Applied Materials (AMAT) 19 May 222022 Q2 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.

thank earnings joining call. and of second everyone, XXXX fiscal afternoon, you Applied's for quarter Good

Joining and Hill, Officer. CEO; are and me Gary Brice our Dickerson, Chief our President Financial

measures. call call to and and risks GAAP Reconciliations contained to uncertainties our X-K in uncertainties Form materials, Information that financial with actual recent you on like includes filings concerning are our of today's and I'd in XX-Q cause Applied's to begin, statements, which release IR most at we available the earnings to Today's are press also that Before in SEC. quarterly is found today's which measures are appliedmaterials.com. results contains website page could the forward-looking non-GAAP subject the and remind differ. earnings our risks

And join lithography. logic technology will to in XX% over to to by the introduce I'd our presentations road Dickerson. maps integration one begin, will industry calendar introduce to I now at product Master Q&A. developments Gary of like We We'll our wiring resistance challenges o'clock Pacific the that density to a detail its Time. you'll distribution backside you experts translate targets. increase next EUV solve scaling. IMS XXth, networks for new hybrid the X you same week hope heterogeneous up and new have power turn today inflections we bonding at announcement. can from We'll the host solutions We'll and these growth how Before Applied and to call on that build and May Thursday, for chip Class

story. Demand fulfill I second to stronger two-part and to industry as growing Thank issues. industry's of unprecedented of demand fiscal you, while constrained never been a continue would global has set semiconductors supply summarize this ongoing Materials chain quarter Mike. navigate ability XXXX for the The an remains by or broader Applied semiconductor challenges. Applied's

priority meet March, this and supply the shutdowns capacity we our impacting topics. I'll of team more and to offset prepared remarks, around in online. number creatively and component is our quickly of Today, doing only commitment key supply. for as to to and our recognize February COVID-related quarter. of small disrupted a successfully suppliers one and work In needs. These are further bring our bottlenecks stretched be revenue the million to would hard key April $XXX During ultimately chain delayed are progress my our customers' across already possible some suppliers, number resolved I to in work three industry everything who the like cover global shutdowns

we and the First, the coming see situation supply months. evolving how over this

him initial our the and experience unique we on markets, more brings a Second, rich why color with at landscape and believe Materials some been view provide performance have delighted of of opportunities third, financial eight for this the impressions. time the near-term industry's capabilities the together long-term and And and sustainable. Applied our and differentiated that, will this Brice and our company. After roadmap remains demand that environment leadership strong for create industry. us weeks, his Brice we're board. and broad of on our share Applied for team critical to to and has He deep

the is challenges present Let near-term. biggest our address. we of to are supply to hard multiple of The equation, me with the continues which supply begin that the situation side working area in focus

the that Our go as certain shortages key into other of parts tools. as are components our of silicon subsystems well issues

sites, their to We in alternative shipments, system merging ways qualifying whatever at in to our are deliver resources customers to Applied to chain with investing accelerate it supply sending modules for doing takes creative from including customers working supplier parts, sites. our

services the enabled In fast their start-up equipment addition, it qualification we're of and fabs. track to collaborating once at using technology with our arrives customers

a shipment customer's high you the factory, map to our a install starting and the tools tool time line, ending first production the if reference, qualify time months. with typical out For factory volume can from for wafer in the take and production of out with

We we building time are engagements our stronger. seeing A solutions strong challenges down for support ramp to our partnering consequence near-term positive customer Not acceleration suppliers to becoming the services with cut industry of more we growth is to pull robust much are are that that current also new overcome only years. valuable constraints, supplier coming significantly. our over are

addressing we scarcity, are the of labor in customers, performance. costs Applied's incurring financial near-term adding and in needs deliveries our our impacting part factories that additional As on expediting we field, by focus the are

are resolved issues abate. transitory capture, long-term cost We're including improve actions will effective and taking also headwinds solutions, adjustments. we As to value implement price

The to positive. remains side Turning demand the clear. the for our of picture outlook is equation, XXXX

growing and assessment. and be longer mitigated focus give ship and demand us The We believe key are than in several strong issues see much currently On primary the would $XXX past. booked, the XXXX. year. securing unconstrained able being this or our factors for XXXX. supply how full supply is have equipment plan we customers higher will and There now fab this wafer is visibility more backlog. our are and The billion is more. both this build the The industry orders customers be for term can than question remaining confidence a be quickly We to large how in a additional providing XXXX for basis, detailed that actually

this ever. Materials seen installed record; as before. industry existing utilization new by all very Applied arrive installed starting capacity fab as fabs, even almost newly content and to second, analytics, our high continues is on tools on customer are comes demand online. Based XX is years which we not and of end First, have as than silicon growth they team for are being Essentially, in driven highest quarter for utilization third, applications; new up capacity the by service grow, faster soon customers at

where As to than XXXX, the communications, over adoption IoT, foundry/logic XXXX. WFE most make silicon. significantly And demand composition consideration equipment will also of spending with continue electric and electronics of grown think unit, we more more total we more $XXX the the several and example customers. sustainable average this about we take the expect now as fab advanced consuming almost these nodes relatively vehicles. between as spending. broad-based production years, will is by per global has past and The for markets. much investments. applications twice silicon split power and investment demand automotive, the content in are ICAPS, evenly we edge up wafer the grow sustainability, is into One automotive, of This to In XX% see ICAPS sensors

example Another RF and is battery-powered more in edge innovation a materials by process efficiency an phone applications a has XG content than handset. XG structures that power and driving extreme steps. and layers is enabled The in is and for XX% need increase

application-specific ever, applications. products. more specific the we've with XX years, longer systems meeting a cost for chiplet packaging we needs and integration use also new introduced as focused innovation are for past over sustainable than ICAPS the customers ICAPS advanced power, the and optimal heterogeneous nodes, new where in an for each One support are system. five demand ICAPS implant, developed on node example performance is chip Over and these term, for designers can

sits before single-digit and of will top market within remains $X.X challenges add eight decades $X and the priority another it consensus period. a near-term will even $X.X increase is sight over long-term the six better navigating to there's remain the we words, years. revenues increasing, to of decade. are rate about expect would the While technology opportunities. a We compound path of now today, high semiconductor Applied took complexity trillion industry than the we bigger we the today's where from annual the losing equipment at that That growth are level further clear within other more industry our not Because next we that represent today. where In five ecosystem. intensity feel It's picture within or annual to reach trillion a Materials end trillion

a inflections PPACt We spending, in market. within faster more deliver market of As materials future shifting available engineering, in grow and Then than the that industry road WFE improvements technology our performance, described by equipment or the time. cost over enabled result, line to the will major will as are dollars power overall devices playbook. semiconductor map semiconductor

the are While same: the playbook, pillars, and technology components of Within to new advanced from transition of timing. map inflections XD and master new materials, to in different new is new Applied companies the XD the version of recent portfolio the that ways technology. have emerging FinFET solutions their clear which industry's described architectures, value be five quantified class, these are of broadest structures, the terms to structure. can road transistor has At of new shrink a each we our gate-all-around, enable PPACt next-generation own packaging. fundamental impact,

inflection, total almost new Based Contact are X-nanometer the to and tool more that class expect areas both our about customers, for gate-all-around we in master of month, the Between XX%. in on shipments and the positions, by increase metalization to integration they and more is X contact the record talk than develop node, our XX%. XD our networks. XX%, of our expect next And the focus next than transistor backside including our materials of X-nanometer terms end expanding share growing points. grows and more structures, year. total new market power by than chip we'll timing, product as innovations. wiring available market and portfolio With available interconnect major are distribution available at steps ramping we for of start our In market

being are meeting to We'll For approximately year our added process triple. investor opportunity the early track revenue expected interconnect to packaging. provide on and double of our Today, we At faster, layers, update revenue revenue we're XXXX more we XX% than expect believe packaging an our on share served momentum in winning even advanced our we XXXX. also to ago, year goal steps a and between market. our hit one XXXX packaging by said, we

using results in delivered are and this and delivering record equipment, year-on-year. capturing service both advanced We management our the benefits Beyond supply parts see from revenue value constraints customers XX% up and Facing record more proprietary our in with services. utilization, AGS as quarter, seeing reflected are significant we fab

anticipate Before I world, the is products supply quickly with rapidly ongoing by incremental fulfill hard over chain to important consumption of quarter. economically We making improvements strategically growing I'll to blocks Demand with building and in the the silicon. sustainable Today, in more strong, the remain ever. this challenges for summarize. services and near-term constrained will and hand up is than them our ability our Applied's world's broad-based. beginning Brice, the demand Semiconductors industry fourth the call are entire keep of model to working

Our number working capacity one priority industry suppliers and more with is collaboratively bring to customers continue to online.

visible to progress our although of by market term, incredibly for as in outgrow materials is enabling are exciting in it key portfolio solutions. making We not with road semiconductor we secular areas, results. see our the trends opportunities differentiated create yet opportunities the Longer Applied map engineering PPACt

Now, Brice. over to the hand call I'll

Thanks, Gary.

warm invested shared industry I've setting, want been a get customers included. Across business few share so in their up to operations And years dedication the to observations now. such being to almost mission for a I functions, working its for the people I'll thank R&D, every First, units, business speed. thrilled the manufacturing company new tangible quickly is of my Applied, in and to and The company's the be and me to its in have I'm far. and the Applied in team for helping Materials welcome. enthusiasm XX

my semiconductor We of and like and most global economic became engine the knew advanced For the career, technology growth clockwork all of almost productivity. playbook.

to making semiconductor because are rapid future, working and people semiconductor with collection problem, new the this and massive focuses many risk, lower concerned including create in using power analysis where cost. resources. enable and advances and is Applied the progress and in we map data the benefits a that exactly differentiation today, lower road has and consumption difficult materials innovations more less competitive we to all and on care, health playbook road traditional the will invest and energy playbook the But leverage and transportation growth fields, customers to and envision to at performance, need stalled, education, uncertain. fundamental Looking a are so map and we identify higher its new closely do

team So a of feels to it mission. great important be part and this this

Now my share impressions. I'll of three first

deliver hard ecosystem to its availability. relentlessly used flexible have is resolve way out been these of the global less First, chip has inspires almost quarter I'd we the daily my to schedules confidence time, team issues. that highly that component manufacturing focused. for with battle and The heavy the customers and make in-depth company smooth execution Over us semiconductor us a supply production to disruptions. working to in to understanding vulnerable teams The like will challenges end

Applied's confidence cost customer to well beyond in much technologies to just about Second, generations me realize drive today. capability performance, for how many are the gives roadmap power ability we on the is. When future. this continue And extends was didn't emerging and there the industry's into the I side, I talking

emphasize to investors the excellent hope key analyst future are ahead. call, operating on are many on And a the customers three, in and in capital very I'll and invested the industry more both Applied's performance, future. long-term. for increasing our intensity position, the efficient messages. the capacity we meet today's situation return to model with growth but of and growth the spending. excited short-term the and poised Applied's of demand see and provide Third, On to business and constrained, One, outlook near as in financial is supply we strong, and and I'm is you terms community, with highly our we capital. chain context I It's we an of three improves. great support work are in confident earnings Two,

Now, summarize QX I'll results.

which was XX% revenue of year-over-year. First, we generated billion, $X.XX up

exceeded To of because below year-over-year costs our $X.XX revenue met revenue XXX process our of during the infrastructure by We operating number R&D a as to and in material from a was the of if higher X% our you, flowed growth. into points earnings the suppliers. the QX points target due and Operating key We by spending. a We was share because the shipments had lockdown to input cash of percent back-end was would COVID the a benefiting constraints. flow margin occurred, been not in midpoint experiencing basis guidance grew year-over-year inventory. XX.X% billion, midpoint to increased per supply through million $XXX we $X.XX because have our resulted of X% Operating impact the operating region decreased to with Year-to-date, shutdowns and the were size down our guidance revenue year-over-year and as $X.XX, non-GAAP cash higher XX revenue is have guidance. non-GAAP XX.X% below COVID in year-over-year revenue declined basis due chain for of midpoint margin However, dollars of increased gross we in non-GAAP to period inventory XX%, profit shipments. raw which weighted our flow work in line historical performance. which we

repurchase million XX $X During paying the dividends. quarter, billion to and of company stock over $XXX returned shareholders, we $X.X million billion in deploying to shares

$X increase. stock dividend increased our marking the new dividend fifth X.X%, by consecutive announced we buyback billion quarter, a annual the and During authorization

summarize results. I'll segment our Next,

strong systems QX We orders semi and in generate continue both in AGS. to

continues have visibility XXXX and Our into grow beyond. customers our to and backlog from we extending

systems to revenue spending. due year-over-year. is but running customer record lengths in COVID grew growing to regions Our particularly extraordinary expectation XX% and below about guidance, and semi went factories teams In by the margin delivered manufacturing our program the high X% points supplier revenue declined lockdowns. exceeded impacted utilization, operating at basis shutdowns. We segment which AGS, our to increases in XX% year-over-year year-over-year, revenue keep R&D our Semi XXX was costs systems to COVID-related non-GAAP due difficult

ability Applied our demonstrates nature to growth of sequential We AGS operating basis points recurring non-GAAP the by business. XX year-over-year. QX of deliver Services in also The margin increased

AGS XX% a parts the comes affecting And of equipment. As grow reminder, and disruptions around fab this AGS software. enabled wafer strong revenue from services, despite supply mix services chain to

progress. brings us the customers tool. us Our which revenue of Applied subscription three share by predictable strategy use our the subscription QX. In gives per metrics our QX, some and grew portion we revenue, over times in gauge under last generates grew I'll to the is base to of the business, year-over-year our rate our installed services over closer to year-over-year Materials XX% XX,XXX. quarter by average systems The tenure agreements to from grew X.X XX%. to and over renewal systems. agreement of years was And X.X subscription is XX,XXX The X% years grow the

Next, TVs. year-over-year. by for products basis X% non-GAAP at our increased in we display was midpoint like margin consumer operating our up and revenue guidance, of been revenue there year-over-year. points Recently, smartphones, XXX PCs demand the has weakness however, And

softened. to has curtailing with spending adjustments a our demand display in outlook environment. revenue demand the equipment As and we making And result, are our line

We goal maintaining operating of even the with will levels healthy margin. manage cash the and lower of business revenue at flow

Next, opportunity. I'll customers working our visibility. horizons using are longer growth receiving we address much for are how long-term preparing term Today, and we longer better with planning our

We are chain to capacity. output. our longer-term remove and and bottlenecks increase capacity adding are our to partners R&D And with we incremental increase sites and working closely supply at efficiency manufacturing

efforts, and As deeper expect achieve capability with a more with these result we strategic to robust along of manufacturing chain a and suppliers. customers our relationships supply

guidance QX. our Now I'll turn to for

We of plus million. billion minus $XXX wider to $X.XX a expect with revenue or range be

we be during expect supply the and the or that $X.XX, We semi expect is of $X.XX persist $X.XX. a this minus quarter. EPS to assumes constraints non-GAAP demand around systems plus Within chain outlook, well-below number billion, will revenue

of up expect OpEx non-GAAP XX%, $X.XX non-GAAP XX% project rate $X.XX and of billion $XXX We year-over-year gross revenue XX%. of of tax a non-GAAP billion, display and margin AGS We revenue of million.

QX. beyond outlook on Finally, our margin I'll comment gross

Over QX number reductions, of that we recovers, manufacturing to expect to improvements to higher include adjustments, cost logistics reengineering. chain abate increase beginning number a our product as a the transitory costs a through of in actions richer and volumes gradually supply product pricing and ship and time, expect We mix. margins gross

committed are our to And Q&A. are term. in summary, is long very strengthen gross strategic strong profitable and achieving in the please short the In we margin returns. longer-term our and begin targets. and We Mike, growth relationships further fully the to term outlook investing demand shareholder customer our drive

us help on one can, Brice. Thanks, many we ask people as question To just reach today's call. please as

begin. session. If to we’ll re-queue in the and question, back to you our please please another best you later have do let's Operator, come

Thank you. Evercore. [Operator Instructions] Our with first from Muse comes C.J. question

may You proceed.

in smoothing love lead you the talked the question evolving this question. rising Good curious, Yes. permanently? engagements customers? as your is, the work constraints prepared are remarks, like, given I Thank vision supply shipment about with I'm sounds upfront I you. time with from Thank customers there. And and It a well? how your your commitments given how evolving? taking commitments, to from payments you mean build to subsystem guess this would for thoughts contracts plans. longer And And these and hear a and are your out mean backlog, afternoon. suppliers does does key

A toward in about commitments Great. we suppliers our working improve and horizon customers. later get with Starting of commitments chain on with from C.J., and supply the equation, question. tirelessly levels growing thanks demand. the WFE the through the year that to and the been see to the constraints the supply output for supply question entire to the we've side

critical We’ve commitment is of made that's on aperture as to customers, the talked to instead by they’ve the as We're are our how to to lockdowns start frustrated and working us. quarter we've we've working our situation look And being past about output intending open But backlog, described. customers. front level If of get terms at expect about not QX. how of progress. at our are described backlog these this increasing. side, the increase we've in components definitely about We're in in. we've our as deliveries change been. more We And we get of begin the gradually think we to orders problems right most solved. commitment highest we even the On lots of supply down the talked that the we the

QX and past QX, expect we gradually revenue to increase think on. we that into point As from

and from changes the improving tons no supply on commits. of we've customer with open, progress So get We'll made the as our the work suppliers. chain performance we

of is this customers. that, it's better have A with is our I Hi, contracts add their do visibility, What customers relative than Gary. longer-term C.J., customer to Yes. would the ever. lot

XXXX out supply unfortunately so, visibility say booking we the our is delivery But significantly better. relative And all improve we're as the this into have than customers. chain further at time. But way that visibility point actually, to said, we've ever times is one. would conversations seen. And for Brice That's our we're priority to in customers driving I with definitely

you, Thank very much.

Thanks, C.J.

Thank you.

question Our Research. Stacy Bernstein from next comes with Rasgon

You may proceed.

orders. to I about questions. Hi, for the guys. Thanks want backlog taking my ask in

by shipped like to order recognize tools for point? already revenue? Is So represented talked this I'm you much backlog backlog now, you where in it backlog know has guess, and revenue of I about modules. how strong. How trying shipping much it something levels baked is would They're is waiting that the really just final that how right I and the said that you're that you in at maybe missing is record have past? actually at get to obviously, much actually backlog like been the have tools. modules the or And some your –

the Thank question. Yeah. you for

the think the question, continuing first to we're not we've actually grow. seen backlog – I

something have point, and been to last we're the backlog not But We're aperture a we celebrating. a work supplying consistent the and backlog And at at that's looking still this So more two forward. quarters. dynamic it's the that's begin quarters rate been than of open for down. looking faster

exactly won't we you've dynamic. go, got from what overhang the quarter-to-quarter specify As but far right as the is, the missing modules

parts one for those cannot tools recognize until complete missing we shipping are of the or the number a investors. and accountants We revenue that tools. We are two

are all tools complete incomplete. So customer. as work quarter, some There the we shipped work through of at are to we that we've the

get out and guidance next components. us our also not think for revenue It's all next look those. orders overly the the into they'll When And how the critical supply quarter. next carefully help so that mapped our chain in I from to Those the the start as as wouldn't at we go about for overhang. a recognized significant a into we quarter quarter, have it necessarily the head We haven't we we but does exist. to question. field and quarter for when the close think need Thanks supplies of not about and that significant, it's the complete the the you it machines overhang,

Got it. you. Thank

you. Thank

with next question Vivek from Our comes Arya America. Bank of

You may proceed.

my taking for question. Thanks

dramatically quantified given million. That's if give delta I for think of fiscal and we in WFE I something number, was your Is terms QX. doesn't the of improve QX? we instead supply in a about of it the closer think output $XXX you this heard floor systems. us how $XX for you for QX past situation even different halfway kind demand $XXX And hoping to semi are the in for should I or that, year, billion assuming is your mark that year? billion, correctly could it

Thanks Yeah. the question, for Vivek.

and for significant in last we of toward affected lockdowns It of April. month us for on the the our goes last think the or the – that's on quarter of number. million, the We that if on So the $XXX the quarter ownership specifically right a builds overhang have approximately the – in in the the hit of quarter. the – That quarter. number month

on shipping lanes we guidance in be about forecasting components that to our relying out think put we QX. the intelligence. we exceeded not of continue continue that from it had And to have we've to continue all world. factories, mapped supplier factories, And I bump So want we for area to and would us. the are is, the And and have think chain what a to happened. again, communicate our here supply open into QX, the key we staffed of to definitely the When reopen,

We have the plans. ramp

We plans. have the product

So built on that. our forecast is

guidance on done about we've our would when the delta for I say So QX, best that, side. you think the

Our capability guidance demand than much is our and for our higher QX.

we'll for of the So, we then incremental see you piece, forecast say up. resolves how saying you for today to the And And on that's WFE, there quarter. chain if the also why expect speed that's QX, we'll running what by supply improvements, same last the at metered, in is that see this a on going we're we is and expect the rate. back pick we're will, sort

can look last the quarters. running rate. at been sort few We've our at same of You

You know We're that running today's at billion WFE. the year last a was in a speed from perspective. $XX XXs today, low WFE probably

we the orders. know, floor get as continue we you to So, that's say would because

a long have We backlog.

it's So, can Thanks the just timeframe. at much in QX this it point, how crank QX, we for the question. chains up open as supply the

you. Thank

Lipacis comes question Jefferies. next Our with from Mark

may You proceed.

gap that like the I'm situation does up What just that you out? aperture out. on you future? that the just I up suppliers. the could opening on not does that mechanically Like supply? does you're to of that how you Gary, helping manifest Thank wondering, you that also building you an I the Hi. And ability were used was Thanks question. how And have my your demand your with you help taking open And with, kind spell avoid familiar I And expression the could for with about the and have talked between right have in my suppliers, when understanding to wondering you in our so now you was is your -- said believe you. said in that if Gary, suppliers aperture you suppliers relationship that spell to and relationships suppliers. supply? you Brice, then get tighter supply. mean building tighter subsystems in close you

a the aperture Mark. Thanks concept I'll This on comment is Brice. open make quick the there. just

position, So, increased thinking $XXX you our what million if quarter-over-quarter. look at I'm our is inventory inventory

today. our we're large. very capacity higher operating backlog Our is where than And high, is

to poised chains is and the And factories ramp grow we're supply Shanghai, components We to need key do keep quickly. perspective, to my what in need from we open the So the going. get operating. get on supply the chain

if hose place just just nozzle to open think think so inventory prepared actually was can the of that something it about there you see execute faster the you So, the position we're looking like a concept best up a or I that, forward. we or And our in execute. is what can that aperture

probably is on supply doing in the the biggest differently now visibility thing the chain. relationships, Mark, our we're that Yes. multi-tier supplier

to focus So, our never chain. this situation, components and to supply previous chips had that in are we really deep on

to still have very from So, frankly, those visibility gaps, customers support just and fast coming. now are and biggest close that we our those strong But again, gaps.

One situations of again, had from one known and in we would situation, our extending this were We're were would they have we I we that packaged lockdown happened in prior completed customers planning me big encouraging say -- on the that wafers COVID our those the to region. of into lockdown were is region. XXth, just And also what's But that the encountered March to horizons have those wafers engagements with going suppliers. we those that never with suppliers. that

focused units tremendous engineering of tremendous focus the horsepower our business supply chain. have within into with We different all

even factory. went for significantly the And that less on people back of of have our COVID in those it, So March can't you because last fundamental factories. today, bottlenecks with lockdown the actually weeks people suppliers again, we've for improvements And in in no made of over those see the some XX% But really some some several that XXth. than of started tremendous few on the months. suppliers

Mark, So making we joint progress as work quickly our great. for visibility engineering how have really, joint is uncertainty improvement. going just the There's the suppliers, gating the this horsepower doing. biggest dramatically and COVID us our problem with is it's is is the say, for really I been and I'd the incremental that right solving, all in appreciation problem support, now And in really really this been are Brice resolve of suppliers tremendous multi-tier said, solving. focus to focused lockdown, of we have that are terms The tremendous factor better. again

Very helpful. Thank you guys.

Thank you.

with from comes Krish next Your question Cowen. Sankar

proceed may You your with question.

theme And Gary, you've or It Thanks new last months been has my demand question, semi-cap a I semi supply has the the on question companies congrats, long time. hi. strong. like for big constrained that for for Yeah, been taking a for role. Gary. Brice, the so. picture from and been seems clearly and have nine

sake, Now slows let's argument's demand calendar for down assume in actually just say, XXXX.

that or mature Would be your you you. from Would Would be it would nodes? WFE where it impact be memory it Thank WFE Gary, first? So China? see else? experience, something

this Krish, and thanks for see take shot to anything. I'll comment. first at the It's add Gary Brice. if wants a

and hear orders thing I someone each The see in situation that to The the that joined more we we're quarter. situation and want case is first today getting more didn't early. say

Our backlog increasing. is

in customers' and Our utilization are this it calling utilization, us cetera. mentioned look up. entire equipment ICAPS, at all memory, et we customers levels. look of we about foundry, up. in calls telling And When across see the applications, in utilization his track overview. at we industry utilization, we've when us, in at speed in to speed our previous in record are we customers talked to calling And us And Gary

back way is you would wouldn't first We asked So question, would environment change think see new the place see the to where we orders. that get any we turned. if finding you my your

customers to that So not only new that they're the schedule actually a degree says orders getting adding a trying their such it. or orders thinking of different on to about fact reschedule our own, their we're high

starts second consumer we is it some of not there's seeing and discussion less place been be the may see The is, wafer would you demand, companies it it of place see having demand. But either. would we’re actually second there the

answer we're slowing any the down. getting of we those new directly, to So -- orders in it But would see be not signals.

that think seeing first not We're we that place would today. be I it. see the

the I CEOs this add that, with do I conversations tools is long-term with they with content the customers' the customers. cases, And multi-year in capacity of need meeting the have describing need thing customers. to relative some customers those what what are I've edge. qualify What incremental conversations space, numerous they many again, first priority customers. would really seen I that Gary. they And in supply. our those would and again, to in chip those different conversations past, have all that focus say of of a But is visibility, different contracts a of where the of lot innovation their in again, that's from on number for Yes. and multi-year agreements customers. really also I'm is agreements, and ICAPS leading And have Certainly, Krish, the they're with is the those

So in that in industry. I entire think career never seen the that's probably the biggest thing. I've my

Thanks, Gary. Thanks, Really appreciate Brice. it.

you. Thank

comes with Hari question Sachs. from Goldman Toshiya Our next

proceed. may You

for and some of ask the timing taking afternoon. guys both pricing, some Thank adjustments. of of you so you the question. wanted also much the the to the about scope Good talked about adjustments that I of Hi.

adjustment And up XXXX? the of Brice, from timing should for I maybe of impact guiding in pricing of pricing then into the if that dynamic, or QX And the Gary. pricing the fiscal we to and the tailwinds number? one adjustments, in margin QX On not, some some show you're expect guess, XX%. Any on gross embedded scope to fiscal fiscal

in primarily your As products, much where you. say, you have areas customers to are and, like these should expect Thank or receptive discussions competition, pricing process your you pricing customers, and more in the not we leadership have etch with in positive areas control? adjustments so

Thanks, Toshiya. with that. start I'll

communicate side to doing the So I'd pricing, the we cost first, that on offset to we're everything of can like equation. the

to think described XX% out and we work for traction It's with that tools in and materials company. And reduction improvements we include expense. across forward now, they can't bit guide, a more all the impact. things our of along get we So because we've being expedites that the we're pay. than those things the It's the we've model. along. we've gone of points headwind labor quarters got having our That's over overtime. and to It's go few and of the couple off last freight inputs. And higher as we And a the a QX. the efforts those some in cost right those margin it there's gross When grow as more get have little pricing does time mix over will

think we're solutions making of commodity for the with QX, about as in products. reductions of our and of So some supply improving logistics, some terms focused key finding more on reengineering chain, our projects improving we cost

QX, So over to coming on the then help and scope helping think very of do the increase the help I'll QX. cost on Gary is of bend that scope, we'll the the pricing those gradually and side I QX quarters, and see each And then let that. broad, you'll comment then on back are all us the And equation things that our side, and customers.

really on Yeah. is accelerating the and supply capacity with are is closing focused focus Toshiya, customers first the what Applied really between gap really and demand.

in bottleneck innovation what's technology, And mentioned, focus. power class, is you So one making headwinds biggest come way, and innovations want major that. us them value to key solve maybe and for has and master a that. the accelerate encourage And of industry. output can entire there's unique there. innovation The to bottlenecks by help we many also is technologies do understand wiring see to really But our then really thing, in and different industry number those Applied are as I obviously, would the the the other Brice driving differentiated everything creating in Toshiya, would of of the really and terms customers They a of pricing, for that biggest investments. value. Customers May I all performance. And the XX say chip entire that, many

things said, focused So not in on. limited that our those are are the it's of as customers terms Brice anyway, scope. And

Thanks, Gary.

you. Thank

with comes question next Sur JPMorgan. from Our Harlan

proceed. may You

Good afternoon. for taking my Thanks question.

have slower capacity disruptions the of much to to and all next for right, all how be XX% are memory, to that seems and close industry shortages in customers do XX% time industry? year this to words, you supply just the foundry NAND and capacity of delays to grow to this bit sense your And that you supply-demand impacting the guys output component semiconductor going year other of a and logic level and targeted your as result by expansion. in relative XX%? to In to through, is I to going with the It to had all supply is know, longer semi overall DRAM, the peers shipment this customer's good industry certain capacity team you Given are gap. gap. expand equipment XX% a industry targets? able if chain a all going expand will supply-demand or monitors a your then that large But by how think close plans

views. your get to wanted I So

one. on Brice. start This Harlan. Thanks, is I'll Yeah. that

metered the been So right has growth we do think perspective for this you're year sure. of the from

a open level earlier QX questions from And so of in if natural and running we one of I up things the QX. WFE the can speed about up be the think talked what kind and will versus we we're level

And as devices, horizon the across memory we're we markets, demand leading-edge the the markets, So ICAPS study components. industry. that's think a consistent it the – the the different a about and demand, behind described, would the raw perspective. happening cetera, we the When what's the I including all et growth area, way logic about all you've what edge from sustainability quarters think of demand end the see we see across few think is probably we is, we a

it beginning And XXXX. to demand is the cycle. into looks supply the it’s gives just this starting Gary forward we're as think mentioned chain So of at we confidence like over that meter the going to situation us look

as its to We industry have and to that underneath. that's high XXXX work up, ramp confidence on demand that XXXX continue real the even catching into backlog demand on we and through as will up work works the

much. very you Thank Helpful.

Thank you.

Our Fargo. next with Wells question comes Quatrochi from Joe

may You proceed.

the for taking thanks Yes, question.

And of assume quarter systems X,XXX over changed on this obviously lot the headcount. site. you've over a semi But period. or people really manufacturing revenue to straight think fourth that added is these I are hired I time hasn't your

of think absorption structure, next that putting magnitude to I we quarters? I cost adjustments do about we over as or through think think absorption the about margin So, margin the you're improvement the that about the price cost when in several how the guess relative the maybe

Yes. Thanks for question. the

react customer have to flow to hiring I And as and we think, meet we on isn't manufacturing this manufacturing supply. sort point first a you're that amount needs. all, perfect to less significant of hiring, have the there's predictable right as of the at of burst the inventory of in manufacturing

We and use the do number profile alternate products. have both working also of some actually reengineering that the of products. a we projects we're to for to improve the reengineering highlighted the parts our earlier call and in the those cost of And qualifying of

actually takes growth our helping that And then some -- personnel. personnel. we're trajectory. takes with continuing We're improve That also So, course, the situation. of of suppliers

perspective to the forward, an lots of roadmap. at the underway continue from projects we going innovation Looking WFE have

mix. So, in to the going ready environment to in we're that been forecasting. should overhead, with definitely again. to supply a continuing headwinds. on and material, growth one both gross fair from the back It's we've at as freight question last listed headwinds we inventory I the say that and constrained. it and gross point, on manufacturing path. And And the those of expedites, the problems solve margin them get We're and the perspective, margin. four but current environment, that we're is I'll a looking it's and whether capabilities. labor and cost just we're do And

strength look think of the at if that as our gross Thanks we one those you about in how those to want question. for margin. approximately components, against as So, looks equal

Very Thank you. helpful.

Thank you.

Our from next comes Timothy with UBS. Arcuri question

You may proceed.

rest the a through revenue I you can Thanks year. lot. shape of Brice, was if wondering the help us

had three off April You you of I billion, the that or some grow said that that mid-singles the months $X.XX said of the guided then. that calendar throughout to weren't there company But rest year. is know would this of level ago, you and revenue had kind

billion for that about off $X.XX October. and So, billion implied sort that baseline $X for of July

light $XXX at million July. coming for about we're that So, of

that that I'm months it the into in help question guess sort million maybe three I us sort shaped that mid-Xs? to is ago. asking given reshape you you the low so $XXX I the October just Thanks. is, to like had So, of October year of, just push can

find the suppliers' that billion, start enough quarter the the at carefully guide delivery quarter, we question, et how guide get for think Thanks chain to the the was our this are worked quickly cetera? wider about this factories about through to what slightly -- got for make supply -- we let's the we When Tim. get $X.XX a the the quarter, did have we've out the when we supply with will think range. for exact will dates factories lines open? quarter? early How Will we'll and restaff? When them through we -- So quickly

on to best recognize see we're schedule reopening based that accelerating that a continued and today. forecasting You'll is our intelligence

going we're we some will that So used have quarter, we because got demand. there. enter components forward think to to we've When on the risk all the inventory to those no next also satisfy inventory critical QX our

we when or gradually it QX. we're think is saying about larger QX, incrementally So than

don't reasons So of will QX. be up -- the It will in quickly won't guide thinking know the one of I on previous we opens supply think we depending it. metered yet like, is the chain discussion, what QX look how which

manufacturing We in the to have capability much faster. QX go

components have to go the inventory non-constrained We the faster. much on

makes demand the a perishable of us. lockdown And key that for And we continue say to and QX. components though for need will possibilities any if So range factories not in the progress I sense. there's just that last there's on thing, QX wide

chain. with just forward? for this QX where be It's As by the will are one that it push about would question. situation. you of you think think push questions, forward. going Nothing to Thanks in absolutely your parish will I the in we you supply metered

Thank you.

Thank you.

Moore next with Stanley. from comes Joe Our question Morgan

proceed. may You

Great. Thank you.

like business kind the growth? technology anything What's a that smartphone, Is going road? will to return display little smartphone. you're talk this looks down coming talked in about bit weakness tied just to double application down lead that of perspective from to this a about or track it quarter just digits in grow that year. You going to Can it to to -- an you business

This is will make and Joe. a the Thanks, there. comment Brice. maybe about long-term Gary I'll start

point. the demand change some this one have in the impact we consumer in where is this seen the from at So business place

PC to and for characterized the cetera. weakness definitely, the So next smartphone for quarters outlook been as few weakness display in what's in corresponding et and TV,

sure that amount been back the that and years for we returns few is past us some cash applications grow up. of up from what make pick doing back new deliver picks the delivering we've as and resizing to still of spending to demand the we're leave business perspective a ready so And can the the

is, see next been thing in make go will business. there still return I'll those be a as Last So investment. we it you'll will us forward good quarters and few number, investment say made largely on has revenue but most the that of our adjustments lower a be

customers to deliver to and execute able investments made. that have against we're been So

and good you for the of good sort leave perspective. applications. to cash a cash want of does it on business, our us Gary, it's new So flow ready new that's if And returns, demand comment? some

Yes. Joe, thanks question. the for

probably be our So resized -- been And made XX% as will down Brice year. where you double-digit, of roughly as down we've be spending. versus XX% about well have mentioned, this year, We've this said, we in really a lot investments.

know, very are we in cash market you high parts free discussed as share in think, our business. returning investor that committed, very, as of we've I we participate But the to we have this meeting, from flow the in.

of deliver looked market we flow in said, is And out now, lower would going. if be, as even terms really we don't right free able at today a say, XXXX, level. into Brice see cash we'll to where I similar so that strengthening

the flow thing business resizing is into similar another in be that's that to with deliver We able free that's larger will also synergy panels. to And leveraging for deposition of One really continue cash semiconductor technology us. progress. levels

look display there and at technology term. larger in sizes, already the is packaging that our substrate in position strong going to will road packaging map, advanced you longer If strengthen the

a of But technology see a in the that really over those could are don't next we up term, there OLED business. cash good Longer several synergies there. we market. It's step see quarters. flow that some back So barriers, once are solved, the free

you. Thank Great.

you. Thank

comes with Bank. Deutsche Our next from Ho question Sidney

may You proceed.

to you AGS all supplies your the for quarter, my you the My AGS? But what line. than XXX-millimeter constraints Can on And COVID anything touch impacting considering is, metrics in on low question. in Thanks growth better that lockdowns risk the the taking Can have there? disclosed you follow-up revenue talked XXXX. business, Great. the Thanks. the remarks. product upside? the double-digit expected. talk previously changed that services fiscal question in I you you came about prepared last for drove AGS about on suggested is And QX you may in Has appreciate

last operator, just our have Brice. you that And will Thanks for, question Yes. this be so know. we'll time

Okay. Thanks for the question. Yes.

question. the the On business, services for thanks

of more the services for better important format, advice I to shift provides grow and is think our plan that of the that's and business key year-over-year. recognize business did our technology, more know, customers it's it X%. And and grow more And strategy better lets them also subscription because investors XX% to it our and us quarter-over-quarter, been a probably capability. did part to it our

not the of and getting we see rest when give to resistant types, to ecosystem. the business, across really levels beta more XXX-millimeter, little business. we What it's about that utilization drove So a when And supply business up portfolio constraints changes think upside is different parts utilization way just rest across we and And the is the it's to There the record talk that that us of and was revenue, still across for the indicators low recurring set service ecosystem. we is the about. transactional that XX%, for about XX%, the components the business, XX% that in is drives high or all talked entire stronger that surprising bit And business. stronger. the the product a we element spares XXX-millimeter, that of the when that

the And COVID strength higher more on was quarter. have So last that's really you piece would that supply. had the where we that. but had to supply, we're in I working on lockdown, related We been the see even guess

look in forward. And we're question. first priority we So the have on have that served for for QX. we But working the as parts on business of we do Thanks could improving parts more think and us, it's business. stronger the the side been a would

Gary. this Sidney, Yeah. is

the in subscription things Just another growth our that's revenue, subscription of driving point, one services.

on are really increased customers focused output. Our

So have output. customers those services. of we don't and that have many have can shortages And you tell they're I chip very increasing management those are part services happy. that, They

our of time pull customer's. opportunities. We yield for I ramp driving headcount chip service the we acceleration my services, these way, is then That's And optimize another many services is one the good productivity remarks, tremendous have increase this thing from as managed increased to by And we're of some as months prepared our in for ramp, supporting output. other ramp and see to services, said customers. is

So every can to focused accelerate we drive is time the those everybody tools for that chip on week output, that.

So a the that increasing as chips our of these Again, can. subscription that's our really there are number are as percentage, they theme good everybody's in of subscription services on out increasing focused revenue. fast

Brice, closing would Thanks, like for Great. And you your to Gary. us thanks, today's Sidney. thoughts call. give

forward committed to improve want And our for say Gary improving San investors. model. strong, Thanks, York just at long-term Bernstein in We're be I'm the for BofA conference our Mike. weeks. everybody, demand, every two to our some today, supply everybody eager hard to sustainable. joining. to messages to and at And situation Thanks, that. our will We're Important joining. and in gross Thanks, in Absolutely. the committed Francisco day. conference very be meet of to I looking I'll working New margins

on joining call to interest like everybody Applied Materials. X:XX of replay and Brice, we'd thank today. available to Okay. thank continued for Time today. PM A by your going is the you, in And you for Thank website Pacific be our we'd like us to

conference today's Thank for concludes call. This Thank you. you participating.

You may now disconnect.