10-QPeriod: Q2 FY2017

APPLIED MATERIALS INC /DE Quarterly Report for Q2 Ended Apr 30, 2017

Filed May 25, 2017For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported a significant increase in its financial performance for the period ending April 29, 2017. Net sales surged by 45% year-over-year to $3.55 billion for the quarter and 45% for the six-month period to $6.82 billion, driven by robust customer investments across all segments, particularly in semiconductor and display manufacturing equipment. This top-line growth translated into substantial improvements in profitability, with operating income increasing by 9.2 points to 26.5% and net income more than doubling year-over-year for both the quarter and the six-month period. The company's strong operational execution, coupled with favorable market conditions, led to impressive earnings per diluted share of $0.76 for the quarter and $1.40 for the six months, up from $0.29 and $0.53, respectively, in the prior year. The balance sheet also strengthened, with total assets growing to $18.24 billion and stockholders' equity increasing to $8.21 billion, indicating a healthy financial position. The company also demonstrated a commitment to returning capital to shareholders through share repurchases and dividends.

Financial Highlights

57 data points
Beta

Revenue

$3.55B

45.1% Gross Margin

Net Income

$824.00M

23.2% Net Margin

EPS (Diluted)

$0.76

Total Assets

$18.24B

Cash & Equivalents

$4.94B

Free Cash Flow

$834.00M

Financial Statements
Beta
Revenue$3.55B
Cost of Revenue$1.95B
Gross Profit$1.60B
R&D Expenses$437.00M
Operating Expenses$660.00M
Operating Income$940.00M
Interest Expense$44.00M
Net Income$824.00M
EPS (Basic)$0.76
EPS (Diluted)$0.76
Shares Outstanding (Basic)1.08B
Shares Outstanding (Diluted)1.09B

Key Highlights

  • 1Net sales saw a substantial increase of 45% year-over-year for both the quarter ($3.55B) and the six-month period ($6.82B), indicating strong market demand.
  • 2Gross margin improved significantly to 45.1% for the quarter and 44.6% for the six months, up from 41.0% and 40.8% respectively in the prior year, showcasing enhanced operational efficiency and favorable product mix.
  • 3Operating income experienced a dramatic increase of 122% year-over-year for the quarter, reaching $940 million, and a 138% increase for the six-month period, reaching $1.75 billion.
  • 4Diluted earnings per share (EPS) more than doubled year-over-year, reaching $0.76 for the quarter and $1.40 for the six months, reflecting strong profitability.
  • 5The Semiconductor Systems segment remains the largest contributor to revenue, with sales increasing by 51% year-over-year for the quarter, driven by investments from foundry and memory customers.
  • 6Cash and cash equivalents significantly increased to $4.94 billion, and total cash, cash equivalents, and investments grew to $7.71 billion, demonstrating strong cash generation and liquidity.
  • 7The company repurchased $412 million of its common stock in the first half of the fiscal year, signaling confidence and a commitment to shareholder returns.

Frequently Asked Questions

The substantial increase in net sales and profitability was primarily driven by strong customer investments across all segments, particularly in semiconductor and display manufacturing equipment. This was fueled by robust demand for memory, advanced mobile chips, and new display technologies like OLED. Operational improvements, favorable product mix, and material cost savings also contributed to the enhanced gross and operating margins.

Applied Materials' financial position has strengthened considerably, evidenced by a significant increase in cash and cash equivalents to $4.94 billion and total stockholders' equity to $8.21 billion. This robust liquidity provides the company with financial flexibility for strategic investments, capital allocation, and resilience against market fluctuations, which is positive for investor confidence.

The Semiconductor Systems segment continues to be the largest contributor to revenue and showed strong year-over-year growth. Key growth drivers include ongoing investments by memory manufacturers in technology upgrades for 3D NAND and increasing demand for memory, as well as foundry customers investing in new capacity for advanced mobile chips. The company anticipates healthy spending levels in all semiconductor categories for the fiscal year.

Applied Materials is actively managing its capital through strong cash generation and strategic debt management, including issuing new senior unsecured notes. The company is also committed to returning value to shareholders through a significant common stock repurchase program, having bought back $412 million worth of shares in the first half of the fiscal year, and continues to pay quarterly cash dividends.