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Semiconductor equipment maker Lam Research (NASDAQ:LRCX) (NASDAQ:LCRX) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 20.7% year on year to $3.87 billion. The company expects next quarter's revenue to be around $4.05 billion, in line with analysts' estimates. It made a non-GAAP profit of $8.14 per share, improving from its profit of $5.98 per share in the same quarter last year.
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Lam Research (LRCX) Q2 CY2024 Highlights:
- Revenue: $3.87 billion vs analyst estimates of $3.83 billion (1% beat)
- Adjusted Operating Income: $1.19 billion vs analyst estimates of $1.13 billion (4.6% beat)
- EPS (non-GAAP): $8.14 vs analyst estimates of $7.59 (7.3% beat)
- Revenue Guidance for Q3 CY2024 is $4.05 billion at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 47.5%, up from 45.8% in the same quarter last year
- Inventory Days Outstanding: 189, down from 199 in the previous quarter
- Free Cash Flow of $761.7 million, down 40.5% from the previous quarter
- Market Capitalization: $111.8 billion
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 ManufacturingThe 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 GrowthLam Research's revenue growth over the last three years has been unimpressive, averaging 3.4% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $3.21 billion in the same quarter last year to $3.87 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 had a good quarter as its revenue grew 20.7% year on year, topping analysts' estimates by 1%. Lam Research's growth inflected from negative to positive this quarter, indicating that the recent cycle downturn is likely in the rearview mirror.
Lam Research returned to positive revenue growth this quarter and its management team expects the trend to continue. The company is guiding to 16.3% year-on-year growth next quarter, and analysts seem to agree, forecasting 17.8% growth over the next 12 months.
Product Demand & Outstanding InventoryDays 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.
This quarter, Lam Research's DIO came in at 189, which is 39 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 Q2 Results We were impressed by how significantly Lam Research blew past analysts' EPS expectations this quarter. We were also glad its operating margin improved. Revenue guidance for next quarter was in line. Overall, we think this was a fine quarter. Investors were likely expecting more, however, and the stock traded down 2.2% to $903 immediately following the results.
