Applied Materials Announces Third Quarter 2024 Results

Rhea-AI Summary

Applied Materials (NASDAQ: AMAT) reported strong Q3 2024 results with record revenue of $6.78 billion, up 5% year-over-year. GAAP EPS increased 11% to $2.05, while non-GAAP EPS rose 12% to $2.12. The company's GAAP operating margin improved to 28.7%, and non-GAAP operating margin reached 28.8%. Applied Materials generated $2.39 billion in cash from operations and returned $1.19 billion to shareholders through share repurchases and dividends. The company's CEO, Gary Dickerson, attributed the strong performance to increased demand for AI-related products and services. For Q4 2024, Applied Materials expects revenue of approximately $6.93 billion and non-GAAP EPS between $2.00 and $2.36.

Positive

• Record revenue of $6.78 billion, up 5% year-over-year
• GAAP EPS increased 11% to $2.05
• Non-GAAP EPS rose 12% to $2.12
• GAAP operating margin improved to 28.7%
• Non-GAAP operating margin reached 28.8%
• Generated $2.39 billion in cash from operations
• Returned $1.19 billion to shareholders through share repurchases and dividends
• Strong demand for AI-related products and services

Negative

• Non-GAAP free cash flow decreased by 10% year-over-year
• Display and Adjacent Markets segment operating margin declined from 13.6% to 6.4%

Insights

Financial Analyst

Applied Materials' Q3 2024 results demonstrate solid financial performance. Revenue increased by 5% year-over-year to $6.78 billion, while GAAP EPS grew 11% to $2.05. The company's non-GAAP operating margin improved by 0.5 points to 28.8%, indicating enhanced operational efficiency.

Notably, the Semiconductor Systems segment, which accounts for the majority of revenue, saw a 1.3 point increase in non-GAAP operating margin to 35%. This improvement, coupled with the 7% increase in DRAM revenue contribution, suggests a favorable product mix and strong demand in the memory market.

The company's robust cash generation of $2.39 billion from operations and $1.19 billion returned to shareholders through dividends and share repurchases reflect a healthy balance between growth investments and shareholder returns. However, the 10% decrease in non-GAAP free cash flow warrants attention.

Tech Industry Expert

Applied Materials' strong performance underscores the growing demand for advanced semiconductor technologies, particularly in AI applications. The company's CEO highlighted the "race for AI leadership" as a key driver of demand for their products and services, positioning Applied Materials to outperform the market in the long term.

The shift in revenue mix towards DRAM (24% vs 17% last year) aligns with the increasing memory requirements of AI and machine learning workloads. This trend is likely to continue as AI adoption accelerates across industries.

The slight decline in the Display and Adjacent Markets segment's operating margin (from 13.6% to 6.4%) suggests potential challenges in this area, possibly due to market saturation or increased competition. However, the segment's small size relative to Semiconductor Systems mitigates its impact on overall performance.

Applied Materials' ability to maintain strong margins and grow revenue in a competitive semiconductor equipment market demonstrates its technological leadership and ability to capitalize on emerging trends in the industry.

• Revenue $6.78 billion, up 5 percent year over year
• GAAP operating margin 28.7 percent and non-GAAP operating margin 28.8 percent, up 0.7 points and 0.5 points year over year, respectively
• GAAP EPS $2.05 and non-GAAP EPS $2.12, up 11 percent and 12 percent year over year, respectively
• Generated $2.39 billion in cash from operations

SANTA CLARA, Calif., Aug. 15, 2024 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its third quarter ended Jul. 28, 2024.

Third Quarter Results

Applied generated record revenue of $6.78 billion. On a GAAP basis, the company reported gross margin of 47.3 percent, operating income of $1.94 billion or 28.7 percent of net revenue, and earnings per share (EPS) of $2.05.

On a non-GAAP basis, the company reported gross margin of 47.4 percent, operating income of $1.95 billion or 28.8 percent of net revenue, and EPS of $2.12.

The company generated $2.39 billion in cash from operations and distributed $1.19 billion to shareholders including $861 million in share repurchases and $331 million in dividends.

“Applied Materials is delivering strong results in 2024 with record revenues in our fiscal third quarter and earnings towards the high end of our guided range,” said Gary Dickerson, President and CEO. “The race for AI leadership is fueling demand for our unique and connected portfolio of products and services, positioning Applied to outperform our markets over the longer term.”

Results Summary

	Q3 FY2024				Q3 FY2023				Change
	(In millions, except per share amounts and percentages)
Net revenue	$	6,778			$	6,425			5	%
Gross margin		47.3	%			46.3	%		1.0 point
Operating margin		28.7	%			28.0	%		0.7 points
Net income	$	1,705			$	1,560			9	%
Diluted earnings per share	$	2.05			$	1.85			11	%
Non-GAAP Results
Non-GAAP gross margin		47.4	%			46.4	%		1.0 point
Non-GAAP operating margin		28.8	%			28.3	%		0.5 points
Non-GAAP net income	$	1,767			$	1,600			10	%
Non-GAAP diluted EPS	$	2.12			$	1.90			12	%
Non-GAAP free cash flow	$	2,088			$	2,328			(10	)%

A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Measures” section.

Business Outlook

In the fourth quarter of fiscal 2024, Applied expects net revenue to be approximately $6.93 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $2.00 to $2.36.

This outlook for non-GAAP diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes the normalized tax benefit of share-based compensation of $0.01 per share and includes a net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax-related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Third Quarter Reportable Segment Information

Effective in the first quarter of fiscal 2024, management began including share-based compensation expense in the evaluation of reportable segments' performance. Prior-year numbers have been recast to conform to the current-year presentation.

Semiconductor Systems	Q3 FY2024				Q3 FY2023
	(In millions, except percentages)
Net revenue	$	4,924			$	4,676
Foundry, logic and other		72	%			79	%
DRAM		24	%			17	%
Flash memory		4	%			4	%
Operating income	$	1,712			$	1,568
Operating margin		34.8	%			33.5	%
Non-GAAP Results
Non-GAAP operating income	$	1,722			$	1,578
Non-GAAP operating margin		35.0	%			33.7	%

Applied Global Services	Q3 FY2024				Q3 FY2023
	(In millions, except percentages)
Net revenue	$	1,580			$	1,464
Operating income	$	467			$	399
Operating margin		29.6	%			27.3	%
Non-GAAP Results
Non-GAAP operating income	$	467			$	399
Non-GAAP operating margin		29.6	%			27.3	%

Display and Adjacent Markets	Q3 FY2024				Q3 FY2023
	(In millions, except percentages)
Net revenue	$	251			$	235
Operating income	$	16			$	32
Operating margin		6.4	%			13.6	%
Non-GAAP Results
Non-GAAP operating income	$	16			$	32
Non-GAAP operating margin		6.4	%			13.6	%

Corporate and Other
(In millions)	Q3 FY2024				Q3 FY2023
Unallocated net revenue	$	23			$	50
Unallocated cost of products sold and expenses		(276	)			(247	)
Total	$	(253	)		$	(197	)

Use of Non-GAAP Financial Measures

Applied provides investors with certain non-GAAP financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring and severance charges and any associated adjustments; impairments of assets; gain or loss, dividends and impairments on strategic investments; certain income tax items and other discrete adjustments. On a non-GAAP basis, the tax effect related to share-based compensation is recognized ratably over the fiscal year. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied's ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast and related slide presentation will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statement

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the fourth quarter of fiscal 2024 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic, political and industry conditions, including changes in interest rates and prices for goods and services; the implementation of additional export regulations and license requirements and their interpretation, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; the effects of geopolitical turmoil or conflicts; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; cybersecurity incidents affecting our information systems or information contained in them, or affecting our operations, suppliers, customers or vendors; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the effects of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations and other risks and uncertainties described in our SEC filings, including our recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible a better future. Learn more at www.appliedmaterials.com.

Contact:

Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
	Three Months Ended						Nine Months Ended
(In millions, except per share amounts)	July 28, 2024			July 30, 2023			July 28, 2024			July 30, 2023
Net revenue	$	6,778		$	6,425		$	20,131		$	19,794
Cost of products sold		3,573			3,449			10,569			10,579
Gross profit		3,205			2,976			9,562			9,215
Operating expenses:
Research, development and engineering		836			767			2,375			2,313
Marketing and selling		205			193			621			584
General and administrative		222			214			745			635
Total operating expenses		1,263			1,174			3,741			3,532
Income from operations		1,942			1,802			5,821			5,683
Interest expense		63			60			181			180
Interest and other income (expense), net		81			64			617			41
Income before income taxes		1,960			1,806			6,257			5,544
Provision for income taxes		255			246			811			692
Net income	$	1,705		$	1,560		$	5,446		$	4,852
Earnings per share:
Basic	$	2.06		$	1.86		$	6.57		$	5.76
Diluted	$	2.05		$	1.85		$	6.52		$	5.73
Weighted average number of shares:
Basic		826			838			829			842
Diluted		833			843			835			846

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)	July 28, 2024			October 29, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	8,288		$	6,132
Short-term investments		815			737
Accounts receivable, net		4,970			5,165
Inventories		5,568			5,725
Other current assets		1,030			1,388
Total current assets		20,671			19,147
Long-term investments		2,981			2,281
Property, plant and equipment, net		3,100			2,723
Goodwill		3,732			3,732
Purchased technology and other intangible assets, net		262			294
Deferred income taxes and other assets		2,901			2,552
Total assets	$	33,647		$	30,729
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	99		$	100
Accounts payable and accrued expenses		4,387			4,297
Contract liabilities		2,742			2,975
Total current liabilities		7,228			7,372
Long-term debt		6,158			5,461
Income taxes payable		671			833
Other liabilities		750			714
Total liabilities		14,807			14,380
Total stockholders’ equity		18,840			16,349
Total liabilities and stockholders’ equity	$	33,647		$	30,729

APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)	Three Months Ended								Nine Months Ended
	July 28, 2024				July 30, 2023				July 28, 2024				July 30, 2023
Cash flows from operating activities:
Net income	$	1,705			$	1,560			$	5,446			$	4,852
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization		95				136				282				385
Share-based compensation		132				114				436				375
Deferred income taxes		(179	)			(38	)			(385	)			(174	)
Other		48				15				(199	)			189
Net change in operating assets and liabilities		584				796				522				1,518
Cash provided by operating activities		2,385				2,583				6,102				7,145
Cash flows from investing activities:
Capital expenditures		(297	)			(255	)			(783	)			(797	)
Cash paid for acquisitions, net of cash acquired		—				(7	)			—				(25	)
Proceeds from sales and maturities of investments		382				302				1,495				971
Purchases of investments		(745	)			(465	)			(1,968	)			(1,195	)
Cash used in investing activities		(660	)			(425	)			(1,256	)			(1,046	)
Cash flows from financing activities:
Debt borrowings, net of issuance costs		694				—				694				—
Proceeds from issuance of commercial paper		100				297				300				892
Repayments of commercial paper		(100	)			(300	)			(300	)			(700	)
Proceeds from common stock issuances		—				—				119				111
Common stock repurchases		(861	)			(439	)			(2,381	)			(1,489	)
Tax withholding payments for vested equity awards		(25	)			(11	)			(258	)			(165	)
Payments of dividends to stockholders		(331	)			(268	)			(863	)			(707	)
Repayments of principal on finance leases		1				1				(12	)			(8	)
Cash used in financing activities		(522	)			(720	)			(2,701	)			(2,066	)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents		1,203				1,438				2,145				4,033
Cash, cash equivalents and restricted cash equivalents—beginning of period		7,175				4,695				6,233				2,100
Cash, cash equivalents and restricted cash equivalents — end of period	$	8,378			$	6,133			$	8,378			$	6,133
Reconciliation of cash, cash equivalents, and restricted cash equivalents
Cash and cash equivalents	$	8,288			$	6,025			$	8,288			$	6,025
Restricted cash equivalents included in deferred income taxes and other assets		90				108				90				108
Total cash, cash equivalents, and restricted cash equivalents	$	8,378			$	6,133			$	8,378			$	6,133
Supplemental cash flow information:
Cash payments for income taxes	$	213			$	197			$	819			$	418
Cash refunds from income taxes	$	2			$	—			$	7			$	51
Cash payments for interest	$	35			$	35			$	137			$	137

Additional Information
	Q3 FY2024				Q3 FY2023
Net Revenue by Geography (In millions)
United States	$	1,053			$	1,039
% of Total		16	%			16	%
Europe	$	339			$	661
% of Total		5	%			10	%
Japan	$	555			$	478
% of Total		8	%			8	%
Korea	$	1,102			$	988
% of Total		16	%			15	%
Taiwan	$	1,148			$	1,345
% of Total		17	%			21	%
Southeast Asia	$	428			$	180
% of Total		6	%			3	%
China	$	2,153			$	1,734
% of Total		32	%			27	%
Employees (In thousands)
Regular Full Time		35.2				34.5

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
	Three Months Ended								Nine Months Ended
(In millions, except percentages)	July 28, 2024				July 30, 2023				July 28, 2024				July 30, 2023
Non-GAAP Gross Profit
GAAP reported gross profit	$	3,205			$	2,976			$	9,562			$	9,215
Certain items associated with acquisitions1		6				7				20				21
Non-GAAP gross profit	$	3,211			$	2,983			$	9,582			$	9,236
Non-GAAP gross margin		47.4	%			46.4	%			47.6	%			46.7	%
Non-GAAP Operating Income
GAAP reported operating income	$	1,942			$	1,802			$	5,821			$	5,683
Certain items associated with acquisitions1		10				10				31				32
Acquisition integration and deal costs		1				6				9				20
Non-GAAP operating income	$	1,953			$	1,818			$	5,861			$	5,735
Non-GAAP operating margin		28.8	%			28.3	%			29.1	%			29.0	%
Non-GAAP Net Income
GAAP reported net income	$	1,705			$	1,560			$	5,446			$	4,852
Certain items associated with acquisitions1		10				10				31				32
Acquisition integration and deal costs		1				6				9				20
Realized loss (gain), dividends and impairments on strategic investments, net		16				(4	)			12				109
Unrealized loss (gain) on strategic investments, net		25				6				(275	)			13
Income tax effect of share-based compensation2		8				5				(7	)			(6	)
Income tax effects related to intra-entity intangible asset transfers		17				9				57				25
Resolution of prior years’ income tax filings and other tax items		(11	)			10				22				(22	)
Income tax effect of non-GAAP adjustments3		(4	)			(2	)			(2	)			(7	)
Non-GAAP net income	$	1,767			$	1,600			$	5,293			$	5,016

1	These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2	GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
3	Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
	Three Months Ended							Nine Months Ended
(In millions, except per share amounts)	July 28, 2024				July 30, 2023			July 28, 2024				July 30, 2023
Non-GAAP Earnings Per Diluted Share
GAAP reported earnings per diluted share	$	2.05			$	1.85		$	6.52			$	5.73
Certain items associated with acquisitions		0.01				0.01			0.04				0.04
Acquisition integration and deal costs		—				0.01			0.01				0.02
Realized loss (gain), dividends and impairments on strategic investments, net		0.01				—			0.01				0.13
Unrealized loss (gain) on strategic investments, net		0.03				—			(0.33	)			0.01
Income tax effect of share-based compensation		0.01				0.01			(0.01	)			(0.01	)
Income tax effects related to intra-entity intangible asset transfers		0.02				0.01			0.07				0.03
Resolution of prior years’ income tax filings and other tax items		(0.01	)			0.01			0.03				(0.02	)
Non-GAAP earnings per diluted share	$	2.12			$	1.90		$	6.34			$	5.93
Weighted average number of diluted shares		833				843			835				846

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
	Three Months Ended								Nine Months Ended
(In millions, except percentages)	July 28, 2024				July 30, 2023				July 28, 2024				July 30, 2023
Semiconductor Systems Non-GAAP Operating Income
GAAP reported operating income	$	1,712			$	1,568			$	5,157			$	5,138
Certain items associated with acquisitions1		10				10				30				29
Non-GAAP operating income	$	1,722			$	1,578			$	5,187			$	5,167
Non-GAAP operating margin		35.0	%			33.7	%			35.2	%			34.9	%
Applied Global Services Non-GAAP Operating Income
GAAP reported operating income	$	467			$	399			$	1,320			$	1,128
Non-GAAP operating income	$	467			$	399			$	1,320			$	1,128
Non-GAAP operating margin		29.6	%			27.3	%			28.8	%			26.5	%
Display and Adjacent Markets Non-GAAP Operating Income
GAAP reported operating income	$	16			$	32			$	46			$	51
Non-GAAP operating income	$	16			$	32			$	46			$	51
Non-GAAP operating margin		6.4	%			13.6	%			6.8	%			8.9	%

1	These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.

Note: The reconciliation of GAAP and non-GAAP segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
	Three Months Ended
(In millions, except percentages)	July 28, 2024
GAAP provision for income taxes (a)	$	255
Income tax effect of share-based compensation		(8	)
Income tax effects related to intra-entity intangible asset transfers		(17	)
Resolutions of prior years’ income tax filings and other tax items		11
Income tax effect of non-GAAP adjustments		4
Non-GAAP provision for income taxes (b)	$	245
GAAP income before income taxes (c)	$	1,960
Certain items associated with acquisitions		10
Acquisition integration and deal costs		1
Realized loss (gain), dividends and impairments on strategic investments, net		16
Unrealized loss (gain) on strategic investments, net		25
Non-GAAP income before income taxes (d)	$	2,012
GAAP effective income tax rate (a/c)		13.0	%
Non-GAAP effective income tax rate (b/d)		12.2	%

UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
	Three Months Ended								Nine Months Ended
(In millions)	July 28, 2024				July 30, 2023				July 28, 2024				July 30, 2023
Cash provided by operating activities	$	2,385			$	2,583			$	6,102			$	7,145
Capital expenditures		(297	)			(255	)			(783	)			(797	)
Non-GAAP free cash flow	$	2,088			$	2,328			$	5,319			$	6,348

FAQ

What was Applied Materials' (AMAT) revenue in Q3 2024?

Applied Materials reported record revenue of $6.78 billion in Q3 2024, representing a 5% increase year-over-year.

How much did Applied Materials' (AMAT) EPS grow in Q3 2024?

Applied Materials' GAAP EPS increased 11% to $2.05, while non-GAAP EPS rose 12% to $2.12 in Q3 2024 compared to the same period last year.

What is Applied Materials' (AMAT) revenue guidance for Q4 2024?

Applied Materials expects net revenue of approximately $6.93 billion, plus or minus $400 million, for Q4 2024.

How much cash did Applied Materials (AMAT) return to shareholders in Q3 2024?

Applied Materials returned $1.19 billion to shareholders, including $861 million in share repurchases and $331 million in dividends.