Applied Materials (AMAT) AI Stock Analysis

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Applied Materials

(NASDAQ:AMAT)

Rating:82Outperform

Price Target:

$192.00

▲( 18.35% Upside)

Applied Materials scores highly due to strong financial performance and optimistic earnings outlook. Technical indicators show positive momentum, though caution is advised as the stock nears overbought levels. The strategic credit facility further enhances its operational flexibility, supporting its growth trajectory despite external challenges like trade restrictions.

Positive Factors

Earnings

EPS ahead at $2.39, driven by favorable mix of products and business segments.

Shareholder Returns

AMAT has increased its dividend per share by 15% and authorized an extra $10 billion for buybacks, aiming to return 80-100% of free cash flow over time.

Valuation

Valuation remains attractive relative to peers with the shares still the cheapest of the 'big-5' semicaps.

Negative Factors

Demand Profile

Tariff and trade dynamics are expected to drive a weaker demand profile in the second half of the year, impacting revenue and earnings estimates.

Export Restrictions

Uncertainties surrounding U.S. export restrictions to China may persist, particularly as China still accounts for approximately 25% of total revenue in 2QFY25.

Market Share

AMAT lost approximately 200 basis points in SAM share in 2024, and there are fears that losses could persist in the following year if growth only reaches mid-single digits year-over-year while peers grow at higher rates.

Applied Materials (AMAT) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$134.65B

Dividend Yield0.96%

Average Volume (3M)8.35M

Price to Earnings (P/E)20.2

Beta (1Y)1.76

Revenue Growth6.12%

EPS Growth-5.66%

CountryUS

Employees36,000

SectorTechnology

Sector Strength76

IndustrySemiconductors

Share Statistics

EPS (TTM)2.39

Shares Outstanding812,440,860

10 Day Avg. Volume8,417,355

30 Day Avg. Volume8,349,093

Financial Highlights & Ratios

PEG Ratio2.68

Price to Book (P/B)7.08

Price to Sales (P/S)0.00

P/FCF Ratio22.66

Enterprise Value/Market Cap1.00

Enterprise Value/Revenue1.23

Enterprise Value/Gross Profit9.95

Enterprise Value/Ebitda3.99

Forecast

1Y Price Target

$200.16

Price Target Upside23.38% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering23

Applied Materials Business Overview & Revenue Model

Company DescriptionApplied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The Semiconductor Systems segment develops, manufactures, and sells various manufacturing equipment that is used to fabricate semiconductor chips or integrated circuits. This segment also offers various technologies, including epitaxy, ion implantation, oxidation/nitridation, rapid thermal processing, physical vapor deposition, chemical vapor deposition, chemical mechanical planarization, electrochemical deposition, atomic layer deposition, etching, and selective deposition and removal, as well as metrology and inspection tools. The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity comprising spares, upgrades, services, remanufactured earlier generation equipment, and factory automation software for semiconductor, display, and other products. The Display and Adjacent Markets segment offers products for manufacturing liquid crystal displays; organic light-emitting diodes; and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices. The company operates in the United States, China, Korea, Taiwan, Japan, Southeast Asia, and Europe. Applied Materials, Inc. was incorporated in 1967 and is headquartered in Santa Clara, California.

How the Company Makes MoneyApplied Materials generates revenue primarily through the sale of manufacturing equipment and related services in the semiconductor and display industries. The Semiconductor Systems segment is the largest contributor to revenue, driven by the sale of equipment used in the fabrication of semiconductor chips. The Applied Global Services segment provides value-added services, including maintenance, support, and optimization, for existing machines, ensuring ongoing customer engagement and recurring revenue. The Display and Adjacent Markets segment focuses on equipment for manufacturing advanced display technologies. Key revenue streams include equipment sales, service contracts, and software solutions, with significant earnings bolstered by partnerships with leading technology companies and continuous innovation in product offerings.

Applied Materials Key Performance Indicators (KPIs)

Any

Semiconductor Systems Revenue Breakdown

Semiconductor Systems Revenue Breakdown
Breaks down revenue from semiconductor systems, offering insight into demand trends, technological leadership, and competitive positioning in the semiconductor market.

Chart InsightsApplied Materials' semiconductor systems revenue shows a mixed trajectory. While 'Foundry, Logic, and Other' segments are rebounding after a dip in 2023, DRAM sales have been volatile, reflecting challenges from reduced sales to China. Despite these fluctuations, the company reported record-breaking revenue in Q1 FY2025, driven by strong growth in foundry logic and advanced packaging innovations. However, trade restrictions with China and DRAM sales decline remain significant headwinds. The company's strategic focus on AI and advanced packaging positions it well for future growth, despite geopolitical challenges.

Data provided by:

Main Street Data

Applied Materials Financial Statement Overview

Summary

Applied Materials demonstrates a strong financial position with robust revenue growth, high profitability margins, and effective cash flow management. The low leverage and high ROE indicate financial stability, though there is room for improvement in the equity ratio.

Income Statement

Very Positive

Applied Materials demonstrated strong profitability with a consistent increase in revenue over the years, reaching $28.09 billion in TTM. The gross profit margin is robust at 48.14%, and the net profit margin remains healthy at 24.05%. Revenue growth is steady, with a recent increase of 3.36% from the previous year. The EBIT margin of 29.66% and EBITDA margin of 31.20% reflect operational efficiency and strong earnings generation.

Balance Sheet

Very Positive

The company maintains a solid balance sheet with a debt-to-equity ratio of 0.33, indicating low leverage. The return on equity is impressive at 35.63%, showcasing effective management of shareholders' equity. However, the equity ratio stands at 56.37%, indicating a balanced structure of liabilities and equity, but room for improvement in asset financing through equity.

Cash Flow

Very Positive

Applied Materials exhibits strong cash flow generation with a free cash flow of $5.94 billion in TTM. The operating cash flow to net income ratio is a solid 1.08, indicating efficient conversion of earnings into cash. Free cash flow to net income ratio stands at 0.88, reflecting good cash flow health despite a slight decline in free cash flow compared to the previous year.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
28.09B	27.18B	26.52B	25.79B	23.06B	17.20B
	Gross Profit
13.52B	12.90B	12.38B	11.99B	10.91B	7.69B
	EBIT
8.33B	7.87B	7.65B	7.79B	6.89B	4.37B
	EBITDA
8.77B	8.26B	8.17B	8.23B	7.59B	4.84B
	Net Income Common Stockholders
6.76B	7.18B	6.86B	6.53B	5.89B	3.62B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
5.46B	9.47B	6.87B	2.58B	5.46B	5.74B
	Total Assets
25.82B	34.41B	30.73B	26.73B	25.82B	22.35B
	Total Debt
5.45B	6.26B	6.00B	5.54B	5.45B	5.45B
	Net Debt
457.00M	-1.76B	-133.00M	3.55B	457.00M	97.00M
	Total Liabilities
13.58B	15.41B	14.38B	14.53B	13.58B	11.78B
	Stockholders Equity
12.25B	19.00B	16.35B	12.19B	12.25B	10.58B
Cash Flow		Free Cash Flow
5.93B	7.49B	7.59B	4.61B	4.77B	3.38B
	Operating Cash Flow
7.28B	8.68B	8.70B	5.40B	5.44B	3.80B
	Investing Cash Flow
-2.78B	-2.33B	-1.53B	-1.36B	-1.22B	-130.00M
	Financing Cash Flow
-5.10B	-4.47B	-3.03B	-7.04B	-4.59B	-1.34B

Applied Materials Technical Analysis

Technical Analysis Sentiment

Positive

Last Price162.23

Price Trends

50DMA

150.73

Positive

100DMA

161.50

Positive

200DMA

173.71

Negative

Market Momentum

MACD

5.24

Negative

RSI

55.07

Neutral

STOCH

47.96

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AMAT, the sentiment is Positive. The current price of 162.23 is above the 20-day moving average (MA) of 159.06, above the 50-day MA of 150.73, and below the 200-day MA of 173.71, indicating a neutral trend. The MACD of 5.24 indicates Negative momentum. The RSI at 55.07 is Neutral, neither overbought nor oversold. The STOCH value of 47.96 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AMAT.

Applied Materials Risk Analysis

Applied Materials disclosed 24 risk factors in its most recent earnings report. Applied Materials reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 3 New Risks

We may not continue to declare cash dividends or repurchase our shares. Q3, 2023

We are exposed to cybersecurity threats and incidents. Q3, 2023

We are exposed to ongoing changes specific to the semiconductor industry. Q3, 2023

Applied Materials Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AMAT	82 Outperform	$134.65B	20.18	36.37%	0.96%	6.12%	-5.66%
MU	79 Outperform	$109.63B	23.58	10.10%	0.47%	71.05%	―
LRCX	78 Outperform	$107.82B	23.48	53.14%	1.05%	20.33%	31.89%
KLAC	74 Outperform	$104.51B	28.72	104.10%	0.80%	20.44%	44.14%
ADI	71 Outperform	$111.34B	71.59	4.43%	1.67%	-19.28%	-44.00%
Sector *	60 Neutral	$11.56B	10.24	-7.04%	2.94%	7.46%	-10.54%
INTC	45 Neutral	$92.78B	―	-18.66%	2.35%	-3.97%	-562.40%

* Technology Sector Average

Performance Comparison

AMAT

Applied Materials

162.23

-54.29

-25.07%

ADI

Analog Devices

222.22

-8.51

-3.69%

INTC

Intel

20.69

-9.20

-30.78%

KLAC

KLA

778.94

20.89

2.76%

LRCX

Lam Research

82.79

-11.98

-12.64%

Micron

95.84

-29.85

-23.75%

Applied Materials Earnings Call Summary

Earnings Call Date:May 15, 2025

(Q2-2025)

% Change Since: -7.16%|

Next Earnings Date:Aug 14, 2025

Earnings Call Sentiment Positive

The earnings call reflected a strong financial performance with record earnings per share and robust revenue growth across segments. However, challenges persist in the China market and trade restrictions are impacting service business growth. Despite these challenges, the company shows strong potential in advanced DRAM and service revenues.

Q2-2025 Updates

Positive Updates

Record Earnings Per Share

Applied Materials delivered record earnings per share in Q2 2025, with a 14% year-over-year increase to $2.39.

Revenue Growth

Total net revenue reached approximately $7.1 billion, up 7% year-over-year, with growth across all business segments.

Strong Gross Margin

Non-GAAP gross margin was 49.2%, up 170 basis points year-over-year, marking the highest quarterly gross margin since fiscal year 2000.

Advanced DRAM Customer Growth

Revenues from advanced DRAM customers are expected to grow more than 40% in 2025 due to investments in DDR-5 and high-bandwidth memory.

Service Revenue Growth

Core parts and services revenues grew in the low double-digit range last year, and a similar growth rate is expected in 2025.

Increased Shareholder Capital Distributions

Approximately $2 billion was distributed in dividends and share repurchases during Q2, with a 15% increase to the dividend per share.

Negative Updates

China Market Challenges

Lower spending in China is expected with investments in both DRAM and mature logic down for the year, affected by trade restrictions.

200-millimeter Equipment Sales Decline

Applied Global Services saw a decline in sales of 200-millimeter equipment, impacting overall AGS revenue growth.

Trade Restrictions Impact

Trade restrictions impacted service business growth, particularly in China, affecting the overall growth rate of Applied Global Services.

Company Guidance

During the Applied Materials Second Quarter Fiscal 2025 Earnings Conference Call, the company provided robust guidance with an optimistic outlook on several metrics. They reported a record earnings per share and a 7% year-to-date revenue increase. For the third quarter, they anticipate total revenue of $7.2 billion, plus or minus $500 million, representing a 6% year-over-year increase. The company expects non-GAAP EPS to be $2.35, plus or minus $0.20, indicating an 11% increase year-over-year. In terms of segment performance, Semiconductor Systems revenue is projected to be approximately $5.4 billion, up 10% year-over-year, while Applied Global Services (AGS) revenue is forecasted at $1.55 billion, slightly down 2% year-over-year. Display revenue is expected to remain stable at around $250 million. Despite challenges in China and trade restrictions, the company maintains a positive growth trajectory, supported by advancements in AI-driven technologies and strategic co-innovation initiatives.

Applied Materials Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Applied Materials Secures New $2 Billion Credit Facility

Positive

Feb 27, 2025

On February 24, 2025, Applied Materials, Inc. entered into a new five-year $2.0 billion revolving credit facility with Bank of America, replacing a previous $1.5 billion agreement set to expire in 2026. This strategic financial move enhances Applied’s credit capacity, potentially strengthening its operational flexibility and market position.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.