AMAT Q1 Earnings Beat: Will a Weak Guidance Drag the Stock Down?

Applied Materials (AMAT Quick QuoteAMAT – Free Report) ended first-quarter fiscal 2025 on a strong note by reporting better-than-expected results. First-quarter non-GAAP earnings of $2.38 per share surpassed the Zacks Consensus Estimate by 4.4% and improved 12% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

AMAT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 7.5%.

Applied Materials’ first-quarter fiscal 2025 revenues of $7.17 billion beat the consensus mark by 0.3%. The top line rose 7% year over year due to an impressive performance across its Semiconductor Systems and Applied Global Services (AGS) segments. Robust demand across the United States also contributed to the top-line growth.

Despite strong quarterly performance, Applied Materials shares lost 5% on Feb. 13 after-market trading following the results. Weak revenue outlook for second-quarter fiscal 2025 due to perceived weakness in the Chinese market made investors cautious about the company’s near-term prospects.

The recent guidance is unlikely to boost AMAT’s stock price, which already declined 6.3% in the past year against the Zacks Electronics – Semiconductors industry’s return of 47%.

Applied Materials’ Q1 Details

Applied Materials operates through four segments, namely, Semiconductor Systems, AGS, Display and Corporate & Other. Stronger-than-expected performances across Semiconductor Systems and AGS drove the top line.

Semiconductor Systems generated revenues worth $5.37 billion, which contributed 74.7% to its net revenues, reflecting growth of 9.1% from the year-ago quarter. AGS reported revenues of $1.59 billion (22.2% of net revenues), up 8% from the prior-year quarter.

Revenues from Display and Adjacent Markets were $183 million (2.6% of net revenues), down 25% from the year-ago quarter. Corporate and Other revenues were $33 million (0.5% of revenues), down 57.7% year over year.

Revenues in the United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China were $917 million, (up 20.8%), $330 million (down 19.5%), $540 million (down 4.4%), $1.67 billion (up 35.4%), $1.18 billion (up 111.6%), $286 million (up 53.8%) and $2.24 billion (down 25.2%).

Revenues in the United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China contributed 13%, 4%, 8%, 23%, 17%, 4% and 31% to net sales, respectively.

AMAT generated non-GAAP gross profit of $3.5 billion, up 9.1% year over year. The non-GAAP gross margin expanded 100 basis points (bps) to 48.9%. The non-GAAP operating margin of 30.6% expanded 110 bps year over year.

Applied Material’s Balance Sheet & Cash Flow

Applied Materials had cash and short-term investments of $6.26 billion as of Jan. 26, 2025, compared with $9.5 billion as of Sept. 30, 2024.

Long-term debt was $5.46 billion as of Jan. 26, which remained unchanged as of Sept. 30.

Cash flow from operations was $925 million and free cash flow was $544 million in the first quarter. During the quarter, Applied Materials bought back shares worth $1.64 billion and paid $326 million in dividends.

AMAT Initiates Q2 Guidance

For the second quarter of fiscal 2025, AMAT expects revenues to be $7.1 billion, (plus or minus $400 million). The Zacks Consensus Estimate for revenues is pegged at $7.3 billion, suggesting a year-over-year rise of 9.8%.

Applied Materials expects non-GAAP diluted EPS to be approximately $2.30, (plus or minus $0.18). The Zacks Consensus Estimate for earnings is pegged at $2.32 per share, indicating a year-over-year rise of 11%.

Zacks Rank and Stocks to Consider

Currently, AMAT carries a Zacks Rank #4 (Sell).

Celestica (CLS Quick QuoteCLS – Free Report) , CrowdStrike (CRWD Quick QuoteCRWD – Free Report) and Akamai Technology (AKAM Quick QuoteAKAM – Free Report) are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. While CLS sports Zacks Rank #1 (Strong Buy), CRWD and AKAM carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus mark for CLS’ 2025 earnings has been revised upward by 31 cents to $4.75 per share over the past 30 days, indicating a 22.4% year-over-year increase. CLS shares have risen 244.8% in the past year.

The consensus mark for CRWD’s 2025 earnings has been revised upward by a penny to $3.74 per share over the past 60 days, indicating a 21% year-over-year increase. CRWD shares have gained 35.3% in the past year.

The consensus mark for AKAM’s 2025 earnings has been revised upward by 3 cents to $6.76 per share over the past 60 days, indicating a 6.78% year-over-year decline. AKAM shares have declined 11.9% in the past year.