EPS of $2.06 increased by 11.3% from previous year
Gross margin of 47.4%
Net income of 1.72B
""Our tools under subscription agreement increased by 8% year-over-year and our installed base of chambers surpassed 200,000 for the first time."" - Brice Hill
Applied Materials Inc delivered robust financial performance for the second quarter of fiscal 2024, reporting revenues of $6.65 billion, which reflects a 3.44% increase year-over-year (YoY). Growth was mainly driven by significant demand in semiconductor manufacturing equipment and services, as ongoing technological transitions emphasize the critical role of the company's offerings in the evolving technological landscape. Furthermore, the continued momentum in advanced packaging, high-bandwidth memory, and logic nodes positions Applied Materials favorably for future revenue expansion. Completion of ongoing collaboration with leading-edge customers has also bolstered confidence in sustaining double-digit growth for the services segment, which generated $1.53 billion in revenue this quarter. Management attributes these achievements to strategic investments in R&D and a focus on enhancing their service business, expecting further double-digit increase in 2025 as adoption of gate-all-around technologies accelerates.
Key Performance Indicators
Revenue
6.65B
QoQ: -0.91% | YoY:3.44%
Gross Profit
3.15B
47.44% margin
QoQ: -1.59% | YoY:5.95%
Operating Income
1.91B
QoQ: -2.80% | YoY:6.10%
Net Income
1.72B
QoQ: -14.71% | YoY:10.38%
EPS
2.07
QoQ: -14.81% | YoY:11.29%
Revenue Trend
Margin Analysis
Key Insights
**Q2 2024 Revenue**: $6.65 billion
**YoY Growth**: 3.44%
**QoQ Growth**: -0.91% (slight decline attributed to seasonal adjustments in customer demand)
### Profitability Metrics
- Gross Profit: $3.15 billion (Gross margin: 47.50%, improved by 70 bps YoY)
- Operating Income: $1.91 billion (Operating margin: 28.76%)
- Net Income: $1.72 billion (Net margin: 25.92%, up 10.38% YoY)
- Earnings Per Share (EPS): $2.07, a 11.29% increase YoY
### Balance Sheet Health
- Total Assets: $31.95 billion
- Total Liabilities: $13.75 billion
- Total Equity: $18.20 billion
- Current Ratio: 2.80, strong liquidity position
### Cash Flow Metrics
- Net Cash from Operating Activities: $1.39 billion
- Free Cash Flow: $1.14 billion (consistent generation of cash facilitates shareholder returns)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.65B
3.44%
-0.91%
Gross Profit
3.15B
5.95%
-1.59%
Operating Income
1.91B
6.10%
-2.80%
Net Income
1.72B
10.38%
-14.71%
EPS
2.07
11.29%
-14.81%
Key Financial Ratios
currentRatio
2.8
grossProfitMargin
47.4%
operatingProfitMargin
28.8%
netProfitMargin
25.9%
returnOnAssets
5.39%
returnOnEquity
9.46%
debtEquityRatio
0.33
operatingCashFlowPerShare
$1.68
freeCashFlowPerShare
$1.37
dividendPayoutRatio
15.4%
priceToBookRatio
9.36
priceEarningsRatio
24.73
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Key Insights from Management
- Gary Dickerson, CEO: "We are in a great position to benefit from secular growth trends over the longer-term. Tectonic shifts in technology, including AI and IoT, are built upon semiconductors, driving demand for more chips and new chips with higher performance and better energy-efficiency."
- Brice Hill, CFO: "We had a strong quarter across DRAM, advanced packaging, ICAPS, and services. Our AGS segment has seen significant growth with recurring revenue streams supporting a firm foundation for future performance."
"Our tools under subscription agreement increased by 8% year-over-year and our installed base of chambers surpassed 200,000 for the first time."
â Brice Hill
"The advanced chips that power AI datacenters are enabled by four key semiconductor technologies: leading-edge logic, compute memory or high-performance DRAM, DRAM stacking technology, and advanced packaging to connect the logic and memory chips together."
â Gary Dickerson
Forward Guidance
Management provided guidance for Q3 revenue in the range of approximately $6.65 billion, with EPS projected around $2.01, indicating expectations of stable earnings despite challenges in DRAM segments. The upcoming adoption of gate-all-around technologies is anticipated to drive robust growth, potentially doubling revenue in the segment from $2.5 billion in 2024 to an estimated $5 billion in 2025 as global chip capacity scales up.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AMAT Focus
47.44%
28.80%
9.46%
24.73%
KLAC
60.70%
38.30%
19.10%
33.81%
ASML
51.50%
29.40%
10.70%
59.45%
ACLS
43.80%
20.60%
5.44%
22.54%
TER
58.00%
21.20%
6.82%
31.30%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Considering Applied Materials' strong financial results, clear growth trajectory in high-demand segments, and proactive management strategies, the company maintains a compelling investment proposition. Investors should monitor ongoing trends in the semiconductor industry, especially shifts towards AI-driven technologies, as these could enhance Applied's competitive position and profitability over the medium to long term. Key factors include overall semiconductor demand growth, successful customer collaborations in technology inflections, and maintaining effective cost management to protect margins amidst potential external pressures.
Key Investment Factors
Growth Potential
Applied Materials is poised for significant growth in the advanced packaging and AI-driven semiconductor segments. Innovations in gate-all-around technologies and expanding offerings in ICAPS and DRAM prepare the company to capitalize on increasing demand in the semiconductor market.
Profitability Risk
Supplier chain challenges and possible continued regulatory headwinds in China present risks. Volatility in semiconductor demand, particularly from the global data-center build-out, could impact revenue projections if demand doesn't materialize as forecasted.
Financial Position
The company maintains a solid financial position with a current ratio of 2.80, ensuring strong liquidity, coupled with a robust cash flow generation capacity demonstrated by a free cash flow of $1.14 billion, which supports ongoing investments and shareholder returns.
SWOT Analysis
Strengths
Strong revenue growth in semiconductor equipment segment
High margins supported by effective cost control
Leadership in advanced packaging and materials engineering technologies
Weaknesses
Limited market presence in the NAND segment
Dependence on the cyclical semiconductor industry which is prone to downturns
Opportunities
Growing demand for AI and edge computing solutions
Potential market share gains in advanced packaging
Expansion of services and subscription-based revenue models
Threats
Regulatory challenges affecting market access, particularly in China
Intense competition from key players like ASML and Lam Research