10-QPeriod: Q1 FY2021

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 31, 2021

Filed February 25, 2021For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported strong financial results for the first quarter of fiscal year 2021, demonstrating significant year-over-year growth across key metrics. Net sales surged by 24% to $5.16 billion, driven by robust demand in the semiconductor equipment market, particularly from foundry, logic, and memory customers. The company's operating income also saw a substantial increase of 23% to $1.28 billion, reflecting improved operational efficiency and favorable product mix. Profitability was further bolstered by a higher gross margin of 45.5%, up from 44.6% in the prior year, attributed to increased sales volume and a favorable product mix, partially offset by rising freight and personnel costs. Net income reached $1.13 billion, a significant 27% increase from the previous year, translating to diluted earnings per share of $1.22, up from $0.96. The company also reported a healthy increase in cash flow from operations, underscoring its financial strength and operational momentum. A notable event was the $152 million severance and related charges incurred as part of a workforce realignment plan, which impacted the operating income, but the company's core performance remained strong.

Financial Highlights

56 data points
Beta

Revenue

$5.16B

45.5% Gross Margin

Net Income

$1.13B

21.9% Net Margin

EPS (Diluted)

$1.22

Total Assets

$23.30B

Cash & Equivalents

$6.21B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$5.16B
Cost of Revenue$2.81B
Gross Profit$2.35B
R&D Expenses$606.00M
Operating Expenses$1.07B
Operating Income$1.28B
Interest Expense$61.00M
Net Income$1.13B
EPS (Basic)$1.23
EPS (Diluted)$1.22
Shares Outstanding (Basic)915.00M
Shares Outstanding (Diluted)925.00M

Key Highlights

  • 1Net sales increased by 24% year-over-year to $5.16 billion, driven by strong performance in the Semiconductor Systems segment.
  • 2Operating income grew by 23% year-over-year to $1.28 billion, indicating improved profitability.
  • 3Gross margin improved to 45.5% from 44.6% in the prior year, reflecting operational efficiencies and product mix.
  • 4Net income increased by 27% year-over-year to $1.13 billion, with diluted EPS rising to $1.22 from $0.96.
  • 5Cash flow from operating activities significantly increased to $1.42 billion from $0.99 billion in the prior year.
  • 6The company incurred $152 million in severance and related charges as part of a workforce realignment plan.
  • 7Strong revenue growth was observed in Korea (+154%) and Southeast Asia (+164%), while Taiwan saw a decline (-12%) compared to the prior year.

Frequently Asked Questions

The substantial 24% increase in net sales to $5.16 billion was primarily driven by increased customer investments in semiconductor equipment. This growth was particularly strong in the Semiconductor Systems segment, with higher spending from memory customers and continued investment in advanced foundry-logic nodes. The Applied Global Services segment also contributed with higher customer spending on service agreements and spares, and the Display and Adjacent Markets segment saw increased investment in mobile product display manufacturing equipment.

Applied Materials incurred $152 million in severance and related charges in the first quarter of fiscal 2021 as part of a workforce realignment plan, which included a voluntary retirement program and other workforce reduction actions. These charges reduced operating income and net income, but the company's underlying operational performance remained robust, as evidenced by the year-over-year growth in net sales and operating income before these charges.

The company demonstrated strong cash flow generation, with cash provided by operating activities increasing to $1.42 billion in the quarter. Applied Materials' management believes that its cash generated from operations, combined with existing cash balances and borrowing capacity, will be sufficient to meet its liquidity requirements for the next 12 months. The company also maintained a healthy cash, cash equivalents, and investments balance of $8.22 billion as of January 31, 2021.

Applied Materials saw significant year-over-year growth in net sales in several key regions. Korea experienced a remarkable 154% increase, and Southeast Asia saw a 164% surge, largely driven by semiconductor equipment spending. While China showed a 9% increase, Taiwan experienced a 12% decrease in net sales compared to the prior year. The United States saw a 22% decrease, while Europe grew by 95%.