News Release

Applied Materials Announces First Quarter 2024 Results

Feb 15, 2024 at 4:01 PM EST
  • Revenue $6.71 billion, flat year over year
  • GAAP operating margin 29.3 percent and non-GAAP operating margin 29.5 percent, up 0.1 points and flat year over year, respectively
  • GAAP EPS $2.41 and non-GAAP EPS $2.13, up 19 percent and 5 percent year over year, respectively
  • Generated $2.33 billion in cash from operations

SANTA CLARA, Calif., Feb. 15, 2024 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its first quarter ended Jan. 28, 2024.

First Quarter Results

Applied generated revenue of $6.71 billion. On a GAAP basis, the company reported gross margin of 47.8 percent, operating income of $1.97 billion or 29.3 percent of net revenue, and earnings per share (EPS) of $2.41.

On a non-GAAP basis, the company reported gross margin of 47.9 percent, operating income of $1.98 billion or 29.5 percent of net revenue, and EPS of $2.13.

The recently disclosed change in useful lives of certain property, plant and equipment increased GAAP and non-GAAP EPS by $0.03.

The company generated $2.33 billion in cash from operations and distributed $966 million to shareholders including $700 million in share repurchases and $266 million in dividends.

“Applied Materials delivered strong results in the first quarter of fiscal 2024 and has outperformed our markets for the fifth consecutive year,” said Gary Dickerson, President and CEO. “Our leadership positions at key semiconductor inflections support continued outperformance as customers ramp next-generation chip technologies critical to AI and IoT over the next several years.”

Results Summary

  Q1 FY2024   Q1 FY2023   Change
  (In millions, except per share amounts and percentages)
Net revenue $ 6,707     $ 6,739    
Gross margin   47.8 %     46.7 %   1.1 points
Operating margin   29.3 %     29.2 %   0.1 points
Net income $ 2,019     $ 1,717     18%
Diluted earnings per share $ 2.41     $ 2.02     19%
Non-GAAP Results          
Non-GAAP gross margin   47.9 %     46.8 %   1.1 points
Non-GAAP operating margin   29.5 %     29.5 %  
Non-GAAP net income $ 1,782     $ 1,724     3%
Non-GAAP diluted EPS $ 2.13     $ 2.03     5%
Non-GAAP free cash flow $ 2,096     $ 1,983     6%
                   

A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Measures” section.

Business Outlook

In the second quarter of fiscal 2024, Applied expects net revenue to be approximately $6.50 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $1.79 to $2.15.

This outlook for non-GAAP diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes the normalized tax benefit of share-based compensation of $0.01 per share and includes a net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax-related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

First Quarter Reportable Segment Information

Effective in the first quarter of fiscal 2024, management began including share-based compensation expense in the evaluation of reportable segments' performance. Prior-year numbers have been recast to conform to the current-year presentation.

Semiconductor Systems Q1 FY2024   Q1 FY2023
  (In millions, except percentages)
Net revenue $ 4,909     $ 5,162  
Foundry, logic and other   62 %     77 %
DRAM   34 %     13 %
Flash memory   4 %     10 %
Operating income $ 1,744     $ 1,855  
Operating margin   35.5 %     35.9 %
Non-GAAP Results    
Non-GAAP operating income $ 1,754     $ 1,864  
Non-GAAP operating margin   35.7 %     36.1 %


Applied Global Services Q1 FY2024   Q1 FY2023
  (In millions, except percentages)
Net revenue $ 1,476     $ 1,369  
Operating income $ 417     $ 345  
Operating margin   28.3 %     25.2 %
Non-GAAP Results    
Non-GAAP operating income $ 417     $ 345  
Non-GAAP operating margin   28.3 %     25.2 %


Display and Adjacent Markets Q1 FY2024   Q1 FY2023
  (In millions, except percentages)
Net revenue $ 244     $ 167  
Operating income $ 25     $ 3  
Operating margin   10.2 %     1.8 %
Non-GAAP Results    
Non-GAAP operating income $ 25     $ 3  
Non-GAAP operating margin   10.2 %     1.8 %
               

Use of Non-GAAP Financial Measures

Applied provides investors with certain non-GAAP financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring and severance charges and any associated adjustments; impairments of assets; gain or loss, dividends and impairments on strategic investments; certain income tax items and other discrete adjustments. On a non-GAAP basis, the tax effect related to share-based compensation is recognized ratably over the fiscal year. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied's ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast and related slide presentation will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statement

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the second quarter of fiscal 2024 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products, our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; global economic, political and industry conditions, including rising inflation and interest rates; the implementation and interpretation of new export regulations and license requirements, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the effects of geopolitical turmoil or conflicts, and of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations and other risks and uncertainties described in our SEC filings, including our recent Forms 10-K and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible a better future. Learn more at www.appliedmaterials.com.

Contact:

Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977


 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
  Three Months Ended
(In millions, except per share amounts) January 28,
2024
  January 29,
2023
Net revenue $ 6,707     $ 6,739  
Cost of products sold   3,503       3,594  
Gross profit   3,204       3,145  
Operating expenses:      
Research, development and engineering   754       771  
Marketing and selling   207       197  
General and administrative   276       207  
Total operating expenses   1,237       1,175  
Income from operations   1,967       1,970  
Interest expense   59       59  
Interest and other income (expense), net   395       50  
Income before income taxes   2,303       1,961  
Provision for income taxes   284       244  
Net income $ 2,019     $ 1,717  
Earnings per share:      
Basic $ 2.43     $ 2.03  
Diluted $ 2.41     $ 2.02  
Weighted average number of shares:      
Basic   831       845  
Diluted   837       849  


 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions) January 28,
2024
  October 29,
2023
ASSETS      
Current assets:      
Cash and cash equivalents $         6,854             $         6,132          
Short-term investments           638                       737          
Accounts receivable, net           4,700                       5,165          
Inventories           5,646                       5,725          
Other current assets           1,344                       1,388          
Total current assets           19,182                       19,147          
Long-term investments           2,910                       2,281          
Property, plant and equipment, net           2,826                       2,723          
Goodwill           3,732                       3,732          
Purchased technology and other intangible assets, net           283                       294          
Deferred income taxes and other assets           2,607                       2,552          
Total assets $         31,540             $         30,729          
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Short-term debt $         100             $         100          
Accounts payable and accrued expenses           3,829                       4,297          
Contract liabilities           3,147                       2,975          
Total current liabilities           7,076                       7,372          
Long-term debt           5,462                       5,461          
Income taxes payable           850                       833          
Other liabilities           723                       714          
Total liabilities           14,111                       14,380          
Total stockholders’ equity           17,429                       16,349          
Total liabilities and stockholders’ equity $         31,540             $         30,729          


 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
  Three Months Ended
(In millions) January 28,
2024
  January 29,
2023
Cash flows from operating activities:      
Net income $ 2,019     $ 1,717  
Adjustments required to reconcile net income to cash provided by operating activities:      
Depreciation and amortization   91       120  
Share-based compensation   170       148  
Deferred income taxes   (72 )     (21 )
Other   (235 )     7  
Net change in operating assets and liabilities   352       299  
Cash provided by operating activities   2,325       2,270  
Cash flows from investing activities:      
Capital expenditures   (229 )     (287 )
Cash paid for acquisitions, net of cash acquired         (20 )
Proceeds from sales and maturities of investments   531       414  
Purchases of investments   (749 )     (406 )
Cash used in investing activities   (447 )     (299 )
Cash flows from financing activities:      
Proceeds from commercial paper   100       298  
Repayments of commercial paper   (100 )     (100 )
Common stock repurchases   (700 )     (250 )
Tax withholding payments for vested equity awards   (192 )     (136 )
Payments of dividends to stockholders   (266 )     (220 )
Repayments of principal on finance leases   1       (10 )
Cash used in financing activities   (1,157 )     (418 )
Increase (decrease) in cash, cash equivalents and restricted cash equivalents   721       1,553  
Cash, cash equivalents and restricted cash equivalents—beginning of period   6,233       2,100  
Cash, cash equivalents and restricted cash equivalents — end of period $ 6,954     $ 3,653  
       
Reconciliation of cash, cash equivalents, and restricted cash equivalents      
Cash and cash equivalents $ 6,854     $ 3,547  
Restricted cash equivalents included in deferred income taxes and other assets   100       106  
Total cash, cash equivalents, and restricted cash equivalents $ 6,954     $ 3,653  
       
Supplemental cash flow information:      
Cash payments for income taxes $ 139     $ 69  
Cash refunds from income taxes $ 2     $ 4  
Cash payments for interest $ 34     $ 34  


 
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions) Q1 FY2024   Q1 FY2023
Unallocated net revenue $ 78     $ 41  
Unallocated cost of products sold and expenses   (297 )     (274 )
Total $ (219 )   $ (233 )
               

Additional Information

  Q1 FY2024   Q1 FY2023
Net Revenue by Geography (In millions)  
United States $ 759     $ 1,051  
% of Total   11 %     16 %
Europe $ 410     $ 573  
% of Total   6 %     8 %
Japan $ 565     $ 456  
% of Total   9 %     7 %
Korea $ 1,231     $ 1,293  
% of Total   18 %     19 %
Taiwan $ 559     $ 1,968  
% of Total   8 %     29 %
Southeast Asia $ 186     $ 253  
% of Total   3 %     4 %
China $ 2,997     $ 1,145  
% of Total   45 %     17 %
       
Employees (In thousands)      
Regular Full Time   34.5       33.9  


 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
  Three Months Ended
(In millions, except percentages) January 28,
2024
  January 29,
2023
Non-GAAP Gross Profit      
GAAP reported gross profit $ 3,204     $ 3,145  
Certain items associated with acquisitions1   7       7  
Non-GAAP gross profit $ 3,211     $ 3,152  
Non-GAAP gross margin   47.9 %     46.8 %
Non-GAAP Operating Income      
GAAP reported operating income $ 1,967     $ 1,970  
Certain items associated with acquisitions1   11       11  
Acquisition integration and deal costs   3       6  
Non-GAAP operating income $ 1,981     $ 1,987  
Non-GAAP operating margin   29.5 %     29.5 %
Non-GAAP Net Income      
GAAP reported net income $ 2,019     $ 1,717  
Certain items associated with acquisitions1   11       11  
Acquisition integration and deal costs   3       6  
Realized loss (gain), dividends and impairments on strategic investments, net   (1 )     (4 )
Unrealized loss (gain) on strategic investments, net   (280 )     (4 )
Income tax effect of share-based compensation2   (26 )     (14 )
Income tax effects related to intra-entity intangible asset transfers   22       17  
Resolution of prior years’ income tax filings and other tax items   33       (5 )
Income tax effect of non-GAAP adjustments3   1        
Non-GAAP net income $ 1,782     $ 1,724  


1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2 GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
3 Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.


 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
  Three Months Ended
(In millions, except per share amounts) January 28,
2024
  January 29,
2023
Non-GAAP Earnings Per Diluted Share      
GAAP reported earnings per diluted share $ 2.41     $ 2.02  
Certain items associated with acquisitions   0.01       0.01  
Acquisition integration and deal costs         0.01  
Unrealized loss (gain) on strategic investments, net   (0.33 )      
Income tax effect of share-based compensation   (0.03 )     (0.02 )
Income tax effects related to intra-entity intangible asset transfers   0.03       0.02  
Resolution of prior years’ income tax filings and other tax items   0.04       (0.01 )
Non-GAAP earnings per diluted share $ 2.13     $ 2.03  
Weighted average number of diluted shares   837       849  


 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
  Three Months Ended
(In millions, except percentages) January 28,
2024
  January 29,
2023
Semiconductor Systems Non-GAAP Operating Income      
GAAP reported operating income $ 1,744     $ 1,855  
Certain items associated with acquisitions1   10       9  
Non-GAAP operating income $ 1,754     $ 1,864  
Non-GAAP operating margin   35.7 %     36.1 %
Applied Global Services Non-GAAP Operating Income      
GAAP reported operating income $ 417     $ 345  
Non-GAAP operating income $ 417     $ 345  
Non-GAAP operating margin   28.3 %     25.2 %
Display and Adjacent Markets Non-GAAP Operating Income      
GAAP reported operating income $ 25     $ 3  
Non-GAAP operating income $ 25     $ 3  
Non-GAAP operating margin   10.2 %     1.8 %


1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
   

Note: The reconciliation of GAAP and non-GAAP segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
 
  Three Months
Ended
(In millions, except percentages) January 28, 2024
   
GAAP provision for income taxes (a) $ 284  
Income tax effect of share-based compensation   26  
Income tax effects related to intra-entity intangible asset transfers   (22 )
Resolutions of prior years’ income tax filings and other tax items   (33 )
Income tax effect of non-GAAP adjustments   (1 )
Non-GAAP provision for income taxes (b) $ 254  
   
GAAP income before income taxes (c) $ 2,303  
Certain items associated with acquisitions   11  
Acquisition integration and deal costs   3  
Realized loss (gain), dividends and impairments on strategic investments, net   (1 )
Unrealized loss (gain) on strategic investments, net   (280 )
Non-GAAP income before income taxes (d) $ 2,036  
   
GAAP effective income tax rate (a/c)   12.3 %
   
Non-GAAP effective income tax rate (b/d)   12.5 %


 
UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
 
  Three Months Ended
(In millions) January 28,
2024
  January 29,
2023
Cash provided by operating activities $ 2,325     $ 2,270  
Capital expenditures   (229 )     (287 )
Non-GAAP free cash flow $ 2,096     $ 1,983  


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Source: Applied Materials, Inc.