Applied Materials, the semiconductor industry equipment manufacturer, has reported impressive first-quarter earnings and revenue that have surpassed analysts’ expectations. The company’s stock has responded positively, trading higher following the announcement.
For the first quarter, Applied Materials reported earnings of $2.13 per share, beating the consensus estimate of $1.90 per share. Additionally, revenue stood at $6.71 billion, surpassing the $6.48 billion target. The company’s net profit also increased by 18% to $2.01 billion compared to the previous year.
Applied Materials’ President and Chief Executive, Gary Dickerson, highlighted the company’s strong performance, stating that they have outperformed the wider semiconductor market for five consecutive years. He emphasized the company’s leadership positions in key semiconductor inflections, supporting continued success as customers prepare to ramp up next-generation chip technologies crucial for artificial intelligence (AI) and the Internet of Things (IoT).
As a supplier of complex chipmaking equipment to major chipmakers such as Intel, Samsung, and Taiwan Semiconductor Manufacturing, Applied Materials serves as an important indicator of future demand in the chipmaking industry. The company receives orders well in advance of the opening of new chipmaking factories or upgrades to existing ones, suggesting a positive outlook for chip production in the US. Both Intel and TSMC are currently constructing new plants in the US in anticipation of increased domestic chip demand.
Applied Materials attributes its strong performance to the rising demand for AI chips and the slight recovery in the personal computer market. There is also a growing need for more powerful chips in AI-embedded PCs. Additionally, there is increasing demand for chips in internet-connected appliances, communication devices, and the automotive industry, collectively known as the ICAPS market. This is driven by the need for greater connectivity and computing power in various devices. Dickerson expects this market to continue to grow as more chips are needed per device, particularly in electric vehicles and edge devices.
Despite restrictions on shipping advanced technology to China due to national security concerns, Applied Materials has experienced rapid growth in China’s domestic chipmaking industry. Revenue from China doubled from the previous year and accounted for 45% of the company’s total sales. However, the company is currently under investigation by the US Department of Justice over its dealings with China’s Semiconductor Manufacturing International Corp. The investigation focuses on allegations that Applied Materials shipped equipment worth hundreds of millions of dollars to SMIC without the necessary export licenses.
Notwithstanding the potential challenges posed by the investigation, Applied Materials remains optimistic about its near-term prospects. The company expects second-quarter revenue to reach around $6.5 billion, exceeding Wall Street’s projection of $5.92 billion. Similarly, profit per share is forecasted to be between $1.79 and $2.15, above the Street’s estimate of $1.79 per share.
Overall, Applied Materials’ strong earnings and revenue performance, driven by the demand for AI chips and various industry sectors, demonstrate its continued success in the semiconductor market. With the anticipation of future growth and ongoing technological advancements, the company is well-positioned for further success.
