Applied Materials, Inc. is a global leader in materials engineering solutions, providing manufacturing equipment, services, and software to the semiconductor, display, and related industries **[0001193125-24-146038_d840000dex101.htm:0]** **[0000006951-23-000041_amat-20231029.htm:52]** **[0000006951-23-000041_amat-20231029.htm:4]**. The company operates through a direct sales force, with operations and manufacturing activities in the United States, Europe, Israel, and Asia **[0000006951-24-000022_amat-20240428.htm:35]** **[0000006951-24-000012_amat-20240128.htm:29]**. Applied Materials' offerings are highly technical, catering to the needs of semiconductor systems, global services, and display markets **[0001193125-24-014287_d633899ddef14a.htm:48]** **[0001193125-24-014287_d633899ddef14a.htm:7]**.

1. **Semiconductor Systems** - Focuses on manufacturing equipment for foundry-logic, implant, packaging, metal deposition, and chemical vapor deposition (CVD), significantly contributing to the company's revenue **[0001193125-24-014287_d633899ddef14a.htm:48]** **[0001193125-24-014287_d633899ddef14a.htm:7]**.
2. **Applied Global Services** - Provides long-term subscription service agreements, accounting for a substantial portion of parts and service revenues **[0001193125-24-014287_d633899ddef14a.htm:48]** **[0001193125-24-014287_d633899ddef14a.htm:7]**.
3. **Display and Adjacent Markets** - Offers solutions for the display industry, maintaining profitability even during industry down cycles **[0001193125-24-014287_d633899ddef14a.htm:48]** **[0001193125-24-014287_d633899ddef14a.htm:7]**.

1673815b4601d33275944b461f99c0443401642e70357eb007f7ff2f31ea3b30

cf28ed2174197678934fd0fe9ed6b6dc1f04e03a1229f373745d122f310495f0

d92b60186efd39411a065ea8d156fda4cd84ce0e8086cf047c0c2e0301c44186

| Segment/Quarter | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 |
|-----------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **Semiconductor Systems** ($ million) | **5,180**  **[AMAT_3408747_4]**  | **4,920**  **[0000006951-24-000026_exhibit991q32024earningsre.htm:1]**  | **4,901**  **[0000006951-24-000017_exhibit991q22024earningsre.htm:1]**  | **4,909**  **[0000006951-24-000006_exhibit991q12024earningsre.htm:1]**  | **4,880**  **[AMAT_3367436_5]**  | **4,680**  **[AMAT_3382887_4]**  | **4,977**  **[0000006951-23-000017_exhibit991q22023earningsre.htm:1]**  | **5,162**  **[0000006951-23-000007_exhibit991q12023earningsre.htm:1]**  |
| **Applied Global Services (AGS)** ($ million) | **1,640**  **[AMAT_3408747_4]**  | **1,580**  **[0000006951-24-000026_exhibit991q32024earningsre.htm:1]**  | **1,530**  **[0000006951-24-000017_exhibit991q22024earningsre.htm:1]**  | **1,476**  **[0000006951-24-000006_exhibit991q12024earningsre.htm:1]**  | **1,470**  **[AMAT_3367436_5]**  | **1,460**  **[AMAT_3382887_4]**  | **1,428**  **[0000006951-23-000017_exhibit991q22023earningsre.htm:1]**  | **1,369**  **[0000006951-23-000007_exhibit991q12023earningsre.htm:1]**  |
| **Display and Adjacent Markets** ($ million) | **211**  **[AMAT_3408747_4]**  | **251**  **[0000006951-24-000026_exhibit991q32024earningsre.htm:1]**  | **179**  **[0000006951-24-000017_exhibit991q22024earningsre.htm:1]**  | **244**  **[0000006951-24-000006_exhibit991q12024earningsre.htm:1]**  | **298**  **[AMAT_3367436_5]**  | **235**  **[AMAT_3382887_4]**  | **168**  **[0000006951-23-000017_exhibit991q22023earningsre.htm:1]**  | **167**  **[0000006951-23-000007_exhibit991q12023earningsre.htm:1]**  |
| **Corporate and Other** ($ million) | N/A | **23**  **[0000006951-24-000032_amat-20240728.htm:32]**  | **36**  **[0000006951-24-000022_amat-20240428.htm:32]**  | N/A | N/A | N/A | N/A | **41**  **[0000006951-23-000012_amat-20230129.htm:25]**  |

081df4bd5c443bb47609ea25a52bb25747041c294ffc9a788605105d610ec935

1. With your advanced node revenue expected to double, how much of this growth is truly incremental versus replacing revenue from prior nodes, and how do you assess the sustainability of this growth moving forward?
2. Considering that approximately 30% of your revenue comes from China, primarily in the ICAPS business, do you expect this level to hold given potential geopolitical risks and how might changes in trade policies impact your outlook?
3. Despite the strong growth in your services business, operating margins remain below prior targets; what structural challenges are preventing margins from returning to the low 30% range, and what actions are you taking to improve profitability?
4. You noted an increase in gross margins due to favorable product mix and value-based pricing; can you provide more detail on the drivers behind this improvement and discuss the sustainability of higher gross margins in the current market environment?
5. As you see customers adding DRAM capacity, particularly for high-bandwidth memory, how are you managing the potential risk of overcapacity in conventional DRAM, and what strategies are in place to balance investment and demand?

385c7f29884a03d1a17acb1d0004840f27a714b28964c179d764449ca164c174

Adjustments for Non-Cash Items (USD, millions)

Stock-Based Compensation (USD, millions)

Changes in Working Capital (USD, millions)

Capital Expenditures (USD, millions)

Proceeds from / Repayments of Debt (USD, millions)

Share Repurchases (USD, millions)

Dividend Payments (USD, millions)

Net Change in Cash (USD, millions)

5e345008800db82b71cf32a49e1770e008c6a8f6e5f78a5db38a4170286b6538

### Q4 2024 Earnings Call
- **Issued Period**: Q4 2024
- **Guided Period**: Q1 2025
- **Guidance**:
  - **Total Revenue**: **$7.15 billion**, plus or minus $400 million
  - **Non-GAAP EPS**: **$2.29**, plus or minus $0.18
  - **Semiconductor Systems Revenue**: Approximately **$5.3 billion**
  - **Applied Global Services (AGS) Revenue**: Approximately **$1.65 billion**
  - **Display Revenue**: Approximately **$175 million**
  - **Non-GAAP Gross Margin**: Approximately **48.4%**
  - **Non-GAAP Operating Expenses**: Approximately **$1.33 billion**
  - **Tax Rate**: Approximately **14%**  **[AMAT_3408747_5]** 

### Q3 2024 Earnings Call
- **Issued Period**: Q3 2024
- **Guided Period**: Q4 2024
- **Guidance**:
  - **Total Revenue**: **$6.93 billion**, plus or minus $400 million
  - **Non-GAAP EPS**: **$2.18**, plus or minus $0.18
  - **Semi Systems Revenue**: Approximately **$5.1 billion**
  - **Applied Global Services (AGS) Revenue**: About **$1.61 billion**
  - **Display Revenue**: Around **$200 million**
  - **Non-GAAP Gross Margin**: Approximately **47.4%**
  - **Non-GAAP Operating Expenses**: Around **$1.275 billion**
  - **Tax Rate**: Modeled at **12.5%**  **[AMAT_3399120_5]** 

### Q2 2024 Earnings Call
- **Issued Period**: Q2 2024
- **Guided Period**: Q3 2024
- **Guidance**:
  - **Revenue**: **$6.65 billion**, plus or minus $400 million
  - **Non-GAAP EPS**: **$2.01**, plus or minus $0.18
  - **Semi Systems Revenue**: Approximately **$4.8 billion**
  - **Applied Global Services (AGS) Revenue**: About **$1.57 billion**
  - **Display Revenue**: Around **$245 million**
  - **Non-GAAP Gross Margin**: Approximately **47%**
  - **Non-GAAP Operating Expenses**: Around **$1.26 billion**
  - **Tax Rate**: **12.3%**  **[AMAT_3389648_5]** 

### Q1 2024 Earnings Call
- **Issued Period**: Q1 2024
- **Guided Period**: Q2 2024
- **Guidance**:
  - **Revenue**: Expected to be **$6.5 billion**, plus or minus $400 million
  - **Non-GAAP EPS**: Expected to be **$1.97**, plus or minus $0.18
  - **Non-GAAP Gross Margin**: Expected to be approximately **47.3%**
  - **Non-GAAP Operating Expenses**: Expected to be around **$1.235 billion**
  - **Tax Rate**: Modeling a tax rate of **12.5%**
  - **Segment Revenue Expectations**:
    - **Semi Systems Revenue**: Around **$4.8 billion**
    - **AGS Revenue**: About **$1.5 billion**
    - **Display Revenue**: Around **$150 million**  **[AMAT_3373553_5]** 

4e85d2f9f4c2b8d7431293f51caac9ed69880a08c59dcbd0cb571447d664a65b

Semiconductor Systems

- Foundry, Logic, and Other

- DRAM

- Flash Memory

Silicon Systems Group

Applied Global Services

Display

Display and Adjacent Markets

Energy and Environmental Solutions

Corporate and Other

Total Revenue

dfcc6373293300933e2ed6b25849b10b0d2d6eca461074f7e3a99b555af10825

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

0527e666672171473548d9eeff1a1aacac4dd2e47cd06de134c46ac5ae28f4dc

| Program Details          | Program 1          | Program 2          |
|--------------------------|--------------------|--------------------|
| Approval Date            | March 2022  **[0000006951-24-000044_amat-20241027.htm:49]**      | March 2023  **[0000006951-24-000044_amat-20241027.htm:49]**      |
| End Date/Duration        | N/A                | N/A                |
| Total Additional Amount  | **$6.0 billion**  **[0000006951-24-000044_amat-20241027.htm:49]**  | **$10.0 billion**  **[0000006951-24-000044_amat-20241027.htm:49]**  |
| Remaining Authorization  | **$0 billion**  **[0000006951-24-000044_amat-20241027.htm:49]**  | **$8.9 billion**  **[0000006951-24-000044_amat-20241027.htm:49]**  |
| Details                  | Combined remaining authorization with Program 2  **[0000006951-24-000044_amat-20241027.htm:49]**  | Combined remaining authorization with Program 1  **[0000006951-24-000044_amat-20241027.htm:49]**  |

05fcdefe99592c4c24fc8d4209c1a0fe18504fd0ef40975590efbd9e41014edc

**Quarterly guidance for fiscal Q1 2025:**
- **Total Revenue**: $7.15B ± $400M  **[AMAT_3408747_5]**  (raised from $6.93B ± $400M  **[AMAT_3399120_5]** )  
- **Non-GAAP EPS**: $2.29 ± $0.18  **[AMAT_3408747_5]**  (raised from $2.18 ± $0.18  **[AMAT_3399120_5]** )  
- **Semiconductor Systems Revenue**: $5.3B  **[AMAT_3408747_5]**  (raised from $5.1B  **[AMAT_3399120_5]** )  
- **Applied Global Services (AGS) Revenue**: $1.65B  **[AMAT_3408747_5]**  (raised from $1.61B  **[AMAT_3399120_5]** )  
- **Display Revenue**: $175M  **[AMAT_3408747_5]**  (lowered from $200M  **[AMAT_3399120_5]** )  
- **Non-GAAP Gross Margin**: 48.4%  **[AMAT_3408747_5]**  (raised from 47.4%  **[AMAT_3399120_5]** )  
- **Non-GAAP Operating Expenses**: $1.33B  **[AMAT_3408747_5]**  (raised from $1.275B  **[AMAT_3399120_5]** )  
- **Tax Rate**: 14%  **[AMAT_3408747_5]**  (raised from 12.5%  **[AMAT_3399120_5]** )  

1f981cfc034b6ea979c600adcc940c2b5df2d59e44a9325f30bd1c3319dddd11

| Name       | Start Date | End Date | Reason for Change |
|------------|------------|----------|-------------------|
| KPMG LLP   | 2004  **[0000006951-24-000044_amat-20241027.htm:82]**    | Present  | Current auditor   |
```

7413efee1b4d55fcd0db55f9ec898ec83e8ceecd1753791f6c8545383a4c4c0b

748dab3840f5787d9dff5ade839f310d950af954756afb6f6729045cf514ecbe

- Total Revenue: $7.045 billion (+5% YoY)  **[0000006951-23-000041_amat-20231029.htm:127]** **[0000006951-24-000044_amat-20241027.htm:116]** **[0000006951-24-000044_amat-20241027.htm:54]**   
- Semiconductor Systems: $5.177 billion (+6% YoY)  **[0000006951-23-000041_amat-20231029.htm:127]** **[0000006951-24-000044_amat-20241027.htm:116]** **[0000006951-24-000044_amat-20241027.htm:54]**   
- Applied Global Services: $1.639 billion (+11% YoY)  **[0000006951-23-000041_amat-20231029.htm:127]** **[0000006951-24-000044_amat-20241027.htm:116]** **[0000006951-24-000044_amat-20241027.htm:54]**   
- Display: $211 million (**-29%** YoY)  **[0000006951-23-000041_amat-20231029.htm:127]** **[0000006951-24-000044_amat-20241027.htm:116]** **[0000006951-24-000044_amat-20241027.htm:54]**   
- Corporate and Other: $18 million (**-75%** YoY)  **[0000006951-23-000041_amat-20231029.htm:127]** **[0000006951-24-000044_amat-20241027.htm:116]** **[0000006951-24-000044_amat-20241027.htm:54]**   

- Taiwan: $1.284 billion (+39% YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   
- China: $2.136 billion (**-28%** YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   
- Korea: $1.172 billion (**+57%** YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   
- Southeast Asia: $314 million (**+87%** YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   
- United States: $1.153 billion (**+44%** YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   
- Europe: $405 million (-8% YoY)  **[0000006951-23-000041_amat-20231029.htm:55]** **[0000006951-24-000044_amat-20241027.htm:117]** **[0000006951-24-000044_amat-20241027.htm:55]**   

- Net Income: $1.731 billion (-14% YoY)  **[0000006951-23-000041_amat-20231029.htm:90]** **[0000006951-24-000044_amat-20241027.htm:82]**   

99cfbeb028b12bbccfa5ebcfaa2e7a791a446955cb63535c7b7af81b9e15f9fc

05d57b32158fa82e42f32542dc19ebe4208fea0b094ba9d6f2208f50e181a263

1861e5692f12f9cc5617f66c9bfb1e1fde783f0c862436e1d989a200177e98ab

1. **Gate-All-Around Revenue Growth**  
   **Q:** Will gate-all-around revenue double to $5B in 2025?  
   **A:** Yes, we expect **$2.5 billion** in gate-all-around shipments this year and have the opportunity to double that next year, reaching approximately **$5 billion** in 2025.  **[AMAT_3389648_8]** 

2. **Advanced Packaging Outlook**  
   **Q:** When will advanced packaging revenues double again?  
   **A:** We anticipate our advanced packaging business, currently estimated at **$1.7 billion** for 2024, has the opportunity to double over the coming years due to strong industry demand for AI computing and high-bandwidth memory integration.  **[AMAT_3389648_11]** 

3. **China DRAM Decline and ICAPS Growth**  
   **Q:** How is Applied offsetting the China DRAM shipment drop?  
   **A:** As China DRAM shipments decline in the second half, we see strength in ICAPS and leading logic shipments filling the gap. Our Q3 guidance reflects this shift, with ICAPS and gate-all-around technologies compensating for the DRAM drop-off.  **[AMAT_3389648_6]** **[AMAT_3389648_12]** 

4. **HBM Demand and Growth**  
   **Q:** Can HBM revenues multiply again in 2025?  
   **A:** We're seeing strong demand for HBM, with orders increasing. We've raised our growth outlook from a **4x to a 6x increase** this year and expect incremental demand moving forward, though we're not providing specific estimates for 2025.  **[AMAT_3389648_14]** 

5. **Process Control and Diagnostics Growth**  
   **Q:** Will process control intensity rise faster than WFE?  
   **A:** Yes, our process diagnostics and control business is a significant growth driver. We're on track to grow our CFE systems revenue around **4x in 2024**, representing about **50%** of total eBeam system sales, driven by major architecture inflections.  **[AMAT_3389648_18]** 

6. **China Revenue Normalization**  
   **Q:** Is China revenue returning to 30% of total?  
   **A:** Correct, as the incremental China DRAM shipments decrease, we expect our China revenue mix to normalize to approximately **30%** of total revenue by the end of the year, which is in line with historical averages.  **[AMAT_3389648_12]** **[AMAT_3389648_16]** 

7. **Materials Engineering Value Capture**  
   **Q:** Will adding more value improve profitability?  
   **A:** We believe our leadership in materials engineering and deep customer collaborations on major device architecture inflections will allow us to capture more value and enhance profitability as we deliver increased value to our customers.  **[AMAT_3389648_9]** 

8. **NAND Market Outlook**  
   **Q:** Are NAND customers resuming equipment purchases?  
   **A:** While the NAND market remains slow, we expect growth over time driven by technology upgrades rather than new wafer starts. Storage demand is important, even for AI applications, and we anticipate NAND will grow at the speed of semiconductors.  **[AMAT_3389648_14]** 

9. **Backside Power Delivery Timing**  
   **Q:** When will backside power delivery revenues grow?  
   **A:** Revenue from backside power delivery is small in 2024 but will grow in 2025. Significant ramp is expected beyond 2025 as the technology advances, and we're supporting both architectural approaches in this area.  **[AMAT_3389648_15]** 

10. **ICAPS Demand in China**  
    **Q:** How is ICAPS demand trending in China vs. non-China?  
    **A:** ICAPS demand in China remains strong, with Q1, Q2, and Q3 showing robust performance. We're monitoring over 30 factory projects in China, and utilization and yields are improving, indicating a large and important market for us going forward.  **[AMAT_3389648_17]** 

5fd45569b25b7fa477304fb019a738917690185a56cd704ba7e27cfff3fbe71e

Days sales outstanding of accounts receivable (days)

3e0e418ca2d8de3b4df85ff4f944d5dd939817a2abfc057a1dd91525acb9f8b3

35285e22f63ffbaec2a7d050183bffe701409e8aed7f1ad58a8b57225a177b47

| Year | Amount Due (in millions) | Debt Type           | Interest Rate (%) | % of Total Debt                     |
|----------|------------------------------|-------------------------|-----------------------|------------------------------------------|
| 2024     | $100                         | Commercial Paper Notes  | 5.06                 | 1.6% = (100 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2025     | $700                         | 3.900% Senior Notes     | 3.944                | 11.2% = (700 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2027     | $1,200                       | 3.300% Senior Notes     | 3.300                | 19.2% = (1,200 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2029     | $700                         | 4.800% Senior Notes     | 4.800                | 11.2% = (700 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2030     | $750                         | 1.750% Senior Notes     | 1.750                | 12.0% = (750 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2035     | $500                         | 5.100% Senior Notes     | 5.100                | 8.0% = (500 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2041     | $600                         | 5.850% Senior Notes     | 5.850                | 9.6% = (600 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2047     | $1,000                       | 4.350% Senior Notes     | 4.350                | 16.0% = (1,000 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |
| 2050     | $750                         | 2.750% Senior Notes     | 2.750                | 12.0% = (750 / 6,259) * 100 **[0000006951-24-000044_amat-20241027.htm:103]** **[0000006951-24-000044_amat-20241027.htm:83]** |

1be7689b33b5c6dabf0dee986778566b0033566f5e4a2e2118e29d9a07566afa

1. **Gross Margin Outlook**  
   **Q:** What's driving gross margin improvement to 48%?  
   **A:** The underlying gross margin rate has improved to about **48.0%** due to business improvements across logistics, inventory management, cost controls, and the implementation of value pricing.  **[AMAT_3408747_7]**  For Q1, they are guiding to **48.4%**, benefiting from a strong product mix.  **[AMAT_3408747_7]**  They view **48%** as the right level longer term and will continue working to improve it.  **[AMAT_3408747_7]** 

2. **China Sales**  
   **Q:** Is China revenue expected to remain at 30%?  
   **A:** China revenue was **30%** of total revenue in Q4, down from mid-40s previously when fulfilling specific DRAM demand.  **[AMAT_3408747_11]**  The Q1 outlook is also approximately **30%**, which they consider a normalized rate.  **[AMAT_3408747_11]**  Future levels depend largely on the health of the ICAPS market in China.  **[AMAT_3408747_21]** 

3. **Leading-Edge Foundry Growth**  
   **Q:** How do you view leading-edge foundry demand?  
   **A:** They anticipate significant growth in leading-edge foundry-logic driven by AI and the need for energy-efficient computing.  **[AMAT_3408747_10]**  Architecture changes like gate-all-around and backside power distribution improve power efficiency by **20% to 30%**, providing a tailwind for Applied Materials.  **[AMAT_3408747_10]**  They are well positioned to gain share as customers adopt these new nodes.  **[AMAT_3408747_10]** 

4. **DRAM Capacity and HBM Demand**  
   **Q:** Are DRAM customers adding capacity for conventional DRAM?  
   **A:** Customers are adding overall DRAM capacity, with about **10%** of DRAM wafers allocated to high-bandwidth memory (HBM) production.  **[AMAT_3408747_18]**  HBM demand is growing at about a **30%** rate, leading to more capacity allocated each quarter.  **[AMAT_3408747_18]**  They see the DRAM market continuing to be fairly strong.  **[AMAT_3408747_18]** 

5. **WFE Spending Intensity**  
   **Q:** What's the outlook for WFE spending intensity?  
   **A:** WFE intensity increased to around **17%** in 2023 due to China's capacity ramp but is expected to decrease slightly over time.  **[AMAT_3408747_14]**  They are comfortable with it staying in the **mid-teens** to support the projected **$1 trillion** semiconductor market by 2030.  **[AMAT_3408747_14]** 

6. **Value-Based Pricing**  
   **Q:** How is value-based pricing impacting margins?  
   **A:** Value-based pricing is contributing to gross margin improvements.  **[AMAT_3408747_7]**  They are in the "third inning" of this initiative, enhancing evaluation of the value provided for each application and strengthening customer communications.  **[AMAT_3408747_12]**  Integrated platforms, crucial for technology inflections, make up about **30%** of revenue and bolster their value pricing capability.  **[AMAT_3408747_12]** 

7. **ICAPS Market Outlook**  
   **Q:** Despite slow end markets, how is ICAPS performing?  
   **A:** ICAPS remains strong globally, including China.  **[AMAT_3408747_6]**  While markets like automotive, industrial, analog, and image sensors have been slower, power-related components and microcontrollers are performing well.  **[AMAT_3408747_23]**  They expect customers to continue adding capacity over time  **[AMAT_3408747_6]** , though there may be some slowing of investment due to lower utilizations.  **[AMAT_3408747_23]** 

8. **Services Business Margins**  
   **Q:** Why are services operating margins below targets?  
   **A:** Operating margins are about **100 basis points** below prior levels due to allocating more corporate expenses to the segments.  **[AMAT_3408747_16]**  They expect to continue improving operating profit even with these increased allocations.  **[AMAT_3408747_16]** 

9. **NAND Market Outlook**  
   **Q:** What's your outlook for NAND spending?  
   **A:** They see a slight growth in NAND in their Q1 outlook.  **[AMAT_3408747_20]**  Due to impressive shrink rates delivering needed bits, there hasn't been a need for new wafer starts in NAND, making it more of an upgrade market.  **[AMAT_3408747_20]** 

10. **Impact of Administration Changes**  
    **Q:** How might a new administration affect restrictions?  
    **A:** It's too early to speculate on changes due to a new administration, and they can't provide insights on potential policy shifts at this time.  **[AMAT_3408747_8]** 

a613b8249243690ecc70e0abf276aeb7e4b67c7c5f6883f258bfb26186a92156

- **Significant Growth in Gate-All-Around Technology Revenue**: Applied Materials expects $2.5 billion in revenue from gate-all-around technology in 2024, with the opportunity to double that amount in 2025 as the technology ramps towards high-volume manufacturing.  **[AMAT_3389648_8]** **[AMAT_3389648_7]** **[AMAT_3389648_6]** **[AMAT_3389648_10]**
- **Strong Demand and Growth in High-Bandwidth Memory (HBM) and Advanced Packaging**: The company anticipates its HBM-related revenue to increase sixfold in 2024 due to higher utilization and capacity expansion, and sees opportunities to double its advanced packaging business over time driven by the growing importance of heterogeneous integration and AI applications.  **[AMAT_3389648_7]** **[AMAT_3389648_14]** **[AMAT_3389648_11]**
- **Leadership in Key Technology Inflections Driving Market Share Gains**: By focusing on enabling major device architecture inflections like gate-all-around transistors, backside power delivery, and advanced DRAM architectures, Applied Materials is positioned to capture more value and outgrow the market through its broad and connected portfolio of materials engineering solutions.  **[AMAT_3389648_7]** **[AMAT_3389648_9]** **[AMAT_3389648_18]**

b8488ee670b8b5b6c8ab1c1c0d108e4e878fcae24e1b8b6cf9ec1648f22984b8

- **Applied Materials expects to outperform in 2024** due to their exposure to fast-growing markets and strong positions in key technology inflections like gate-all-around transistors and backside power delivery, where they have opportunities for **over 50% market share**.  **[AMAT_3373553_8]** **[AMAT_3373553_19]**
- **The company is well-positioned in high-bandwidth memory (HBM)**, expecting their HBM packaging revenues to be **4x larger** than last year, growing to almost **$0.5 billion** in fiscal 2024. This growth is driven by increased demand for AI data center applications.  **[AMAT_3373553_13]** **[AMAT_3373553_10]**
- **Applied Materials sees growing optimism in the semiconductor industry**, with improving inventories and utilization rates. **Customers are optimistic for 2025**, expecting the semiconductor end market for devices to be growing, signaling potential growth opportunities.  **[AMAT_3373553_9]** **[AMAT_3373553_15]**

62676115cd54275e3360728cbc1525997840868dca601c28c5f9c95d73d7cd88

- **Applied Materials is positioned to capture over 50% of the spending on new device architectures, such as gate-all-around transistors, due to strong positions in leading-edge technologies and inflections in AI and data center.**  **[AMAT_3399120_14]**
- **Significant growth expected in advanced packaging, particularly in high-bandwidth memory (HBM), with revenue from advanced packaging projected to double over the next several years from the current $1.7 billion.**  **[AMAT_3399120_19]** **[AMAT_3399120_13]**
- **Improving utilization across all markets, including DRAM and NAND, with positive outlook for memory investment in 2025, driven by AI energy and leading-edge acceleration.**  **[AMAT_3399120_11]** **[AMAT_3399120_10]**

2ecadfcff89228bf43fadf1494ea87f131e561aacd3611be9e8790fa1baa5b73

- **Strong Growth in Leading-Edge Foundry Logic**: Applied Materials anticipates "significant growth in leading-edge foundry-logic" driven by AI and energy-efficient computing. The company is "well positioned to gain share" in new architectures like gate-all-around transistors and backside power distribution.  **[AMAT_3408747_10]**
- **Improved Gross Margins Through Value-Based Pricing**: The implementation of value-based pricing and operational improvements have enhanced gross margins. The underlying gross margin rate has improved to about **48.0%**, with further gains expected from shipping "more valuable products."  **[AMAT_3408747_7]**
- **Increasing Demand in DRAM and High-Bandwidth Memory (HBM)**: DRAM customers are adding capacity, particularly for HBM, where demand is growing at about **30%**. Approximately **10%** of DRAM wafers are allocated to HBM production, and Applied Materials sees "capacity increases in the DRAM customers."  **[AMAT_3408747_18]**

3af003f7be80591beb81653309f450eaab3e6e2ec25007390e147247da8f46ea

- **Gross margins are expected to decline from 47.9% to around 46.7% due to normalization of China mix from 45% to 30% and cost headwinds in the supply chain**.  **[AMAT_3373553_11]**
- **There is uncertainty whether growth in leading-edge business can offset the expected digestion and weakness in the ICAPS business, which could lead to revenue declines**.  **[AMAT_3373553_18]** **[AMAT_3373553_8]**
- **Delays in CHIPS Act funding are affecting schedules of leading-edge foundry logic programs, potentially impacting near-term growth**.  **[AMAT_3373553_14]**

5c5bf9528698685c9fa8396d4cdc8b74dba66c98fe4feccf93cedc144fc03b7c

- **Operating margins in the services business have declined due to structural changes**, including increased allocation of corporate expenses, potentially impacting profitability in this segment.  **[AMAT_3408747_16]**
- **Reliance on value-based pricing to maintain gross margins**, necessitated by supply chain cost increases, may face customer resistance and challenges in implementation, as the company is only in the "third inning" of this process.  **[AMAT_3408747_12]** **[AMAT_3408747_2]**
- **Significant revenue exposure to China**, with approximately **30% of revenues** coming from China, which may be subject to geopolitical risks and export controls, potentially affecting future growth.  **[AMAT_3408747_24]**

db8f85492ae68c2dd353ca1d6a1f982695619985eb0fb62d05e64fccf4ae820b

1. **China DRAM Sales**  
   **Q:** How is China DRAM demand affecting your results?  
   **A:** We saw high shipments of DRAM to China, consistent with an approximately **$500 million** increase seen in Q4.  **[AMAT_3373553_6]**  This elevated demand is expected to continue in Q2, after which we anticipate China mix to normalize from **45%** to around **30%** over the year.  **[AMAT_3373553_6]** 

2. **2024 WFE Outlook**  
   **Q:** How do you view the WFE market in 2024?  
   **A:** We expect DRAM to remain strong, NAND to improve slightly, and leading logic to be larger as gate-all-around and new investments ramp up.  **[AMAT_3373553_7]**  There will be some digestion in ICAPS and China after enormous growth in the past two years.  **[AMAT_3373553_7]** 

3. **Continued Outperformance**  
   **Q:** Will you outperform the market again in 2024?  
   **A:** We anticipate continued outperformance due to our strong positions in major inflections like gate-all-around and backside power distribution, which are incremental **billion-dollar** opportunities.  **[AMAT_3373553_8]**  We're well-positioned in DRAM, ICAPS, and Packaging.  **[AMAT_3373553_8]** 

4. **Sculpta Technology Growth**  
   **Q:** What's the update on Sculpta technology?  
   **A:** Sculpta, our breakthrough pattern shaping technology, offers a cost-effective alternative to EUV double patterning.  **[AMAT_3373553_8]**  We expect Sculpta revenue to grow to close to **$200 million** in 2024 and ramp to around **$0.5 billion** annually in the next few years.  **[AMAT_3373553_8]** 

5. **2025 Market Optimism**  
   **Q:** How do you see the market shaping up in 2025?  
   **A:** We're seeing improvements in inventories and utilization across the market, and our customers express optimism for 2025. We anticipate growth in semiconductor end markets and investment cycles on the leading edge.  **[AMAT_3373553_9]** 

6. **Gross Margin Impact**  
   **Q:** How will China mix normalization affect gross margins?  
   **A:** As China mix normalizes from **45%** to around **30%**, gross margin will come down from **47.9%** to a more normal level.  **[AMAT_3373553_10]**  The underlying gross margin is approximately **46.7%** without the higher China mix and will continue to improve slowly.  **[AMAT_3373553_10]**  We maintain our 2025 gross margin target of **48% to 48.5%**.  **[AMAT_3373553_10]** 

7. **HBM Growth Impact**  
   **Q:** How will HBM growth affect equipment spending?  
   **A:** HBM accounts for about **5%** of wafer starts.  **[AMAT_3373553_11]**  Customers are shifting capacity to HBM, which has larger die sizes, driving up utilization and eventually increasing equipment orders.  **[AMAT_3373553_11]** 

8. **DRAM and NAND Recovery**  
   **Q:** What's the outlook for conventional DRAM and NAND?  
   **A:** We're seeing improvements in inventories, pricing, and utilization in both DRAM and NAND.  **[AMAT_3373553_12]**  Utilizations have been low but are picking up, and we expect technology advances to drive spending.  **[AMAT_3373553_12]** 

9. **CHIPS Act Delay Impact**  
   **Q:** Are CHIPS Act funding delays affecting your programs?  
   **A:** Schedule changes are consistent with our outlook, and we don't expect changes to the ultimate destination of these projects.  **[AMAT_3373553_13]**  We're preparing our applications for CHIPS Act R&D funding.  **[AMAT_3373553_13]** 

10. **ICAPS Growth and Outlook**  
    **Q:** How much did ICAPS grow, and can leading-edge offset its decline?  
    **A:** ICAPS grew approximately **40%** in 2022 and grew faster in 2023.  **[AMAT_3373553_14]**  We expect some digestion in ICAPS and leading-edge to accelerate but won't specify which force will be stronger.  **[AMAT_3373553_14]** 

11. **China WFE Spending**  
    **Q:** How do you view China WFE spending and concerns about duplication?  
    **A:** We don't see stockpiling and believe investments are rational and serving end markets.  **[AMAT_3373553_15]**  Over the next four years, we expect added wafer start capacity in China.  **[AMAT_3373553_15]** 

12. **Advanced Packaging Revenue**  
    **Q:** Can you clarify the $500 million HBM-related revenue?  
    **A:** We expect our HBM packaging business to increase to almost **$500 million** in 2024.  **[AMAT_3373553_16]**  Our overall Advanced Packaging revenue is around **$1.5 billion**.  **[AMAT_3373553_16]** 

13. **Revenue Transition Timing**  
    **Q:** Will there be a revenue dip due to ICAPS digestion and leading-edge pickup?  
    **A:** We recognize the dynamics but won't guide future quarters. The impact depends on which market force is stronger.  **[AMAT_3373553_17]** 

14. **Materials Engineering Demand**  
    **Q:** Will delayed high NA EUV adoption lead to more materials engineering?  
    **A:** Innovations are driven by new structures and materials like gate-all-around and backside power.  **[AMAT_3373553_18]**  These require advanced materials engineering, increasing our served market.  **[AMAT_3373553_18]** 

15. **Leading-Edge Growth Source**  
    **Q:** Is leading-edge strength from new fab builds or capacity additions?  
    **A:** Typically, it's from greenfield new fab build-outs.  **[AMAT_3373553_20]** 

0a1b639276f55560d3af9bfa055932def9a0c814aa651e8325ede1f16d13bee0

- **Applied Materials expects a significant drop-off in DRAM shipments to China in the second half of the year**, potentially impacting revenue if not fully offset by other segments.  **[AMAT_3389648_6]**
- **The company's NAND business remains slow, with growth primarily coming from technology upgrades rather than new wafer starts**, indicating continued weakness in this segment.  **[AMAT_3389648_14]** **[AMAT_3389648_7]**
- **There is uncertainty around the company's guidance for gate-all-around revenue**, with changes in reporting leading to confusion among analysts and potential challenges in forecasting.  **[AMAT_3389648_10]**

0d9bf843080f81c333644d28f18aae96ff3fb6c3a3c492d6e52426e655dc7b6a

1. **China Sales**  
   **Q:** How did China revenue perform this quarter?  
   **A:** China revenue mix declined to **32%** this quarter, down from the mid-40s in the prior three quarters due to lower DRAM shipments. This **32%** mix is considered normal and is driven by a robust ICAPS business in China. Applied expects the China mix to remain around **30%** next quarter.  **[AMAT_3399120_7]** ,  **[AMAT_3399120_8]** 

2. **WFE Outlook**  
   **Q:** What's the outlook for wafer fabrication equipment spending into 2025?  
   **A:** Applied Materials maintains its forecast of **$2.5 billion** in gate-all-around equipment for this fiscal year and sees strong acceleration in the leading-edge segment driven by AI and data center demand. While not providing specific guidance for 2025, the company is enthusiastic about continued growth fueled by these trends.  **[AMAT_3399120_6]** ,  **[AMAT_3399120_9]** ,  **[AMAT_3399120_10]** 

3. **Gross Margins**  
   **Q:** How are gross margins trending, and what's the profitability outlook?  
   **A:** Gross margin for the quarter was **47.4%**, now considered the baseline level. The company aims to achieve **48% or higher next year**, despite headwinds from China mix and potential growth in services and display. Applied is focusing on cost improvements and pricing to enhance margins.  **[AMAT_3399120_14]** ,  **[AMAT_3399120_20]** 

4. **Advanced Packaging Growth**  
   **Q:** What's the status of growth in advanced packaging, particularly non-memory segments?  
   **A:** Advanced packaging revenue is projected to grow from **$1.1 billion last year** to **$1.7 billion this year**, with **$600 million** of the growth coming from HBM-related equipment. Non-memory advanced packaging remains relatively stable. The company expects the total packaging business to **double over several years** due to demand for advanced technologies.  **[AMAT_3399120_13]** ,  **[AMAT_3399120_15]** 

5. **Intel CapEx Cuts**  
   **Q:** How will Intel's CapEx cuts impact Applied's business?  
   **A:** Applied does not expect changes to its outlook despite Intel's CapEx cuts. The company continues to see strong demand in leading-edge investments, driven by AI and data center excitement. Their forecast remains unchanged, reflecting updates from all customers.  **[AMAT_3399120_9]** 

6. **Services Business**  
   **Q:** How is the services business performing?  
   **A:** The services business grew **8% year-over-year** in Q3 and is expected to grow **9%** in Q4. While utilization improvements were slightly slower than anticipated, the company expects low double-digit growth going forward. About **85%** of this revenue is recurring, providing stable operating profit and supporting dividend increases.  **[AMAT_3399120_12]** 

7. **TSMC as 10% Customer**  
   **Q:** Did TSMC become a 10% customer this quarter?  
   **A:** Yes, TSMC was a **10% customer in Q3**, reflecting their significant role in leading-edge investments, particularly in gate-all-around technologies. Applied sees continued acceleration in this segment throughout the year.  **[AMAT_3399120_17]** 

8. **EPIC R&D Center Investment**  
   **Q:** How does the EPIC R&D center investment impact margins?  
   **A:** Despite not receiving expected grants, Applied is proceeding with the **$4 billion** EPIC R&D center, which will elevate CapEx going forward. The company benefits from investment tax credits related to such projects and expects these investments to accelerate co-innovation with customers, supporting long-term growth and profitability goals.  **[AMAT_3399120_20]** 

9. **ICAPS Business Outlook**  
   **Q:** What's the outlook for the ICAPS business?  
   **A:** The ICAPS business remains very strong and is expected to have a record year. Applied anticipates mid- to high single-digit growth over time, driven by trends in clean energy, electrification, and AI edge sensors. Growth is robust both in China and other regions, with utilization improvements and new customer additions.  **[AMAT_3399120_6]** ,  **[AMAT_3399120_8]** ,  **[AMAT_3399120_18]** ,  **[AMAT_3399120_19]** 

ff5a319e5ed878b0b7aad6920b137036f111357a72cfd2c159762ca37757b083

- **Gross margins are under pressure, with non-GAAP gross margin at 47.4%, partly due to headwinds from a decline in China mix to 32%**.  **[AMAT_3399120_14]**  There are potential headwinds if services or display grow faster than the core business, which could impact margins.  **[AMAT_3399120_14]**
- **China revenue is declining, with DRAM sales in China decreasing as anticipated**.  **[AMAT_3399120_16]**  The company is **not expecting the elevated DRAM shipments to China to repeat next year**, which could impact future revenue growth.  **[AMAT_3399120_16]**
- **Potential CapEx cuts at key customers like Intel could impact future orders**, despite management stating no change in outlook; this could be a risk to future growth.  **[AMAT_3399120_9]**

188ee01d7cd549bca9f6224e1a3af018e32881243805626f6e13b7c5c1fa5dee

Applied Materials Inc (AMAT)

Financials