01—Abstract
Summary
Summary of the 10-Q filed February 27, 2024. Cited figures are marked; the original filing is the authoritative source.
Applied Materials, Inc. (AMAT) reported its second-quarter fiscal 2024 results, showing resilient revenue and a notable increase in net income compared to the prior year.
While net revenue saw a slight decrease year-over-year, primarily driven by a pullback in Semiconductor Systems, the company demonstrated strong operational execution, leading to a significant improvement in profitability. The company's financial performance was bolstered by a substantial rise in interest and other income, alongside a gross margin improvement, indicating effective cost management and favorable pricing.
Applied Materials also continued its commitment to returning capital to shareholders through dividends and substantial share repurchases, underscoring its financial strength and confidence in future prospects. The outlook suggests continued strategic investment in key technology transitions within the semiconductor and display industries, positioning AMAT to capitalize on future growth opportunities.
02—Key points
Key Highlights
- Net income increased by approximately 17.2% to $2.019 billion, or $2.41 per diluted share, compared to $1.717 billion, or $2.02 per diluted share, in the prior year's quarter.
- Total net revenue was $6.707 billion, a slight decrease of 0.5% from $6.739 billion in the same period last year, reflecting mixed performance across segments.
- Gross margin improved to 47.8% from 46.7% in the prior year's quarter, driven by lower costs and a decrease in inventory reserves.
- Interest and other income (expense), net, saw a significant increase, rising to $395 million from $50 million in the prior year, primarily due to higher net gains on equity investments and increased interest income.
- The company returned $1.2 billion to shareholders through share repurchases ($700 million) and dividends ($266 million) during the quarter.
- Semiconductor Systems, the largest segment, saw revenue decline by 5% to $4.909 billion, while Applied Global Services revenue grew by 8% to $1.476 billion, and Display and Adjacent Markets revenue surged by 46% to $244 million.
- Cash provided by operating activities remained strong at $2.325 billion, reflecting solid cash generation capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Applied Materials kept $0.30.
- Revenue$6.71B100.0%
- Cost of revenue−$3.50B52.2%
- Gross profit$3.20B47.8%
- Operating costs−$1.24B18.4%
- Operating income$1.97B29.3%
- Interest, other & tax$52.0M0.8%
- Net income$2.02B30.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 27, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $6.71B$6.74B | −0.5% |
| Cost of Revenue | $3.50B$3.59B | −2.5% |
| Gross Profit | $3.20B$3.15B | +1.9% |
| R&D Expenses | $754.00M$771.00M | −2.2% |
| Operating Expenses | $1.24B$1.18B | +5.3% |
| Operating Income | $1.97B$1.97B | −0.2% |
| Interest Expense | $59.00M$59.00M | 0.0% |
| Net Income | $2.02B$1.72B | +17.6% |
| EPS (Basic) | $2.43$2.03 | +19.7% |
| EPS (Diluted) | $2.41$2.02 | +19.3% |
| Shares Outstanding (Basic) | 831.00M845.00M | −1.7% |
| Shares Outstanding (Diluted) | 837.00M849.00M | −1.4% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of Applied Materials in this quarter?
Applied Materials reported resilient financial performance with a slight year-over-year decrease in net revenue to $6.707 billion. However, net income saw a significant increase of 17.2% to $2.019 billion, or $2.41 per diluted share, driven by improved gross margins and a substantial increase in other income.
How did the different business segments perform?
The Semiconductor Systems segment, which is the largest, experienced a 5% revenue decline. In contrast, the Applied Global Services segment showed robust growth with an 8% revenue increase, and the Display and Adjacent Markets segment saw a significant surge of 46% in revenue. This indicates a mixed performance across the company's core businesses.
What is the company doing to return value to shareholders?
Applied Materials demonstrated a strong commitment to shareholder returns by repurchasing $700 million worth of its common stock and paying $266 million in dividends during the quarter, totaling $1.2 billion in capital returned to shareholders. The company also has approximately $12.0 billion remaining available under its stock repurchase program.
What is driving the increase in net income despite the slight dip in revenue?
The significant increase in net income was primarily driven by an improved gross margin of 47.8% (up from 46.7% year-over-year) due to lower costs and reduced inventory reserves. Additionally, a substantial increase in interest and other income, largely from gains on equity investments and higher interest income, significantly boosted the bottom line.
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