Applied Materials, Inc. Q2 FY2023 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Q2 revenue: $6.63B (up 6% year-over-year; at high end of guidance).
  • Non-GAAP EPS: $2.00 (up 8% year-over-year).
  • Non-GAAP gross margin: 46.8% (flat sequentially).
  • Operating cash flow: $2.3B (35% of revenue); free cash flow: $2B.
  • Shareholder returns: $219M dividends, $800M buybacks.

Market Context & Trends

  • Consumer electronics–driven demand remains weak (PCs, smartphones).
  • Memory spending at lowest level in over a decade; customers sharply reduced 2023 investments.
  • Leading-edge foundry/logic customers trimmed 2023 spending (timing adjustments, not roadmap pullbacks).
  • ICAPS (IoT, Communications, Automotive, Power, Sensors) demand remains very strong and is offsetting weakness elsewhere.
  • Regionalization trend: ~$400B in global government incentives expected over next five years, heavily favoring ICAPS.
  • U.S., Europe, and Japan are the fastest-growing regions for ICAPS in 2023.

Business Segment Performance (Year-over-Year)

  • Semi Systems revenue: $4.98B (up 12%).
  • AGS (Applied Global Services): $1.43B (up 3%); 15th consecutive quarter of growth.
  • Display: $168M (flat sequentially).
  • Service business produced record revenue; over 60% subscription-based, with >90% renewal rate.

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Operator: Welcome to the Applied Materials Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. I would now like to turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir. Michael Sullivan: Good afternoon, everyone, and thank you for joining Applied's second quarter of fiscal 2023 earnings call. Joining me are Gary Dickerson, our President and CEO, and Brice Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call contains forward-looking statements which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning the risks and uncertainties is contained in Applied's most recent Form 10-Q filing with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures are found in today's earnings press release and in our quarterly earnings materials, which are available on the IR page of our website at appliedmaterials.com. Before we begin, I have a calendar announcement. On July 11th, Applied plans to host a Semicon West technology breakfast from 7:30 to 9.00 a.m., Pacific Time. We plan to announce a major new platform and lead a heterogeneous integration panel featuring executives from AMD, Intel and Qualcomm along with Besi and the EV Group. You can register by visiting the events page of our IR we

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