01—Abstract
Summary
Summary of the 10-K filed December 13, 2018. Cited figures are marked; the original filing is the authoritative source.
Applied Materials, Inc. (AMAT) reported robust performance in its fiscal year ending October 27, 2018, with net sales increasing by 19% to $17.25 billiona, driven by strong customer investments across all its segments, particularly in Semiconductor Systems.
The company's operational efficiency also improved, with gross margins rising to 45.3% and operating margins expanding to 27.8%. Significant investments in Research, Development, and Engineering (RD&E) continued, totaling $2.02 billionb, underscoring AMAT's commitment to innovation in materials engineering for the semiconductor and display industries. The company also demonstrated strong cash generation from operations, amounting to $3.79 billion.
AMAT actively returned capital to shareholders through substantial stock repurchases ($5.3 billionc) and increased cash dividends. The global business continues to be a significant driver, with 85% of net sales originating from outside the United States, highlighting geographic diversification. However, investors should note the inherent cyclicality and volatility of the semiconductor and display industries, coupled with risks related to global economic conditions, trade policies, and customer concentration.
02—Key points
Key Highlights
- Net sales increased by 19% year-over-year to $17.25 billion in fiscal 2018.
- Gross margin improved to 45.3% and operating margin reached 27.8% in fiscal 2018.
- The Semiconductor Systems segment remains the largest contributor to revenue, with a 15% increase in net sales year-over-year.
- Applied Global Services saw a significant 24% increase in net sales, indicating growing demand for services.
- The company invested $2.02 billion in Research, Development, and Engineering (RD&E), emphasizing future innovation.
- Applied Materials returned a substantial $5.9 billion to shareholders through stock repurchases and dividends in fiscal 2018.
- 85% of net sales were generated from customers outside the United States, showcasing strong international presence.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Applied Materials kept $0.18.
- Revenue$16.70B100.0%
- Cost of revenue−$9.19B55.0%
- Gross profit$7.52B45.0%
- Operating costs−$3.03B18.1%
- Operating income$4.49B26.9%
- Interest, other & tax−$1.45B8.7%
- Net income$3.04B18.2%
Where FY2018 revenue went
$16.70B- Cost of revenue: $9.19B, 55% of revenue
- Net income: $3.04B, 18% of revenue
- R&D: $2.02B, 12% of revenue
- Other operating costs: $1.00B, 6.0% of revenue
- Interest, other & tax: $1.45B, 8.7% of revenue
Kept 18% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed December 13, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $16.70B$14.54B | +14.9% |
| Cost of Revenue | $9.19B$8.09B | +13.6% |
| Gross Profit | $7.52B$6.61B | +13.7% |
| R&D Expenses | $2.02B$1.78B | +13.5% |
| Operating Expenses | $3.03B$2.68B | +13.1% |
| Operating Income | $4.49B$3.94B | +14.1% |
| Interest Expense | $234.00M$198.00M | +18.2% |
| Net Income | $3.04B$3.52B | −13.7% |
| EPS (Basic) | $3.00$3.28 | −8.5% |
| EPS (Diluted) | $2.96$3.25 | −8.9% |
| Shares Outstanding (Basic) | 1.01B1.07B | −5.6% |
| Shares Outstanding (Diluted) | 1.03B1.08B | −5.4% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of Applied Materials in fiscal year 2018?
In fiscal year 2018, Applied Materials reported a strong financial performance with net sales reaching $17.25 billion, a 19% increase from the previous year. Gross profit margin improved to 45.3%, and operating income grew significantly, reflecting increased customer spending across its core business segments.
How did the different business segments perform?
The Semiconductor Systems segment, the largest contributor to revenue, saw a 15% increase in net sales. The Applied Global Services segment experienced robust growth with a 24% rise in net sales, indicating strong demand for its support and optimization services. The Display and Adjacent Markets segment also showed significant growth, with a 31% increase in net sales, driven by investments in TV and mobile display manufacturing equipment.
What is Applied Materials' strategy regarding innovation and R&D?
Applied Materials is committed to innovation and significantly increased its investment in Research, Development, and Engineering (RD&E) to $2.02 billion in fiscal 2018. This investment supports the development of new materials engineering capabilities and products aimed at solving customer challenges and expanding market opportunities in the semiconductor and display industries.
How is Applied Materials returning capital to shareholders?
In fiscal 2018, Applied Materials demonstrated a strong commitment to returning capital to shareholders by repurchasing $5.3 billion of its common stock and paying $605 million in cash dividends. This reflects the company's confidence in its financial position and its strategy to enhance shareholder value.
06—Continue