Shares of U.S. semiconductor equipment maker Lam Research fell nearly 12% on October 22 after the company's earnings outlook failed to meet market expectations.
Amid renewed skepticism about AI investments following Meta Platforms' funding plans, Lam Research's disappointing earnings forecast contributed to a 2.6% drop in the NASDAQ index and a 6.7% decline in the Philadelphia Semiconductor Index.
Lam Research announced its fiscal first-quarter results for 2027 (July to September) after the market closed the previous day. The company reported revenue of $8.22 billion, exceeding market expectations of $8.1 billion. This marks a record revenue figure, up 22% from the previous quarter and 54% year-over-year.
Adjusted earnings per share (EPS) also surpassed expectations at $2.20, compared to the forecast of $2.18, reflecting a 21% increase from the prior quarter. The operating margin improved to 40.2%, up from 38.4% in the previous quarter.
CEO Tim Archer projected that the global wafer fab equipment (WFE) market would grow to the mid-$150 billion range this year, up from earlier estimates of the mid-$130 billion range, and expected it to exceed $200 billion (approximately 265 trillion won) next year.
He indicated that DRAM would drive growth, describing the current period as the 'early stage of a multi-year investment cycle.' South Korea accounts for 20% of Lam Research's revenue.
However, concerns arose regarding the outlook for the next quarter. Lam Research projected second-quarter revenue between $8.2 billion and $9 billion. The midpoint of $8.6 billion slightly exceeds the market consensus of $8.54 billion but represents only a 5% growth from the previous quarter. The guidance for operating margin was also expected to remain similar to the previous quarter, at 39.5% to 41.5%.
As worries grew about slowing revenue growth and profitability improvements, Lam Research shares closed at $230.15, down 11.8% from the previous day.
The target price for Lam Research was also revised downward. Needham lowered its target from $390 to $290, while Morgan Stanley reduced its target from $385 to $339. Both firms maintained their investment ratings.
Other semiconductor-related stocks also fell sharply. Applied Materials dropped 8.2%, ASML fell 6.9%, Micron declined 6.3%, and NVIDIA decreased by 4.4%, contributing to a more than 6.7% drop in the Philadelphia Semiconductor Index.
* This article has been translated by AI.
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