AMAT Rides on the Strength in Semiconductor Systems: Will it Last?

Core Insights - Applied Materials' Semiconductor Systems segment is experiencing strong demand, leading to record revenues in Q3 fiscal 2025 [1][8] - Revenues for the Semiconductor Systems reached $5.43 billion in Q3, reflecting a 10% year-over-year increase [2][8] - The company anticipates a 50% increase in revenues from leading-edge DRAM customers in fiscal 2025 [3][8] - Long-term growth drivers include advancements in AI, advanced packaging, and power electronics [4] - Weaker guidance for Q4 2025 is attributed to capacity digestion in China and export license backlogs [4][8] Revenue and Growth Projections - The Semiconductor Systems segment's revenues are projected to grow significantly due to the transition to gate-all-around transistors, which could increase revenue opportunities by 30% per fab capacity [3] - The Zacks Consensus Estimate indicates an 8.55% year-over-year growth for fiscal 2025 earnings [10] Competitive Landscape - Competitors like Lam Research and ASML Holdings are also performing well in the DRAM and logic sectors, with Lam Research gaining traction through AI-related products [5] - ASML's revenue is driven by DRAM and logic customers, but it expects gross margin contraction due to low-margin tool revenue [6] Valuation Metrics - Applied Materials trades at a forward price-to-sales ratio of 4.32X, which is lower than the industry average of 8.81X [9] - Year-to-date, Applied Materials shares have declined by 2.7%, contrasting with a 19.1% growth in the Electronics - Semiconductors industry [7]