EPS of $2.09 decreased by 12.1% from previous year
Gross margin of 47.3%
Net income of 1.73B
""We generated more than $2.5 billion of revenue from advanced nodes in fiscal year 2024 and expect those revenues to approximately double in 2025."" - Gary Dickerson
Applied Materials Inc (AMAT) Q4 2024 Financial Results: Record Revenue and Earnings Amid Strategic Growth
Executive Summary
Applied Materials Inc (AMAT) delivered an impressive quarter, with record revenue of $7.05 billion, up nearly 5% year-over-year, marking the fifth consecutive year of growth for the company. The growth was fueled by robust demand in its Semiconductor Systems and Applied Global Services segments. Management highlighted substantial advancements in materials engineering and technology innovations, positioning the company favorably for the future. While revenue from China normalized to approximately 30%, management emphasized strong momentum in leading-edge foundry and memory technology deployments, particularly driven by AI and energy-efficient computing trends.
The company reported a non-GAAP operating margin of 35.4% and generated free cash flow of $2.2 billion in Q4, reinforcing its shareholder return strategy while maintaining significant cash reserves to support future investments. As growth continues, investors should monitor key drivers such as evolving semiconductor demand and Applied Materials' position within this dynamic market.
Balance Sheet and Cash Flow Metrics:
- Cash and Cash Equivalents: $8.0 billion
- Total Debt: $6.3 billion; Net Debt: -$1.7 billion (indicating strong liquidity)
- Free Cash Flow: $2.2 billion, with total operating cash flow of $8.7 billion for the fiscal year.
Outlook: Management anticipates Q1 2025 revenues of $7.15 billion, indicating continuation of upward momentum amid strong demand, particularly within leading-edge logic and ICAPS nodes.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
7.05B
4.79%
3.94%
Gross Profit
3.34B
5.24%
4.06%
Operating Income
2.05B
3.81%
5.36%
Net Income
1.73B
-13.62%
1.52%
EPS
2.11
-12.08%
2.43%
Key Financial Ratios
currentRatio
2.51
grossProfitMargin
47.3%
operatingProfitMargin
29%
netProfitMargin
24.6%
returnOnAssets
5.03%
returnOnEquity
9.11%
debtEquityRatio
0.33
operatingCashFlowPerShare
$3.13
freeCashFlowPerShare
$2.64
dividendPayoutRatio
19%
priceToBookRatio
8.02
priceEarningsRatio
22
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key Insights from Management:
- Gary Dickerson, CEO: "...we've created significant growth opportunities for the company to offer new solutions...AI and energy-efficient computing are emerging as key drivers for our industry."
- Brice Hill, CFO: "Our non-GAAP gross margin was 47.5%, up slightly driven by favorable mix and operational improvements despite headwinds related to lower China revenue. Our service agreements are growing in both length and renewal rate, indicating strong customer retention and loyalty."
The remarks stress the importance of innovation in materials engineering and collaborative R&D as long-term strategies for sustainable growth, setting the scene for future resilience against market volatility.
"We generated more than $2.5 billion of revenue from advanced nodes in fiscal year 2024 and expect those revenues to approximately double in 2025."
â Gary Dickerson
"Our AGS segment delivered record revenue for Q4, showing robust growth, particularly in our subscription services, which have a high renewal rate and longer contract lengths."
â Brice Hill
Forward Guidance
Management's guidance for Q1 2025 projects revenues of approximately $7.15 billion, with non-GAAP EPS expected to reach $2.29, representing an increase of about 7% year-over-year. This optimistic outlook is supported by strong demand trends in the leading-edge logic sector and increasing investment in memory technologies, particularly high-bandwidth memory (HBM). The company foresees continued robust growth through effective engagement and collaboration with clients, especially around advanced packaging solutions and energy-efficient systems.
Investors are advised to consider factors such as material shortages, geopolitical influences, and ongoing shifts in global semiconductor policies as potential risks to guidance achievability.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AMAT Focus
47.34%
29.00%
9.11%
22.00%
KLAC
62.00%
41.00%
24.80%
33.27%
ASML
51.70%
36.20%
14.60%
24.78%
ACLS
46.00%
21.60%
4.93%
11.34%
TER
59.40%
20.40%
3.94%
34.97%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Applied Materials presents a compelling investment opportunity due to its strong financial results, solid growth trajectory, and leadership in technological innovation. Continued monitoring of macroeconomic trends and customer demand will be essential to validate management's optimistic outlook. Investors should remain cautious of potential geopolitical risks and their implications on market dynamics, particularly in the context of ongoing developments in China.
Key Investment Factors
Growth Potential
Applied Materials is currently positioned to capitalize on the high growth potential of the semiconductor industry, with trends favoring energy-efficient solutions and advancements in AI technologies. Major inflections in semiconductor device architectures bolster its market opportunity.
Profitability Risk
Significant risks include market volatility influenced by geopolitical uncertainties, especially relating to China, potential supply chain disruptions, and competitive pressures from key industry peers. Furthermore, the normalization of growth rates post-pandemic may temper expectations.
Financial Position
Strong balance sheet supported by substantial cash reserves of $8 billion and manageable debt levels of $6.3 billion. The company is generating significant free cash flow which allows for continued investment in innovation and robust shareholder returns.
SWOT Analysis
Strengths
Strong revenue and earnings growth, with record financial performance in Q4 2024.
Industry leader in innovative semiconductor manufacturing technologies, particularly in materials engineering.
Robust cash flow generation allowing for shareholder returns and strategic investments.
Weaknesses
High reliance on China market for revenue, which may pose risks due to geopolitical tensions.
Single segment dependency can lead to vulnerabilities if growth in specific areas falters.
Opportunities
Growing demand for semiconductor technology driven by AI, edge computing, and IoT developments.
Expansion in service agreements and long-term customer relationships enhances recurring revenue streams.
Threats
Competitive pressure from peers such as ASML and KLA Corporation in advanced semiconductor manufacturing.
Risks related to regulatory changes and supply chain disruptions affecting the semiconductor industry.