Lam Research Q1 net income up 86 percent because of intense equipment demand

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Lam Research, a leading provider of wafer fab equipment (WFE) recently revealed that it increased its first-quarter net income by 86.3 percent year-over-year. The firm explained its substantial growth is due to intense end-market demand for its products and services.

The manufacturer expects its business to keep expanding as chipmakers by its tools to accommodate society’s ongoing digitalization.

Lam Research’s Strong Q1 Financial Performance

In the three months ending March 28, Lam generated $3.84 billion in revenue with net income of $1.07 billion or earnings of $7.51 per share. By comparison, it made $2.50 billion with a profit of $578.4 million or $3.96 per share in the same time last year. CEO Timothy A. Archer said the corporation set new system and services intake records during Q1.

The equipment maker’s blockbuster Q1 performance greatly surpassed Wall Street’s expectations. Market analysts pegged its sales and earnings at $3.75 billion and $6.62 a share, respectively. It also topped the midpoint of the guidance it offered for the period, which was $3.75 billion versus $6.55 in EPS.

Lam stated its better than expected returns in the last quarter are the result of multiple developments.

The firm noted chipmakers sought to purchase its WFE products to address changes in consumer and commercial needs and preferences. Following the COVID-19 outbreak, individuals and organizations turned to digital tools to operate remotely. That paradigm shift caused a massive spike in demand for AI, 5G, and IoT-related components.

In response, vendors bought Lam’s products to expand or upgrade their production lines and manufacturing nodes.

The manufacturer also benefited from the worldwide scarcity of certain electronic components. U.S. News reported that the shortage of 200mm silicon prompted a spike in demand for the company’s mature fabrication tools. Its ability to meet the desires of those customers helped push its Q1 income to record highs.

Digitalization to Fuel Demand for WFE in 2021 and Beyond

Lam anticipates bringing in $3.75 billion to $4.25 billion with earnings of $7.00 to $8.00 per share in Q2. If the firm meets the midpoint of its projections, it will better its sales by 43.3 percent and its profit by 58.56 percent.

The machinery vendor believes chipmakers will spend $75 billion on WFE in 2021. Since it possesses industry-leading products, it can capitalize on trends like the post-pandemic digitalization wave. Lam specified that the mounting adoption of 3D NAND and 5nm nodes would bolster its revenue in the future.

Based on current market conditions, Lam’s faith in its growth potential is justified.

Samsung and TSMC, the world’s leading contract foundries, intend to build out their capacity to accommodate unprecedented demand. Consequently, both providers will likely purchase significant quantities of its machines for their facilities. And its services revenue should increase in tandem with the expansion of its install-base.

In addition, Lam CFO Douglas R. Bettinger commented that the corporation derived 63 percent of its Q1 income from China and South Korea. As it happens, both nations recently declared their intentions to help their respective semiconductor ecosystems grow and become more self-sufficient. As a renowned WFE provider with an established presence in the area, it can take advantage of those initiatives.

Right now, Lam is on course to keep setting new revenue records throughout 2021.

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