APPLIED Materials, the largest US maker of chip-manufacturing equipment, fell after issuing a lukewarm revenue forecast for the current period, citing the risk of export controls crimping its business.
Sales will be about US$7.1 billion in the fiscal second quarter, which runs to April, the company said on Thursday (Feb 13). That compares with an average Wall Street estimate of US$7.22 billion. Profit will be US$2.30 a share, Applied Materials said, in line with projections.
Chief financial officer Brice Hill said the company was “taking into account export control related headwinds”. China makes up roughly a third of the company’s sales, and stricter trade curbs from the US have made it harder to sell in that country.
The company’s shares were down 5.3 per cent on Friday at US$174.53. Till Thursday’s close, the stock had been up 13 per cent for the year.
Export rules adopted in the final months of the Biden administration will knock about US$400 million off fiscal 2025 revenue, the company said.
About half of the reduction will come in the current period, with much of it hitting Applied Materials’ service business. That’s because the company will have to stop servicing equipment at some customer sites in China, chief executive officer Gary Dickerson said on a conference call with analysts. In the long term, he expects its service operations to resume healthy growth.
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China accounted for 31 per cent of sales last quarter, down from 45 per cent a year earlier. A surge in orders from Chinese memory makers has not continued into this year, the company said.
Meanwhile, Applied Materials is enjoying high demand for the most advanced types of equipment needed for artificial intelligence (AI) components, he said. That’s making up for weaker demand from makers of less complicated chips.
“The biggest driver for the whole industry is AI,” he said. The amount of silicon going into data centres – facilities that handle much of the AI workload – will soon surpass the level consumed by personal computers and smartphones. Those have traditionally been the two biggest markets for chipmakers.
First-quarter profit was US$2.38 a share, excluding some items, compared with an estimate of US$2.28. Revenue gained 6.8 per cent to US$7.17 billion. Analysts projected US$7.15 billion. The company is facing tax changes in Singapore, resulting in an expense of US$644 million, or 79 US cents a share, during fiscal 2025.
Applied Materials’ management has maintained confidence in the overall growth of the industry. The rapid spread of semiconductors to new products and the AI boom will help maintain demand, Dickerson argued. The sheer complexity of chips also has added pressure on customers to upgrade their equipment.
Applied Materials’ customer ranks include some of the biggest names in the chip industry, including Taiwan Semiconductor Manufacturing Company, Samsung Electronics and Intel. Those manufacturers order gear well ahead of starting production, making Applied Materials’ forecasts a barometer for future demand. BLOOMBERG
