Semiconductor equipment maker Lam Research (NASDAQ: LRCX) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 33.6% year on year to $5.17 billion. On top of that, next quarter’s revenue guidance ($5.2 billion at the midpoint) was surprisingly good and 10.8% above what analysts were expecting. Its non-GAAP profit of $1.33 per share was 10.3% above analysts’ consensus estimates.
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Lam Research (LRCX) Q2 CY2025 Highlights:
- Revenue: $5.17 billion vs analyst estimates of $5.01 billion (33.6% year-on-year growth, 3.3% beat)
- Adjusted EPS: $1.33 vs analyst estimates of $1.21 (10.3% beat)
- Adjusted Operating Income: $1.78 billion vs analyst estimates of $1.68 billion (34.4% margin, 5.9% beat)
- Revenue Guidance for Q3 CY2025 is $5.2 billion at the midpoint, above analyst estimates of $4.69 billion
- Adjusted EPS guidance for Q3 CY2025 is $1.20 at the midpoint, above analyst estimates of $1.00
- Operating Margin: 33.7%, up from 29.1% in the same quarter last year
- Free Cash Flow Margin: 46.1%, up from 19.7% in the same quarter last year
- Inventory Days Outstanding: 152, down from 169 in the previous quarter
- Market Capitalization: $126.6 billion
Company Overview
Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ: LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Lam Research’s 12.9% annualized revenue growth over the last five years was impressive. Its growth beat the average semiconductor company and shows its offerings resonate with customers, a helpful starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Lam Research’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.8% over the last two years was well below its five-year trend. 
This quarter, Lam Research reported wonderful year-on-year revenue growth of 33.6%, and its $5.17 billion of revenue exceeded Wall Street’s estimates by 3.3%. Beyond the beat, this marks 5 straight quarters of growth, implying that Lam Research is in the middle of its cycle - a typical upcycle generally lasts 8-10 quarters. Company management is currently guiding for a 24.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not accelerate its top-line performance yet. At least the company is tracking well in other measures of financial health.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Lam Research’s DIO came in at 152, which is 9 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Lam Research’s Q2 Results
We were impressed by Lam Research’s strong improvement in inventory levels. We were also excited its EPS outperformed Wall Street’s estimates by a wide margin. Looking ahead, revenue and EPS guidance for next quarter also exceeded expectations. Zooming out, we think this quarter featured some important positives. The stock remained flat at $98.25 immediately after reporting.
Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
