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After Applied Materials reported its November results, we updated our fair value. We moved our rating from Avoid to Watch. We raised our earnings growth projections and the profit margins we expect the business to keep as it scales. We added the gap between actual profit and the headline figure caused by outside investment losses to what we track. We also added the five billion dollar spending plans for the new research center and the expansion in India to our projections.
The company brought in $10.41 billion in revenue this quarter, topping the $10.30 billion analysts expected. Profits also came in higher than predicted at $4.16 per share. This growth was fueled by massive demand for the specialized machines needed to build high-end AI chips, which require more complex manufacturing steps than standard processors.
Looking ahead, the company expects this momentum to continue as it forecasts next quarter's sales to stay above previous estimates. While the business is performing at a record level, the stock fell about 4 percent following the report. This often happens when a company's price has already risen quickly and even a strong report isn't enough to surprise the market further.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Applied Materials is scheduled to report its latest quarterly results after the market closes today. Analysts are looking for revenue of about 10.3 billion dollars and earnings per share of roughly 4.06 dollars. The main thing to watch is the demand for machines that build advanced AI chips and memory. While the company has a long history of beating expectations, we remain cautious because the stock price already reflects high growth expectations, leaving little room for error if the outlook for next year is anything less than perfect.
Applied Materials is scheduled to report its quarterly results on Thursday, November 12. Wall Street analysts expect the company to report revenue of about 10.3 billion dollars and earnings of 4.06 dollars per share. The update will be a key signal for the chip industry, as the company's sales of specialized manufacturing machines reflect how much chipmakers are spending on new capacity. Investors will likely focus on whether demand for AI-related hardware remains strong enough to offset any softness in other parts of the electronics market.
Applied Materials plans to increase its ownership in BE Semiconductor Industries from 9 percent to about 20 percent. This move strengthens a partnership focused on advanced packaging, which is the process of stacking and connecting different parts of a chip to make it faster and more efficient.
This matters because traditional ways of making chips faster are becoming harder and more expensive. As AI chips require more complex designs, the industry is shifting toward this kind of advanced packaging. By owning a larger slice of a key specialist in this field, Applied Materials is better positioned to capture more of the spending as chipmakers move away from old manufacturing methods.
Source: Reuters
Management has cleared their own targets for eight straight quarters. The recent jump in growth suggests the AI chip boom is moving faster than the company's conservative forecasts can keep up with.
| Expectation | |
|---|---|
| EPS | $4.30 |
| Revenue | $11.01B |
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