Did Lam Research beat expectations in the December 2023 quarter?

The filing does not include consensus estimates, so a formal beat or miss cannot be determined from this document alone. Relative to its own trajectory, results were solid: revenue and EPS both grew sequentially, and non-GAAP EPS of $7.52 was above the prior quarter's $6.85. Investors should compare these figures against published analyst consensus.

Why did gross and operating margins decline sequentially?

GAAP gross margin fell 70 bps to 46.8% and GAAP operating margin fell 130 bps to 28.1%. Restructuring charges rose to about $17 million in cost of goods sold and operating expenses combined, and transformational costs increased to roughly $25 million. Higher research and development and SG&A costs, including elective deferred compensation valuation changes, also weighed on GAAP results. Non-GAAP margins were more stable, with gross margin down only 30 bps and operating margin down 10 bps.

What does the guidance for the March 2024 quarter imply?

Lam guided revenue to roughly $3.7 billion, essentially flat with the $3.76 billion reported in the December quarter. Non-GAAP gross margin is projected at 48.0% and non-GAAP operating margin at 29.5%, both modestly higher than December. Non-GAAP EPS is guided to $7.25, slightly below the $7.52 reported. The guidance is a range, so actual outcomes could differ materially.

Is the demand outlook improving?

Several indicators are constructive. Deferred revenue rose 14% sequentially to $1.93 billion, and systems revenue increased 12% sequentially to $2.30 billion. Management also pointed to AI-driven demand as a driver of semiconductor industry growth. Year-over-year revenue, however, is still down about 29%, so the recovery is still in its early stages.

What are the main risks highlighted for investors?

The company cites trade regulations and export controls, which affect its ability to sell into China. China represented 40% of December quarter revenue, creating significant concentration risk. Other risks include geopolitical tensions, customer and competitor actions, supply chain cost inflation, supply chain disruptions, and natural or human-caused disruptions. Investors should also watch the sizable Japan deferred revenue balance and its effect on revenue timing.

LRCX 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 24, 2024. Cited figures are marked; the original filing is the authoritative source.

Lam Research (LRCX) reported fiscal Q2 2024 results (quarter ended December 24, 2023) that beat its own trajectory on the top line and profitability.

Revenue rose 7.9% sequentially to $3.76 billion^a, while U.S. GAAP diluted EPS climbed 8.4% to $7.22 and non-GAAP diluted EPS rose 9.8% to $7.52. Margins were mixed: U.S. GAAP gross margin fell 70 bps to 46.8% and operating margin fell 130 bps to 28.1%, though the company attributed part of the pressure to restructuring and transformational costs and a mix that leaned toward systems sales. Management credited AI-driven demand for supporting semiconductor industry growth over the coming years.

Cash generation was strong. Operating cash flow was $1.45 billion^b for the quarter, and Lam returned capital through $645 million of share repurchases and $264 million of dividends. Cash and equivalents, short-term investments, and restricted cash rose to $5.6 billion.

Deferred revenue increased to $1.93 billion^c from $1.69 billion, which points to a healthier order backlog. Systems revenue grew to $2.30 billion from $2.06 billion sequentially, while customer support-related revenue increased more modestly to $1.46 billion. Revenue is still well below the year-ago level of $5.28 billion, a decline of about 29% year over year, reflecting a cyclical downturn in wafer fab equipment spending.

For the March 2024 quarter, Lam guided revenue to approximately $3.7 billion^d (±$300 million), non-GAAP gross margin to 48.0% (±1%), non-GAAP operating margin to 29.5% (±1%), and non-GAAP diluted EPS to $7.25 (±$0.75) on 132 million diluted shares. The guidance implies a roughly flat sequential top line with modestly higher margins. Geographic exposure remains concentrated, with China at 40% of revenue, which keeps export-control and geopolitical risk central to the investment thesis.

02—Key points

Key Highlights

Revenue of $3.76 billion, up 7.9% sequentially but down about 29% year over year from $5.28 billion
U.S. GAAP diluted EPS of $7.22 (+8.4% Q/Q); non-GAAP diluted EPS of $7.52 (+9.8% Q/Q)
Gross margin of 46.8% (GAAP) and 47.6% (non-GAAP), with GAAP margin down 70 bps Q/Q; operating margin of 28.1% (GAAP) and 30.0% (non-GAAP)
Operating cash flow of $1.45 billion; returned $645 million via buybacks and $264 million via dividends
Deferred revenue rose to $1.93 billion from $1.69 billion, indicating stronger forward visibility
March 2024 quarter guidance: revenue ~$3.7 billion, non-GAAP EPS $7.25 (±$0.75), non-GAAP gross margin 48.0%
China accounted for 40% of revenue, highlighting concentration and export-control exposure

03—Questions

Frequently Asked Questions

Did Lam Research beat expectations in the December 2023 quarter?
The filing does not include consensus estimates, so a formal beat or miss cannot be determined from this document alone. Relative to its own trajectory, results were solid: revenue and EPS both grew sequentially, and non-GAAP EPS of $7.52 was above the prior quarter's $6.85. Investors should compare these figures against published analyst consensus.
Why did gross and operating margins decline sequentially?
GAAP gross margin fell 70 bps to 46.8% and GAAP operating margin fell 130 bps to 28.1%. Restructuring charges rose to about $17 million in cost of goods sold and operating expenses combined, and transformational costs increased to roughly $25 million. Higher research and development and SG&A costs, including elective deferred compensation valuation changes, also weighed on GAAP results. Non-GAAP margins were more stable, with gross margin down only 30 bps and operating margin down 10 bps.
What does the guidance for the March 2024 quarter imply?
Lam guided revenue to roughly $3.7 billion, essentially flat with the $3.76 billion reported in the December quarter. Non-GAAP gross margin is projected at 48.0% and non-GAAP operating margin at 29.5%, both modestly higher than December. Non-GAAP EPS is guided to $7.25, slightly below the $7.52 reported. The guidance is a range, so actual outcomes could differ materially.
Is the demand outlook improving?
Several indicators are constructive. Deferred revenue rose 14% sequentially to $1.93 billion, and systems revenue increased 12% sequentially to $2.30 billion. Management also pointed to AI-driven demand as a driver of semiconductor industry growth. Year-over-year revenue, however, is still down about 29%, so the recovery is still in its early stages.
What are the main risks highlighted for investors?
The company cites trade regulations and export controls, which affect its ability to sell into China. China represented 40% of December quarter revenue, creating significant concentration risk. Other risks include geopolitical tensions, customer and competitor actions, supply chain cost inflation, supply chain disruptions, and natural or human-caused disruptions. Investors should also watch the sizable Japan deferred revenue balance and its effect on revenue timing.

04—Continue

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