10-QPeriod: Q1 FY2017

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 29, 2017

Filed February 23, 2017For Securities:AMAT

Summary

Applied Materials Inc. reported a significant increase in net sales and profitability for the first quarter of fiscal year 2017, ending January 29, 2017. Net sales surged by 45% year-over-year to $3.28 billion, driven by strong customer investments across all segments, particularly in Semiconductor Systems. This robust top-line growth translated into a substantial improvement in net income, which more than doubled from $286 million in the prior year quarter to $703 million, with earnings per share rising from $0.25 to $0.65. The company demonstrated improved operational efficiency, with gross margin increasing to 44.1% and operating margin expanding significantly to 24.6%. This performance reflects favorable product mix and cost management. The Semiconductor Systems segment, the largest contributor, saw operating income more than double year-over-year, underscoring its importance to the company's overall financial health. Applied Materials maintains a strong financial position with substantial cash and investments, while continuing to return capital to shareholders through dividends and share repurchases.

Financial Highlights

56 data points
Beta

Revenue

$3.28B

44.1% Gross Margin

Net Income

$703.00M

21.4% Net Margin

EPS (Diluted)

$0.65

Total Assets

$15.24B

Cash & Equivalents

$3.49B

Free Cash Flow

$728.00M

Financial Statements
Beta
Revenue$3.28B
Cost of Revenue$1.83B
Gross Profit$1.45B
R&D Expenses$417.00M
Operating Expenses$638.00M
Operating Income$807.00M
Interest Expense$38.00M
Net Income$703.00M
EPS (Basic)$0.65
EPS (Diluted)$0.65
Shares Outstanding (Basic)1.08B
Shares Outstanding (Diluted)1.09B

Key Highlights

  • 1Net sales increased by 45% year-over-year to $3.28 billion, primarily driven by increased customer investments across all segments.
  • 2Net income more than doubled year-over-year, reaching $703 million from $286 million in the prior year period.
  • 3Earnings per diluted share rose to $0.65, a significant increase from $0.25 in the comparable prior year quarter.
  • 4Gross margin improved to 44.1% from 40.6% year-over-year, and operating margin expanded to 24.6% from 15.7%.
  • 5The Semiconductor Systems segment showed robust growth, with net sales up 57% and operating income up 160% year-over-year.
  • 6The company ended the quarter with a strong liquidity position, including $3.49 billion in cash and cash equivalents and $1.56 billion in short-term and long-term investments.
  • 7Applied Materials returned $238 million to shareholders through share repurchases ($130 million) and dividends ($108 million) during the quarter.

Frequently Asked Questions

The primary driver of Applied Materials' revenue growth was increased customer investments across all three reportable segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. Specifically, growth in the Semiconductor Systems segment was fueled by memory manufacturers investing in technology upgrades and new capacity, particularly related to the transition to 3D NAND, and foundry customers investing in advanced mobile chips.

Profitability significantly improved due to a combination of factors. The substantial increase in net sales provided operating leverage. Additionally, gross margin improved to 44.1% from 40.6% year-over-year, driven by favorable product mix and material cost savings. The operating margin also saw a significant expansion, reaching 24.6% from 15.7% in the prior year, reflecting effective cost management and increased sales.

The outlook for the Semiconductor Systems segment appears strong. The company anticipates healthy spending levels in all semiconductor categories for the fiscal year, with mobility investments continuing to be a significant driver for new technology and capacity expansion, particularly in memory and foundry sectors.

Applied Materials maintains a strong liquidity position with over $5 billion in cash, cash equivalents, and investments. During the quarter, the company continued its capital return strategy by repurchasing $130 million of its common stock and paying $108 million in dividends to shareholders, demonstrating its commitment to returning value to investors.