Introduction
Applied Materials has announced exceptional financial results for the third quarter of fiscal year 2024, marking a new high in revenue and notable gains in earnings per share (EPS).
The company’s performance highlights its robust market position and strategic growth amid a competitive landscape.
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Record Revenue and Impressive Earnings Growth
Applied Materials reported a record-breaking revenue of $6.78 billion for the third quarter, representing a 5% increase from the $6.43 billion reported in the same period last year.
This achievement underscores the company’s strong operational performance and its ability to capitalize on growing demand in the semiconductor and display sectors.
The company’s earnings per share (EPS) also saw significant growth. On a GAAP basis, EPS increased by 11% year-over-year, reaching $2.05 compared to $1.85 in Q3 FY2023.
Non-GAAP EPS surged by 12%, climbing to $2.12 from $1.90, reflecting a successful operational strategy and effective cost management.
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Margins and Operational Efficiency
Applied Materials delivered solid improvements in its profit margins. The GAAP gross margin for the quarter was 47.3%, up from 46.3% in the previous year.
Non-GAAP gross margin was slightly higher at 47.4%. These gains indicate effective management of production costs and enhanced operational efficiency.
The company’s operating margin was 28.7% on a GAAP basis, a 0.7 percentage point increase from the 28.0% reported in Q3 FY2023. On a non-GAAP basis, the operating margin rose to 28.8%, up 0.5 percentage points.
This improvement highlights Applied Materials’ ability to maintain profitability while scaling its operations.
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Strong Cash Flow and Shareholder Returns
In addition to its revenue and earnings growth, Applied Materials generated $2.39 billion in cash from operations during the quarter.
The company demonstrated a strong commitment to returning value to its shareholders by distributing $1.19 billion, which included $861 million in share repurchases and $331 million in dividends.
This strategic allocation of resources underscores the company’s solid financial health and confidence in its ongoing business prospects.
Segment Performance Insights
Semiconductor Systems
The Semiconductor Systems segment achieved a net revenue of $4.92 billion, up from $4.68 billion in Q3 FY2023.
This segment also reported an operating income of $1.71 billion, with an operating margin of 34.8%, compared to 33.5% in the previous year.
Non-GAAP operating income increased to $1.72 billion, with a non-GAAP operating margin of 35.0%.
These results reflect strong demand for advanced semiconductor solutions and effective execution in this critical segment.
Applied Global Services
The Applied Global Services segment saw revenue rise to $1.58 billion from $1.46 billion a year earlier.
The segment’s operating income was $467 million, translating to an operating margin of 29.6%, up from 27.3% in the same quarter last year.
Non-GAAP results for this segment remained consistent, indicating stable performance in services and support operations.
Display and Adjacent Markets
Revenue in the Display and Adjacent Markets segment increased to $251 million from $235 million year-over-year.
However, the segment faced challenges with a decrease in operating income to $16 million and a drop in operating margin to 6.4%, down from 13.6% in the prior year.
Non-GAAP results reflected these difficulties, highlighting the need for continued strategic focus in this area.
Corporate and Other
The Corporate and Other segment reported unallocated net revenue of $23 million, a decline from $50 million in Q3 FY2023.
The segment’s unallocated cost of products sold and expenses rose to $(276) million from $(247) million, resulting in a total of $(253) million, compared to $(197) million a year earlier.
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Forward Guidance and Strategic Outlook
Looking ahead to the fourth quarter of fiscal 2024, Applied Materials expects net revenue to be approximately $6.93 billion, with a variance of $400 million.
The company forecasts non-GAAP diluted EPS to range between $2.00 and $2.36. This guidance reflects the company’s positive outlook and its strategic focus on sustaining growth despite potential market uncertainties.
CEO Commentary on Performance
Gary Dickerson, President and CEO of Applied Materials, commented on the company’s performance:
“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. 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.”
Dickerson’s remarks underscore the company’s strategic positioning to leverage emerging opportunities in AI and advanced technologies, driving future growth and maintaining its competitive edge in the industry.
Understanding Non-GAAP Financial Measures
Applied Materials provides non-GAAP financial measures to offer additional insights into its operational performance.
These measures exclude certain costs and adjustments related to mergers, acquisitions, restructuring, and other factors.
While these non-GAAP measures enhance the understanding of the company’s financial health, they should not be viewed as substitutes for GAAP results.
About Applied Materials
Applied Materials, Inc. is a leading innovator in materials engineering solutions used in semiconductor manufacturing and advanced display technologies.
The company’s expertise in atomic-level material modification drives the development of cutting-edge technologies and supports the growth of the electronics industry. For more information, visit Applied Materials.
Applied Materials’ robust financial performance in Q3 FY2024 reflects its strong market position and operational efficiency.
As the company continues to navigate the dynamic tech landscape, its strategic focus on innovation and growth positions it well for continued success in the coming quarters.
