I have used lambda on various occasions when writing a standout function was not warranted, but I must say that if the procedure is something that can be used elsewhere, it is almost (note I said almost) always a good idea to globalize it within the code and utilize it as needed rather than rewrite sections of code.
In your above example, I would have not used lambda, but then I like to make things a bit more compact.
(defun sum-of-two-squares ( x y )
(+ (* X X)(* Y Y))
)