Applied Materials Forecast Spurs Concern About Chip Spending
In This Article:
(Bloomberg) -- Applied Materials Inc., the largest US maker of chip-manufacturing equipment, gave a disappointing revenue forecast, signaling that some semiconductor customers may be holding off on orders.
Most Read from Bloomberg
Fiscal first-quarter sales will be about $7.15 billion, the company said in a statement Thursday. That compares with a $7.25 billion average of analysts’ estimates.
Massive spending on artificial intelligence computing has fueled demand for the most advanced chips — and, in turn, the machines needed to produce them. But other sectors of the industry are slowing down. Some makers of chips for industrial equipment and vehicles, for instance, have reported sluggish demand.
Applied Materials’ revenue from China also has slipped. The company had seen a surge in orders from that country in recent quarters, driven in part by demand for memory-chip equipment. The market is still healthy, Applied Materials said, and China is generating a more sustainable share of its revenue. The country accounted for 30% of sales last quarter, down from 44% a year earlier.
Shares of the Santa Clara, California-based company fell about 5% in extended trading following the announcement. They earlier closed at $186 in New York, leaving them up 15% in 2024.
Chief Executive Officer Gary Dickerson said he remains confident that AI and new types of chips will keep the industry growing.
“Applied has leadership in all the advanced segments,” he said in an interview. “AI is the big driver for the entire industry.”
Applied Materials’ main customers are some of the biggest companies in the chip industry, including Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. Those manufacturers order gear well ahead of starting production, making Applied Materials’ forecasts a barometer for future demand.
The company’s profit outlook was stronger. Excluding some items, earnings will be roughly $2.29 a share in first quarter, which runs through January. The average projection was $2.28 a share, according to data compiled by Bloomberg.
Fourth-quarter results also exceeded estimates. Profit was $2.32 a share, excluding some items, with revenue rising 4.8% to $7.05 billion. Analysts estimated $2.19 a share in earnings and $6.97 billion in sales.
Applied Materials and other US chip companies have been navigating stricter trade restrictions. In China, chipmakers use its machines to produce less sophisticated chips — ones that aren’t subject to the trade curbs. The most advanced semiconductors, and the equipment used to make them, are barred from the country.