10-QPeriod: Q1 FY2018

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 28, 2018

Filed February 22, 2018For Securities:AMAT

Summary

Applied Materials Inc. reported strong financial results for the first quarter of fiscal year 2018, with net sales surging 28% year-over-year to $4.204 billion. This growth was primarily driven by robust customer investments across all segments, particularly in semiconductor manufacturing equipment. The Semiconductor Systems segment saw a significant 32% increase in net sales, reflecting strong demand in foundry, logic, and memory markets. The Applied Global Services segment also experienced substantial growth of 30%, indicating strong demand for spares and services. Despite the impressive revenue growth and a 1.6 percentage point improvement in gross margin to 45.7%, net income saw a significant decrease of 81% to $135 million. This decline is largely attributable to a substantial $1.0 billion income tax expense related to the U.S. Tax Cuts and Jobs Act, which reduced earnings per diluted share by $0.94. Excluding this one-time tax impact and other adjustments, non-GAAP adjusted net income was $1.135 billion, and adjusted earnings per diluted share was $1.06, demonstrating the underlying operational strength of the business.

Financial Highlights

54 data points
Beta

Revenue

$4.21B

46.1% Gross Margin

Net Income

$165.00M

3.9% Net Margin

EPS (Diluted)

$0.15

Total Assets

$19.66B

Cash & Equivalents

$6.80B

Free Cash Flow

$1.26B

Financial Statements
Beta
Revenue$4.21B
Cost of Revenue$2.27B
Gross Profit$1.94B
R&D Expenses$489.00M
Operating Expenses$725.00M
Operating Income$1.22B
Interest Expense$59.00M
Net Income$165.00M
EPS (Basic)$0.16
EPS (Diluted)$0.15
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Net sales increased significantly by 28% year-over-year to $4.204 billion, driven by strong demand across all segments.
  • 2Semiconductor Systems segment showed robust growth with net sales up 32% to $2.847 billion, fueled by foundry, logic, and memory demand.
  • 3Gross margin improved by 1.6 percentage points to 45.7%, benefiting from increased net sales and favorable product mix.
  • 4A significant one-time income tax expense of $1.0 billion related to the U.S. Tax Cuts and Jobs Act dramatically reduced reported net income to $135 million and EPS to $0.13.
  • 5Excluding the tax impact and other adjustments, non-GAAP adjusted net income was $1.135 billion, and adjusted EPS was $1.06, highlighting strong operational performance.
  • 6The company repurchased $782 million of its common stock during the quarter, indicating a commitment to returning capital to shareholders.
  • 7Cash generated from operating activities increased substantially to $1.466 billion, up from $792 million in the prior year period.

Frequently Asked Questions

Net sales increased by 28% to $4.204 billion primarily due to strong customer investments in semiconductor manufacturing equipment and services across all segments. The Semiconductor Systems segment, in particular, saw a substantial rise in demand from foundry, logic, and memory manufacturers.

The reported net income decreased by 81% to $135 million mainly due to a one-time income tax expense of $1.0 billion related to the U.S. Tax Cuts and Jobs Act. This significant charge impacted the effective tax rate and earnings per share considerably.

Applied Materials generated $1.466 billion in cash from operating activities. The company also actively repurchased $782 million of its common stock and paid $106 million in dividends, demonstrating a focus on shareholder returns. The company's cash, cash equivalents, and investments totaled $8.657 billion, providing ample liquidity.

The report indicates continued strong demand for semiconductor equipment, with significant investments in foundry, logic, and memory sectors. The Applied Global Services segment is also showing robust growth, suggesting continued demand for support and maintenance of the installed base. The Display and Adjacent Markets segment saw moderate growth, with increased investment in mobile device manufacturing equipment.