Lam Research (LRCX) Delivers Strong Q2 Results as AI-Driven Demand Boosts Growth

Lam Research (LRCX) saw a strong market response to its second-quarter earnings report, posting impressive results that exceeded both revenue and earnings expectations. The semiconductor equipment supplier delivered its first set of bullish quarterly guidance in two years, signaling renewed optimism as wafer fab equipment (WFE) spending is expected to tick higher in 2025.

The company’s performance closely mirrored that of its peer ASML, which also posted encouraging quarterly results. Lam Research benefited from robust demand for advanced semiconductor technologies, particularly in AI-driven markets, even as it faced headwinds from export restrictions in China and soft spending in the NAND segment.

Quarterly Performance and Growth Drivers

For the second quarter, Lam Research reported double-digit growth in adjusted earnings, reaching $0.91 per share, alongside a 16.4 percent increase in revenue, totaling $4.38 billion. Gross margins stood at 47.5 percent, slightly above the midpoint of the company’s previous guidance but reflecting a minor 70 basis point contraction compared to the previous quarter due to an unfavorable customer mix.

A key highlight was Lam’s ability to maintain strong shipments of gate-all-around and advanced packaging technologies, essential components for manufacturing AI-driven semiconductor devices. These shipments reached over $1 billion in 2024, continuing the momentum from the previous quarter when this milestone was first achieved.

While NAND spending remained subdued, demand for AI-related semiconductor manufacturing helped offset this weakness. This trend is expected to continue into 2025, as AI-driven applications demand higher performance at both the device and package level.

Bullish Outlook for 2025 and Beyond

Looking ahead, Lam Research projects WFE spending to rise to approximately $100 billion in 2025, a modest increase from 2024 levels. The company anticipates a substantial increase in shipments for gate-all-around nodes and advanced packaging, forecasting revenue from these segments to exceed $3 billion in 2025, representing a potential 200 percent year-over-year increase.

Reflecting this optimism, Lam issued strong guidance for the third quarter, with projected adjusted earnings per share in the range of $0.90 to $1.10 and revenue between $4.35 billion and $4.95 billion.

Impact of Export Restrictions on Chinese Sales

China remains an important but challenging market for Lam Research. While the region accounted for approximately 31 percent of total revenue in the fourth quarter, this was a decline of seven percentage points from the first quarter. The decline reflects the impact of new export controls introduced in early December, which restricted Lam Research’s ability to sell certain products to specific Chinese customers.

Management estimates that these restrictions could have a $700 million impact, with much of this effect being felt in the latter half of 2025. Despite these hurdles, strong demand from other global markets is expected to compensate for the normalization of revenue in China.

Risks and Market Volatility

While Lam Research’s second-quarter results were encouraging, risks remain on the horizon. Geopolitical uncertainties, particularly regarding US-China trade policies, could create further disruptions to supply chains and sales. Additionally, while AI-related markets remain strong, demand in other semiconductor segments—such as smartphones and PCs—has been more uncertain, which could lead to increased volatility.

The market reaction to ASML and Lam Research’s earnings reports has been positive, setting a bullish tone ahead of upcoming reports from peers in the semiconductor equipment space. KLA Corp is scheduled to report earnings later today, followed by NXP Semiconductors on February 3 and Applied Materials on February 13. These reports will provide further insight into broader semiconductor equipment trends and the sustainability of AI-driven growth.

Conclusion

Lam Research’s strong second-quarter results and optimistic outlook underscore the continued demand for advanced semiconductor manufacturing technologies, particularly those supporting AI applications. While challenges remain, including export restrictions and potential macroeconomic volatility, the company’s robust product offerings and strategic focus on AI-driven markets position it well for growth in 2025.

Investors will closely watch how the broader semiconductor equipment market performs in the coming weeks as additional earnings reports provide more clarity on industry trends. However, with its latest results, Lam Research has reaffirmed its position as a key player in the evolving semiconductor landscape.