Applied Materials reports record revenue but shares drop 5% after-hours

Applied Materials reported record fiscal third-quarter revenue of $9.1 billion, a 25% increase from the previous year. Despite this strong performance, shares of the chip-equipment maker fell about 5% in after-hours trading on Thursday. The stock was trading about 28% below its 52-week high of $739.67, closing at $534.54 before the earnings announcement.

The company’s impressive revenue figures come at a time when demand for semiconductor manufacturing equipment is surging, particularly due to the growing artificial intelligence (AI) sector. Management projected fiscal fourth-quarter revenue to reach $10.25 billion, which would signal a 51% increase year over year. The accelerating growth trend is noteworthy; revenue rose 15% sequentially, marking the highest quarter-on-quarter growth in the company’s history, according to CEO Gary Dickerson.

Applied Materials also reported record non-GAAP earnings per share of $3.50, a 41% rise from a year earlier. Operating income and cash flow reached new highs, with cash flow exceeding $3 billion. The company highlighted that revenue from DRAM, which includes high-bandwidth memory packaging, surged by 52% year over year, demonstrating robust demand. The fourth-quarter guidance suggests sustained momentum, with expectations for non-GAAP earnings per share to hit $4.02, reflecting an 85% increase compared to last year.

Despite the strong financial performance, investor sentiment appears cautious, as evidenced by the stock's decline. Analysts are questioning what the market may be pricing in that the financial results do not reveal. However, Applied Materials remains optimistic about future growth, particularly in areas critical to AI computing, which it anticipates will drive 80% of growth in the wafer fab equipment market over the next few years. The company expects a significant uptick in DRAM revenue as memory makers expand their production capabilities.