10-QPeriod: Q1 FY2023

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 29, 2023

Filed February 23, 2023For Securities:AMAT

Summary

Applied Materials Inc. (AMAT) reported its financial results for the fiscal second quarter ended January 29, 2023. The company demonstrated revenue growth of 7% year-over-year, reaching $6.74 billion. Net income saw a slight decrease to $1.72 billion, translating to a diluted EPS of $2.02, a modest increase from $2.00 in the prior year quarter. The company's performance was primarily driven by strong demand in the Semiconductor Systems segment, which experienced a 13% revenue increase, while the Display and Adjacent Markets segment faced a significant 54% revenue decline due to weakness in consumer electronics. AMAT also benefited from improved supply chain performance, though ongoing constraints are expected to persist. Financially, AMAT maintained a solid liquidity position with $6.14 billion in cash, cash equivalents, and investments. The company utilized $418 million in financing activities, primarily for share repurchases and dividend payments. Management noted ongoing investments in Research, Development, and Engineering (RD&E) to maintain technological leadership. Despite external challenges like U.S. export regulations impacting sales to China and a recent cybersecurity incident at a key supplier, AMAT's strong execution in its core semiconductor business and strategic focus on innovation position it to navigate the dynamic industry landscape.

Financial Highlights

56 data points
Beta

Revenue

$6.74B

46.7% Gross Margin

Net Income

$1.72B

25.5% Net Margin

EPS (Diluted)

$2.02

Total Assets

$27.96B

Cash & Equivalents

$3.55B

Free Cash Flow

$1.98B

Financial Statements
Beta
Revenue$6.74B
Cost of Revenue$3.59B
Gross Profit$3.15B
R&D Expenses$771.00M
Operating Expenses$1.18B
Operating Income$1.97B
Interest Expense$59.00M
Net Income$1.72B
EPS (Basic)$2.03
EPS (Diluted)$2.02
Shares Outstanding (Basic)845.00M
Shares Outstanding (Diluted)849.00M

Key Highlights

  • 1Net sales increased by 7% to $6.74 billion compared to the prior year quarter.
  • 2Diluted earnings per share (EPS) improved slightly to $2.02 from $2.00 year-over-year.
  • 3Semiconductor Systems segment revenue grew by 13% to $5.16 billion, driven by customer investments in technology and capacity.
  • 4Display and Adjacent Markets segment revenue declined by 54% to $167 million due to reduced customer investment.
  • 5Gross margin decreased by 0.5 percentage points to 46.7%, attributed to higher material and logistics costs, inventory charges, and unfavorable product mix.
  • 6Cash provided by operating activities was $2.27 billion, reflecting strong operational cash generation.
  • 7The company extended its $1.5 billion revolving credit facility to February 2026, maintaining financial flexibility.

Frequently Asked Questions

The primary driver of AMAT's revenue growth was the Semiconductor Systems segment, which saw a 13% increase in net sales, benefiting from continued strategic investments by customers in new technology transitions and capacity expansion, particularly in foundry and logic.

The company faced headwinds including higher material and logistics costs, unfavorable product mix, and the impact of U.S. export regulations, which specifically affected sales to China. The Display and Adjacent Markets segment was significantly impacted by reduced customer investment due to weakness in the consumer electronics market (PCs and smartphones).

AMAT maintained a strong liquidity position with total cash, cash equivalents, and investments of $6.14 billion as of January 29, 2023. Operating activities generated $2.27 billion in cash. The company also extended its revolving credit facility, ensuring continued financial flexibility.

While supply chain performance has improved, AMAT expects some shortages to persist through the remainder of fiscal 2023. A significant concern is a recent cybersecurity incident at a major supplier, which is expected to impact shipments in the second quarter.