01—Abstract
Summary
Summary of the 10-K filed December 17, 2014. Cited figures are marked; the original filing is the authoritative source.
Applied Materials, Inc. (AMAT) for the fiscal year ending October 25, 2014, reported a significant increase in net sales to $9.07 billiona, up from $7.51 billion in the prior year.
This growth was primarily driven by robust demand in the Silicon Systems Group, which accounted for the largest portion of net sales and saw a 25%b increase year-over-year. The company experienced strong performance across most segments, with the Display segment also showing substantial growth. However, the Energy and Environmental Solutions segment continued to face challenges due to overcapacity in the solar industry, though it did see an increase in net sales.
The company invested heavily in Research, Development, and Engineering (RD&E), allocating $1.43 billionc (16% of net sales) to innovation, particularly focusing on advancements in 3D chip technology and 300mm product development. Applied Materials also reported a growing backlog of $2.92 billion, indicating strong future demand. Management is focused on expanding its market presence and improving profitability, while navigating industry cyclicality and intense competition.
02—Key points
Key Highlights
- Net sales increased by 21% to $9.07 billion in fiscal year 2014, compared to $7.51 billion in fiscal year 2013.
- The Silicon Systems Group, the largest segment, saw a 25% increase in net sales, driven by demand for advanced mobile chips and memory upgrades.
- Investment in Research, Development, and Engineering (RD&E) was $1.43 billion, representing 16% of net sales, with a focus on 3D chip technology and advanced nodes.
- The company's backlog grew by 23% to $2.92 billion, signaling robust future demand for its products and services.
- Despite overall growth, the Energy and Environmental Solutions segment faced continued weakness due to solar industry overcapacity, although net sales increased by 61%.
- Applied Materials announced an agreement to combine with Tokyo Electron Limited (TEL), subject to regulatory approvals, aiming to create a larger, more comprehensive player in the semiconductor and display equipment market.
- Gross margin improved to 42.4% from 39.8% in the prior year, reflecting higher sales and operational efficiencies.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Applied Materials kept $0.12.
- Revenue$9.07B100.0%
- Cost of revenue−$5.23B57.6%
- Gross profit$3.84B42.4%
- Operating costs−$2.32B25.6%
- Operating income$1.52B16.8%
- Interest, other & tax−$448.0M4.9%
- Net income$1.07B11.8%
Where FY2014 revenue went
$9.07B- Cost of revenue: $5.23B, 58% of revenue
- R&D: $1.43B, 16% of revenue
- Net income: $1.07B, 12% of revenue
- Other operating costs: $895.0M, 9.9% of revenue
- Interest, other & tax: $448.0M, 4.9% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed December 17, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $9.07B$7.51B | +20.8% |
| Cost of Revenue | $5.23B$4.52B | +15.7% |
| Gross Profit | $3.84B$2.99B | +28.5% |
| R&D Expenses | $1.43B$1.32B | +8.2% |
| Operating Expenses | $2.32B$2.56B | −9.2% |
| Operating Income | $1.52B$432.00M | +251.9% |
| Interest Expense | $95.00M$95.00M | 0.0% |
| Net Income | $1.07B$256.00M | +318.8% |
| EPS (Basic) | $0.88$0.21 | +319.0% |
| EPS (Diluted) | $0.87$0.21 | +314.3% |
| Shares Outstanding (Basic) | 1.22B1.20B | +1.1% |
| Shares Outstanding (Diluted) | 1.23B1.22B | +1.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Applied Materials' revenue growth in fiscal year 2014?
Applied Materials' revenue growth in fiscal year 2014 was primarily driven by increased customer investments in semiconductor and display equipment, as well as strong demand for spares and services. The Silicon Systems Group, in particular, benefited from the continued demand for advanced mobile chips and memory upgrades.
How is Applied Materials investing in future growth?
The company is making substantial investments in Research, Development, and Engineering (RD&E), allocating $1.43 billion in fiscal year 2014. These investments are focused on key areas like 3D chip technology, advanced node development (e.g., FinFET and 3D NAND), and enabling technologies for next-generation mobile computing.
What is the outlook for the Energy and Environmental Solutions segment?
The Energy and Environmental Solutions segment, which includes solar photovoltaic equipment, continued to face challenges due to overcapacity in the solar industry. While net sales increased by 61% in fiscal year 2014, the segment's performance remains sensitive to industry-wide supply and demand dynamics and investment levels in capital equipment.
What is the significance of the proposed business combination with Tokyo Electron Limited (TEL)?
The proposed business combination with TEL, announced in September 2013 and progressing through regulatory approvals, aims to create a leading player in the materials engineering and precision patterning space. It is expected to combine complementary technologies and product portfolios, potentially offering expanded capabilities and greater market reach for the combined entity.
06—Continue