Lam Research Proves Analysts Wrong with a Strong Earnings Report

Key Points

• Lam Research stock is up more than 4% after a solid earnings report and bullish guidance for the coming quarter.
• The company expects strong growth from AI-related applications to be a tailwind for 2025.
• LRCX stock may be confirming a double bottom. 

In the week heading into the first quarter earnings report for its 2025 fiscal year (FY), Lam Research Corp. NASDAQ: LRCX stock was down nearly 15%. Furthermore, analysts were lowering their price targets for LRCX stock over concerns of slowing growth that would make it difficult to see the stock outperforming the market.  

However, the stock is reversing course with a gain of over 4% in early trading the morning after the company’s earnings report. Is this a temporary lift or a sign that Lam Research may be proving its naysayers wrong? 

Before reviewing what came out of the earnings report, it’s important to get a sense of what the company does and why that’s significant for investors. Semiconductors have been a volatile sector in the last four years, mostly to the upside. That’s because this is a sector that provides the “picks and shovels” that allow companies to build out their artificial intelligence (AI) infrastructure.  

Lam Research in turn makes wafer-fabrication equipment and related services that the chipmakers need. In a world where more chips are needed in smaller spaces, Lam’s etch and deposition machines allow chips to be stacked vertically.  

A Bullish Reversal May Be in Play 

Analysts aren’t necessarily bearish on LRCX stock. Heading into earnings, the consensus price target for the stock was $141.28. That suggested an increase of over 90% in 12 months. And it comes after the company completed a 10-for-1 stock split in October. 

But the concerns weren’t without some merit. Prior to the fourth quarter of FY2024, Lam Research had delivered several quarters in which revenue and earnings came in lower year over year (YOY). This makes sense when you consider where the company is in the semiconductor chain.  

Many chipmakers were forecasting slower growth. If companies need fewer picks and shovels, those companies will need fewer handles and spades. 

However, the trend shifted in the fourth quarter of FY 2024. This came at a time when many chipmakers started to upgrade their internal forecasts. But as investors know, one time doesn’t make a pattern. That's why it’s significant that this is now two consecutive quarters where Lam Research delivered a YOY beat on revenue and earnings.  

 Artificial Intelligence Continues to Provide a Tailwind 

The headline numbers in the company’s earnings report showed topline revenue of $4.17 billion, higher than the $4.06 billion that analysts were expecting. On the bottom line, Lam delivered earnings per share (EPS) of 86 cents, above expectations of 81 cents.  

Although the company won’t offer full-year guidance until next quarter. It did project its second-quarter revenue to be $4.3 billion, which is higher than the current forecast for $4.22 billion. The company is forecasting EPS of 87 cents, which is above estimates for 85 cents.  

And according to Lam Research’s president and chief executive officer, Timothy Archer, it’s demand for AI applications that will continue fueling this growth. Although not giving specific numbers, the company sees strong growth in leading-edge logic nodes (NAND) as well as areas such as high-bandwidth memory (HBM).  

LRCX Stock May Have Confirmed Support 

The Lam Research analyst forecasts on MarketBeat are showing that analysts are wasting no time in doubling down on their outlook. Since the report, four analysts have lowered their price targets on LRCX stock with two of the forecasts being below the consensus price of $97.29. Supporting that price target is the company’s forward price-to-earnings ratio around 20x which puts it in the lower half of technology stocks.  

However, while it may be too early to go all in on the stock, it’s important to note that the bounce after earnings may be confirming a double bottom for the stock around $72 per share. The question is whether the stock will continue to move higher. At one point in pre-market trading the stock climbed near $78 before pulling back to around $75.