% (+/-1%), while the non-GAAP operating margin is expected to be 29.5% (+/-1%).
Non-GAAP earnings are projected to be $7.25 (+/- 75 cents) per share on a diluted share count of 132 million. The Zacks Consensus Estimate for the same is pinned at $6.74 per share.
Zacks Rank and Stocks to Consider
Currently, Lam Research carries a Zacks Rank #3 (Hold).
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Lam Research's (LRCX) Q2 Earnings Beat, Revenues Down Y/Y
Lam Research Corporation (LRCX - Free Report) delivered second-quarter fiscal 2024 non-GAAP earnings of $7.52 per share, which surpassed the Zacks Consensus Estimate by 6.5%. The figure decreased by 29.8% from the year-ago fiscal quarter’s reading.
Revenues of $3.76 billion surpassed the Zacks Consensus Estimate of $3.71 billion. The figure declined by 28.8% year over year. This was primarily attributed to weakness in the systems business due to sluggish memory spending.
Lam Research’s system revenues were $2.29 billion (61.2% of the total revenues), down 35.2% from the year-ago fiscal quarter’s figure. The reported figure surpassed the Zacks Consensus Estimate of $2.27 billion.
In the Customer Support Business Group, revenues for the reported quarter were $1.46 billion (38.8%), down 15.7% from the year-ago fiscal quarter’s number. The figure beat the consensus mark of $1.44 billion.
Although sluggish wafer fabrication equipment (“WFE”) spending remains a concern, improvement in the outlook for the same owing to modest memory recovery is a positive. For 2024, WFE spending is expected to be in the mid-high $80 billion range.
NAND is expected to benefit from technology upgrades, while DRAM is likely to benefit from node conversions and capacity additions in HBM. Foundry/logic to benefit from leading-edge investments.
Stability in domestic spending in China remains a plus.
Lam Research’s proper execution and expansion, as well as diversifying global footprints, remain positives. The company’s technological advancements, especially with AI, are noteworthy. Also, its strength in 3D DRAM and advanced packaging is a tailwind.
Coming to price performance, Lam Research has gained 72.5% over a year, outperforming the industry’s growth of 30.9%.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
Regions in Detail
China, Korea and Taiwan accounted for 40%, 19% and 13%, respectively, of Lam Research’s total revenues for the fiscal second quarter. Japan, Southeast Asia, the United States and Europe accounted for 14%, 4%, 5% and 5%, respectively.
Operating Details
The non-GAAP gross margin was 47.6%, which expanded 250 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $662.3 million, down 3.5% from the prior year's fiscal quarter’s reading. As a percentage of revenues, the figure expanded 460 bps from the year-earlier fiscal quarter’s level to 17.6%.
The non-GAAP operating margin was 30%, contracting 210 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Dec 24, 2023, cash and cash equivalents and short-term investments were $5.64 billion compared with $5.16 billion as of Sep 24, 2023.
Cash flow from operating activities was $1.45 billion for the reported quarter, up from $951.2 million in the previous fiscal quarter. Capital expenditure was $115 million in second-quarter fiscal 2024 compared with $77 million in first-quarter fiscal 2024.
In the reported quarter, Lam Research paid out dividends of $264 million and repurchased shares worth $640 million.
Guidance
For third-quarter fiscal 2024, LRCX expects revenues of $3.7 billion (+/- $300 million). The Zacks Consensus Estimate for the same is pegged at $3.71 billion.
The non-GAAP gross margin is projected at 48% (+/-1%), while the non-GAAP operating margin is expected to be 29.5% (+/-1%).
Non-GAAP earnings are projected to be $7.25 (+/- 75 cents) per share on a diluted share count of 132 million. The Zacks Consensus Estimate for the same is pinned at $6.74 per share.
Zacks Rank and Stocks to Consider
Currently, Lam Research carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Logitech International (LOGI - Free Report) and Itron (ITRI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have returned 116.5% over the past year. The long-term earnings growth rate for ANET is pegged at 19.77%.
Shares of Logitech International have returned 23.2% over the past year. The long-term earnings growth rate for LOGI is currently projected at 15.75%.
Shares of Itron have gained 22.3% over the past year. The long-term earnings growth rate for ITRI is currently projected at 23%.