Is the Floor in for Lam Research After Bullish Earnings?
Known for being a cyclical industry to begin with, many semiconductor stocks have been down significantly since the summer of 2024. And just as some investors were inching back into technology stocks, DeepSeek and tariffs came in to put a ceiling on chip stocks. But if the recent earnings report from Lam Research Corp. (NASDAQ: LRCX) means anything, that ceiling may be a floor that launches LRCX stock higher as well as the entire sector.
Lam Research delivered a strong earnings report by beating analysts’ estimates on the topline and bottom line. Revenue of $4.72 billion was higher than the estimate of $4.64 billion, 7% higher than the prior quarter, and 24.5% higher year-over-year (YoY). Highlights included record revenue for the company’s foundry business and from Taiwan.
The news was equally positive on the bottom line. Earnings per share (EPS) of $1.04 beat estimates by $1. This number was 14% higher than the prior quarter and 35% higher year over year.
Lam Research is at the Tip of the Tech Spear
Lam Research doesn’t make semiconductor chips, but it makes equipment that is invaluable to chipmakers. That’s why there was so much interest in the company’s earnings—not only the results from the quarter that just ended but also what that would mean for the company’s results going forward.
As of now, management said on the conference call that it’s expecting the June quarter to continue the strong momentum. Some of the highlights include:
- Revenue of $5 billion at the midpoint (plus or minus $300 million).
- $1.20 EPS at the midpoint (plus or minus 10 cents).
- Gross margin of 49.5% (plus or minus 1%).
- Operating margin of 33.5% (plus or minus 1%).
It’s worth noting that those goals would mark a record level of profitability and the company's highest operating margin since the 1990s.
One reason to believe this growth is achievable is that the company’s earnings report did not show a significant pullback from China, which accounts for 31% of the company’s revenue. However, management reiterated its expectations that its China concentration will be lower YoY in 2025. That could mean a drop of about $700 million in revenue.
Is Lam Insulated from Tariffs?
This is a question that almost every company will have to answer this earnings season. A specific concern as it relates to Lam Research is the amount of manufacturing the company does in Malaysia and Taiwan. Specifically, whether the company has the manufacturing bandwidth in the United States to service the growing manufacturing footprint in the United States.
The company commented that it has a “longstanding strategy of putting our capabilities close to our customers.” It also remarked that it has “already shown an ability to be agile withinng and supply chain, " our manufacturi making it clear that such a switch wouldn’t be an issue.
Technicals Indicate a Breakout Opportunity
LRCX stock is down about 7.7% in 2025, continuing the slide that started in summer 2024. However, the stock’s recent bounce is approaching the level reached in early April. This marked a ceiling at that time, which also correlates closely with the stock’s price at the beginning of the year and the 50-day SMA. If the stock’s momentum pushes it above that level, the stock could have a new floor and a higher ceiling.
Analysts have been lowering their price targets since the earnings call, and the range of prices reflects the continued uncertainty in the market. However, the stock remains a Moderate Buy with a consensus price target of $93.23, which would be a 31% gain.
Learn more about LRCX
