LRCX Likely to Beat Q4 Earnings Estimates: How to Play the Stock?

Lam Research Corporation LRCX is scheduled to release its fourth-quarter fiscal 2025 results on July 30. The company expects revenues of $5 billion (+/- $300 million) for the fourth quarter. The Zacks Consensus Estimate is pegged at $4.99 billion, indicating 28.9% growth from the figure reported in the year-ago quarter.

Lam Research expects earnings of $1.20 (+/- $0.10) for the fourth quarter. The consensus mark for fourth-quarter earnings has remained unchanged at $1.20 per share over the past 60 days, implying a 48.2% year-over-year increase.

Lam Research has an impressive earnings surprise history. In the last reported quarter, LRCX delivered an earnings surprise of 4.6%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.1%.

Earnings Whispers for LRCX

Our proven model predicts an earnings beat for Lam Research this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.23) and the Zacks Consensus Estimate ($1.20), is +2.71%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: LRCX carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Influence LRCX’s Q4 Results

Lam Research has been riding on the wave of a strong rebound in the semiconductor industry, driven by the surging demand for memory and advanced AI applications. The rise in spending on AI and machine learning, particularly with the growing influence of Generative AI, is likely to have provided a significant boost to the company's performance in the fiscal fourth quarter. The increasing need for advanced AI-centric chips has become a key growth catalyst.

Heightened dynamic random access memory (DRAM) spending, especially in response to demand for high-bandwidth memory, is likely to have played in Lam Research's favor. The company's momentum in 3D DRAM and advanced packaging technologies is also expected to have added to its strong performance. At the same time, ongoing technological advancements are pushing NAND spending higher, which is likely to contribute to LRCX’s quarterly results.

Lam Research’s focus on expanding semiconductor fabrication capabilities, along with its heavy investment in research and development, positions it well in a competitive landscape. Its innovation through Semiverse solutions, particularly in high-aspect-ratio memory hole etch for NAND, is likely to have fueled this progress. LRCX’s strategic investments in cutting-edge technologies are likely to have bolstered its performance in the foundry and logic segment, while the increasing adoption of 3D architectures is expected to have supported growth in its etch and deposition services.

The company’s robust suite of tools, which enable foundry logic inflections, is likely to have secured strong customer traction. With the accelerating deployment of 5G and the Internet of Things (IoT), Lam Research’s semiconductor and memory solutions remain in high demand, reinforcing its market position in the fiscal fourth quarter.

All these factors are likely to have driven growth in system revenues. The Zacks Consensus Estimate forecasts fiscal fourth-quarter system revenues at $3.22 billion, implying year-over-year growth of 48.5%, underscoring Lam Research’s continued strength in the evolving tech landscape. The consensus mark for the Customer Support segment’s fourth-quarter revenues is pegged at $1.76 billion, indicating a year-over-year increase of 3.4%.

LRCX Stock Price Performance & Valuation

Lam Research shares have gained 9.8% over the past year, underperforming the Zacks Electronics – Semiconductors industry, which has risen 39.5%. The stock has also underperformed major semiconductor players, including Broadcom AVGO, NVIDIA NVDA and Marvell Technology MRVL. Shares of Broadcom, NVIDIA and Marvell Technology have soared 90%, 52.1% and 14.5%, respectively.

One-Year Price Return Performance

Let us look at the value Lam Research offers investors at current levels. Currently, LRCX is trading at a discount, with a forward 12-month P/E of 24.1X compared with the industry’s 33.76X.

Compared with semiconductor giants, the stock trades at lower multiples than Broadcom and NVIDIA, while at a higher multiple than Marvell Technology. At present, Broadcom, NVIDIA and Marvell Technology have forward 12-month P/E multiples of 36.23, 34.76 and 23.17, respectively.

Investment Thesis for Lam Research Stock

Lam Research is benefiting from powerful shifts in semiconductor demand, particularly around AI and data center chips. These advanced chips require complex manufacturing, and Lam provides the essential tools, like deposition and etching systems, needed to build them.

In 2024 alone, Lam Research shipped more than $1 billion worth of products tied to next-gen chip technologies and packaging. The figure is expected to triple in 2025. LRCX’s equipment is especially critical as the industry moves toward innovations like backside power delivery and dry-resist processing.

Lam Research’s steady investments in research & development and new products are paying off. Its Cryo 3.0 technology has set new standards in the industry, and the Aether dry-resist system is being adopted, especially for high-bandwidth DRAM.

Expanding its manufacturing operations in Asia has also helped the company lower costs and improve margins. In the third quarter of fiscal 2025, Lam Research’s non-GAAP operating margin rose to 32.8%, up 210 basis points from last year, which is impressive, considering the tough conditions in the semiconductor market.

Conclusion: Buy Lam Research for Now

Lam Research’s reasonable valuation, strong financials and clear focus on AI-related growth make it a good investment choice right now. Its market position in AI and data center chipmaking, combined with ongoing innovation, should keep driving long-term gains.

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This article originally published on Zacks Investment Research (zacks.com).

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