Lam Research exceeds expectations in Q4 2024 with strong operational performance and expects growth in 2025.
From Nasdaq: 2025-01-29 22:00:13
Lam Research (NASDAQ: LRCX) held its Q4 2024 Earnings Call on Jan 29, 2025, with President and CEO Tim Archer and CFO Doug Bettinger sharing financial results for the December 2024 quarter. The company saw strong operational execution, with revenue, gross margin, operating margin, and EPS all exceeding guidance midpoints. Wafer fabrication equipment spending for 2024 was in line with expectations. Lam’s results show progress in broadening exposure across device segments and strengthening the product portfolio for the AI era. Shipments for gate-all-around nodes and advanced packaging each exceeded $1 billion in 2024, with WFE spending expected to rise in 2025.
Lam Research has made strategic investments in R&D infrastructure to enhance product development, with technologies like Cryo 3.0 and Aether dry resist solution showing promising results. The company’s focus on deposition and etch technology as a differentiator positions it well for growth in 2025, especially in DRAM and foundry logic markets. Trends like transitioning to molybdenum and upgrading NAND environment play to Lam’s favor, with the company aiming to outgrow WFE spending and bolster its bottom line in the coming year. Lam Research is seeing a trend in the adoption of carbon gap fill for higher bit density and lower costs in NAND shipments. Their TCBD-based process offers high-edge selectivity and superior mechanical properties. The company is leveraging Semiverse Solutions to optimize equipment performance and address the semiconductor industry’s workforce shortage. Lam also introduced a collaborative maintenance robot for in-fab service automation. Revenue for the December quarter was $4.38 billion, with expectations for lower deferred revenue in 2025. Memory systems revenue increased, driven by NAND spending on tech conversions and foundry investments. The China region accounted for 31% of revenue, while CSBG generated $1.8 billion in revenue for the quarter. The December quarter saw a gross margin performance of 47.5%, with a slight decrease from the previous quarter. Operating expenses were on target at $735 million, with R&D accounting for 67% of total expenses. Cash and short-term investments totaled $5.7 billion, with a decrease due to capital return activities. Revenue for the March 2025 quarter is expected to be $4.65 billion. Operating margin is projected to be 32%, with earnings per share of $1. Investments in R&D and digital transformation project are planned for 2025.
Lam Research will be hosting an Investor Day in New York City on February 19 to discuss their product portfolio and long-term financial model. Questions from analysts during a recent call focused on gross margin, with guidance staying within a tight range. NAND spending is expected to increase, with leading-edge foundry and DRAM markets remaining strong this year.
Analysts also inquired about China export controls impacting Lam Research in 2025, with an estimated $700 million revenue loss from restricted customers. Despite these challenges, the company’s lead times remain stable. Discussions on WFE growth and the split between systems and CSBG highlighted upgrades and NAND spending as key drivers for the year.
C.J. Muse from Cantor Fitzgerald asked about the ranking of incremental drivers for Lam Research, with gate-all-around and advanced packaging expected to contribute significantly in 2025. CEO Timothy M. Archer emphasized the importance of these technologies in driving growth for the company. The most impactful change for Lam Research is the growth in NAND, with a strong position in NAND upgrades and new tools shipments being the largest year-on-year difference. Advanced packaging and leading-edge foundry strength also contribute to growth. Annual projections are not provided, but a positive outlook is maintained for the year.
Lam Research’s revenue growth is expected to outperform WFE, with a focus on one quarter at a time. The company anticipates growth in advanced packaging and high bandwidth memory, with revenues exceeding $1 billion in 2024 and projected growth for 2025. Emphasis is placed on the transition to HBM3 and advanced packaging processes.
Lam Research’s sustained gross margin strength is attributed to better-than-expected performance, particularly in the Malaysia manufacturing facility. The company’s strategic alignment with suppliers in low-cost regions contributes to margin growth and sustainability, with ongoing positive projections for the future. In a recent conference call, Lam Research executives discussed their successful strategy to increase gross margins by over 100 basis points through proactive measures. The company is pleased with their performance but warns of a headwind from customer mix. They emphasize their commitment to investing for sustainable performance improvement.
Lam Research attributes their outperformance relative to the Wafer Fabrication Equipment (WFE) market to growth in deposition and etching processes. This growth is driven by the increasing complexity of semiconductor structures. The company is focused on winning share in new applications and markets to drive expansion and market share gains.
Looking ahead, Lam Research anticipates a decline in their Reliant business in 2025 due to softer spending in certain areas. However, they expect a good upgrade year, which may help offset the decline in Reliant. The company plans to provide updates on their performance as the year progresses. In a recent earnings call, Lam Research executives discussed the future of CSBG, highlighting the potential for growth in equipment intelligence and cobots. They anticipate a flattish trajectory for CSBG in calendar ’25, with a focus on spares, upgrades, and Reliant business. The company sees opportunities in disrupting service delivery in fabs. Additionally, executives mentioned the transition to moly B technology, noting that it will contribute more as customers move towards higher layer counts. Lam Research plans to increase spending on R&D and digital transformation projects while delivering leverage to the P&L, aiming for revenue growth to outpace opex. Analysts sought clarification on CSBG performance and opex growth for calendar ’25. Lam Research executives discuss $100 billion WFE forecast for 2025, including customer concentration and geographic trends. Expectations for China sales to decrease in March quarter due to lost customers. CSBG outlook flat due to loss of $700 million forecasted revenue from Chinese customers. China revenue percentage expected to decrease in 2025. NAND business remains strong due to technology migration and upgrades, with high capture rate of WFE spend. Analysts inquire about reasons behind NAND strength despite softening economic demand. Bettinger — Executive Vice President, Chief Financial Officer
Yeah, Tom, it’s a good question. The NAND business is definitely a leader in our growth outlook for the year. As for the foundry logic side, it’s a smaller percentage of our business, but still important. We’ve seen TSMC’s capex guide, and there may be changes in market share dynamics that could impact us. We’re monitoring the situation closely and will adjust accordingly. It’s something we’re keeping an eye on as we move forward.
Lam Research recently discussed their focus on NAND recovery and the shift towards DRAM and foundry logic. The company highlighted their strength in advanced packaging and leading-edge foundry logic, positioning them well for share gain opportunities. They also mentioned a new production tool of record decision that will generate revenue, showcasing an important milestone for the company. Lam is excited about future opportunities in the wafer bonding space and remains confident in their capture rate of upgrade cycles. Investors are encouraged to attend Lam’s Investor Day on February 19 in New York for updates on new products and the financial model. The Motley Fool discloses their position in and recommendation of Lam Research. 1. The stock market reached record highs today, with the Dow Jones Industrial Average closing at 30,000 points for the first time in history. This milestone comes as investors remain optimistic about a potential COVID-19 vaccine and a smooth transition of power in the White House.
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Read more at Nasdaq: Lam Research (LRCX) Q4 2024 Earnings Call Transcript