When Lam Research (NASDAQ:LRCX) announced fiscal first-quarter 2020 results a week ago, it was evident that the market was pleased with what the semiconductor-processing solutions specialist had to say. Though Lam's revenue and earnings declined on a year-over-year basis given continued industry headwinds constraining growth, the rates of those declines were less pronounced than most investors had anticipated, leaving shares to rally nearly 14% last Thursday in response.

But the stock has all but given up those gains in the days since, leaving us to wonder: Is Lam Research a buy now? Let's take a closer look at its quarter to find out.


Fiscal Q1 2020*

Fiscal Q1 2019**



$2.166 billion

$2.331 billion


GAAP net income

$465.8 million

$533.4 million


GAAP diluted earnings per share




Data source: Lam Research. *For the quarter ended Sept. 29, 2019. **For the quarter ended Sept. 23, 2018

"A foundation for long-term growth..."

For perspective, revenue was slightly above the midpoint of Lam's guidance provided in early August for a range of $2.0 billion to $2.3 billion. And after adjusting the bottom line for items like restructuring and acquisition expenses, adjusted (non-GAAP) net income arrived at $480 million, or $3.18 per share -- down from $3.62 per share a year ago, but also near the high end of guidance for a per-share range of $2.80 to $3.20. Adjusted gross margin was 45.4%, again near the top end of Lam's target range of 44% to 46%.

Stock chart indicating longer-term gains on a dark background


Meanwhile, deferred revenue rose to $481 million, up from $449 million three months ago, and Lam's deferred profit climbed $26 million sequentially from last quarter to $407 million. Lam further generated $464 million in operating cash flow, more than offsetting the cost of dividends, share repurchases, stock-based compensation, capital expenditures, and debt reductions -- and lifting cash, cash equivalents, and short-term investments by $100 million sequentially to $5.8 billion in the process.

Lam's geographic results provide additional perspective on the sources of both its headwinds and its relative strength: Roughly 27% of total sales came from China (down from 33% last quarter), 21% came from Korea (down from 25% before), Taiwan represented 18% (up from 14% previously), Japan was 13% (up from 9% last quarter), Southeast Asia was 10% (doubling from 5% last quarter), the U.S. was 8% (down from 11%), and Europe remained steady at 3% of total sales.

"Lam delivered solid results in the ... quarter, highlighted by strong profitability," stated Lam Research CEO Tim Archer. "Through our unwavering commitment to customer collaboration and technology innovation, Lam has laid a foundation for long-term growth and outperformance."

On guidance

The market was equally pleased with Lam Research's forward outlook, which calls for revenue in the current quarter (ending December 2019) of $2.35 billion to $2.65 billion, with adjusted gross margin of 44% to 46%, and adjusted net income per share of $3.60 to $3.80. By comparison, most analysts were modeling significantly lower quarterly adjusted earnings of $3.16 per share on revenue closer to $2.2 billion.

In the end, given that encouraging guidance and Lam's relative outperformance last quarter, it's hard to argue with the market's initial reaction to last week's report. In retrospect, perhaps more surprising was the fact Lam Research stock has given investors the chance to dive in yet again at its pre-earnings levels. Assuming Lam can sustain its strength as it waits for headwinds to abate, I think now could be a great time to open or add to a position.