Lam Research Stock Drops Despite Strong Earnings

Lam Research shares fell 5% in early trading despite reporting better-than-expected Q2 earnings. The semiconductor equipment manufacturer posted GAAP profits of $1.35 per share on $5.2 billion revenue, beating analyst estimates of $1.21 EPS on $5 billion sales. Year-over-year sales grew 10% while earnings surged 31%.

The decline appears counterintuitive given strong fundamentals and optimistic guidance. Management forecast Q3 profits between $1.10-$1.30 per share on $4.9-$5.5 billion revenue, exceeding Wall Street expectations. This contrasts with recent concerns about slowing demand in the semiconductor sector, highlighted by ASML's weak bookings data two weeks prior.

Valuation concerns persist with the stock trading at 27 times trailing earnings. The market's reaction suggests investors remain cautious about semiconductor equipment makers despite Lam's strong performance, potentially signaling broader sector concerns rather than company-specific issues.