01—Abstract
Summary
Summary of the 10-K filed December 15, 2023. Cited figures are marked; the original filing is the authoritative source.
Applied Materials Inc. (AMAT) reported strong performance in its fiscal year ended October 28, 2023, driven by robust demand in the Semiconductor Systems segment.
Despite a slight year-over-year increase in net sales, the company saw a minor decrease in operating margin, attributed to higher R&D expenses, inventory adjustments, and the impact of export regulations. The Applied Global Services segment demonstrated resilience with increased net sales, while the Display and Adjacent Markets segment experienced a significant decline due to weaker consumer demand for electronics. The company's strategic focus on materials engineering and its extensive product portfolio, which addresses critical technology inflections in chip manufacturing, positions it well for future growth.
Applied Materials continues to invest heavily in Research, Development, and Engineering (RD&E) to maintain its technological edge and expand into new market opportunities, particularly in areas like AI and advanced computing. Management expresses confidence in its ability to navigate supply chain challenges and meet future demand, supported by a substantial remaining authorization for share repurchases and a consistent dividend policy.
02—Key points
Key Highlights
- Net sales increased by 3% to $26.52 billion in fiscal 2023 compared to fiscal 2022, driven by the Semiconductor Systems segment.
- Operating income slightly decreased by 2% to $7.65 billion, with operating margin declining 1.3 percentage points to 28.9%, primarily due to increased R&D expenses and export regulation impacts.
- The Semiconductor Systems segment remains the largest revenue contributor, with net sales up 5% to $19.70 billion, driven by foundry and logic spending.
- The Applied Global Services segment saw a 3% increase in net sales to $5.73 billion, supported by service agreements and legacy system sales.
- The Display and Adjacent Markets segment experienced a significant 35% decline in net sales to $868 million, reflecting weakened consumer demand for display technologies.
- The company repurchased $2.2 billion of common stock in fiscal 2023, with $12.7 billion remaining authorization, and maintained its quarterly dividend payments.
- Applied Materials continues to make substantial RD&E investments, with expenses increasing by 12% to $3.10 billion, reflecting its commitment to innovation and new technology development.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Applied Materials kept $0.26.
- Revenue$26.52B100.0%
- Cost of revenue−$14.13B53.3%
- Gross profit$12.38B46.7%
- Operating costs−$4.73B17.8%
- Operating income$7.65B28.9%
- Interest, other & tax−$798.0M3.0%
- Net income$6.86B25.9%
Where FY2023 revenue went
$26.52B- Cost of revenue: $14.13B, 53% of revenue
- Net income: $6.86B, 26% of revenue
- R&D: $3.10B, 12% of revenue
- SG&A: $1.63B, 6.1% of revenue
- Interest, other & tax: $798.0M, 3.0% of revenue
Kept 26% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed December 15, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $26.52B$25.79B | +2.8% |
| Cost of Revenue | $14.13B$13.79B | +2.5% |
| Gross Profit | $12.38B$11.99B | +3.3% |
| R&D Expenses | $3.10B$2.77B | +11.9% |
| SG&A Expenses | $1.63B— | — |
| Operating Expenses | $4.73B$4.21B | +12.5% |
| Operating Income | $7.65B$7.79B | −1.7% |
| Interest Expense | $238.00M$228.00M | +4.4% |
| Net Income | $6.86B$6.53B | +5.1% |
| EPS (Basic) | $8.16$7.49 | +8.9% |
| EPS (Diluted) | $8.11$7.44 | +9.0% |
| Shares Outstanding (Basic) | 840.00M871.00M | −3.6% |
| Shares Outstanding (Diluted) | 845.00M877.00M | −3.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of Applied Materials' financial performance in fiscal year 2023?
Applied Materials' financial performance in fiscal year 2023 was primarily driven by strong demand in its Semiconductor Systems segment, particularly from foundry and logic customers investing in new capacity and technology transitions. The Applied Global Services segment also contributed positively with increased sales from service agreements and legacy systems.
How is the company addressing the challenges in the Display and Adjacent Markets segment?
The Display and Adjacent Markets segment saw a significant year-over-year decrease in net sales due to lower customer investments in display manufacturing equipment, attributed to weak consumer demand for electronic products. The company is focused on expanding its presence with technologically differentiated equipment for emerging display technologies and aims to leverage its capabilities to navigate these market conditions.
What is the company's strategy for future growth and innovation?
Applied Materials' growth strategy centers on developing products that solve customer challenges at technology inflections, expanding its served market opportunities within the semiconductor and display industries, and growing its services business. This involves significant and continued investment in Research, Development, and Engineering (RD&E) to deliver new products and technologies, particularly in high-growth areas like AI, IoT, 5G, and automotive electronics.
How is the company managing its capital and returning value to shareholders?
Applied Materials continues to return value to shareholders through a combination of share repurchases and dividends. In fiscal year 2023, the company repurchased $2.2 billion of its common stock, with a substantial $12.7 billion authorization remaining. It also consistently paid quarterly cash dividends, demonstrating a commitment to capital management and shareholder returns.
06—Continue