Applied Materials met Wall Street’s expectations in the first quarter of 2025, but the market reacted negatively, reflecting concerns that surfaced during the earnings call. Management highlighted strong demand for AI-enabling semiconductors and robust performance in leading-edge foundry and DRAM segments as primary growth drivers. CEO Gary Dickerson noted, “Our customers remain focused on winning the race to be first-to-market with transformative new technologies,” yet acknowledged that trade restrictions and a weaker 200-millimeter equipment market, especially in China, affected the company’s service segment. CFO Brice Hill cited the “rapidly evolving economic and trade policy environment” as a challenge that the company continues to navigate.
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Applied Materials (AMAT) Q1 CY2025 Highlights:
- Revenue: $7.1 billion vs analyst estimates of $7.13 billion (6.8% year-on-year growth, in line)
- Adjusted EPS: $2.39 vs analyst estimates of $2.31 (3.4% beat)
- Adjusted EBITDA: $2.28 billion vs analyst estimates of $2.24 billion (32.2% margin, 2% beat)
- Revenue Guidance for Q2 CY2025 is $7.2 billion at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q2 CY2025 is $2.35 at the midpoint, above analyst estimates of $2.31
- Operating Margin: 30.5%, up from 28.8% in the same quarter last year
- Inventory Days Outstanding: 142, up from 136 in the previous quarter
- Market Capitalization: $153.3 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Applied Materials’s Q1 Earnings Call
- Stacy Rasgon (Bernstein Research) asked about ongoing weakness in the AGS segment, especially due to China trade restrictions. CFO Brice Hill explained that core services will continue to grow at a low double-digit rate, but 200-millimeter equipment sales remain subdued.
- Vivek Arya (Bank of America Securities) questioned the impact of mature node (ICAPS) exposure on growth. Hill clarified that ICAPS markets are expected to grow mid-to-high single digits, with China’s 28-nanometer investments seen as an opportunity for Applied Materials.
- C.J. Muse (Cantor Fitzgerald) probed gross margin sustainability amid tariff pressures. Hill stated that flexible manufacturing, value-based pricing, and cost management should hold margins in the low 48% range, with ongoing improvements anticipated.
- Melissa Weathers (Deutsche Bank) asked about DRAM spending trends and the balance between cyclical lows and AI-driven growth. CEO Gary Dickerson emphasized strong DRAM demand led by high-bandwidth memory and the company’s market share gains in this segment.
- Krish Sankar (TD Cowen) explored competitive dynamics in process tools and the rationale behind the BESI investment. Dickerson highlighted Applied’s positioning at key technology inflections and deep customer collaborations as differentiators.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of adoption for advanced AI and memory products, (2) the impact of evolving trade restrictions and tariffs on both equipment and services revenue, and (3) the ability of Applied Materials to sustain margin improvements through manufacturing efficiencies and cost controls. Progress on these fronts will help determine whether recent investments translate into durable, profitable growth.
Applied Materials currently trades at $190.86, up from $174.59 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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