01—Abstract
Summary
Summary of the 10-K filed December 15, 2017. Cited figures are marked; the original filing is the authoritative source.
Applied Materials Inc. (AMAT) reported robust financial performance for the fiscal year ending October 28, 2017.
The company experienced a significant increase in net sales, driven by strong demand across its key segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. This growth was fueled by increased customer investments in semiconductor manufacturing equipment, particularly from memory and foundry customers, as well as continued investment in new display technologies and manufacturing equipment for OLED and larger TVs. The company demonstrated improved profitability, with notable increases in gross and operating margins.
This was attributed to higher net sales, favorable product mix, and materials cost savings, despite increased investment in research, development, and engineering (RD&E) to support future growth and technological advancements. Applied Materials continues to prioritize innovation, investing significantly in RD&E to maintain its competitive edge in the rapidly evolving semiconductor and display industries.
02—Key points
Key Highlights
- Net sales increased by 34% to $14.54 billion in fiscal year 2017, up from $10.83 billion in fiscal year 2016.
- Gross margin improved to 44.9% in fiscal year 2017 from 41.7% in fiscal year 2016, driven by higher net sales and favorable product mix.
- Operating income surged by 76% to $3.17 billion in the Semiconductor Systems segment, reflecting strong customer demand.
- The company's RD&E expenses increased by 15% to $1.77 billion, reflecting a commitment to innovation and new product development.
- Asia Pacific remains the dominant geographic region for net sales, accounting for 84% of total sales in fiscal year 2017.
- Samsung Electronics and Taiwan Semiconductor Manufacturing Company Limited were significant customers, each accounting for over 15% of net sales.
- Applied Materials returned substantial capital to shareholders through stock repurchases totaling $1.17 billion and dividends of $430 million in fiscal year 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Applied Materials kept $0.24.
- Revenue$14.54B100.0%
- Cost of revenue−$7.92B54.5%
- Gross profit$6.61B45.5%
- Operating costs−$2.68B18.4%
- Operating income$3.94B27.1%
- Interest, other & tax−$417.0M2.9%
- Net income$3.52B24.2%
Where FY2017 revenue went
$14.54B- Cost of revenue: $8.09B, 56% of revenue
- Net income: $3.52B, 24% of revenue
- R&D: $1.78B, 12% of revenue
- Other operating costs: $734.0M, 5.0% of revenue
- Interest, other & tax: $417.0M, 2.9% of revenue
Kept 24% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed December 15, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $14.54B$10.82B | +34.3% |
| Cost of Revenue | $8.09B$6.31B | +28.1% |
| Gross Profit | $6.61B$4.51B | +46.6% |
| R&D Expenses | $1.78B$1.54B | +15.6% |
| Operating Expenses | $2.68B$2.36B | +13.4% |
| Operating Income | $3.94B$2.15B | +82.9% |
| Interest Expense | $198.00M$155.00M | +27.7% |
| Net Income | $3.52B$1.72B | +104.5% |
| EPS (Basic) | $3.28$1.56 | +110.3% |
| EPS (Diluted) | $3.25$1.54 | +111.0% |
| Shares Outstanding (Basic) | 1.07B1.11B | −3.1% |
| Shares Outstanding (Diluted) | 1.08B1.12B | −2.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of Applied Materials' revenue growth in fiscal year 2017?
Revenue growth was primarily driven by increased customer investments across all segments, particularly in semiconductor manufacturing equipment from memory and foundry customers. Demand for new display technologies and equipment for advanced TVs also contributed significantly.
How did Applied Materials' profitability change in fiscal year 2017 compared to fiscal year 2016?
Applied Materials saw a significant improvement in profitability. Gross margin increased from 41.7% to 44.9%, and operating margin increased from 19.9% to 26.6%. This improvement was due to higher net sales, a favorable product mix, and effective cost management, including materials cost savings.
What is the company's strategy regarding research and development (RD&E)?
Applied Materials views RD&E as critical for long-term growth. The company significantly increased its RD&E investments in fiscal year 2017 to $1.77 billion, focusing on developing new materials engineering capabilities and products that address customer challenges and enable expansion into new markets within the semiconductor and display industries.
How is the company managing its capital resources and returning value to shareholders?
Applied Materials generated strong cash flow from operations, allowing it to invest in capital expenditures, manage debt, and return capital to shareholders. In fiscal year 2017, the company repurchased $1.17 billion of its common stock and paid $430 million in dividends. The company had $3.6 billion remaining under its stock repurchase programs as of October 29, 2017.
06—Continue