- Adjusted earnings per share: $2.12 (exceeding the $2.03 forecast)
- Revenue: $6.78 billion (up 5.5% YoY, surpassing the $6.68 billion estimate)
- Net profit: $1.705 billion (up from $1.56 billion YoY)
- Strong performance driven by AI chip demand and growth in high-performance computing and cloud data centers
- Semiconductor Systems division revenue: $4.92 billion (up 5% YoY)
- Global Services revenue: $1.58 billion (up 8% YoY)
- Display and Adjacent Markets revenue: $251 million (up 7% YoY)
- Concerns over lower-than-expected sales in China
- Export restrictions and ongoing investigations into dealings with China’s SMIC pose potential risks
- Optimistic Q4 forecast: $6.93 billion in sales and $2 to $2.36 earnings per share
- Stock fluctuated in after-hours trading, reflecting mixed investor sentiment
- Year-to-date stock performance: over 30% gain
Main AI News:
Applied Materials Inc., a key player in the semiconductor equipment industry, posted strong fiscal third-quarter results driven by rising demand from AI chipmakers.
The company reported adjusted earnings of $2.12 per share, surpassing analysts’ expectations of $2.03. Revenue grew 5.5% year-over-year to $6.78 billion, exceeding the forecast of $6.68 billion. Net profit rose to $1.705 billion from $1.56 billion last year. CEO Gary Dickerson noted that the revenue marked a new third-quarter record, positioning the company to capitalize on the AI boom.
Applied Materials supplies advanced chipmaking equipment to industry giants like Intel, Samsung, and TSMC, making it a bellwether for future semiconductor demand. As Intel and TSMC build new U.S. plants, the company stands to benefit from increasing domestic chip production.
The surge in AI chip demand has boosted the need for Applied Materials’ fabrication equipment, with additional gains from high-performance computing and cloud data centers. The Semiconductor Systems division saw a 5% revenue increase to $4.92 billion, while Global Services rose 8% to $1.58 billion, and Display and Adjacent Markets reported $251 million in sales, up 7%.
Despite the strong performance, concerns linger over the company’s sales in China, which were lower than expected, signaling a quicker normalization of demand. Like peers such as ASML, Applied Materials faces export restrictions on advanced technology to China due to U.S. government pressure.
Ongoing investigations into the company’s dealings with China’s SMIC also pose potential risks, though no charges have been filed. Nonetheless, Applied Materials remains optimistic, forecasting fourth-quarter sales of around $6.93 billion, slightly ahead of estimates, with earnings expected between $2 and $2.36 per share.
Following a 5% rise in regular trading, the stock fluctuated after hours, dipping just over 2%. Analyst Ashley Schulman attributed this to earlier gains and investor caution regarding the mixed China sales report and wide forecast range.
Despite these concerns, the company’s stock has gained over 30% this year, reflecting strong confidence in its future growth.
Conclusion:
Applied Materials’ strong Q3 results, driven by robust demand for AI-related technologies, reinforce the company’s strategic positioning in the semiconductor industry. However, challenges like lower-than-expected sales in China and potential regulatory risks could temper future growth. The company’s optimistic outlook for Q4 suggests continued confidence. Still, market participants should closely monitor geopolitical developments and export restrictions as these factors could influence both Applied Materials’ performance and the broader semiconductor equipment market. Overall, the company’s results signal strong demand in the semiconductor space, particularly in AI and high-performance computing, which will likely sustain growth in the near term.
