Applied Materials(AMAT) - 2025 Q3 - Quarterly Results

Executive Summary & Business Outlook Q3 FY2025 Financial Highlights Applied Materials delivered record performance in its third fiscal quarter of 2025, achieving significant year-over-year growth in key financial metrics including revenue, operating margins, and non-GAAP EPS | Metric | Value | Change YoY | | :-------------------- | :---------- | :--------- | | Record revenue | $7,300M | +8% | | GAAP gross margin | 48.8% | - | | Non-GAAP gross margin | 48.9% | - | | GAAP operating margin | 30.6% | - | | Non-GAAP operating margin | 30.7% | - | | GAAP EPS | $2.22 | +8% | | Record non-GAAP EPS | $2.48 | +17% | Management Commentary CEO Gary Dickerson highlighted record Q3 performance and projected the sixth consecutive year of revenue growth for fiscal 2025, expressing confidence in long-term semiconductor industry growth despite near-term macroeconomic and policy uncertainties, particularly concerning China. CFO Brice Hill anticipates a Q4 revenue decline, attributing it to capacity digestion in China and non-linear demand from leading-edge customers, while emphasizing the company's robust supply chain and customer relationships for navigating these challenges - CEO Gary Dickerson reported record Q3 performance and projected the sixth consecutive year of revenue growth for fiscal 2025, maintaining confidence in long-term semiconductor industry growth despite near-term macroeconomic and policy uncertainties, especially concerning China[2] - CFO Brice Hill anticipates a Q4 revenue decline, attributing it to capacity digestion in China and non-linear demand from leading-edge customers, while highlighting the company's robust supply chain and customer relationships for navigating these challenges[2] Q4 FY2025 Business Outlook Applied Materials projects total net revenue for the fourth quarter of fiscal 2025 to be approximately $6.70 billion (±$500 million), with a non-GAAP gross margin of 48.1% and non-GAAP diluted EPS of $2.11 (±$0.20) | Metric | Q4 FY2025 Outlook | | :-------------------- | :---------------- | | Total net revenue | $6,700M +/- $500M | | Non-GAAP gross margin | 48.1% | | Non-GAAP diluted EPS | $2.11 +/- $0.20 | Q3 FY2025 Financial Performance Consolidated Financial Results Applied Materials reported Q3 FY2025 net revenue of $7,302 million, an 8% increase year-over-year. GAAP diluted EPS rose 8% to $2.22, and non-GAAP diluted EPS increased 17% to $2.48, reflecting strong operational performance and margin expansion | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :----------------------- | :--------- | :--------- | :------- | | Net revenue | $7,302M | $6,778M | 8% | | Gross margin | 48.8% | 47.3% | 1.5 points | | Operating margin | 30.6% | 28.7% | 1.9 points | | Net income | $1,779M | $1,705M | 4% | | Diluted earnings per share | $2.22 | $2.05 | 8% | | Non-GAAP gross margin | 48.9% | 47.4% | 1.5 points | | Non-GAAP operating margin | 30.7% | 28.8% | 1.9 points | | Non-GAAP net income | $1,989M | $1,767M | 13% | | Non-GAAP diluted EPS | $2.48 | $2.12 | 17% | | Non-GAAP free cash flow | $2,050M | $2,088M | (2)% | Segment Performance In Q3 FY2025, Semiconductor Systems revenue grew to $5,427 million with improved operating margins. Applied Global Services maintained strong revenue at $1,600 million, while the Display segment revenue increased to $263 million with a significant rise in operating margin to 23.6% - Semiconductor Systems revenue increased to $5,427 million in Q3 FY2025 from $4,924 million in Q3 FY2024, with operating margin improving to 36.2% (non-GAAP 36.4%)[6] - Applied Global Services reported net revenue of $1,600 million in Q3 FY2025, slightly up from $1,580 million in Q3 FY2024, though operating margin decreased to 27.8% (non-GAAP 27.8%)[6] - Display segment revenue grew to $263 million in Q3 FY2025 from $251 million in Q3 FY2024, with a substantial increase in operating margin to 23.6% (non-GAAP 23.6%) from 6.4% in the prior year[6] Semiconductor Systems The Semiconductor Systems segment reported net revenue of $5,427 million in Q3 FY2025, up from $4,924 million in Q3 FY2024. Foundry, logic and other accounted for 69% of revenue, DRAM for 22%, and Flash memory for 9%, with Flash memory showing a notable increase in contribution | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------- | :--------- | :--------- | | Net revenue | $5,427M | $4,924M | | Operating income | $1,966M | $1,712M | | Operating margin | 36.2% | 34.8% | | Non-GAAP operating income | $1,977M | $1,722M | | Non-GAAP operating margin | 36.4% | 35.0% | | Revenue Mix | Q3 FY2025 | Q3 FY2024 | | :-------------------- | :--------- | :--------- | | Foundry, logic and other | 69% | 72% | | DRAM | 22% | 24% | | Flash memory | 9% | 4% | Applied Global Services Applied Global Services generated $1,600 million in net revenue for Q3 FY2025, a slight increase from the prior year, with an operating margin of 27.8% | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------- | :--------- | :--------- | | Net revenue | $1,600M | $1,580M | | Operating income | $445M | $467M | | Operating margin | 27.8% | 29.6% | | Non-GAAP operating income | $445M | $467M | | Non-GAAP operating margin | 27.8% | 29.6% | Display The Display segment's net revenue for Q3 FY2025 was $263 million, showing growth from $251 million in Q3 FY2024, and its operating margin significantly improved to 23.6% from 6.4% year-over-year | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------- | :--------- | :--------- | | Net revenue | $263M | $251M | | Operating income | $62M | $16M | | Operating margin | 23.6% | 6.4% | | Non-GAAP operating income | $62M | $16M | | Non-GAAP operating margin | 23.6% | 6.4% | Corporate and Other Unallocated net revenue for Corporate and Other was $12 million in Q3 FY2025, with total unallocated costs and expenses amounting to $(240) million | Metric | Q3 FY2025 | Q3 FY2024 | | :------------------------------------ | :--------- | :--------- | | Unallocated net revenue | $12M | $23M | | Unallocated cost of products sold and expenses | $(252)M | $(276)M | | Total | $(240)M | $(253)M | Geographic Revenue & Employee Information Geographic Revenue & Employee Information In Q3 FY2025, China was the largest geographic market, contributing 35% of total net revenue ($2,548 million), up from 32% in Q3 FY2024. Taiwan also significantly increased its contribution to 25% of total revenue. The company's regular full-time employee count increased to 36.1 thousand | Geography | Q3 FY2025 Net Revenue (Millions) | % of Total | Q3 FY2024 Net Revenue (Millions) | % of Total | | :---------------- | :------------------------------ | :--------- | :------------------------------ | :--------- | | United States | $683 | 9% | $1,053 | 16% | | Europe | $160 | 2% | $339 | 5% | | Japan | $713 | 10% | $555 | 8% | | Korea | $1,160 | 16% | $1,102 | 16% | | Taiwan | $1,843 | 25% | $1,148 | 17% | | Southeast Asia | $195 | 3% | $428 | 6% | | China | $2,548 | 35% | $2,153 | 32% | | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------- | :--------- | :--------- | | Regular Full Time Employees (thousands) | 36.1 | 35.2 | Consolidated Financial Statements Statements of Operations The unaudited consolidated condensed statements of operations show net revenue of $7,302 million for the three months ended July 27, 2025, with a net income of $1,779 million and diluted EPS of $2.22. For the nine months, net revenue was $21,568 million and net income was $5,101 million | Metric (3 Months Ended) | July 27, 2025 | July 28, 2024 | | :---------------------- | :------------ | :------------ | | Net revenue | $7,302M | $6,778M | | Gross profit | $3,562M | $3,205M | | Income from operations | $2,233M | $1,942M | | Net income | $1,779M | $1,705M | | Diluted earnings per share | $2.22 | $2.05 | | Metric (9 Months Ended) | July 27, 2025 | July 28, 2024 | | :---------------------- | :------------ | :------------ | | Net revenue | $21,568M | $20,131M | | Gross profit | $10,543M | $9,562M | | Income from operations | $6,577M | $5,821M | | Net income | $5,101M | $5,446M | | Diluted earnings per share | $6.29 | $6.52 | Balance Sheets As of July 27, 2025, total assets were $34,211 million, slightly down from $34,409 million at October 27, 2024. Total current assets decreased, while long-term investments and property, plant and equipment increased. Total stockholders' equity grew to $19,504 million | Metric | July 27, 2025 | October 27, 2024 | | :------------------------------------ | :------------ | :--------------- | | Total current assets | $19,718M | $21,220M | | Long-term investments | $4,133M | $2,787M | | Property, plant and equipment, net | $4,124M | $3,339M | | Total assets | $34,211M | $34,409M | | Total current liabilities | $7,883M | $8,468M | | Total liabilities | $14,707M | $15,408M | | Total stockholders' equity | $19,504M | $19,001M | Statements of Cash Flows For the three months ended July 27, 2025, cash provided by operating activities was $2,634 million, while cash used in investing activities was $(1,967) million and cash used in financing activities was $(1,457) million, resulting in a decrease in cash and cash equivalents. For the nine months, cash provided by operating activities was $5,130 million, with cash used in investing and financing activities of $(2,643) million and $(5,146) million, respectively | Metric (3 Months Ended) | July 27, 2025 | July 28, 2024 | | :------------------------------------ | :------------ | :------------ | | Cash provided by operating activities | $2,634M | $2,385M | | Cash used in investing activities | $(1,967)M | $(660)M | | Cash used in financing activities | $(1,457)M | $(522)M | | Increase (decrease) in cash, cash equivalents and restricted cash equivalents | $(790)M | $1,203M | | Cash, cash equivalents and restricted cash equivalents — end of period | $5,454M | $8,378M | | Metric (9 Months Ended) | July 27, 2025 | July 28, 2024 | | :------------------------------------ | :------------ | :------------ | | Cash provided by operating activities | $5,130M | $6,102M | | Cash used in investing activities | $(2,643)M | $(1,256)M | | Cash used in financing activities | $(5,146)M | $(2,701)M | | Increase (decrease) in cash, cash equivalents and restricted cash equivalents | $(2,659)M | $2,145M | | Cash, cash equivalents and restricted cash equivalents — end of period | $5,454M | $8,378M | Non-GAAP Financial Measures & Reconciliations Use of Non-GAAP Financial Measures Applied Materials utilizes non-GAAP financial measures to assess operating and financial performance, adjusting for specific costs, expenses, gains, and losses such as those related to acquisitions, restructuring, impairments, and certain tax items. These measures are intended to provide a clearer view of ongoing operational performance and facilitate period-over-period comparisons, though they are not a substitute for GAAP results - Applied Materials uses non-GAAP financial measures to evaluate performance and for planning, adjusting for items like acquisition-related costs, restructuring charges, asset impairments, and certain tax items[8] - These non-GAAP measures aim to enhance understanding of the company's ongoing operating performance and facilitate consistent comparisons, but they are not prepared in accordance with GAAP and should not be considered in isolation[8] GAAP to Non-GAAP Reconciliation (Consolidated) This section provides detailed reconciliations of GAAP to non-GAAP figures for consolidated gross profit, operating income, net income, and diluted earnings per share, highlighting adjustments for acquisition-related items, strategic investments, and various tax effects Gross Profit Reconciliation Non-GAAP gross profit for Q3 FY2025 was $3,569 million (48.9% margin), adjusted from GAAP gross profit of $3,562 million by adding $7 million for certain acquisition-related items | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------- | :--------- | :--------- | | GAAP reported gross profit | $3,562M | $3,205M | | Certain items associated with acquisitions | $7M | $6M | | Non-GAAP gross profit | $3,569M | $3,211M | | Non-GAAP gross margin | 48.9% | 47.4% | Operating Income Reconciliation Non-GAAP operating income for Q3 FY2025 was $2,245 million (30.7% margin), adjusted from GAAP operating income of $2,233 million by adding $11 million for acquisition-related items and $1 million for acquisition integration costs | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------- | :--------- | :--------- | | GAAP reported operating income | $2,233M | $1,942M | | Certain items associated with acquisitions | $11M | $10M | | Acquisition integration and deal costs | $1M | $1M | | Non-GAAP operating income | $2,245M | $1,953M | | Non-GAAP operating margin | 30.7% | 28.8% | Net Income Reconciliation Non-GAAP net income for Q3 FY2025 was $1,989 million, adjusted from GAAP net income of $1,779 million. Key adjustments included a $(314) million unrealized gain on strategic investments, $460 million for resolution of prior years' income tax filings, and $32 million for intra-entity intangible asset transfers | Metric | Q3 FY2025 | Q3 FY2024 | | :---------------------------------------------------- | :--------- | :--------- | | GAAP reported net income | $1,779M | $1,705M | | Certain items associated with acquisitions | $11M | $10M | | Acquisition integration and deal costs | $1M | $1M | | Realized loss (gain), dividends and impairments on strategic investments, net | $16M | $16M | | Unrealized loss (gain) on strategic investments, net | $(314)M | $25M | | Income tax effect of share-based compensation | $7M | $8M | | Income tax effects related to intra-entity intangible asset transfers | $32M | $17M | | Resolution of prior years' income tax filings and other tax items | $460M | $(11)M | | Income tax effect of non-GAAP adjustments | $(3)M | $(4)M | | Non-GAAP net income | $1,989M | $1,767M | - The Q3 FY2025 non-GAAP net income adjustment included the impact of the recognition of a $410 million valuation allowance against deferred tax assets related to corporate alternative minimum tax credits[20] Earnings Per Diluted Share Reconciliation Non-GAAP diluted EPS for Q3 FY2025 was $2.48, adjusted from GAAP diluted EPS of $2.22. Significant adjustments included a $(0.39) impact from unrealized loss (gain) on strategic investments and a $0.57 impact from the resolution of prior years' income tax filings | Metric | Q3 FY2025 | Q3 FY2024 | | :---------------------------------------------------- | :--------- | :--------- | | GAAP reported earnings per diluted share | $2.22 | $2.05 | | Certain items associated with acquisitions | $0.01 | $0.01 | | Realized loss (gain), dividends and impairments on strategic investments, net | $0.02 | $0.01 | | Unrealized loss (gain) on strategic investments, net | $(0.39) | $0.03 | | Income tax effect of share-based compensation | $0.01 | $0.01 | | Income tax effects related to intra-entity intangible asset transfers | $0.04 | $0.02 | | Resolution of prior years' income tax filings and other tax items | $0.57 | $(0.01) | | Non-GAAP earnings per diluted share | $2.48 | $2.12 | - The Q3 FY2025 non-GAAP diluted EPS adjustment included a $0.51 per diluted share impact from the recognition of a valuation allowance against deferred tax assets related to corporate alternative minimum tax credits[23] GAAP to Non-GAAP Reconciliation (Segment) This section provides reconciliations of GAAP to non-GAAP operating income for each reportable segment: Semiconductor Systems, Applied Global Services, and Display, primarily adjusting for certain acquisition-related items Semiconductor Systems Operating Income Reconciliation Non-GAAP operating income for Semiconductor Systems in Q3 FY2025 was $1,977 million (36.4% margin), adjusted from GAAP operating income of $1,966 million by adding $11 million for acquisition-related items | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------- | :--------- | :--------- | | GAAP reported operating income | $1,966M | $1,712M | | Certain items associated with acquisitions | $11M | $10M | | Non-GAAP operating income | $1,977M | $1,722M | | Non-GAAP operating margin | 36.4% | 35.0% | Applied Global Services Operating Income Reconciliation Applied Global Services' non-GAAP operating income for Q3 FY2025 was $445 million (27.8% margin), which was consistent with its GAAP operating income | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------- | :--------- | :--------- | | GAAP reported operating income | $445M | $467M | | Non-GAAP operating income | $445M | $467M | | Non-GAAP operating margin | 27.8% | 29.6% | Display Operating Income Reconciliation The Display segment's non-GAAP operating income for Q3 FY2025 was $62 million (23.6% margin), matching its GAAP operating income | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------- | :--------- | :--------- | | GAAP reported operating income | $62M | $16M | | Non-GAAP operating income | $62M | $16M | | Non-GAAP operating margin | 23.6% | 6.4% | Non-GAAP Effective Income Tax Rate Reconciliation The non-GAAP effective income tax rate for Q3 FY2025 was 12.6%, significantly lower than the GAAP effective income tax rate of 30.6%, primarily due to adjustments for share-based compensation, intra-entity intangible asset transfers, and the resolution of prior years' income tax filings | Metric | Q3 FY2025 | | :---------------------------------------------------- | :--------- | | GAAP provision for income taxes (a) | $784M | | Income tax effect of share-based compensation | $(7)M | | Income tax effects related to intra-entity intangible asset transfers | $(32)M | | Resolutions of prior years' income tax filings and other tax items | $(460)M | | Income tax effect of non-GAAP adjustments | $3M | | Non-GAAP provision for income taxes (b) | $288M | | GAAP income before income taxes (c) | $2,563M | | Non-GAAP income before income taxes (d) | $2,277M | | GAAP effective income tax rate (a/c) | 30.6% | | Non-GAAP effective income tax rate (b/d) | 12.6% | Non-GAAP Free Cash Flow Reconciliation Non-GAAP free cash flow for Q3 FY2025 was $2,050 million, derived from $2,634 million in cash provided by operating activities less $584 million in capital expenditures | Metric | Q3 FY2025 | Q3 FY2024 | | :------------------------------------ | :--------- | :--------- | | Cash provided by operating activities | $2,634M | $2,385M | | Capital expenditures | $(584)M | $(297)M | | Non-GAAP free cash flow | $2,050M | $2,088M | Additional Information & Disclosures Webcast Information Applied Materials will host an earnings call and live webcast at 1:30 p.m. Pacific Time, with a replay available on their investor relations website - An earnings call and live webcast will be held at 1:30 p.m. Pacific Time, with a replay accessible on https://ir.appliedmaterials.com[9](index=9&type=chunk) Forward-Looking Statements This section contains forward-looking statements regarding anticipated growth, market trends, financial performance, and strategic initiatives, which are subject to various risks and uncertainties including demand levels, global economic conditions, export regulations, trade issues, and geopolitical factors - The press release includes forward-looking statements about anticipated growth, market trends, and financial performance, which are not guarantees of future results[10] - Factors that could cause actual results to differ materially include demand for products, global economic and political conditions, export regulations, trade issues, and geopolitical turmoil[10] About Applied Materials Applied Materials, Inc. is a leader in materials engineering solutions, providing foundational technology for semiconductors and advanced displays, essential for advancing AI and next-generation chips - Applied Materials, Inc. is a leader in materials engineering solutions, foundational to semiconductors and advanced displays[11] - The company's technology is crucial for advancing AI and accelerating the commercialization of next-generation chips[11]