Applied Materials(US:AMAT) Haitong Securities International·2025-08-15 09:35Investment Rating - The report assigns an "Outperform" rating for the company, indicating an expected total return over the next 12-18 months that exceeds the relevant market benchmark by more than 10% [19]. Core Insights - In Q3 FY2025, Applied Materials reported total revenue of $7.3 billion, an 8% year-over-year increase, surpassing market expectations [8][9]. - The semiconductor systems segment generated $5.43 billion in revenue, up 10% year-over-year, driven by investments in expanding Gate-All-Around (GAA) node capacity [9][10]. - The company anticipates a decline in revenue for Q4 FY2025 due to uncertainties in the Chinese market, projecting total revenue guidance of $6.7 billion ± $500 million [8][11]. - AI-driven technology innovations are reshaping semiconductor roadmaps, with a focus on advanced packaging and materials science, which is expected to double the packaging business revenue to over $3 billion annually in the coming years [10][12]. Summary by Sections Financial Performance - Total revenue for Q3 FY2025 reached $7.3 billion, exceeding the consensus estimate of $7.21 billion, with a GAAP gross margin of 48.9% [8][9]. - Non-GAAP earnings per share increased by 17% year-over-year to $2.48, surpassing the consensus of $2.36 [8][9]. Business Segments - The semiconductor systems business saw a revenue increase of 10% year-over-year, primarily due to investments in GAA technology, while DRAM business outperformed expectations with significant growth in AI-related investments [9][10]. - Global Applied Services (AGS) revenue was $1.6 billion, a 1% increase year-over-year, with core services growing approximately 10% [9][10]. Market Trends - The transition from FinFET to GAA technology is expected to increase revenue opportunities by 30% for equivalent fab capacity, with market share gains anticipated as new technologies are adopted [12]. - The company is increasing investments in the U.S., planning over $200 million for a new advanced component manufacturing facility in Arizona [11][12]. Future Outlook - The Chinese market is expected to continue its decline, with revenue projected to drop 15-20% in the coming quarters compared to 2024 [11][12]. - The company aims to enhance its market position in DRAM and advanced packaging, targeting significant revenue growth driven by AI demand [10][12].