Lam Research Q3 Earnings Beat: Can Strong Guidance Lift the Stock?

Lam Research LRCX reported third-quarter fiscal 2025 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate.

LRCX reported third-quarter fiscal 2025 non-GAAP earnings of $1.04 per share, which beat the Zacks Consensus Estimate by 4%. The bottom line increased 33.3% on a year-over-year basis, primarily driven by strong product demand, technology-driven upgrade cycles, and strategic execution across manufacturing and supply chain operations. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

In the third quarter of fiscal 2025, LRCX reported revenues of $4.72 billion, which surpassed the consensus mark by 1.64%. The top line increased 24.5% from the year-ago quarter’s $3.79 billion.

Buoyed by better-than-expected fiscal third-quarter performance, Lam Research has released a strong outlook for the fourth quarter of fiscal 2025. LRCX shares have lost 28.2% in the past month due to a widespread sell-off in tech stocks, triggered by fears of rising trade tensions and slowing economic growth.

However, the strong results of fiscal third quarter and upbeat guidance for the fiscal fourth quarter have pushed the stock up 4.4% in the pre-market trading hours of Thursday.

LRCX’s Segment in Detail

Lam Research’s Systems revenues were $3.04 billion (64.3% of total revenues), up 15.6% from the previous quarter and 26.6% year over year. The reported figure missed the Zacks Consensus Estimate of $2.69 billion.

In the Customer Support Business Group, revenues were $1.68 billion, comprising 35.7% of total revenues. This marks a 3.7% decrease from the previous quarter’s $1.75 billion, but a 20.5% increase from the year-ago period.

LRCX’s Regions in Detail

During the quarter, China contributed 31% of total revenues, Korea 24%, and Taiwan 24%. Other regions included Japan (10%), the United States (4%), Southeast Asia (4%), and Europe (3%).

Operating Details of LRCX

Lam Research’s non-GAAP gross margin rose to 49.0%, up 150 basis points from 47.5% in the previous quarter.

Non-GAAP operating expenses increased to $763 million, up 3.8% from $735 million. As a result, the non-GAAP operating margin improved to 32.8%, up 210 basis points from the prior quarter’s 30.7%.

LRCX’s Balance Sheet & Cash Flow

As of March 30, 2025, Lam held $5.46 billion in cash and cash equivalents, down from $5.67 billion at the end of the prior quarter.

Cash flow from operating activities increased significantly to $1.31 billion, up from $742 million in the previous quarter.

During the quarter, Lam Research paid dividends totaling $295.7 million and repurchased shares worth $347 million.

LRCX Provides Strong Guidance

For the fourth quarter of fiscal 2025, Lam Research projects revenues of $5 billion (+/- $300 million). The Zacks Consensus Estimate for the fiscal fourth quarter is pegged at $4.54 billion, indicating year-over-year growth of 17.23%.

The company expects a non-GAAP gross margin of 49.5% (+/-1%) and a non-GAAP operating margin of 33.5% (+/-1%).

Non-GAAP earnings per share are projected to be $1.20 (+/- $0.10), with a diluted share count of 1.28 billion. The Zacks Consensus Estimate for the fiscal fourth quarter is pegged at 96 cents, indicating year-over-year growth of 18.5%.

Zacks Rank and Other Stocks to Consider

Currently, LRCX carries a Zacks Rank #2 (Buy).

ACM Research ACMR, Super Micro Computer SMCI and ACI Worldwide ACIW are some other top-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. ACIW, SMCI and ACMR sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACMR shares have lost 29.9% for the past year. The Zacks Consensus Estimate for ACMR’s full-year 2025 earnings is pegged at $2.15 per share, up by 35 cents over the past 60 days, suggesting a decline of 4.8% from the year-ago quarter’s reported figure.

SMCI shares have plunged 56.4% in the past year. The Zacks Consensus Estimate for SMCI’s full-year fiscal 2025 earnings have been revised downward to $2.52 in the past seven days reflecting a year-over-year growth of 14%.

ACIW shares have gained 55% over the past year. The Zacks Consensus Estimate for ACIW’s full-year 2025 earnings is pegged at $2.80 per share, up by 7 cents over the past 30 days, implying a rise of 6% from the year-ago quarter’s levels.

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

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