AMAT Expects Advanced DRAM Sales to Grow 40%: Can It Keep its Lead?

Core Insights - Applied Materials (AMAT) anticipates significant growth in its memory segment, particularly in advanced dynamic random-access memory (DRAM) technologies, with projected revenue growth of over 40% in fiscal 2025 driven by demand for DDR5 and high-bandwidth memory [1][9] Group 1: Company Performance - In the second quarter of fiscal 2025, AMAT's advanced DRAM customers are expected to contribute to a revenue increase of more than 40% [1][9] - The Sym3 Magnum etch system has generated over $1.2 billion in revenues since its launch in February 2024 [2][9] - AMAT achieved record revenues in its Process Diagnostics and Control Business, supported by Cold Field Emission eBeam technology and advancements in 3D DRAM [3][9] Group 2: Strategic Focus - Management emphasized a focus on critical steps for next-generation DRAM, which has helped establish a strong leadership position in the market [4] - The company projects substantial increases in leading-edge DRAM investments through 2025, driven by investments in wafer fab equipment and 3D DRAM [4] Group 3: Competitive Landscape - Lam Research (LRCX) reported that DRAM accounted for 23% of its systems revenues in the third quarter of fiscal 2025, supported by customer investments in DDR5 and high-bandwidth memory [5] - ASML Holding (ASML) noted strong customer demand for its products, particularly from DRAM and logic customers utilizing its NXE:3800E EUV systems [6] Group 4: Valuation and Estimates - AMAT shares have increased by 6.8% year to date, outperforming the Electronics - Semiconductors industry, which grew by 4.3% [7] - The company trades at a forward price-to-sales ratio of 4.65X, lower than the industry average of 8X [10] - The Zacks Consensus Estimate for AMAT's fiscal 2025 and 2026 earnings implies year-over-year growth of 9.48% and 5.48%, respectively, with upward revisions in estimates for fiscal 2026 and 2027 [13]