Applied Materials (AMAT) Q2 Earnings & Sales Beat, Rise Y/Y

Applied Materials Inc. AMAT reported second-quarter fiscal 2023 non-GAAP earnings of $2.00 per share, surpassing the Zacks Consensus Estimate by 8.7%. Further, the figure improved 8% from the year-ago fiscal quarter’s reported figure.

Net sales of $6.63 billion climbed 6% from the year-ago fiscal quarter’s level and surpassed the Zacks Consensus Estimate of $6.4 billion.

Top-line growth was driven by strong performances in Semiconductor Systems and Applied Global Services segments.

AMAT witnessed solid growth in geographies, namely the United States, Japan, Taiwan, Korea and Southeast Asia, which was another positive.

However, Applied Materials continued to witness sluggishness in its Display segment. Also, it suffered from weakening momentum in China and Europe.

Nevertheless, the company’s robust portfolio of differentiated products, expanding service business and growing momentum among leading customers at key technology inflections are likely to instill investors’ optimism in the future.

Applied Materials, Inc. Price, Consensus and EPS Surprise


Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote


Segments in Detail

Semiconductor Systems generated sales worth $4.98 billion, which contributed 75% to its net sales, reflecting an 11.6% increase from the year-ago fiscal quarter’s reading. Strength in ICAPS drove the top-line growth within the segment.

Applied Global Services reported sales of $1.43 billion (22% of net sales), up 3.2% from the prior-year fiscal quarter’s reported number.

Sales from Display and Adjacent Markets were $168 million (3% of net sales), down 55.9% from the year-ago fiscal quarter’s reported level.

Revenues by Geography

The United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China generated sales of $1.11 billion, $477 million, $460 million, $1.6 billion, $1.43 billion, $157 million and $1.4 billion each, contributing 17%, 7%, 7%, 24%, 22%, 2% and 21% to net sales, respectively.

Sales in the United States, Japan, Korea, Taiwan and Southeast Asia increased 58.5%, 13%, 63.5%, 1.9% and 13.8%, respectively, from the respective year-ago fiscal quarter’s readings. Sales in Europe and China fell 2.4% and 34.1%, respectively, from the year-ago quarter’s corresponding levels.

Operating Results

The non-GAAP gross margin was 46.8%, down 20 basis points (bps) from the year-ago fiscal quarter’s figure.

Operating expenses were $1.2 billion, up 14.5% from the year-ago fiscal quarter. As a percentage of sales, the figure expanded 130 bps from the year-earlier fiscal quarter’s level to 17.8%.

The non-GAAP operating margin of 29.1% for the reported quarter contracted 150 bps from the prior-year fiscal period’s actuals.

Balance Sheet & Cash Flow

As of Apr 30, 2023, cash and cash equivalent balances and short-term investments were $5.1 billion, up from $4.05 billion as of Jan 29, 2023.

Inventories were $5.9 billion in second-quarter fiscal 2023 compared with $6.05 billion in first-quarter fiscal 2023. Accounts receivables increased to $5.5 billion in the reported quarter from $5.4 billion in the previous fiscal quarter.

Long-term debt was $5.459 billion at the end of the reported quarter compared with $5.458 billion at the end of the previous fiscal quarter.

Applied Materials generated a cash flow of $2.29 billion, compared with $2.27 billion in the prior fiscal quarter.

AMAT returned $1.02 billion to its shareholders, of which share repurchases were worth $800 million and dividend payments amounted to $219 million.


For third-quarter fiscal 2023, Applied Materials expects net sales of $6.15 billion (+/-$400 million). The Zacks Consensus Estimate for the same is pegged at $5.86 billion.

AMAT anticipates Semiconductor Systems, AGS and Display revenues to be $4.5 billion, $1.43 billion and $170 million, respectively.

Management expects non-GAAP earnings per share in the band of $1.56-$1.92. The Zacks Consensus Estimate for the same is pegged at $1.58.

Applied Materials expects a non-GAAP gross margin of 46.3% and non-GAAP operating expenses of $1.17 billion. It projects a non-GAAP tax rate of 12.3%.

Zacks Rank & Stocks to Consider

Currently, Applied Materials carries a Zacks Rank #4 (Sell).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Ciena CIEN, DigitalOcean DOCN and AMETEK AME, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ciena shares have lost 14.9% in the year-to-date time frame. The Zacks Consensus Estimate for CIEN’s fiscal year 2023 earnings is pegged at $2.81 per share, suggesting an increase of 47.9% from the prior year’s reported figure.

DigitalOcean shares have risen 27% in the year-to-date period. The Zacks Consensus Estimate for DOCN’s 2023 earnings is pegged at $1.66 per share, suggesting a jump from 94 cents per share reported in the prior year.

AMETEK shares have rallied 3.4% year to date. The Zacks Consensus Estimate for AME’s 2023 earnings is pegged at $6.08 per share, suggesting an increase of 7.04% from the prior year’s reported figure.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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