10-QPeriod: Q3 FY2017

APPLIED MATERIALS INC /DE Quarterly Report for Q3 Ended Jul 30, 2017

Filed August 24, 2017For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported strong financial results for the nine months ended July 30, 2017, demonstrating significant growth compared to the same period in the prior year. Net sales increased by 40% to $10.6 billion, driven by robust demand across all segments, particularly in Semiconductor Systems, which saw a 49% surge in net sales. This top-line growth translated into substantial improvements in profitability, with operating income more than doubling to $2.77 billion and net income rising to $2.45 billion, up from $1.11 billion in the prior year. The company's financial health is further underscored by a significant increase in its cash and cash equivalents, which grew to $5.28 billion. This strong cash generation allowed for continued investment in R&D, a dividend payout, and substantial share repurchases, reflecting a balanced approach to capital allocation. The company's strategic positioning in key growth markets for semiconductors and displays appears to be paying off, as evidenced by the increased sales and operating margins across its major business segments.

Financial Highlights

58 data points
Beta

Revenue

$3.74B

45.4% Gross Margin

Net Income

$925.00M

24.7% Net Margin

EPS (Diluted)

$0.85

Total Assets

$19.08B

Cash & Equivalents

$5.28B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$3.74B
Cost of Revenue$2.04B
Gross Profit$1.70B
R&D Expenses$454.00M
Operating Expenses$677.00M
Operating Income$1.02B
Interest Expense$59.00M
Net Income$925.00M
EPS (Basic)$0.86
EPS (Diluted)$0.85
Shares Outstanding (Basic)1.07B
Shares Outstanding (Diluted)1.08B

Key Highlights

  • 1Net sales for the nine months ended July 30, 2017, increased by 40% to $10.57 billion, compared to $7.53 billion in the same period last year.
  • 2Net income for the nine months ended July 30, 2017, more than doubled to $2.45 billion, up from $1.11 billion in the prior year.
  • 3Operating income saw a substantial increase of 101% to $2.77 billion for the nine-month period, compared to $1.37 billion.
  • 4The Semiconductor Systems segment remains the largest contributor, with net sales up 49% to $7.09 billion for the nine months.
  • 5Applied Global Services segment also showed growth, with net sales increasing 15% to $2.19 billion for the nine months.
  • 6Cash and cash equivalents increased significantly to $5.28 billion as of July 30, 2017, from $3.41 billion at the end of fiscal 2016.
  • 7The company repurchased $787 million in common stock during the first nine months of fiscal 2017, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

The primary driver of Applied Materials' revenue growth was increased customer investments across all segments, with the majority of the increase stemming from the Semiconductor Systems segment. This was further fueled by strong demand in memory and foundry sectors, including the transition to 3D NAND and demand for advanced mobile chips.

Profitability significantly improved. Gross margin increased from 41.3% to 44.9% for the nine months, and operating margin expanded from 18.3% to 26.2%. This led to a more than doubling of net income, from $1.11 billion to $2.45 billion.

Applied Materials reported a strong cash position, with cash and cash equivalents totaling $5.28 billion as of July 30, 2017. The company generated $2.91 billion in cash from operating activities during the first nine months of fiscal 2017. This strong cash flow supported significant share repurchases ($787 million) and dividend payments ($323 million), alongside investments in R&D and capital expenditures.

All segments showed growth. Semiconductor Systems, the largest segment, saw net sales increase by 49% to $7.09 billion. Applied Global Services grew by 15% to $2.19 billion. The Display and Adjacent Markets segment also experienced substantial growth, with net sales up 62% to $1.22 billion.