Lam Research LRCX reported second-quarter fiscal 2022 non-GAAP earnings of $8.53 per share, which surpassed the Zacks Consensus Estimate by 0.8%. The figure increased 41.5% year over year and 2% sequentially.

Revenues improved 22.3% year over year to $4.23 billion. However, the figure decreased 1.8% sequentially. It also lagged the Zacks Consensus Estimate of $4.40 billion.

The year-over-year revenue growth was driven by well-performing systems and the customer support business.

Yet, impacts of the OMICRON variant, labor shortages, freight and logistics cost escalation as well as supply chain constraints remained concerns.

Lam Research Corporation Price, Consensus and EPS Surprise

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Quarter Details

In the reported quarter, the company witnessed strong momentum across 3D NAND manufacturers for critical applications. Its NAND, DRAM, foundry and logic segments performed well owing to the growing traction among etch and deposition technologies. Further, strong wins for conductor etch and selective etch applications were positives. All these factors aided the company’s system revenues, which were $2.74 billion (accounting for 65% of total revenues), up 18.8% from the year-ago quarter. Under systems revenues, non-volatile memory, foundry, DRAM, and logic/other accounted for 35%, 31%, 23%, and 11%, respectively.

Growing installed base of tools, customers operating at high utilization levels and Lam Research’s value-added advanced service solutions drove top-line growth for the company’s Customer Support Business Group. Further, robust Reliant business contributed well. Customer support-related revenues and others for the reported quarter were $1.49 billion (35% of total revenues), up 29.4% year over year.

For 2021, WFE spending is estimated in the mid-$80 billion range, driven by growth of end-market demand, rising device complexity, strong semiconductor industry profitability, and regional government support and incentives. Also, the growing demand for advanced processors and memory devices to meet the increasing adoption of gaming devices remained a tailwind.

Regions in Detail

China, Korea, and Taiwan accounted for 26%, 25%, and 18% of the company’s total fiscal second-quarter revenues, respectively. Then again, Japan, Southeast Asia, the United States, and Europe accounted for 12%, 9%, 6%, and 4%, respectively.

Operating Results

Non-GAAP gross margin was 46.8%, which expanded 20 basis points (bps) year over year.

Non-GAAP operating expenses were $627.4 million, reflecting an increase of 11.4% from the prior-year quarter. As a percentage of revenues, the figure contracted 150 bps year over year to 14.8%.