• Total Net Sales: Approximately $7.2 billion, up 7% year-over-year.
• Non-GAAP Gross Margin: 48.9%, up 100 basis points year-over-year.
• Non-GAAP Operating Expenses: $1.31 billion.
• Non-GAAP EPS: $2.38, up 12% year-over-year.
• Semiconductor Systems Sales: $5.36 billion, up 9% year-over-year.
• Applied Global Services Revenue: $1.59 billion, up 8% year-over-year.
• Display Business Revenue: $183 million.
• Cash and Cash Equivalents: $6.3 billion.
• Debt: $6.3 billion.
• Cash from Operations: $925 million.
• Free Cash Flow: $544 million.
• Shareholder Distribution: $1.6 billion, including $1.3 billion in share repurchases and $326 million in dividends.
• Share Repurchase Authorization Remaining: Approximately $7.6 billion.
• Q2 Revenue Outlook: $7.1 billion, plus or minus $400 million.
• Q2 Non-GAAP EPS Outlook: $2.30, plus or minus $0.18.
• Q2 Non-GAAP Gross Margin Outlook: Approximately 48.4%.
• Q2 Non-GAAP Operating Expenses Outlook: Approximately $1.3 billion.
• Q2 Tax Rate Outlook: Approximately 13%.

• Warning! GuruFocus has detected 5 Warning Signs with DVA.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Applied Materials Inc (NASDAQ:AMAT) delivered record revenues in the first fiscal quarter of 2025, surpassing the previous high set last quarter.
• The company is well-positioned at major device architecture inflections, including next-generation gate-all-around transistors and advanced packaging, which are critical for energy-efficient AI.
• Applied Materials Inc (NASDAQ:AMAT) achieved a 12% year-over-year increase in non-GAAP earnings per share, driven by healthy revenue growth and margin expansion.
• The company has strong leadership in key areas such as leading-edge logic, high-performance DRAM, and advanced packaging, which are expected to drive future growth.
• Applied Materials Inc (NASDAQ:AMAT) is focused on high-velocity co-innovation with customers and partners, accelerating the development of next-generation technologies and optimizing R&D efficiencies.

Negative Points

• The company's ability to serve the China market is constrained by updated trade rules, resulting in an estimated $400 million revenue impact in fiscal 2025.
• Applied Materials Inc (NASDAQ:AMAT) expects a decline in DRAM sales due to the non-repetition of prior year sales to customers in China.
• The company anticipates a headwind to revenue in the second quarter of fiscal 2025 due to expanded export controls, with nearly half of the impact in Q2.
• Applied Materials Inc (NASDAQ:AMAT) faces challenges in the ICAPS market, with a more measured level of investment following strong spending in previous years.
• The near-term service growth is negatively impacted by trade restrictions, although the company remains confident in achieving low double-digit annualized growth over the longer term.

Q & A Highlights

Q: Can you provide context on how you're thinking about the year in terms of WFE by application and geography, and your expected outperformance relative to the market? A: Brice Hill, CFO: Our Q2 guide indicates market evolution, with leading-edge growth driven by AI, DRAM, and advanced logic. We expect leading-edge to accelerate through the year. ICAPS investment is lower after strong spending in previous years. Memory is roughly flat, with NAND growing from low levels. Advanced packaging capacity adds are slower. Overall, we see consistent year-over-year growth. Gary Dickerson, CEO: We've outperformed in leading-edge foundry logic, DRAM, HBM, advanced packaging, and ICAPS outside China. We're focused on major device architecture inflections critical to AI and energy-efficient computing, positioning us for continued outperformance.

Q: Will silicon systems return to sequential growth in the July quarter? A: Brice Hill, CFO: We'll have to wait and see on semiconductor systems. We expect leading-edge to accelerate with significant capacity in gate-all-around and backside power nodes. ICAPS market continues to evolve, and our forecast changes quarterly. For services, we expect a step back in Q2 due to trade rules but anticipate low double-digit growth as we add customers and services.

Q: How do you reconcile the China impact on AGS with your expectation of AGS growth in Q3? A: Brice Hill, CFO: Half of the China impact will be in Q2, with continued impact in following quarters. However, we expect AGS to grow from there at a low double-digit rate as we add installed base and tools. Without the $200 million China impact, AGS would still grow at low double digits or higher.

Q: Can you discuss gross margins and value-based pricing throughout 2025? A: Brice Hill, CFO: We achieved strong gross margins of 48.9% in Q1 and guide 48.4% in Q2. We maintain a 48% underlying rate. Pricing dynamics include increasing value proposition for our solutions and disciplined pricing mechanisms. We're in the third inning of our pricing process.

Q: How do you assess the headwind from Chinese companies gaining WFE share? A: Brice Hill, CFO: We believe we've gained share in all markets except China, where local vendors have advantages due to trade rules. China remains a significant market, especially in ICAPS, and we expect it to grow over time. Gary Dickerson, CEO: We're well-positioned in leading-edge foundry logic, DRAM, HBM, advanced packaging, and ICAPS, with room to grow in PDC and etch.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.