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Lam Research Roars to New Heights on Improving WFE Industry Conditions

By Steve Symington - Jan 31, 2020 at 9:00AM

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And the semiconductor-processing solutions leader expects more strength ahead.

Lam Research (LRCX -1.61%) released fiscal second-quarter 2020 results late Wednesday, marking a return to top-line growth for the semiconductor-processing solutions company that was much more pronounced than its previous guidance (which was provided in October) indicated.

Shares are up more than 4% as the market absorbs the news, setting a new all-time high in the process. Let's dig in for a better idea of what Lam accomplished over the past few months, as well as what we should be watching for the rest of the year.

Metric

Fiscal Q2 2020*

Fiscal Q2 2019

Change

Revenue

$2.584 billion

$2.523 billion

2.4%

GAAP net income

$514.5 million

$568.9 million

(9.6%)

GAAP diluted earnings per share

$3.43

$3.51

(2.3%)

Data source: Lam Research. *For the quarter ended Dec. 29, 2019. GAAP = generally accepted accounting principles. 

Semiconductor equipment with a round wafer.

Image source: Getty Images.

"An improving wafer fabrication equipment environment..."

Adjusted for one-time items like acquisition and restructuring expenses, Lam's non-GAAP net income was $602 million, or $4.01 per share, up from $3.87 per share in the same year-ago period. Adjusted gross margin also arrived at 45.7%. Of note here: That bottom line was notably bolstered by Lam moving to repurchase $1 billion of common shares during the quarter. 

Still, these results compared favorably to Lam's latest guidance, which called for revenue of $2.35 billion to $2.65 billion, adjusted gross margin of 44% to 46%, and adjusted net income per share of $3.60 to $3.80.

Meanwhile, Lam generated operating cash flow of $307.9 million, ending the quarter with $4.9 billion in cash, cash equivalents, and short-term investments. Deferred revenue also declined to $411 million from $481 million last quarter, while its deferred profit fell to $366 million from $407 million three months ago. 

On a geographic basis, Lam generated 29% of total revenue from China (up from 27% last quarter), 26% from Taiwan (up from 18% last quarter), 18% from Korea (down from 21% three months ago), 9% from the U.S. (up from 8% before), 8% in Japan (down from 13%), 7% from Southeast Asia (down from 7% previously), and Europe was steady at roughly 3% of total sales.

"Lam closed out calendar 2019 with strong December quarter results," stated Lam Research President and CEO Tim Archer. "We are executing at a high level in an improving wafer fabrication equipment environment and building a powerful pipeline of new products to fuel future growth."

Looking forward

For the current quarter (ending March 29, 2020), Lam Research expects revenue of $2.6 billion to $3 billion, adjusted gross margin of 45.5% to 47.5%, and adjusted net income per share of $4.15 to $4.95. Here again, most analysts were modeling lower fiscal third-quarter earnings of $4 per share on revenue near the bottom end of Lam's target range.

All told, there was little not to like about Lam's steady results amid modestly improved WFE industry conditions. And even with shares trading near their all-time highs leading into this report, it was no surprise to see this top tech stock continuing to surge in response on Thursday.

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Stocks Mentioned

Lam Research Corporation Stock Quote
Lam Research Corporation
LRCX
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