Lam Research (LRCX, Financial) saw a modest 2% rise today after reporting strong Q1 results, with both revenue and earnings surpassing expectations. The company also provided Q2 projections in line with analyst estimates, marking the sixth consecutive period of doing so. This performance helped alleviate some concerns following ASML's (ASML, Financial) disappointing Q3 report, which predicted a slower-than-expected recovery outside of AI markets. Despite this, LRCX shares remain about 12% below pre-ASML report levels and over 30% below their all-time high in July.
- AI remains a bright spot for both ASML and LRCX. LRCX's advanced packaging business, which supports high bandwidth memory (HBM), generated $1 billion in sales this quarter. The company noted that AI demand has exceeded initial expectations and doesn't foresee a slowdown, based on customer discussions.
- LRCX achieved its second consecutive quarter of double-digit revenue growth, with a 19.7% year-over-year increase to $4.17 billion, surpassing its $3.75-4.35 billion guidance range. Margins also exceeded expectations, leading to a 29% year-over-year rise in adjusted EPS to $0.86.
- The company's 2024 WFE spending forecast remains unchanged in the mid-$90 billion range. While AI demand remains strong, domestic China WFE spending is expected to decline in the latter half of the year. China's share of LRCX's revenue is normalizing to around 30% for Q2. The company provided a wide guidance range for Q2, with expected adjusted EPS of $0.77-0.97 and revenue of $4.0-4.6 billion.
- LRCX is optimistic about year-over-year growth in 2025 WFE spending, driven by NAND and DRAM recovery, advanced packaging demand, and technology upgrades. The company expects to outperform overall WFE growth next year due to its essential role in chip manufacturing.
Despite LRCX's solid Q1 results, uncertainty about the timing of a broader recovery keeps market sentiment cautious. ASML's recent guidance adds to these concerns, and the market may need additional positive signals from LRCX's peers to regain confidence. Investor sentiment may improve next quarter when LRCX provides its 2025 WFE spending outlook.
