Applied Materials, Inc. Q3 FY2022 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Highlights

  • Record quarterly revenue of $6.52 billion, landing at the high end of guidance. This represents sequential growth and continued demand strength despite supply constraints.
  • Non-GAAP EPS of $1.94, matching the company’s previous quarterly record and rising $0.09 sequentially.
  • Non-GAAP gross margin of 46.2%, down 80 basis points from the prior quarter due to higher logistics, materials, and labor costs.
  • Backlog continues to grow as demand remains well above Applied’s supply capacity, with constraints expected to persist for several quarters.
  • Supply chain conditions improved slightly versus Q2, though still materially limiting shipments.

Business Segment Performance

  • Semi Systems revenue grew 6% quarter-over-quarter (up $276 million) but saw a 100 bps decline in operating margin to 36.1% due to elevated costs.
  • AGS (Services) delivered record revenue, up 3% sequentially. Installed base under long‑term service agreements rose 9% year-over-year, with renewal rates at 93%. AGS operating margin rose slightly to 30.6%.
  • Display revenue fell 13% sequentially to $333 million as consumer electronics softness weighed on demand.
  • Process Diagnostics & Control (PDC) expected to grow nearly 40% for FY22; strong traction in eBeam metrology and optical inspection platforms.

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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 will now 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 Third Quarter of Fiscal 2022 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 and 8-K filings 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. Applied plans to host our Services Master Class five weeks from today on Thursday, May 26th at 9 o’clock Pacific Time. We will describe the market opportunity for our Services business, explain why 87% of AGS revenue is truly recurring and give you the growth formula for the business through our 2024 financial model horizon and beyo

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