LRCX Likely to Beat Q2 Earnings Estimates: Should You Buy the Stock?

Core Insights - Lam Research Corporation (LRCX) is expected to exceed earnings estimates for Q2 fiscal 2026, with projected revenues of $5.2 billion, reflecting a 19% year-over-year increase [1][8] - The anticipated earnings per share (EPS) for Q2 is $1.15, indicating a 27.5% increase compared to the previous year [2][8] - The company has a strong history of earnings surprises, having beaten estimates in the last four quarters with an average surprise of 5.89% [3] Revenue and Earnings Expectations - Q2 revenue is projected at $5.2 billion, with a variance of +/- $300 million, compared to the Zacks Consensus Estimate of $5.22 billion [1] - The earnings ESP (Earnings Surprise Prediction) is +1.56%, calculated from the Most Accurate Estimate of $1.18 and the consensus estimate of $1.16 [5] - System revenues are estimated at $3.41 billion, showing a year-over-year growth of 29.7%, while Customer Support segment revenues are expected to reach $1.8 billion, a 2.6% increase [11] Market and Industry Dynamics - The semiconductor industry is experiencing a strong rebound, driven by increased demand for memory and AI applications, particularly in Generative AI [6] - Heightened spending on dynamic random access memory (DRAM) and advancements in 3D DRAM and packaging technologies are expected to positively impact LRCX's performance [7][9] - The company's focus on expanding semiconductor fabrication capabilities and heavy investment in R&D positions it favorably in a competitive landscape [9] Stock Performance and Valuation - LRCX shares have increased by 177% over the past year, significantly outperforming the Zacks Electronics – Semiconductors industry, which rose by 30.6% [12] - The stock currently trades at a forward 12-month P/E ratio of 41.29, higher than the industry average of 32.75 [14] - Compared to peers, LRCX trades at a lower multiple than ASML Holding but higher than KLA Corporation and Applied Materials [18] Investment Thesis - Lam Research is capitalizing on AI trends, providing essential tools for manufacturing next-generation semiconductors, including high-bandwidth memory [19] - The company's innovative products, such as the ALTUS ALD tool and Aether platform, enhance chip production efficiency and performance [20] - Continued investments in R&D and expansion in Asia are expected to improve margins and lower costs, with a notable increase in non-GAAP operating margin to 35% year over year [22]