Applied Materials Q3 Earnings Beat Estimates, Revenues Rise Y/Y

Core Insights - Applied Materials Inc. (AMAT) reported third-quarter fiscal 2025 non-GAAP earnings of $2.48 per share, exceeding the Zacks Consensus Estimate by 5.1% and up from $2.12 per share a year ago [1][9] - The company reported revenues of $7.3 billion for the quarter, which was a 7.7% increase year over year but missed the Zacks Consensus Estimate by 1.4% [1][9] Financial Performance - Semiconductor Systems generated revenues of $5.43 billion, accounting for 74.3% of total net revenues, marking a 10.2% increase from the previous year and surpassing the consensus estimate of $5.38 billion [3][9] - Applied Global Services reported revenues of $1.60 billion, representing 21.9% of total net revenues, up 1.3% year over year and above the consensus estimate of $1.57 billion [3] - Display segment revenues were $263 million, improving 4.8% from the year-ago quarter and exceeding the consensus estimate of $259 million [4] Geographic Revenue Breakdown - Revenues by geography included: - United States: $683 million (9%) - Europe: $160 million (2%) - Japan: $713 million (10%) - Korea: $1.16 billion (16%) - Taiwan: $1.843 billion (25%) - Southeast Asia: $195 million (3%) - China: $2.548 billion (35%) [5] - Notable year-over-year revenue increases were seen in Japan (28.5%), Taiwan (60.5%), and China (18.4%), while revenues in the United States, Europe, and Southeast Asia decreased significantly [6] Operating Results - The non-GAAP gross margin was 48.9%, an increase of 150 basis points year over year [7] - Operating expenses totaled $1.33 billion, up 5.2% from the previous year, but decreased as a percentage of sales to 18.1% [7] - The non-GAAP operating margin improved to 30.7%, up 190 basis points year over year [7] Balance Sheet & Cash Flow - As of July 27, 2025, cash and cash equivalents plus short-term investments were $7.01 billion, down from $9.47 billion as of April 27, 2025 [8] - Inventories increased to $5.81 billion from $5.66 billion in the prior quarter, while accounts receivable decreased to $5.77 billion from $6.19 billion [10] - The company generated a non-GAAP free cash flow of $2.05 billion, significantly up from $1.06 billion in the prior quarter, and returned $1.42 billion to shareholders [11] Guidance - For the fiscal fourth quarter, AMAT expects net sales of $6.7 billion (+/- $500 million), with the Zacks Consensus Estimate at $7.31 billion [12] - Projected sales for segments include Semiconductor Systems at $4.70 billion, Applied Global Services at $1.60 billion, and Display at $350 million [12] - Management anticipates a non-GAAP gross margin of 48.1% and non-GAAP operating expenses of $1.31 billion, with expected non-GAAP earnings per share of $2.11 (+/- $0.20) [12][13]