Key Takeaways
- The company delivered adjusted earnings per share of $3.50, surpassing the Street’s $3.40 expectation, while revenue reached $9.12 billion versus the anticipated $9 billion.
- On a GAAP basis, earnings landed at $3.17 per share, falling short of projections, influenced by an unrealized investment loss of $220 million.
- Shares declined 4.9% to $508.30 during Friday’s premarket session.
- Fourth-quarter revenue outlook significantly exceeded analyst projections: $10.25 billion compared to the $9.55 billion consensus.
- DRAM represented 26% of semiconductor systems revenue during the third quarter, climbing from 22% in the prior-year period.
Shares of Applied Materials (AMAT) slid 4.9% to $508.30 in premarket hours Friday following the release of fiscal third-quarter earnings that, while exceeding Wall Street’s projections, left investors wanting more.
The company posted adjusted earnings of $3.50 per share, representing significant growth from $2.48 in the same quarter last year and surpassing the FactSet consensus of $3.40. Total revenue climbed 25% year-over-year to $9.12 billion, outpacing the $9 billion Wall Street estimate.
However, GAAP-based earnings registered at $3.17 per share, missing analyst expectations. The shortfall was primarily attributed to a $220 million unrealized loss on investments.
The semiconductor equipment manufacturer’s stock had previously suffered a sharp 30% decline in July. Despite Friday’s pullback, AMAT shares remain up an impressive 108% year-to-date.
Investor expectations were exceptionally elevated heading into the report. As a primary beneficiary of increased capital expenditures on AI chips and advanced memory solutions, Applied Materials faced considerable pressure to deliver exceptional results.
Fourth Quarter Outlook Significantly Exceeds Analyst Estimates
Looking ahead to fiscal Q4, Applied Materials projected revenue of $10.25 billion, with a variance range of $500 million. This forecast substantially exceeds the $9.55 billion consensus among Wall Street analysts.
The company’s adjusted earnings guidance of $4.02 per share, plus or minus 20 cents, similarly outpaced the analyst consensus of $3.71 by a considerable margin.
Nevertheless, the robust forward-looking guidance failed to satisfy investors during Thursday evening’s after-hours trading session.
DRAM Segment Shows Continued Growth Momentum
The DRAM segment contributed 26% of semiconductor systems revenue in the third quarter, representing an increase from 22% during the same period last year. Foundry and logic equipment continue to constitute the largest portion of Applied Materials’ systems operations.
Demand for memory capacity driven by artificial intelligence applications is projected to maintain its upward trajectory, positioning Applied Materials favorably to capitalize on this expanding market opportunity.
The earnings release coincided with reports from key competitors KLA Corp. and Lam Research, both of which delivered robust quarterly performance. The trio continues to vie for market leadership in DRAM equipment as capacity expansion initiatives accelerate across the industry.
Applied Materials’ quarterly report arrived during a particularly active earnings period for AI-related companies. Cloud infrastructure provider CoreWeave, AI server manufacturer Supermicro, and AMAT were among the prominent names releasing results this week.
According to FactSet data, S&P 500 earnings for the second quarter are tracking toward a 50% year-over-year increase, marking the strongest growth rate since 2021. Bank of America strategists identify artificial intelligence as the principal catalyst behind this performance.
Approximately 90% of S&P 500 constituents have now disclosed their quarterly results.
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