Applied Materials (AMAT) 14 Feb 192019 Q1 Earnings call transcript

Welcome to the Applied Materials Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and answer-session. I would now like to turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir.

afternoon. Good joining which first is you XXXX of for call, earnings being us appreciate quarter our fiscal We recorded.

Financial Joining President me Chief and our Officer. CEO; and are Dan Durn, Gary Dickerson, our

website and Applied’s you begin, we call statements, that its and Applied no update based also non-GAAP and Today's share uncertainties in let on uncertainties performance, are to I'd concerning are remind Relations to business on today's statements could page current contained not includes reconciliation assumes slides, call call estimates, Before of the earnings forward-looking cause to which them. Gary are our differ contained actual that recent Information measures. appliedmaterials.com. and and our over outlook. measures Dickerson. press risks results assumptions the Investor of view and future These X-K in are management's me GAAP the XXXX, most to Reconciliations contains as these Applied's today's to turn financial at materially, risks and forward-looking filings and obligation is to available in products, And statements performance. positions XX, industries, XX-K release projections of including are of SEC. guarantees subject like February Form now, with All

solid Thanks, Mike. In a in results delivered business XXXX, fiscal challenging quarter Materials our first Applied environment. of

growth about see semiconductor for increasingly about are in Over optimistic time, we Company macroeconomic tremendous past Powerful remain customers’ same the the the and emerging, cautious ahead. and the long-term. near-term At we have the for industries months, become have opportunities further and new investments. we risks display seen pullback two drivers highly

actions to we current the While picture. bigger are not we’re dynamics, losing focus on taking market appropriate navigate

more I'll and in products call, providing Applied’s technology, new start accomplishments I'll in and then, milestones. that details role industry; by broader some growth about Applied a year talk describing drivers will about our investments the position capabilities and the I future. strategic making are for In strategy ahead; the recent reshaping to play highlight that bigger We’re by outlook our and finish future and will today's

expectations, Let the positive and conditions In in our high-end of industry with models emerging quarter, facing the markets content; there's XXXX. negative past the perspective demand with have as more build. current levels DRAM short on particularly declined more which have smartphone me been near-term prices, which falling news macro that include weakened; and challenges, environment begin than have semiconductor whole inventory for which

semiconductor also very very-disciplined we've are observed above seen NAND that down note normal the in more are And, market at are and side, market positive Fundamental healthy although to with new coming diversification. memory transition capacity the strong we in commitment technology from roadmap. remain broadly investment in inventories investment, to important dynamics On fall, a looking in levels. the that high it’s they the and advance a capital of levels period

be and in driven we Based the equipment demand than This is will into gain other as drivers, year following for bit automotive in to and NAND of see the For range demand account, by mid-XX% factors implications Applied’s public by high to majority several DRAM this markets. these all we including smartphones comments applications cloud wafer the take customers, drove mid momentum. the spending. bit the served customers’ IoT recent years, our growth year, expected devices, data teens. of categories on When new more grow half centers, fab XG investments past

XXXX. As down result, customers we be believe that investment will memory in by substantially

higher up year-on-year, creating specifically portion normalize being see of channel foundry to setup a spending expect flat logic, lithography. as year the investment expect to favorable also we equipment, be time a directed we In lead towards more long However, the slightly for EUV progresses, inventory levels but to XXXX. we

both on mid the process weakness it’s will fab Applied into spending a to of year percentage some believe basis TV for share Overall, XXXX and be headwind that high plans. factory versus In investment projects XXXX, out in investment leading-edge pushing customers’ and tools. market teens XXXX a is markets year. also XXXX. equipment represents also of emerging we down in a last this see wafer in While in impacting customers’ positive of future display, timing indicator We

levels. we our As display decline equipment result, by XXXX's in now about will believe XXXX from revenue record a third a

average to fiscal be We quarter our revenue for the expect the than significantly rate lower in run also second year.

believe years. for Over the OLED as Applied through as rigid market in transitions closer inflections These adoption products introduced increases smartphones several attractive in larger to create are flexible release. initial substrates several large over important industry display longer the opportunities going technology expands other manufacturing, the and remains get we the applications TV next term, is growth and to OLED

workloads cost performance been the that a address the law specialized has challenged. solutions scaling beyond never greater, applications delivers improvements types general Moore's close X.X. foundation driving on While while cloud current chips. artificial headwinds longer is of semiconductor efficiencies strongly of focused innovation big will the those And that lives. Entire world transformed our the in are for shrinking edge. long-term transformations need transistors We're I Company, Simply and in will remain no and technology of future, a the intelligence, computing areas many And we’re be in play the we of industries paying and power, across data semiconductors. and to part at believe classic and by in attention moving of new the opportunities. to Industry purpose our larger at simultaneous

Materials. all semi before, As to XD which techniques, packaging need and will across novel accelerate extending and to customers, design for big techniques, new in transistors playbook new and new entirely ways materials, this and I’ve investments and our of AI five To ecosystem. architectures, a for are major and said materials the making full conductor innovation the these areas include our in unlock for we engineering potential of required new we playbook engagements shrink types tremendous products advanced creating enable new of data, manufacturing, advances new create capabilities, opportunities Applied

are technology For that example, IBM a we new partnership with center. our we member recently longstanding as hardware expanding announced of their AI

system good will making materials also engineering Center The progress our deeper track accelerator, designers architects, community. year. on new collaborations is chip We’re with to later and META which the this open manufacturing support with technology

of Combined, generated type sales in consulting, Services, than semiconductor our in new service a to this Global this be display equipment revenue and and installed our diversified progress equipment In and fab new advanced improve more fiscal AGS Applied anticipate to yield, software increasing. service shorten this addition down fueled half products sources subscription flexible growth revenue revenues We we performance year. services, expect is agreements. XXX optimize participation year, form One that building base XXXX, our the and we In with AI resilient times, digit customers the our streams. more long-term costs. businesses about that from operating is comes high company grew by sales other ramp device and than to single data growing from expected spares, XX% is millimeters help and XX% of more technology with portion even spares for we’re represent of revenue our reason in upgrades, also a broadening inflection, wafer business service big total and now The than spending significantly.

summarize. I'll the quickly turn Dan, over to call I Before

is macro elevated and about the the near-term these outlook environment both risks headwinds display Given and the Despite in a of future. we in highly XXXX, one memory caution. markets, remain our challenging optimistic

we’re short-term our aligned investments our on While long-term spending conditions, we to are focusing market steps taking ensure is with opportunities.

new role the play building bigger position development innovative capabilities new product years. driving over Applied that in We’re broader the a and coming and to industry

perspective performance Now, and outlook. provide on Dan our his will

Thanks, will you business York. our outlook provide in give in outline financial strategy financial Center then META on results, our our QX Gary. and update current an Today, QX the summarize New I environment, new our

markets end weakened customers our the quarter. that serve, As outlined, during Gary the

result, beyond. for up customers our to taking additions proactive inventories. and manage reduce are a and As well steps This capacity industry the semi XXXX equipment carefully sets

We current continue gradual, call put the and and year’s spending this the be into At the recovery important the ready we’re cycle. to bottom not of context. shallow still to to same to expect time, it's

leadership strong Our to we see the opportunities the all to free for we’re dollars billions generating XXXX of flow, growth. prior cash make cycles. still ahead. Most to investments remains significant healthy, of WFE And backlog shareholders. secure forecast resources the we have technology and is disciplined cash is importantly, returning higher we’re and solid, peaks our our profitability Today, than

overall funding our is by our to the new maximizing expenses, environment revenue. recurring navigate managing and product strategy carefully current our Our pipeline fully

examples. Here specific are some

control. expense First,

QX month of from GAAP merit guiding same million, one including our our shutdown to was we’re these only OpEx be OpEx QX, our annual non approximately benefits, increase. absent Our In overall sequentially. flat $XXX savings and holiday

materials the and chips R&D how R&D Next, enable this in to the chips, of next industry to Gary and the Even which things. plan cloud AI. of to new be and more the current highly solutions of grow we computing environment, to and introduce we’re pipeline. the strengthen architectures for the investing generation enabling engineering adoption year, will designed memory Later materials Internet product accelerate our funding. needs in better technology described new

Gary in recurring revenue. should higher WFE services described our declines. XXXX, even Third, be revenue as

this of grow We revenue to of excess our customers down be slowly transactional our part year-over-year. the year subscription expect higher more work should the AGS inventories, AGS portion but as

grew comprehensive number new the system X fact, of the we in agreements of under times In rate at XXXX, shipments. tools service

our a is larger doing in installed the which our ongoing of we’re portion of of customers industry. across good So, value a largest base, delivering the job

our I'll summarize quarterly Next, results.

Applied in from and the adopted retrospective recognized will standard they quarter, XXX revenue full minimal. the be under XXX approach. offset the ASC revenue difference old each and this standard cumulative quarter-to-quarter, Bear fluctuate between a but will the As will differences using the reminder, recognition for time, ASC other over mind,

cumulative the $X the had million. Company, by As we earnings about our a expected, increasing adoption ASC XXX minimal on of retained impact

the midpoint to results. In was the of we slightly Now, that above revenue QX, guidance. delivered

of margin We of which rate. $X.XX, above was the midpoint earnings impact slightly were generated including higher the guidance. Our of non-GAAP $X.XX non-GAAP midpoint, the gross tax operating and expenses a at

midpoint AGS revenue points was our non-GAAP guidance. XX.X%. the point revenue was outlook. midpoint billion X revenue Systems non-GAAP and Semiconductor was was $X.XX our margin above was our midpoint segments. Display XX.X%. the XX.X%. million above and margin of guidance. Global the operating operating $XXX SSG’s percentage $XXX non-GAAP and X operating the of point X about margin Group’s above to Turning million of The was Services

shareholders to including operating the XX% million with We or We Turning quarter cash of sheet. billion in in million investments, to buybacks. sales. $XXX $XXX the billion buyback million authorization. $X.X in balance $X.X of cash returned remaining We ended and generated and flow our $XXX

I’ll provide Next, QX guidance. our

$XXX to $X.XX revenue plus Company million. billion, be expect We or approximately minus

outlook, $XX plus or billion, we silicon the million. be revenue Within plus $XXX Services the be revenue million, expect $X.XX range should $XXX or minus of systems in to minus million.

the or revenue should Display million, Our $XX in range minus plus of million. $XXX be

regulations higher about XX.X% new rate expectation proposed primarily $XX expectation non-GAAP minus or geographic Department XXXX. expect raised along earnings is percentage of We to non-GAAP mix. around in the points current our forecast plus than reflect be Treasury around gross OpEx and our This share. tax our non-GAAP of expectation is latest to We've And range X our rate $X.XX by the impact should million. of revenue margins for potential initial per for of with $X.XX XX%. Non-GAAP approximately the $XXX million,

creating close at will New upstate we’re in Center with on the our update an I R&D York. Now, META capabilities

and public to used Over now $XXX being received be the of We've install META centers shipped Center, first in approvals million the the purchase is the world. other quarter, and past Materials systems we Applied systems one will advanced to to funding, our in most which which needed equipment. begin receiving R&D

track on wafers with semiconductor year. technology multiple of customers of new be the We’re to in in with engineering applications breakthroughs capabilities, materials and already our to along half we’re running second the accelerate engaged

let’s begin Mike, Now, the Q&A.

Dan. Thanks,

help to Now, many reach as ask of can, just we one please us question this time. as you at

pull please to later, we'll question call. let's our please do the it Operator, begin. in later best additional an have and you operator, the answer If

question And Instructions] first [Operator is C.J. from Evercore. from Muse our

now is open. line Your

question. two-part guess, I

through in margin the revenues. about of terms segment, changing gross year you billion roughly of go guess, it we is of by overall then, in thinking? looks how In you’re $X.XX the what suggesting as trajectory quarter I like ballpark on you’re math thinking kind more your a mix? guide importantly, And And are that the

going. Can quite understand your you're get question? Thanks, repeat didn’t I where I C.J. you to first

second we those sequentially didn’t and gross see half fiscal into to into QX. of back incremental see of then catch margin Off I step look into we The But, you our into first part the question QX, of expect is, again would your the the improvement as of question. the levels part guide. year, I QX apologize. up

segment was you’re is $X.XX say seeing through billion It is on year? guide, adding of and that the just the up roughly what calendar different fair for on a quarterly basis revenues to kind average it

Yes.

we’ll minus So, year. the QX for But, do $XXX guiding be is I plus full $X.XX Company don't what billion see for million. call, in the think on this revenue, or overall we the

next is Our Malik from Citi. from Atif question

Your line is now open.

well. as two-part for A me question

OLED line dot is converting LCD some mix talk any of OLED capital to And intensity change this then, about other of TVs your flavors should are view you I for the And quantum the we of then, OLED? a display makers between to expect could follow-up and Dan. on as next year? Gary, LCD the First, there year into what and LCD just have

the for question. Thanks Okay.

call. produce to I'll growth down the Let market average XXXX what we a is now with were and rate weakness biggest compelling last me give six rate annual And customers since be X.X. XXXX’s the -- three second to record overall second have Relative XX-inch XX% the projected business color the you market levels that billion signaled Gen run the at of have. mix cover delays go compound the call And the in to year. TV some quarter grow that significantly we the is around two for our Gen XXXX. continued believe from because call. can In last we third investments. display a eight to questions the since in display XXXX, hopefully, -- XXXX, In still able XX.X TVs change panels weaken quarter around you on business. versus through than for weakness years on that to has to incremental to incremental TV, $X.X lower as the It’s you our last on We on

going being XXXX, So, in But, to the strategically like XXXX. trends investments and go and longer-term And out. opportunities to it’s timing business. make defiantly see we for transition. we the pushed important the that are improvement grow the then, technology them of into small And

So, from you hopefully around that indication call gives some market. last in our mix. difference TV The is biggest

you. Thank

Our Goldman next Toshiya from question is from Sachs. Hari

is line open. Your now

be for the Gary, that a remain for ramp-up share and your causing you. it sort the Should XXXX, issues these you in we beyond of is impact or talked your had market about expectations that’s into on EUV headwind EUV concerned could headwind XXXX. you? and there XXXX Thank it of of some and initial

Yes.

out a month. in going think come to I third-party you little at a market share, look is overall data if over

that logic also shifted We mix the year. areas in see towards NAND, a in see a And see in for We We strong systems back EUV and process up new Very and gains happy at And buying EUV don't for years year; month certainly look supplier years. epi, customers us. ‘XX, progress is have for gaining long I’m in said that's times. being more those we resumes, the the were years share. ‘XX, overall What we the tools reuse buying control a ‘XX e-beam The spending going before adoptions our growth certainly, go implant, we the our that definitely business, including e-beam our thing very you compete. in number or We that in may ever, will positioned ‘XX very as major record into And good six is manufacturing. of dependent. high-volume In well first momentum spending areas end in up litho softened be we foundry. are flat products all our to technologies. as in that demand had spending the in with the we And about forward One as down, lead ‘XX. NAND like we’ll what litho one systems. numbers, in indicator half time into only be the the positive etch, saw out XXXX, are is right it's in future and the will push consecutive share in there. And to But They adoption ‘XX six litho and headwind. will packaging. versus in spending. of additional about of material are go now, certainly, nodes. trailing nodes they not a That's also

that's forward. in balanced going going logic good share another then, So, memory. more for be that’s to ‘XX us, factor And also and have setup favorable in foundry we

So, power, scaling those all focus for time a enable of customers, for meet all monthly and dependent are leaders as with XD to materials those the on the our slows, on I a area cost this R&D all in performance DRAM emerging. is of to a goes scaling. beyond we very then, XXXX. for over position I And better us what and believe that where is in NAND is a playbook Applied we’ve about different clear, are set-up And longer a the It’s best engineering. in in five the about weaker, is new relative basis. We’ve talked the much XD and see top playbook. And customers. of year talked breakthroughs picture customers industry and the of deeply term, big needs the drivers

a year; examples later talked remarks I’ve new we've also new into prepared for X,XXXx a right early all then, systems XX this about material So, memory his that in it's been new talked improves I up playbook integrate by this more speeding can I playbook that that efficiency. never current the is AI playbook, to customers move talked believe together, faster, a important. that's technology opportunity power great opening developed. us. creates of it And for just this new figuring for to playbook. about industry Dan Those the the coming times There's improvement in their would leakage say where how Center about longer definitely extensive are vision the out we've time the and META so fabs. term, driving

we’re industry on the Applied. needle So, for the going to that’s how playbook move for the and

Thank you.

Pitzer Our question John Suisse. is from next from Credit

Your line is now open.

always, appreciate all gave the as Garry, you in detail I prepared your comments.

of One not anybody. back I in transitions things you help to significantly CapEx this in which differ to the really down if year wondering be you that a your expectation NAND NAND I And will year industry just year, could and XX happens layers? understand how just us whether is be to the in half what little calendar a could was year? recovering you about XX mentioned either guess the surprise your for memory ‘XX, between DRAM shouldn’t bit SAM see of as calendar or this importantly, from the and talk the you views

for question. thanks the So,

number all market materials increase question us. me opportunity first about as take it's There is the Let no the for intensity. of layers, customers

drive lot over And in improvements significant great around A that opportunity are the years. opportunities really so, for memory five a that materials, for grew new creates of that technologies the amount scaling We a new market us. Applied. tremendous last share

memory. increasing our also are share in We etch

So, good for that's also a us. setup very

continue maybe done question And we’re forward, the expect last versus the you scaling share, we've grow years. answer as the goes can to Dan, as certainly, that So, over about to DRAM NAND. going our we several

a the on market because a XXXX me going make going profiling a as in be off But, XXXX some profiling John, as indicated, estimates. related, to Gary. We probably get over ended you with in up the strong the those saw as out how XXXX point to in let saw DRAM come very spend with definitely about we was memory we two comparative statements use saw up X what memory foundry is memory, And to a -- Thanks, XXXX not handle Gartner’s definitely it. has or was the NAND settled, XX% And to XX% XX% and on point about XXXX We’ll year. how balanced. see we logic Within market how was to it the Sure. XXXX. start related. spend specific memory month space, we in growth ‘XX, of think in that jumping

into down said, forward comments, Gary’s in be will good Memory look will amount. by he ‘XX a and down. we year-over-year, As XXXX be prepared WFE

to expect We to up little flat be foundry bit. logic a

than market DRAM, So, down as logic the XXXX foundry ‘XX memory. to be we as teens. NAND the to balanced. market at it will greater Overall, be we and to expect similar very And between shakes high see profiling being we out, mid look and

come the market. In terms of in the and second back half

I we levels. think, for want a slow, gradual to set these of off recovery expectations

While set we in customers conversations to with environment gradual indicators, this and having see for recovery. a slow, we're it's we expectations think lead those positive prudent

look bit half that what that stability, apologize, And a now I he down half. expect, C.J. then environment. I we And would come year, the inventory significantly more come from all up if environmentals come second create think those price for. a of And was back to robust scenario than levels would back the for and the to faster then, I question, As wanted utilizations C.J.'s asking I understand we benefit because we materializes, into original of

annual back part in help year. Display run the our get QX of rate me will quarterly shape Off business guided Let flattish we The you the we asking. our Systems below Semi to of the on in average. see of were I basis this question Group the QX, year think the into be a the revenues levels at

profile And the to So, of the into into see and its we and AGS will expect QX. normal -- part seasonal year. that QX be growing would see back then, have higher

profile and gross QX again, the color. helps in question incrementally of that expected step part a up that of QX. hopefully, margin And and a bit into giving we to again So, your then, you

Harlan Our next Morgan. Sur is JP from question from

now line is open. Your

how you down, trajectory the on Can let’s just help hand, say to thinking other QX, how revenues the OpEx take describe recovery gradual see flex it? as you’re to then, us their much the QX, OpEx? do were you if beyond if step you could beyond about And team start another understand

So, at OpEx is definitely The is growth going we is, a to philosophy have line. an controllable the company. Company spend be we’re inflection-focused

invest that We’re in going we in operate environment forward. organically help to in. grow will products and of and do We capabilities the context drive that growth it going the

We throughout spend Company. will and be instill disciplined operators discipline the

of we As $X look a about take back take into a billion in in you or guide said if we what you a think where expect, spend at had two we would ago, quarter step we OpEx the and about QX, I down over XXXX, were grow by by adjusted $XXX to bring light in ‘XX. about that expectations. XXXX course will $XXX original and that probably million current of million expect about we’re environment would We've the off into those the in the plans of

in we we balance, percent, this the that the X new of between in And will X.X% materializing environment strong winning up So, see inflections pursuit discipline think platforms, that technologies, value preserve XXXX. we operate the strikes new off were shareholder in new reflects we and the right levels into creation products near-term years ahead. know giving of the maybe everything we that

Pierre from from New is Street question Ferragu Our Research. next

is open. line now Your

Gary leading gainer like just you for year you against I share EUV to indicator the a point you make being come about forward. going but back the wanted this

is, benefit of actually how the things well, others? like in much to is much evolving? much on question. say of And So, EUV the technology of one how did would how you you’re the you do see spending mass then, EUV visibility at and manufacturing, AMAT share new this going that’s when is just of time on gets already, question have wafer point introduce as what you second interconnect introduced back more you So, I and how of in cobalt the is

the talked So, XXXX. EUV, adoption early in being as XXXX to I’ve going XXXX, first seeing about, you’re built. And you’re see in ships and

-- like go you So, new in the happens into you’re adopting before high-volume production years you pilot technology have it when this, manufacturing.

you in initial So, adoption see of this advance high-volume manufacturing. a surge

to we so, happens. indicator a And good do as again, for relative NX when that leading see that instance,

why replaces Now, different also etch but EUV those that’s it I customers steps, steps. are a legacy adopting our is remember to EUV thing one aren’t number because of dep etch that remove and steps. mean, will

So, at every node, is for power have they but even performance important power, the And cost. and customers drive XD is with thing to definitely material. more and innovation and helps, scaling the important area performance most in

So, if instance, are you performance. that power like being inflections in are look customers at improvements a materials there many and node NX as for adopted drive

new surface from new material, different C minus XXX of have treatments. to number there metal going implant a have advanced XXX, steps We gate epi we steps, cold degree hot and

share have new process solutions. momentum etch and good control steps our in increasing We’re in

I four I do higher is many the about needs is that But adoption talked those prepare times that for and So, this customers What new come volume industry early EUV say, of see I’ve what what this as also will playbook. will us. now you a is believe right ramps.

customers. stronger with We ever than we've have and deeper had engagements

So, well-positioned. really positions Relative that well. to us we’re NX,

add, We deep of really I also have we leading-edge the with technology when thing future engagements in customers for logic the EUV NX and about foundry. drive to just talk and power the majority nodes. is adoption, would And performance EUV on are last and

got materials; that’s about us. of market market sensors, that’s the you’ve that’s for the power opportunity XX% devices, half driven have by You image which specialty nodes, memory also great are

to and great the our forward. the of going power And customers logic we’re in opportunities. position XX% edge So, performance with is really really about foundry we leading drive that scaling. market see to XD about And in best and addition

Thank you.

question Sankar Our is next Cowen. from from Krish

open. now is line Your

on [ph] behalf Steve This is calling Krish. of

China. you your Gary, one business and of local your or control any other have on was I vendors -- in as trade ramp is Semi effects Systems pushout sourcing fully one I from given and of that customers, perhaps in spillover schedules tension, focus one, some as DRAM any seen your well? relates tools to increased terms there ongoing First as whether the China, if in it’s the of that even it could, -- your customers any tensions if by customers appreciate also Chinese Chinese control export from China or on wondering -- trade U.S.

Yes. Thanks for question. the

from China, So, in relative usual as see to our today, like region. customers mostly it feels what business the with we

semi China display. for multinational We’re and very with XX well-positioned domestic customers. been in We've years, relationships and in deep across China very

of on China. bit little color a Just

We in IoT, in expect we’re Within on sensors, China we a then, investment types see global position and down of business China logic in with focused in expect with in domestic equipment be ‘XX. foundry nodes, China foundry forecast. that logic be also In China. our domestic to And line versus we’re memory we on year-over-year And for trailing spending Display and gain going both domestic, we see great spending, wafer those overall down multinational higher devices. versus down, China ‘XX will fab to share. Display our

how a we’re relationship teams, great feel have strong China, in about and super positioned we position good going forward. strong overall, So, Display, Semi Service,

millimeter could equipment ask XXX follow-up If quick demand. I on

in have see on expect about X-inch will I side help systems year? the globally this the initiatives to that AGS that think should talked fab or number specifically on wafer opportunities automotive benefits later And Thanks. those Is demand on focused IoT, of future. side? the we foundries equipment something

years, for very node in XXX general geometries the last is Thanks and same. The been also for millimeter strong have Steve. the trailing demand profiling equipment question, couple of the

going chip X sensors being are said, and XX outlook wafer I you demand We are transistor you to forward. say as nanometer equipment that X are And get architectures at the times remains nodes. would are the the strong. the designed for significant AI Like XX at XXX continue to need out to that healthy also nanometer IoT high a expect performance. driving going nodes mature proliferating those But deliver market same the node, into node, millimeter and at they nanometer. count demand mature those the new there of

is highly AGS type From node our silicon well the of like our capable that standpoint, part segment market. strong. XXX at financial dynamic experiencing services, segment. fact we trialing XXX XX for we’re to nodes the report I millimeter continues equipment millimeter reporting the as designs So, nanometers, new and a of think getting reporting of same be bodes

you. Thank

question from next UBS. Timothy Arcuri from Our is

Your line now is open.

questions. Dan, in first the one had I gross like two sort lower is, I revenue, $X it’s looking guess, about you guidance, margins same doing on the XX.X; were of mid-XXXX. as at I’m billion the

over kind coming why Is Thanks. gross gains because that lot So, I’m revenue my have on that incremental a I period. dropping not wondering side? are the really first the a question of is of And through follow-up. is, just margin services then,

Tim. Thanks,

quarter. going margin from about to quarter a they component; there is levels we of well product between factors. will is to and function number revenue aggregate and an As There is segments gross as mix activity overall historically, the be vary segments then talked a factory, of as mix our in within

a industry. we to quarter, take compare QX, when favorably peak the it ago, we profiling look As year to guide relative we’re peers in a our about our at into

profiling question, is a the think and we that follow-up industry, a Company the so, in gross Tim. job doing about good a And parameters favorably peers peak environment, I you relative given to in we that influence think margin given we’re comparison. the And difficult talked had

yes, the model. in understand to just trying And did. I’m the change I

annualized I before think think, X.XX billion six WFE. some feeling months that roughly you ago at I would you said maybe WFE fell was or the XX off, do

sort even even annualized. XX, a sort year probably But a of roughly at above we’re right, of say we’re or at on that you’re bit -- X.XX based if you’re XX. the guidance, We’re a XX you little

you of XX% where number. roughly big below pretty changed. thought, so sort I’m wondering, just what’s that's So, Thanks.

one lot that customers, So, is per I the earnings quarter, And then, what by shape us going space, since smartphones we’ve an we you in above another GPU, up to seen here November noted be to company continues see. the XXXX the that and share a with XXXX, was cryptocurrency weak. and would $X.XX. In like what and end in bit share one give pre-announcements we would a

display. levels high year-over-year the teens Gary mid in XXXX. So, layer in now we've and is down if WFE on below what basis, we said, down spending semi to in customer you clearly, a And saw spend taken

XXXX. they do proactive with foundry will were supply the So, my in balance logic inventories than not to be way expectation earnings in is, taking lower get are in I the is the But, that customers like down space. surprisingly work steps demand, memory both and

XXXX the I into quite as setup So, being good. see

Arya Bank of Vivek Our next America. from question from is

now Your line open. is

and a question. classification A

you mix more versus I the around us transactional Dan, clarification, AGS. some hoping subscription On the could give color in was

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over with the it then subscription for to and Yes. start Thanks question. question I'll Dan. the turn

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for the to So, customers. us, over definitely it for good and it’s for turn next And good Dan question. our I'll also

there as and decades, in you part XXXX. our the of their XXX of to capacity, is couple I look XXX then, of overall a both to bit and perspective next systems. the in of a customers second question, we way come back saw course at X% was automation go operating decade efficient percentage on as a revenue about were footprint became the customers to semiconductor in you your peak look longer-term and all investing at and about it. a our consolidated millimeter of around down couple of XXX XX%. of because and revenues factory And over in Vivek, XXXX, And cut it This more take the a millimeter it of the ways semiconductor think WFE we Yes. If a WFE percentage was as systems

years on the now all has system, that XXXX, XX% in see side, our that environment to is to we a we roadmap, WFE come elevated we’re XXX demand, XXX side the customers efficiency where and in those memory the foundry to from have In gone not way in characterized the through intensity inventories logic way down. levels as both supply very as well market the managing see disciplined inventory the end gains meet XX%. on millimeters Now an their worked since millimeter last few like

good this the baseline think think think below up shipping down. happening XXXX. inventories for year But, market come do a I what happens to is this set year forms we don't demand I these it's end true so, because And what's as

you. Thank

Our next ‎Morgan question Stanley. comes from from Joe Moore

is line now Your open.

to spending -- going what's kick What business effort, talk of it being the gating sovereign of still take it's foundry ready, technology of think being down of is function a the comment memory desire players that to to a made follow the large the build do market being spaces, to it and function it behind and factor of is production up seen a you environment, money. sort creating has starting little to bit oriented. number business to grow? you that start spending wanted seems new There to about bit we’ve and a that amounts be of I on quite a China about

XD difficult. decades had NAND customers in from of now. technology, have extremely transitioning I deep is the XD think, Memory you I mean, right technology, difficult tremendous can very that terms see of to And scaling DRAM XD those certainly experience, talent, Companies ramp NAND. is experience, difficulty

type just many it takes experienced set. that lot skill also many, a So, the different technology you’ll need types time of of And to build base. across of talent

-- trailing is of again of spending type to any we you edge IoT, we definitely China rational continue on is take the talent. develop that of cost going foundry sensors, is if China. And the be in see China bit, a competitiveness growth going to will logic spending to edge incrementally said spend years lot more a the there the before but in tremendous So, before area, for see time in the meantime, what leading technology, to to it’s you again that's terms And look develop in of there in in the And XXXX. ramping the technologies. at

we hockey see technology. talent years going and the to again, So, as increases said but to we before, a stick. build see we It’s take many don't

have I for think time more two operator, we questions. And Joe. Thanks,

Thank you.

from Ho question Our Stifel. Patrick next is from

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nodes basis about At time, new X going of other as same more cobalt business will forward some seeing commentary for on for for the shrink implementation, foundry? edge XX, following even and on a we’re segments to processes Materials edge near your its you discuss maybe edge EUV increasing intensity Applied segment Gary, call, the up the materials foundry and particularly new class increases a of just term. specifically the to X leading leading board. little in and conference brought stuff and that interconnects with Can this on capital you’ve EUV being made you continue logic see the these for litho nanometers, intensity leading for like

Yes. Thanks, Patrick.

to are improvements. are is now the performance, ways customers, our expect every grown We if place all look And Materials. do our shrinking share part area see, NX are industry, said they continue pattern on power, that to scaling techniques As right grow, over earlier Applied for patterning I across years. patterns still patterning to then to we've in revenue before the the some of we placement you XD really grow where of that; of significantly whole those gate surface last interfaces several also treatment power performance, NX, materials, talked one getting very the driving said will location cost. are earlier And about the they very, that and is I -- I implant, driving things, of difficult. for epi, tell for the you, technologies. certainly to part we've in and

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drive is I people more X,XXXx technologies huge in platform a how that a and of performance, combination Applied integrated be power of prime example improvement where the So, I’ve has forward. advantage. of terms significant scaling given The these current on think leakage a materials a will solutions example going and path a requires in of

the are we’re focused those on. areas So,

focus different and regular creates We with conversations all us really, meet have leaders. that's companies. number of the a of for big a basis opportunity. And with many a I the deep on R&D

you. Thank

is from Quinn question Company. Bolton last Needham and Our from

open. now is line Your

look wanted to script, today, your the which the segments share at about you in gaining just supply. comments. in I to Obviously, ready -- the of you those is sort yet talked the gains? follow just bottom. compete share you on you market flat to for what up EUV towards hurt But, shift second expectations are if still Gary, are Are mix question the in share call not then, you And segments?

-- bottom you Just signs to side? for looking are the before you're curious, what on call ready semiconductor the

Yes.

while calling the And the think indicators down we coming that we come semiconductor see the bottom, if part we of we've like would those down. conversations, got seeing, conversations customers. lead of were the we and an On the materializes, looking some see. we're change year, that we in see to lead at to be that would scenario of indicators the contemplating, with currently I And back if again, And XXXX faster the back trend still lines is that than we’re level inventory stability, what rising, think and that benefit ongoing ASP cycle positive into deep I in we’re all greatly utilizations good look will environment. half the that elevated

going are about areas changing inflection-focused It's focused playbook we’re we’ve times about that driving share the Those doing the There in where opportunities. innovation. big competing. we’re XD compete question, we’re is is And I talked well there But market the think, TAM on. expansion are certain in There areas are areas not we’re more on no to very scaling. all areas. to forward. many certainly question

And we’re new we’re new So, playbook. specialty that of image whether investments also memory logic, nodes, devices, very enable focused power that like it's are on. and those new that major on dependent in advanced products all innovation. areas technologies, CMOS, all scaling in those sensors areas new are or structures materials They driving

big for a focus we it us, great see opportunity. is and that's So, a

close before up? it Thanks, Any Dan, thoughts, Quinn. Okay. we last

Sure, Thanks. Mike.

Just thoughts. of quick couple a

know you want years ahead. that structural very is environment to we growth WFE that good feel the about challenging, in while I the the we First, see

So, to do going things that of right we’re value the the Company. the today, increase

new in see We're drive that growth investing. in will the about going new while we new to we’re winning, the inflections organization is invest years play spend are we still capabilities. This We in out throughout discipline know coming. going and to products winning

customers, transparent; our got to a positive you will going lead though less Gary be we've continue conversations to bottom. seeing on to the Morgan coming some the we to temptation based our conference stay and available be close little and call On of forward we’re will that we’re of to continue even I indicators we at the in to up resist to Stanley you. the weeks. Second, other throughout to though the we’re see both look rest there, many point, to two many do events I’ll than customers, with going What going we year.

the go let's Mike, ahead and Okay. close call.

us on the continued everybody is Dan. Pacific Thanks, we’d of in Time. Thank And available website today. p.m. our for joining be thank by replay call great. interest for X to like going Applied Okay, The your you Materials. to

participation thank This the gentlemen, today’s program. and Ladies your for concludes conference. you in

disconnect. now may You