4Q23 results beat, above consensus guidance for 1Q24
- 4Q23 results beat management’s guidance and consensus.
- Improving wafer fabrication equipment (WFE) outlook in 2H23; more upside from domestic China-related spending and growth in high bandwidth memory demand
- AI to fuel growth. Generative AI, still at initial stages of adoption, to drive increasing investment in both memory and foundry logic fabs
4Q23 results beat management’s guidance and consensus. 4Q23 revenue was $3,207m (-17% q-o-q, -31% y-o-y). Gross margin came in at 45.5%, an improvement from the 41.5% in 3Q23. EPS of $5.97 eased 1% q-o-q (-32% y-o-y). 4Q23 earnings saw a strong beat of c.20% from the guidance from management while revenue exceeds by c.4%. Compared to consensus estimates, 4Q23 EPS and revenue exceeded by c.16% and 2% respectively. China accounts for the largest proportion of 26% of total revenue, followed by 24% from Korea and 20% Taiwan. For 1Q24, the group forecasts revenue of c.$3.4bn (+6% q-o-q) and US GAAP EPS of c.$5.82 (-2.5% q-o-q), based on the mid-point of the forecasts, as compared to market consensus of $3.3bn (+3%) revenue and EPS of $5.56 (+5%).
Improving WFE outlook in 2H23; AI to fuel growth. For 2023, LRCX sees further upside from domestic China-related spending and growth in high bandwidth memory (HBM) demand. The group expects overall memory to be down in the mid-40% range as compared to 2022 while non-memory is expected to be down approximately 10%. Overall, 2H23 wafer fabrication equipment (WFE) is tracking higher than 1H23. In the artificial intelligence (AI) space, advanced AI servers have significantly higher leading-edge logic, memory, and storage content. Every incremental 1% penetration of AI servers in data centers is expected to add $1B to $1.5B of additional WFE investment. LRCX is broadening its product portfolio to ride on the AI trend. Emerging growth drivers such as generative AI are only in their initial stages of adoption and will be fundamental to drive increasing investment in both memory and foundry logic fabs over the next several years. Maintain BUY with TP of $668.1.