APPLIED MATERIALS INC /DE (AMAT Q2 FY2025 earnings call

• Applied delivered strong results in Q2 2025, including record earnings per share, driven by execution and global operations agility. • Market trends like AI, IoT, and electric vehicles are built on advanced semiconductors, with AI being a key transformative driver. • In 2024, under-performed in China due to market access restrictions but grew outside China. Core parts and services revenues grew in low double digits in 2024 and on track for similar in 2025. • Innovations in products like Sym3 Magnum etch system and Cold Field Emission eBeam technology are driving growth. • High-velocity co-innovation strategy with global EPIC platform to accelerate next-gen tech development. • EPIC Center in Silicon Valley progressing on schedule, expected to start operations in Spring 2026.

Semiconductor Systems revenue was $5.26 billion for Q2, up 7% year-over-year. Applied Global Services (AGS) delivered revenue of $1.57 billion in Q2, up 2% year-over-year. Display business had revenue of $259 million. Semiconductor Systems' non-GAAP operating margin was 36.4%, up 150 basis points year-over-year. AGS had a non-GAAP operating margin of 28.5%, flat year-over-year. Display business had a non-GAAP operating margin of 26.3%.

• For fiscal Q3, expects total revenue of $7.2 billion, plus or minus $500 million, representing a 6% increase year-over-year at the midpoint. • Non-GAAP EPS expected to be $2.35, plus or minus $0.20, an 11% increase year-over-year at the midpoint. • Semiconductor Systems revenue expected to be approximately $5.4 billion, up ~10% year-over-year. • AGS revenue expected to be approximately $1.55 billion, down 2% year-over-year. • Display revenue expected to be approximately $250 million. • Non-GAAP gross margin expected to be approximately 48.3% with non-GAAP operating expenses of approximately $1.3 billion and a tax rate of approximately 13%.

• Trade restrictions impacting market access in China, affecting equipment and service business. • Macro environment uncertainties and geopolitical factors creating volatility in revenue guidance. • Competition from new companies emerging in the market, potentially impacting market share.

Q: Dig into services in China, specifically AGS segment performance and growth expectations A: Brice Hill said core AGS business will grow at low double digits despite China trade restrictions, with 200-millimeter equipment slowing and utilization flat being factors. Gary Dickerson added 200-millimeter business is tied to power electronics, with mid-to-high single-digit long-term growth but near-term weakness.

Q: Contrast sales growth with peers, size ICAPS as percentage of sales and China vs non-China demand trends A: Brice Hill said mid-20s percent of total company revenue is China semi (equipment and service). Gary Dickerson clarified China semi including equipment and service is mid-20s of total revenue, and Applied is well-positioned in 28-nanometer in China with high share.

Q: Update on gross margins, value-based pricing, and manufacturing balancing A: Brice Hill said Q2 gross margin was 49.2%, Q3 guidance is 48.3%, with progress in pricing, cost management, and logistics. Gary Dickerson added cost improvements and value capture initiatives are driving sustainable margin improvement.

Q: DRAM side, balance between cyclical and HBM upside A: Brice Hill said DRAM is strong, with HBM growing at 40% and DRAM operating at high levels. Gary Dickerson added Applied has gained 10 points of market share in DRAM over a decade and is well-positioned for 4F2 architecture.

Q: Leading-edge foundry-logic spending acceleration and integrated system solutions mix A: Brice Hill said leading-edge spending is accelerating, and integrated system solutions represent ~30% of systems business, expected to continue growing with the business.