By Mackenzie Tatananni

Lam Research, the maker of wafer fabrication equipment, is positioned to outperform some of its most formidable peers as the company seizes opportunities in other key markets, analysts say.

The stock climbed 6.2% to $70.84 on Thursday following Lam's latest earnings report. That left it down about 1.9% so far this year, compared with a loss of 6.8% for the S&P 500, though it is far below the record closing high of $112.73 reached in July.

Lam is regarded as one of the Big Three chip equipment makers, along with KLA and Applied Materials. KLA has gained 8.9% over the same period, but Applied Materials is down 8.2%.

Like much of the rest of the stock market, the shares have been dragged down by uncertainty about the economic environment and President Donald Trump's trade war with China. The country accounted for 31% of Lam's revenue in its latest quarter.

For its third fiscal quarter, Lam reported adjusted earnings of $1.04 a share, compared with the $1 a share that analysts were expecting, according to FactSet. Revenue rose to $4.72 billion, beating Wall Street's calls for $4.64 billion and marking an increase from the $3.79 billion recorded last year.

Management also provided an upbeat outlook for the current quarter, telling investors to expect earnings between $1.10 and $1.30 a share and revenue in the range of $4.7 billion to $5.3 billion. The consensus calls on Wall Street were for earnings of 98 cents a share and revenue of $4.59 billion.

CEO Tim Archer said the outlook for the company is strong. "We are highly confident in our ability to outperform semiconductor industry growth in the years to come," Archer said.

He isn't the only one with high hopes. Susquehanna analyst Mehdi Hosseini said on Thursday that he expects Lam to begin outperforming its peer group in the near term, citing the company's exposure to South Korea. It and Taiwan each represented 24% of revenue in the quarter. Market-share gains should help cushion Lam against any slowdown in global economic growth, Hosseini said.

"Due to export controls, LRCX still expects to lose out on $700M in China revenues the company would have otherwise earned from its China customers in 2H25," Hosseini noted, saying China is expected to account for a smaller share of revenue in 2025 than in 2024. The 31% of revenue the company got from China in the March quarter was down by 8 percentage points from the same quarter a year earlier.

Summit Insights Group analyst Kinngai Chan pointed to encouraging trends in the broader NAND flash-memory market. NAND wafer fab spend is "clearly recovering after a prolonged down cycle," Chan said, as the industry transitions to more advanced 3-D NAND flash memory.

While Chinese spending on wafer-fabrication equipment is expected to moderate, Chan expects technology upgrades from its NAND, foundry, DRAM, and logic customers to drive outperformance in the second half of the year.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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April 24, 2025 15:18 ET (19:18 GMT)

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