Applied Materials Inc (Nasdaq: AMAT) reported better-than-anticipated fiscal 2023 first quarter results. However, the semiconductor systems provider downwardly revised its second-quarter outlook, highlighting distribution chain issues. The stock ended Friday’s trading session at $115.44, almost flat from its prior close. Notably, the stock had lost 15.45% in the past year.
The Santa Clara, California-based company reported first-quarter revenues of $6.74 billion, an increase of 7.50% from $6.27 billion last year.
For the first quarter, which ended January 29, 2023, Applied Materials posted a net income of $1.72 billion, or $2.02 per share, compared with a net income of $1.79 billion, or $2 per share, in the quarter ended January 30, 2022.
Excluding certain items associated with acquisitions, acquisition integration and deal costs, severance, and related charges, realized loss (gain) on strategic investments, net unrealized loss (gain) on strategic investments, the net income tax effect of share-based compensation, income tax effects related to intra-entity intangible asset transfers, and the resolution of prior years’ income tax filings, among others, the Q1 2023 non-GAAP earnings increased to $1.724 billion, or $2.03 per share, from $1.696 billion, or $1.89 per share in Q1 2022.
Analysts surveyed by Refinitiv had anticipated the company to report earnings of $1.93 per share on revenues of $6.69 billion.
The quarterly earnings beat was possible due to the clearing of order backlog and robust demand for equipment used to manufacture semiconductor chips for AI (artificial intelligence) and automotive industries.
Commenting on the results, the company’s CEO Gary Dickerson said “[…] Applied Materials delivered strong first quarter results, and we believe Applied is well positioned to outperform our markets this year.”
Segment wise:
- Semiconductor Systems reported revenues of $5.16 billion, an increase of 13.03% from last year.
- Applied Global Services revenues grew by 3.70% to $1.37 billion.
- Display and Adjacent markets revenues were $167 million, down 54% on a y-o-y basis.
The operating margin fell to 29.20% in 1Q 2023 from 31.70% in 1Q 2022.
Looking forward, the company forecasts 2Q 2023 revenues in the range of $6 billion to $6.80 billion. Analysts surveyed by Refinitiv expect the company to post revenues of $6.29 billion. Likewise, Applied Materials projects Q2 earnings of between $1.66 and $2 per share.
The second-quarter revenue guidance includes an estimated loss of $250 million associated with a cyber-security incident at one of its vendors (MKS Instruments).
The quarterly earnings beat combined with the downward revision of the Q2 outlook is expected to keep the stock of Applied Materials range-bound in the short term.
The historical price chart indicates that the stock of Applied Materials has formed an inverted head and shoulders pattern. Additionally, the MACD indicator is also showing a positive reading. Therefore, we anticipate the share price of Applied Materials to remain in an uptrend (with a medium-term target of $150) for the next few trading sessions.
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