Lam Research’s first quarter results were shaped by robust demand for advanced semiconductor manufacturing technologies, with management attributing growth to record foundry revenue and ongoing strength in memory upgrades. CEO Tim Archer emphasized the impact of recent investments in manufacturing and supply chain flexibility, noting, “Gross margin percentage was also a record for the company since the Novelis merger, as the investments we have made over the past several years…are contributing positively as we scale the business.” The quarter benefited from strong adoption of Lam’s atomic layer deposition and conductor etch solutions, as well as a surge in customer upgrades to support transitions to higher layer NAND memory.
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Lam Research (LRCX) Q1 CY2025 Highlights:
- Revenue: $4.72 billion vs analyst estimates of $4.64 billion (24.4% year-on-year growth, 1.7% beat)
- Adjusted EPS: $1.04 vs analyst estimates of $1.00 (4.1% beat)
- Revenue Guidance for Q2 CY2025 is $5 billion at the midpoint, above analyst estimates of $4.56 billion
- Adjusted EPS guidance for Q2 CY2025 is $1.20 at the midpoint, above analyst estimates of $0.98
- Operating Margin: 33.1%, up from 27.9% in the same quarter last year
- Inventory Days Outstanding: 169, down from 172 in the previous quarter
- Market Capitalization: $118.5 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Lam Research’s Q1 Earnings Call
- C.J. Muse (Cantor Fitzgerald) asked about the sustainability of NAND upgrade-driven growth, to which CEO Tim Archer explained there remains a substantial multi-year opportunity as customers move from 128 to 256-layer technology, with both upgrades and new tool sales contributing.
- Timothy Arcuri (UBS) inquired about Lam’s response to tariff impacts. Archer and CFO Doug Bettinger described their flexible, global manufacturing footprint, enabling adaptation to changing trade rules, though changes cannot happen instantly.
- Stacy Rasgon (Bernstein Research) questioned the sustainability of current gross margin levels given an expected decline in China’s revenue mix. Bettinger noted gross margins will vary with customer and product mix, while the close-to-customer manufacturing strategy has structurally improved margins.
- Harlan Sur (JPMorgan) sought details about Lam’s ability to serve U.S. customers if tariffs persist. Management responded that manufacturing capacity exists in the U.S., and capabilities can be adjusted with sufficient lead time if needed.
- Tom O’Malley (Barclays) asked how long NAND upgrade momentum can last before new equipment demand takes precedence. Archer said upgrades and new tool sales will both be important over the next several years, with timing dependent on broader demand trends.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will be watching (1) the pace and breadth of NAND memory technology conversions and the resulting impact on upgrade versus new equipment sales, (2) Lam’s ability to maintain or expand operating margins as customer and regional mix shifts, and (3) continued adoption of advanced tools for foundry logic and packaging. Execution on digital solutions and effective navigation of tariff-related risks will also be key markers of performance.
Lam Research currently trades at $93.25, up from $66.63 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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