Lam Research guidance tops forecasts but shares slide 6%
The chip equipment maker reported record revenue and a slightly better outlook than expected, but the stock still fell after hours as investors who had ridden an 80% rally took profits.
Lam Research guidance came in above Wall Street's numbers on Wednesday, Oct. 21, yet the stock fell. The chip equipment maker forecast December-quarter revenue of $8.60 billion, plus or minus $400 million, against a consensus of about $8.54 billion, and its shares dropped about 6% in extended trading, Investing.com reported.
What happened
For the quarter ended Sept. 27, Lam reported revenue of $8.22 billion, up 22% from $6.72 billion in the June quarter. Non-GAAP earnings were $2.20 a share, edging past the $2.18 analysts expected, on revenue estimates of about $8.13 billion. On a GAAP basis, net income was $2.75 billion, or $2.19 a share.
Profitability rose too. GAAP gross margin widened to 52.3% from 51.7%, and operating margin climbed to 40.0% from 37.4%. Chief executive Tim Archer said AI was "driving higher semiconductor demand and greater device complexity" and called the quarter a record for revenue, profit and earnings per share.
Systems revenue, the sale of new machines, jumped to $5.73 billion from $4.25 billion. China made up 35% of sales, Korea 20% and Taiwan 18%. Cash and equivalents rose to $7.45 billion from $5.60 billion, and Lam returned more than $1.3 billion through dividends and buybacks.
Why it matters
The outlook was the problem, mainly because of its width. The midpoint for earnings is $2.33 a share, plus or minus 15 cents, only slightly above the roughly $2.32 consensus. The range runs from $8.2 billion to $9.0 billion in revenue, which left room for a weaker result than investors had hoped. Seeking Alpha put the after-hours drop at 6.8%.
Positioning made it worse. Shares had risen nearly 80% over the past year heading into the report, according to Investing.com, so a beat that was only modest was enough to trigger profit-taking. Chip equipment names have been volatile all month, as we noted when the chip index losing streak gave the Nasdaq its worst week, and again during the Asian chip selloff.
Lam's numbers still matter beyond the stock. Its tools etch and deposit the layers in advanced logic and memory chips, so its orders show how fast chipmakers are adding capacity for AI. Rising systems sales and record margins suggest that spending is not slowing.
Operating cash flow reached $3.50 billion in the quarter, Investing.com said. That gives Lam room to keep buying back stock while it adds manufacturing capacity, which Archer said was "paying off" as the company tries to outgrow the wider wafer equipment market. Investors will want to see whether the Lam Research guidance holds up if chipmakers slow orders.
What's next
Nasdaq futures fell more than 1% early Thursday as investors weighed Big Tech earnings, CNBC reported, adding pressure on the sector. Full figures and the outlook are in Lam's earnings release.
The next test is whether chipmakers confirm their 2027 capital budgets in the coming weeks. Until then, the Lam Research guidance range will keep investors focused on the low end.
This article is for information only and is not investment advice.