Semiconductor equipment giant Applied Materials releases impressive financial report

On Wednesday, Eastern Time, Applied Materials, one of the world's largest semiconductor equipment manufacturers, released its financial report, which showed that despite the challenges facing the supply chain, the company's earnings last quarter still exceeded expectations.

After the earnings report was released, the company's stock price rose 4.3% to $146.99 in after-hours trading. However, as of the close of Wednesday, the stock has fallen 10% since the beginning of this year.

Applied Materials' customers include major chip manufacturers such as Samsung Electronics, TSMC and Intel, so Applied Materials' performance forecast can also serve as a window into the spending plans and confidence levels of some of these major manufacturers.

Supply chain remains a major challenge

The financial report shows that in the first quarter of fiscal year 2022 ending in January, Applied Materials' sales increased 21% year-on-year to US$6.271 billion, exceeding market expectations; net profit was US$1.792 billion, an increase of 59% year-on-year.

Applied Materials' non-GAAP earnings per share increased to $1.89 in the first fiscal quarter, up 36% from $1.39 per share in the same period last year and exceeding analysts' average expectation of $1.85.

As the global chip shortage has lasted for several months, the global chip industry urgently needs more semiconductor equipment to meet the growing demand for chip supply. However, the production of semiconductor equipment itself also requires a large number of chips, and the chip shortage has limited the production capacity of equipment manufacturers, making it difficult to produce enough equipment to meet order demand.

Applied Materials' competitors Lam Research Corp. and KLA Corp. have both issued pessimistic earnings forecasts due to supply chain issues. Both companies expect difficulties in product production and delivery capabilities due to chip shortages, especially in the first half of this year.

Applied Materials is also facing such supply difficulties. Due to this concern, Wall Street analysts have lowered their revenue and profit expectations for Applied Materials in recent weeks.

Applied Materials also held a more cautious outlook for the future due to supply chain constraints. Applied Materials expects sales of about $6.35 billion in the second fiscal quarter ending in April, which is lower than analysts' expectations.

Data compiled by Bloomberg show that the average expectation of Wall Street analysts is $6.43 billion. The company expects second-quarter earnings per share to be $1.75 to $2.05, with the median forecast slightly lower than the average analyst expectation of $1.96.

"This issue has become a matter of concern across the industry, and Applied Materials is no exception," analysts at investment firm Stifel wrote in a previous earnings forecast report. Given its size and volume, the problems Applied Materials faces in its supply chain and procurement capabilities may be more complex than other companies.

“While the supply environment remains challenging, Applied Materials is doing everything it can to serve its customers and delivered its highest quarterly revenue ever,” Applied Materials CEO Gary Dickerson said in a statement. “We are very optimistic about the outlook for 2022 and beyond as long-term trends are driving our markets structurally higher, and Applied’s broad technology portfolio puts us in a very good position to capture a larger share of the markets we serve.”