Applied Materials improves FQ4 revenue by 25 percent from 2019

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Applied Materials recently reported it improved its fiscal fourth-quarter revenue by 25 percent because of robust demand for its semiconductor manufacturing equipment. As the company counts Intel, Samsung, and Taiwanese Semiconductor Manufacturing Corporation (TSMC) as clients, its results have positive implications for the larger electronic component industry.

The firm also offered guidance indicating long-term growth related to increasing global digitalization.

Robust FQ4 Growth

Applied Materials made $4.688 billion in the September-ending quarter, up from the $3.754 billion it generated in 2019. The company’s surging sales brought in its net income to $1.131 billion or adjusted earnings per share (EPS) of $1.25. Those results topped its prior-year profit and EPS by 62 and 56.2 percent, respectively.

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CFO Dan Durn said his employer beat the midpoint of the outlook it provided in August because of its operational discipline. He noted his teams ramped up its shipment rates last period and successfully got through its order backlog. The executive also explained his organization experienced healthy demand for its foundry/logic, DRAM, and flash memory fabrication tools.

The pandemic forced billions of people to rely on cutting-edge innovations to form digital connections to replace in-person interactions. That meant organizations had to buy lots of new devices and tools to establish new virtual infrastructure. As a knock effect, semiconductor manufacturers and their suppliers saw their income sharply expand as they facilitated a global technological leap forward.

Since Applied Materials is a vendor for the world’s top chipmakers, it played a key role in facilitating that transition.

OLED and AI as Major Future Growth Drivers

For FQ1 2021, Applied Materials anticipates making $4.95 billion, plus or minus $200 million, with adjusted EPS of $1.20 to $1.32. Wall Street pegged its holiday quarter sales at $4.52 billion and EPS of $1.11.

Durn noted his company has already seen strong demand for its offerings this quarter. With TSMC and Samsung reportedly building out their production capacity, they have likely placed larger orders with their equipment vendor. Since FQ4 2020 marked four consecutive growth quarters for the corporation, its current period outlook is solid.

Applied Materials also believes certain technological advances will drive its growth far beyond the near-term.

CEO Gary Dickerson said the 5G rollout is an encouraging development because it prompts higher demand for organic light-emitting diode (OLED) smartphone panels. He explained over 70 percent of 5G-enabled handsets on the market have OLED screens. So, his organization’s OLED product tools will be more sought as the technology becomes an industry standard.

Dickerson pointed out that increased digitalization is creating trillion-dollar market opportunities in the semiconductor sector. He singled out the wider integration of artificial intelligence (AI) as an inflection point for multiple industries like consumer electronics, personal transportation, and healthcare. And large volumes of next-generation components will need to be fabricated to realize that systemic change.

Dickerson said Applied Materials had built its long-term strategy around a future powered by AI. Considering the chipmakers that make up its customer base, his view is probably inspired by his partners’ roadmaps. For that reason, his vision of cross-sector digital transformation is worth contemplating.

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