Analyst Conference Call Summary

semiconductors

conference date: February 15, 2024 @ 1:30 PM Pacific Time
for quarter ending: January 28, 2024 (first quarter, Q1 fiscal 2024)

Forward-looking statements

Overview: Good quarter, revenue flat y/y.

Basic data (GAAP):

Revenues were $6.71 billion, down slightly sequentially from $6.72 billion and down slightly from $6.74 billion in the year-earlier quarter.

Net income was $2.02 billion, up 1% sequentially from $2.00 billion and up 17% from $1.72 billion year-earlier.

EPS (diluted earnings per share) were $2.41, up 1% sequentially from $2.38 and up 19% from $2.02 year-earlier.

Guidance:

For the 2nd fiscal quarter 2024 revenue to drop to $6.1 to $6.9 billion. Non-GAAP diluted EPS $1.79 to $2.15.

Conference Highlights:

Gary Dickerson, CEO, said "Applied Materials delivered strong results in the first quarter of fiscal 2024 and has outperformed our markets for the fifth consecutive year. Our leadership positions at key semiconductor inflections support continued outperformance as customers ramp next-generation chip technologies critical to AI and IoT over the next several years." Revenue was near high end of guidance, and earnings were above guidance. Leading innovation in the AI and ICAPS markets. Believes cloud companies are re-accelerating investment. Expects foundry logic to strengthen y/y, despite weakness in certain end markets. Applied leads in DRAM process equipment and continues to build its market share. Advanced Packaging is growing rapidly, as is Gate All Around.

Non-GAAP numbers: net income $1.78 billion, down slightly sequentially from $1.79 billion, and up 3% from $1.72 billion year-earlier. EPS $2.13, up slightly sequentially from $2.12, and up 5% from $2.03 year-earlier.

[note: ICAPS = IoT, Communications, Automotive, Power and Sensors]

Semiconductor Systems sales were $4.91 billion, up sequentially from $4.88 billion, and down 5% from $5.16 billion year-earlier. Revenue by type, as % of total: Foundry, logic and other 62%, DRAM 34%, Flash 4%. Segment operating income was $1.75 billion.

Applied Global Services (AGS) revenue was a record $1.48 billion, up sequentially from $1.47 billion and up 8% from $1.37 billion year earlier. Non-GAAP operating income was $417 million.

Display segment revenue was $244 million, down sequentially from $298 million and up 46% from $167 million year-earlier. Non-GAAP operating income was $25 million.

Cash and equivalents (including long-term investments) balance ended at $10.4 billion, up sequentially from $9.15 billion. Cash flow from operating activities was $2.33 billion. Capital expenditures were $229 million. Free cash flow $2.10 billion. $266 million was used for cash dividends. Used $700 million to repurchase shares. Long-term debt was $5.46 billion.

Cost of goods sold was $3.50 billion, leaving gross profit of $3.20 billion. Operating expenses of $1.24 billion consisted of: research and development $754 million; selling and marketing, $207 million; general and administrative $276 million. Leaving income from operations of $1.97 billion. Interest and other income net $336 million. Income tax $284 million.

Q&A selective summary:

China DRAM? We did see high shipments to China in Q1. Expects to remain elevated in Q2, then should normalize.

2024 WFE environment? We expect DRAM to be strong, RAM to improve, logic to start to ramp in second half of year. General shape of our end market outlook has not changed.

Another year of outperformance for Applied in 2024? Because of our exposure to certain faster growing markets, we expect to outperform the overall market. But no specific prediction. Markets with upward inflections of advanced technologies is where we can outperform. Sulpta should be a growth driver.

DRAM customer visibility? We see utilization improving, pricing improving, inventory improving. But it is a bit early to see much adding of capacity.

NAND customer visibility? Also inventory, pricing picking up. Improved technology would drive new spending. Will still be below 2022 demand.

CHIPs bill grant delays, effects of? We are up to date on those schedule changes. Grants are beginning to be considered. We are applying for our own grants. We do not think projects will be significantly delayed.

AI servers have much more foundry logic and DRAM than traditional servers.

OpenIcon Analyst Conference Summaries Main Page

Applied Materials Investor Relations page

Search

More Analyst Conference Pages: