Applied Materials beats Wall Street expectations by delivering record FQ1 earnings

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Applied Materials buys Kokusai Electric
Image: Applied Materials

Applied Materials outpaced Wall Street’s projections and brought in record earnings in its fiscal first quarter. The semiconductor manufacturing equipment company experienced a major surge in business due to the post-pandemic global digital transformation trend.

Even with the electronic components sector’s current volatility, the corporation anticipates its recent growth will carry on throughout this year. It also specified which market segments it believes will see the greatest amount of expansion in 2021.

Applied Materials Record FQ1 Results

In the January-ending period, Applied Materials generated $5.16 billion in revenue with adjusted earnings per share (EPS) of $1.39. Its intake blew past the high point of the guidance it offered last November and set new quarterly records for sales and profit. It also surpassed market analysts’ consensus expectations, which pegged its income at $4.7 billion with $1.28 in EPS.

CEO Gary Dickerson said the firm performed exceedingly well because of the recent multi-industry digital transformation.

Following the outbreak of COVID-19, individuals and businesses adapted to the new socially distant landscape by embracing technological solutions. That meant component sales spiked worldwide as chipmakers ramped up their output to meet the unprecedented demand for consumer and commercial electronics.

As Applied Materials is a vendor for Intel, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC), it benefited from those and other providers aggressively expanding their capacity last year.

CFO Dan Durn said the corporation’s semiconductor systems group expanded its revenue by 24 percent year-over-year. He also noted that it saw the highest spending increases from its memory customers. Its NAND and DRAM-related sales rising by 34 and 27 percent, respectively, from the same period in 2019.

Major 2021 Semiconductor Market Segment Growth

For FQ2 2021, Applied Materials forecast sales of $5.19 billion to $25.39 billion with EPS of $1.44 to $1.56. Provided the firm hits the midpoint of its outlook, its revenue will rise by 33.58 percent, and its profits will jump 60.5 percent. It expects its component-making equipment sales to reach $3.5 billion, up 50 percent year-over-year. Wall Street predicts its intake will be $4.96 billion and $1.28 in EPS.

The corporation anticipates the societal digital transformation to continue driving demand for its clients’ products and its fabrication tools.

Dickerson said memory chip manufacturers would outspend other segment players in 2021 as they did in 2020. He noted NAND segment purchases would increase by more than 30 percent, and DRAM acquisitions will be even higher. The executive also offered that data center provider capital expenditures would intensify by 15 percent year-over-year.

Applied Materials believes auto industry OEMs will ramp up their purchases by the same amount and suggested the global chip shortage is a motivating factor.

In addition, the machinery vendor named 5G as a growth driver in two areas. The fifth-generation of mobile networking technology is prompting phone makers to bolster their device chip content. The wireless data transfer standard is also accelerating OLED screen adoption as that screen type is prevalent in new 5G handsets.

With COVID-19, the semiconductor shortage, and multiple weather-related foundry shutdowns as risk factors, the component sector has limited short-term visibility. However, Applied Materials’ disclosures indicate the industry is headed for a bright future once the current headwinds subside.

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