Applied Materials (AMAT) 19 Aug 222022 Q3 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 will now turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir.

everyone. afternoon, Good for Earnings you Third of Quarter And joining XXXX Call. Fiscal thank Applied’s

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

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

Class begin, plans calendar I Services X o’clock a host Pacific our May at five have from we XXth announcement. weeks Time. to Before Applied today Thursday, on Master

XX% model Gary business, the global team describe growth market will why our you the presentations the horizon join Q&A. give recurring you formula We hope revenue to XXXX our and like now, for Dickerson. the to services business And opportunity Services is and through truly explain of financial for AGS I’d call for of members over and turn We team beyond. our will

The record revenues. delivered new and collaboration the high our supply impact chain has here. at expect quarterly supply steady of challenges results we end mitigate we incremental between and Mike. required from you, an suppliers Resolving customers. Materials have teams, taking guidance fiscal our to improvements issues global are In beginning range our Applied levels Thank have to and quarter, third of been actions

to hard still than continues global this is and of is ability Demand stretched. chains supply for all our our to backlog higher Applied’s grow. it products results, fulfill remain yielding While work

are has customer’s that created our addition, environment in difficult very we relentless working margin overcome. In needs hard this headwinds focus to on meeting

of driving remarks are supply actions dynamics; and to our near-term progress. strategy, Brice, key improve more view key financial my focus. including and that, costs I markets prepared performance industry’s value cover will Applied and color today, our priorities reduce three capture, In term on second, the areas first, roadmap; We and of Materials will After outlook on third, provide and demand longer price our the in operational adjustments. topics;

large as Let field, wafer components emerging as in with shipping to and difficult near-term fab XXXX gaps to perspective systems spending supply, market. finished begin me overall the demand equipment on equipment well with our and the Due companies between partially precision. quantify is

is in best estimate that will range. the mid-$XX it land somewhere Our billion

of revenues the fiscal up midpoint For our If picture be our fourth year. wafer quarter expect to is Applied, we we for guidance, fab our clearer. equipment XX% approximately the use

ahead shaping view we the are As of look XXXX, to market. our there three major factors

First, capacity consumer memory to XXXX, than spending additions. is and in customers and electronics uncertainty expected PCs defer these lower to as in causes some weakness macro be

to first customers leading-edge leadership and inflections. Second, battling strong, be to major implement looks for with foundry/logic technology racing

are Third, inflections, capacity automation. spending solid, long-term securing ICAPS demand chip are They makers In and such plans. those of diverse driven are softness and and areas, as auto, because IoT, and consumer-centric investments that Auto customers, strength underpin seeing these markets, power to in These are and applications. industrial serve who macroeconomic electric communications, markets, sensor serve broad impacted be customers reporting continues large their weakness. which industrial by vehicles factors. agreements areas by capital are being

the resilient a our areas demand business in for if forecast be will the early too in market. than certain pullback of it’s XXXX, is While a past believe more to there provide we

remain to Applied quarters. next for several expect We supply constrained the

orders, of visibility backlog to substantial demand very our commitments own us and through longer and providing their a in addition, which buffer actions need. capacity provides with are fluctuations, customer’s term customers in-year to lock-in strategic working the they response in are We to

confident range mindful of our in of ability are well trends. we to are scenarios, a Although, perform market macroeconomic in the we current

As we for we something is programs operational while of industry. are R&D long-term fully the that and fund a the result, hiring, supply strategic slowing chains down capabilities Regionalization our support also ensuring growth. new

Washington, these accelerate enable role will the recognized build I create key many in economy to strategic am because wafer leaders of We chains platform equipment expect to positive for the late CHIPS the XXXX. The for happy the States need tailwind next-generation a Europe investments. to week, and in new CHIPS nature innovation the the was and the see about higher Last more United supply potential from critical small ecosystems. accelerate see to provide Act government of Asia, signing and excited leaders technologies. acted companies with development degree the and I that to and starting incentives automotive am also U.S., met of fab upon. in of officials for across D.C. in the in overall semiconductor play remains capacity. a their this of the Act will time-bound these high-velocity we semiconductors investments the a I for spending and in and being a and flexible certainty Also, theme commercialization resilient government

long-term compound high further direction revenues reach In to industry $X rate semiconductor look from roadmap technology the Applied. Consensus the the the the becoming that before growth future, our and complex. I within trillion of I the That feel the parallel, of today. is very can single-digit annual is increasingly translates to opportunities a about industry at end As decade. positive

where fab at transistors, Then increase roadmap investment result, As inflections, dollars the of our materials Materials including the market semi to the materials and equipment over this more by period. integration intensity, technology new or heterogeneous power equipment leader networks, and we gate-all-around is are time. expect engineering, distribution ratio Applied wafer interconnect chiplets, major available and to a level remain and chips over this enabled backside to for revenues today’s contact, of shifts

a of a resistance important under significant portfolio. Class, product a IMS critically breakthrough adjacent solutions with volume technology us of to of about steps technology new breadth unique single an this and Applied smaller and resistance low nodes. Integrated and of part we upon these The these dollar portfolio capabilities. Solutions where and that us engineer, pure barrier built In Co-optimized co-optimize number We recent a system these wiring Master the our solutions outperform contact to new This IMS, talked and have manufacturing. highest to approach positions and enabling provides our opportunities. invested for is that is for in migrate these differentiated optimize ahead steps our in ability foundry/logic vacuum or to materials. customer’s where transition of challenges. growing contacts strength combination are of improvements Materials integrate process we optimize contact as metal solutions Material and provides technologies process strategy technology of create represent free increasingly value steps conventional we for are our customers This that are address solutions, process inflections to becoming integrated as a revenue multibillion tungsten-only

record have secured leading quarters, Over all the at of multiple two customers. tool past we positions

our inspection is Our solutions Process ability also to Control in business. and co-optimize record and performance novel Diagnostics metrology materials driving with engineering

is in platforms. to almost welcome Picosun ICAPS be broad-based eBeam a with to acquisition. delighted new our inspection with tuck-in also Applied optical in ALD to revenues and PDC adoption up Metrology are talented Materials our expect XXXX the quarter, of We batch XX% family. portfolio a the technology we fiscal we team and customer their wafer In strengthened leader

and AGS XX to supply X% portion equipment businesses transactional long-term agreements of chain revenues quarterly record demonstrate under continues Installed headwinds Turning to for base constraints. The Service, due over service past the our grew AGS delivered months. to despite tools strength. XXX-millimeter spares subscription

for renewal rate continues to these be XX%. Our running strong is and currently at agreements

summarize. the I I over quickly Brice, Before call hand will to

deliver We us our revenue gradual in for see which the supply improvements are enabled chain, to beginning quarter. to record

for is several some timing their We and to next gap. the than actions macroeconomic the remain we investments. causing close adjust quarters are the expect to to of The changing to continuing environment demand supply drive customers higher

will our thanks uniquely However, industry-wide term for investment strategic in large more capacity. be backlog, enabling we customers confident resilient, a technology, longer to are regional strong pull our business visibility and that from our

that Our growth opportunities and Applied semiconductor are long-term core as of inflections the view by wafer enabled fab multiple Materials. create materials higher. for At the unchanged structurally engineering remains trends our market in time, outsized capabilities parallel technology large drive markets the same equipment secular

Now, hand Brice. to will the call over I

ongoing supply our constraints chain like begin by Thank thank to shortages. our and output, unexpected increase despite you, helping I’d teams for to our partners you Gary. and to saying

supply with schedules. and daily factory adjusting to operated almost in Our agility, logistics teams changes

We to increase demand not output shortages our of and our the meeting chain top manufacturing are remains priority. still all our customer’s supply solving

I Before points. I’d QX four emphasize our like summarize to results,

remains First, our overall healthy. demand

remained added map. the to a factory market weakness road Specifically, of for capacity investments. have market four and the additions. exposure have and strength pull have semiconductor There and strong to new increased, orders overall pockets remains in our high customers factory QX, utilization our in long-term backlog projects are there reschedule are asked affected and their same technology us we customers of strong At areas customer of number broad time, the

the quarter, mentioned. as chain supply in Second, our improved Gary incrementally

our supply our to added chain have improve investments to and We to resolve teams output. inventory in talent and overall significant bottlenecks

partially experiencing long-term unfavorable are Third, we being targets. Today, gross still costs offset we of the to remain are committed pricing by adjustments. mix, margin and which higher our effects

our improve we innovation. improvements engineering manufacturing logistics quarters, to mix, coming gross fourth, volumes, the confident in are and margins growth product costs. over for underlying materials the forecasted pricing process trajectory driven industry’s expect incrementally We capabilities and by in unique And

have While we by headcount and we XX% invested growth, year-to-date fully enabling R&D customer’s slowing in increased our roadmaps. our remain around are spending our

quarter-on-quarter. R&D quarter-on-quarter, increased Non-GAAP of was basis chain Turning grew our we basis in $X.XX operating the additions and billion, delivered added the by XX%, margin XX we and headcount our XX primarily of $X.XX $X.XX of Non-GAAP of results, and driven engineering. QX target supply XX.X%, billion, our to record. record earnings in up as lower guidance matched $XX quarter-on-quarter margin which is previous which revenue declined Non-GAAP Non-GAAP points declined $X.XX resources. spending is and operating million end gross margin gross points on range. high right to

The delivered AGS freight, Systems revenue record a million shipments, Segment basis quarter-on-quarter. offset quarterly or points the quarter-on-quarter. up and great expedite labor due job higher Turning margin to XXX declined million, operating X% by materials, The adjustments. X% non-GAAP $XX XX.X% to $XXX team team growing partially price did by maximizing costs, growing to revenue, segments. Semi sequentially

transactional in to and while the XX.X% parts growth deliver margin We chain continued in minute up about operating will healthy AGS constrained revenue, subscription slightly shortages was few observations a share growth and quarter-over-quarter. year-over-year to XXX-millimeter systems. AGS. I supply take our a non-GAAP

have are host opportunity Master installed and of and our our AGS long-term more strategy toward key our will the XXXX where model. service base, million excellent we to an Class ahead case. high a month, around Next tracking you financial the million QX $XXX intensity our revenue of progress about recurring Services to making plan our is equipment $XXX revenue. agreements. case three ahead exited around The of will of AGS our We increase growth learn drivers service base

capital addition, cash excellent In business the and is flow. produces light Services

of market Display the its portion Moving the is to due on weaker consumer now, exposure high economy. to to

in spending market During with lowered the quarter, the we line environment. current

The revenue or contributed XX%. million which declined $XX Display profit, of by down operating $XXX million. sequentially or business million Our XX% $XX to non-GAAP $XX by million is

cash company cash our to shareholders, was quarter, which dividends. flow we cash deploying $X.XX $XXX billion We paying stock to repurchase and million to of or shares revenue. million flow during flows, returned our XX% $X.XX of operating free billion of generated X.X Turning billion $X in XX% of the

flow two and team. $X.XX a also we We billion flow, $X.X software of Year-to-date, returned cash billion acquired nearly ALD $XXX portfolio for talented billion deployed operating over and to We our around cash free produced in with have shareholders. in acquisitions. Picosun, and strategic we million $X simulation our addition expanded the

I for guidance Now QX. will our share

We expect to billion to revenue increase $XXX million. plus $X.XX or minus

or plus Semi $X this be year-over-year. $X.XX or we up outlook, to revenue billion XX% increase to expect to EPS non-GAAP Within expect $X.XX. minus Systems We

and with revenue limitations year-over-year, We $X.XX growth Services Display or XXX-millimeter revenue increase ongoing around healthy million. continued systems to to decline supply in expect and $XXX X% AGS to chain up parts. billion in transactional should

We expect slightly expenses to increase to billion. non-GAAP expect margin incrementally we XX.X%. our non-GAAP gross to $X.XX And to increase operating

XX.X%. of rate tax a modeling are We

in position current the we our summarize the to Before I’d begin Q&A, company’s environment. like

We consumer continues continue some to been their moderate areas grow. advanced We of see will backlog of our weak additions by capacity very in our strong and to spending. customer in technology customers believe all markets have pull for impacted that our

resilient Applied’s the However, reasons. grown foundry/logic have periods business past particularly in to exposure expect strong I One to is three approximately equipment for that than market, wafer become investments, be to two-thirds has of which spending. more we in fab technology

of have to Second quarters customer’s are multiple quarters. backlog to road the is supply over that maps essential expect several we our technology we products for and to continue increase next that

billion software. Third, services has recurring And Mike, now, of in business that $X.X demand Services size XX% and and to revenue the our please generates Q&A. from parts, grown over for begin

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

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

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

is line open. Your

Thanks be part and How Hi. me are about record How to gross around lead and light question. around of kind supply your guess as higher of production the would thinking about are thinking customers Thanks. times, love takes out of of of hear that the internal for I tool extended throughout moving XXXX that? you into some backlog Yeah. assume, of you time, taking question for a easing I production margins the and that puts plans. in then constraints? thoughts would driving, timing and

Brice. It’s C.J. afternoon, Good

et environment, timing yeah, constraints -- and demand on supply the cetera. Just versus question good

what done just explain where weeks. our cycle XXXX the our customers. we through reconfirmed demand We me of all couple we a let So have of last went with

gives customer changes, best and base want that to drops, and Something they environment, chance adds, constrained lets or it our base in basis supply to make we balance want per a twice in make customer they do to on the once regular the quarter if they the signal a us to make a want across way.

completed but all we significantly we have have of three-plus supply, chain. next above of when the reconfirmed And is demand for confidence got And our ability to -- just we and quarters, we significantly So a as supply, have our about the number comments, that in invested just that. are what see but we there our that think supply we still we comments then the in initial that. changes, said is XXXX

chain supply So suppliers. we are suppliers working in problems chain at and our to identify issues both and and our direct solve loosen supply the the secondary

is on as So the work our several expectation that, for to continued we next continue been quarters backlog, which grow. you has will increase has to that output highlighted, and --

is XX, we zero guess, Hey, that lockdown supply been, the us supply I chain, chain. to relative overall set what also March C.J., COVID relative certainly, Gary. this back have in Shanghai, to

see make to are forward. being continuing We right it now I just progress. going incremental incremental And we -- still

margins. investments, making can, true we same on manpower, the everything incremental, think doing is are I thing adding and it’s but We more

quarter supply into that’s incremental direction throughout from think think really see incremental for the more chain said we is I margins progress both were XXXX. we and improvement where would for I last and XXXX that, going and we

Thank you.

Thank you.

comes Our Mark from next Lipacis Jefferies. of question

Your line is open.

you I guess used come say, is, what orders. guys the that, when if are the I adjusting of the could oh, the Question, your I Gary, help think do us you and adjusting customers mechanics the question have we around expression maybe in, timing understand you

do push take push either the just the two at you to some this you end it listen, we you them allocated point, anymore, back or you do or them to, of push do like, a So go you able quarter and got say, can’t to there, for back -- take the that have slot line. you are or

back, provide that color just you. process? how -- people about could mechanics about quarter, seeing you is is are on If what some Thank and pushing two it it guys manage many is you you real-time quarters operationally a like ground, the how the are

changes Yeah. that’s with they comment. and just test if times, I Mark. quick comment, beneficial we When the backlog a lot to going go I know make to change. is a will of customers, want mutually out a make the Gary

tool, have supply exceeding taking interested customer the We demand point. the that’s because another in this is at

is So to thing try those do changes. first we accommodate the

We that the stay cetera. customers the are not have, on schedule to et trying demand they

So point And try was we the customer really of have flexible. that and to be the out and demand retesting base. going that all the of we re-verifying across

that. So, may to Gary, to want add you

No.

again, racing logic, I the inflections. that’s see right also, inflections. And of we face is I now, everyone our think are in performance challenge new customers exactly you to Mark, Again, really right. major high think, especially driving many these technology

So tremendous ICAPS, demand automotive, we those customers in industrial from just have automation.

we demand. and And work and as outcome with able memory to are we weaker, customers manage to Brice with unfortunately, supply for the come right not So, and to try up them said, us. to is that the for

Very helpful. you. Thank

you. Thank

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

is line open. Your

I going be things, One, mentioned said perspective, over from I next believe, demand of should Gary, think, think, then increasing up. views to said ICAPS, am memory the But right? on the you you could I kind reconcile then down, are leading-edge but be be you I quarters. Brice, you trying to two capacity have mixed a that, several

than view you are we year environment the that about view? you the going in a se, looking of at into Just question baseline how very giving on supply? are on specific I have you plan but next -- the industry based you know next based given are thinking different is, guidance kind terms see, so to XX% or down my to spending of that is it So increase variety, flat do not some what per garden year’s of we X%,

It’s Brice. Vivek. Hi,

on those be side the several than our the for is reconcile next quarters, I three-plus thing that, first higher clear two, think demand far is to to from supply. So

on to that the supply So can that expectation do are best like, next over concentrate, we is stay we supply we several above going do across we that’s our and where to will increasing our say, period. our demand and time will quarters

we our it And think call above about on the in point before on too think a that like said, a some said or very it’s products and is. about there’s the are That’s schedule. someone are some we far we areas to that if build So I it’s make perspective line to areas are that under also is are we have. change where you that are such sure, demand, issues. still that strong if having asking market, But serving market weakness, the so early processes you XXXX, if different of XXXX. for out would the customer schedule they need what are inventory supply on Other

think more or puts year. takes continue the for will we signal us next those So less and into demand

Okay.

Thank you.

Bernstein. of Our question from Rasgon comes next Stacy

open. line Your is

Question, you separately backlog. I on wondering foundry/logic was if comment your and your could memory

the backlog coming but assume backlog if it still increasing is given I you memory is So down supply. are weaker, sounds exceeding well still overall like is demand your it’s

backlog case foundry it think increasing the like is more a how is of that? is about So shrinking memory or of your do pieces than I your different backlog like

is in side. down at fair on has book. been overall. backlog say strongest adds reductions don’t look increasing, memory the Brice. Stacy. component We total terms and strongest backlog right, of This side I the I to of is the -- there to the think I’d Exactly that’s it. But that in the Yeah. and way know our yeah, know order Definitely, is actually foundry/logic that’s is memory definitely, orders if good. a

customers the on have outweighing ICAPS an overall reduced memory, positive side. but increase and backlog customers on the of are foundry/logic driving Some some

is Gary. Hey, Stacy. This

increasing percentage overall So of fab equipment. also an foundry/logic is wafer the

two-thirds percentages, at look foundry/logic is of total around you wafer if So really fab equipment. the

a that the the investments with see And announcements ICAPS in rates so, for high seen certainly, long-term making companies with investments. in competitiveness capacity. companies significant performance, making you of you have ICAPS, lot

increasing that the see of overall certainly, the percentage So, foundry/logic in you in market.

meet Brice still, what and strong not and think asking I that also said are certainly, backlog unfortunately, is demand. that, yeah, we question, you what foundry/logic your So, to able had

it. That’s Thank helpful Got guys. you.

you. Thank

comes Atif question of from Malik next Our Citi.

is line open. Your

your can your is Brice, First Brice. outlook to if Systems Display or sub-XX-nanometer. question for talked total October you some about your peers quarter Did that remind of China had U.S. us expanding July versus impact China what of restrictions sales, and silicon?

Yeah. Atif. Thanks,

that. did on get same we all, the did as of peers notice our First

So China our our to it impact that and for customers, is not sub-XX-nanometer in very July small shipments and quarter, quarter October included did and that’s guidance.

to always in all that have. And clear. we rules is that trade on sure changes with work will part as the So full are we compliance we make

but nothing the periods. October in So, Display or And then you significant July question… could repeat

it. will Yeah. take I

Yeah.

Atif, thank the for question.

does from our going not So exact of customers we business come and But of have the and then to break the Display global amount customers. domestic Display, China. out you are the China most in our revenue

So different you businesses. that’s those of the and Systems all and have -- for Service

the going I not say by So our have and of to this which that semi that, trailing those different the percentages, break is in about nodes. is far, out business would I of what talked think foundry/logic on ICAPS, is China but before, majority all we

you. helps. Thank That

you. Thank

Our next Sankar Krish question of comes Cowen. from

is open. line Your

the color And think Services, how there about revenue about XX% environment down could Brice, total say, you and leverage EPS, next including to if think WFE AMAT’s very Semi about you and how if think more the is Brice, strong backlog? say in overall any WFE importantly, and year, give how given operating be we should revenues, down, would XX%? that helpful? to was

Thanks, Krish. Sure.

will base, as So you of the if about have, and be if kind plus It’s and network a I said, backlog. transactional, want in doesn’t on XXX% or we that if, entire would a do large the what just question driven the and if goes service time backlog which utilization the grows a raising across do installed and serving ship goes investors fluctuate down, to serving our Services output first But that expect factory our agreements quarters, business the our backlog. remind or down thing to spares point subscription that we you are for next tool also the WFE. we our revenue working we with first every thing, just the investors, three that. WFE you off We remind correlate made is across

we portion have I lower that are just of revenue people dampen a So from to would WFE, that would thinking that our weakness highlight tends any for that model.

to you So see lower it whatever look change reacted points probably on the and side, would the and proxy spending performance change on to a relatively the can would be point dampened overall flat. the business where was I a in then revenue of it Services down on look the for And modeling environment, margin signal purposes, WFE which business. equipment piece controlled, was a at at you or at XXXX X as can how would year where XXXX, look X

which were think sort doing I is what if in the implement a you of would in that company if, be of same our those sort reaction would able to environment forecast. the again be

Really a Thanks appreciate lot, it. Got it. Brice.

Thank you.

you. Thank

Our comes next Goldman Sachs. question from Toshiya Hari,

open. is line Your

Hi. Good Gary, some industry, your was much. implications so for business. afternoon. and more you of the made CHIPS on but Thanks comments expand the broader could importantly, the hoping you the I Act regarding

late think you tailwind remarks a it I or stated your expect a in starting in to small you minor prepared tailwind that XXXX. be

CHIPS is, then, from it having build the So guess And where I customers since sort U.S., Taiwan sum your how of a how zero has of if isn’t could kind First would a capacity sort changed you sort that? the for take super it game you that happened of Taiwan Thank in have from if quantify respond are foundry sum, that of of isn’t you helpful. to conversations to you and just subtract more Act would the with the has in for main you. that XXXX of net-net, but big us importantly, you in zero investors kind get decides a and to sort that question the what over all, of gone I through? be XXXX, could U.S.?

Yeah. Thank you, Toshiya.

then it really see So positive industry. and CHIPS wafer very asked, say, at would That’s States And relative the in small and tailwind really equipment just a Act, Science for am United to the the positive you timing-wise on to and question late overall as starting I overall first, the to look I’d fab pass spending that Act I investment CHIPS XXXX. law. become the happy and

look announced ones have so at investments, it’s at kinds those really been investments, you the logic, some in things. least If the that far, performance of ICAPS high

So incrementally positive as space I late Those be mentioned fab so today is bound. going time and also and wafer foundry/logic that’s equipment earlier, to in XXXX into that again, of two-thirds beyond. investments are going

you If made. time certain there investments be frames and are is funding incentives, the at available look to the have where

locations, there start-up some of So they as move those new I those a is incremental positive. degree Service of that them creates costs and efficiency, an fabs and business, they higher especially certainty. would talked to many to that’s as incremental our say, start as companies, less I and for have

and beyond, depends it’s tailwind. a factory factories, small huge if less overall Toshiya, the you period I bigger those a Over but some which incremental those a many, think see -- definitely really of would at until of they and WFE, I is more up. efficient So time, factories as than it of on really investments those in as XXXX spending starting all a of are But, think, factory scale smaller so time. scale it’s efficiency grand in them a there not for will they be years, will look out, tailwind, many you of it take the degree build again, late

Thanks much. so Got it.

Thank you.

of JPMorgan. Harlan comes from question Our next Sur

open. is line Your

Maybe Brice But that have expand for year, afternoon. question. you environment for a some Master taking Good the positive on comments upcoming wanted buffers. WFE Thanks your weaker my of plug mean I I is next in on this to a event had services. several Class.

down the during X% of there’s one, year biggest believe it’s CAGR and over business that not downturns, think, time. and that’s I like down was decline sort XX% only that that years, your been I over historically of cycles, WFE one period to does fact, think stable Services AGS a pretty four revenue in past I driven XX the

of by, sales, may ensure will let’s confidence contracts on Services assume the outside next doing of WFE driving year? continued is doing environment. So XXX-millimeter which subscription if Services that the annuity team WFE equipment down fall say, be growth like What is partially in I and to a outperformance your offset weakness in weak WFE off

on, are for business Thanks that installed Harlan. customers plus the every that we the highlighted, base that and and focused it to the agreements you network two we got we base for installed yield how time that Yes. services really as we that that the transactional I tool. as through question, the capabilities. drivers a then insights serve optimize to what ship on spares support our to you offer hinted subscription there, then, And to of If are with have grows both across for spares optimize ability and how have for kind

It they make the on potentially from valuable the own. to think offerings ramp doing intelligence customer. to and that higher more more tools I So ecosystem really across them reach our Applied whole what portfolio has we yields the don’t of allows have service that that is their increasing of are quickly, benefit it

are gives I able grows, last right, the being on correlated WFE subscription base And analysis think XXX% agreements. that’s to with that you to have is, as installed will not grow our area the for what focus we company same and… be continue piece and that’s just the the confidence us that we

Right.

and in WFE … the the in those and for need business, and or in factories about -- exist the if it’s underlying services the even of as changes weakness rest the the factories. in intelligence utilization that there’s revenue really

So key I those are drivers. think the

Class yeah. The month. next has -- for about Master up -- thing XX just people I helped here you Harlan, Thanks years, years. think the also, coming reminding XX us one if about that so talked you

If doubled time think subscription -- versus that you over agreements of we our go percentage close back to I transactional. period,

agreements we the have and years. increased to a two -- certainly So half of and those length

that… still So more it’s that and being growing, And that business so makes higher agreements I much think of resilient. that percentage

Yeah.

everybody what’s managed where all we have also parts the producing services. perspective, the chip Brice things highlighted about. is versus more along talked that focused good services, chips with competing with … like our also environment has in, available value people for a out, relative really it Things from in available where part been the to shortages, transactional have

for really think value these highlight I agreements subscription helped the term longer of that’s our customers.

this is Mike… Harlan, And

for Thanks Yeah. Yeah. the insight.

Yeah. Hey, Harlan. It’s Mike.

think for myself but Master in next XX, May heard the last which earlier course. I the timing say I five I I It’s weeks today, that is date. XXnd, It’s September right from the think gave of Class.

thank So you.

you. Thank Yeah.

you. Thank

Quatrochi Joe from Fargo. comes question Wells of next Our

is line open. Your

You also there in about in there’s seeing some investments, talked well. strength especially foundry/logic leading-edge, consumer -- still but as driven demand

change capacity your but not So, I seen still there, a change their are customers that place looking maybe terms you in the of like put guess, have roadmaps? to technology in

there’s for the changes. been way about we Thanks think, highlighted Yeah. I than question, that is yes, our first The I all, have Joe. would level, think demand supply higher Yeah. of it,

that came above down the what the foundry think schedules to demand need are able they that products. still processes I for customer we the we leading-edge building is, on think hit a think building supply are be out But a total, quarters. it’s little for and are able I bit, way customers to their they in those for products it about to but

technology really And on product a will in about volumes you equipment you years the market when those thinking place. So is they place. for that right, putting the two the are building then what what to node you committed from for you fairly in a two fluctuate now, products. But now years is if are logic are from are are market getting depending that

environment, demand. simple macroeconomic just and quarter’s lowering current looking not the it’s GDP your at as as So

to about demand But are have the all and year really for have thinking the right. that dynamics function. forward You looking the think We what of the -- just that’s retested about. all customers you dynamics next

Thank you.

Thank you.

question comes UBS. Our Arcuri of next from Timothy

Your line open. is

be such different the concentration that that’s your pushes not a foundry Is such customers there’s foundry/logic it some in as I out, different. at this signals that what’s are time I am are mentioned back sounds works. are business? that up what going something you to also means, are as compete confident trying and Around signals but how capacity you of neighbor was happening of pushing hold one memory getting out something what’s and other it even some hand, others it is from there’s to this the to Is that that on obviously commitments like time going usually leading-edge customers. wondering around, kind long-term that to because because there’s get you and mixed foundry these time, this around of hearing mixed and

on you to just am can your help call I past So on that? if wondering knowledge

Sure, Tim.

first customers perspective. signals the to discussion they a the than comments, a expanded definitely or horizon capacity. giving giving on our band them. of we have all second, the and the before They will us capacity in a some operate with planning are two longer of us us within a basically customers giving certain opportunity sense with Just is from that are And also that engage promise planning

to a and plan from bit we So perspective what high they are giving us we have confidence that’s before. additional than a should what done different confidence for little

Tim. Hey, would helping that I in say one is other This timeframe. Gary. is us this thing

Master If goes steps. go new you the XX Gate-all-around, from for there’s -- new the the X dollars materials interconnect investment node, you in upcoming structures. I go, you think, that have of as more talked relative going X-nanometer to at per Wiring more X about and the we the dollars Class. are to for to look inflections, wafer up,

look to a power about is distribution, relative they technologies have at customers on lower seven integrated platform one significant that’s our the resistance Integrated in Solutions by if going and Backside you power inflection. Material recently, talked XX%. We what one of distribution Backside these combine wiring technology them increase power another significant performance that structures future to their materials for nodes. one to said

XX% on reduce backside features of the some can wafer. of up the the placing area the without structures the by shrinking to You

types that investment again, up technologies us. going in for our relative of that’s the relative helping us, is contribution and So, and thing that’s another

Thanks, both.

you. Thank

Our next Morgan Stanley. from Joseph comes of question Moore

is line open. Your

you. Thank

being true of and we more of isolation, that’s past, the terms have -- if this for should XXXX, In similar pessimistic than you think memory been think or you going would have we memory in in think too to that sort been be guess, is downturn down you if and I you say forward similarly resilient that looks would the view Thanks. a WFE do about why to that XXXX we is that?

Thanks, Joe.

have quarter. I say to more point position -- we The would backlog of about, it or even memory last would the customers. are that resilient it memory I still be I though may philosophy play thought but would first, are, And that, than that I significant backlog the resilient to that, first only. was like memory part, quarters of for We have guess, talked we weaker haven’t reasons

So the second that of service that we than the et one we we a customers the to strength from is reasons are we in business And the that applies resilient are dynamic and backlog periods. resilient of perspective, are are other that Services the is the reasons thinking is cetera. and is spares also one same we more saying and customers overall that memory more

is margin just be for for XXXX piece, back else, make if it past how that a larger and was company. the more implying a in spending then it So go to to I we last that but in good for were And resilient in proxy We I would P&L behave the wasn’t would been weaker won’t has gross also the than and to environment. the WFE. XXXX, everybody changes relative is think sure that

So that. just to clarify

Yeah. Joe, this is Gary.

or changed? it’s part you that longer There’s back percentage Again, And significant I foundry/logic happening this back see is something that their if we higher timeframe. what’s we that logic term agreements tracking and our two-thirds. for that are timeframe. and market. it of in leadership say what’s customers race the performance in what’s customers with significantly that of -- than the high changed the Certainly, investments was in think, same in customers announcing see that’s didn’t and around

and was market. the the think strength I relative to definitely time than XXXX relative there foundry/logic than, in equipment So overall different the it is certainly the fab percentage wafer frame

you. Thank Okay.

Thank you.

of Ho Deutsche from comes Sidney question Bank. next Our

Your line open. is

look my question. points My came at it on, the For taking quarter-over-quarter. from another question is revenue China, China. question When on about percentage X down I

quarter. that walk talk you new in great? domestic Maybe multinationals answering think of a demand know Can more can no I be Chinese peers. than the your restriction dynamics versus have customers there, about us memory, I previous question, from Thanks. export the through July about the talked and some strength that’s versus in foundry you will you impact the the

is Yeah. Brice. This Sidney. Thanks,

are downside I most customers element. is and relates business just just made think as one rest look We general no activity. forward, We that’s to on think ins in largely investments weaker. and think outs one are quarter the normal in signal specific the Display specific primary driver on so is of real change the there driver change observation. the The the that we probably our China don’t China, the there. The any schedule, being ICAPS market, is

deliveries a little smaller outs quarter. to the ins was prior It a of overall than just and happened the in quarter be So different-sized having it’s the that quarter.

reiterate, the the to downs Display the of then general before. just So just no change, we of change the no and to trade and -- ups on would because rest point like we for and rules change said

Thank Okay. you.

you. Thank

comes Needham from Quinn next Our of Bolton & Company. question

line open. Your is

just is the it or of one the across taking it talk rescheduling, ask quick are The you slot tool just and and Really they you is DRAM or out quarters DRAM memory NAND pushing and you. entirely foundry/logic the on happening is you delivery are The memory by clarification memory a reallocating the number is, a just then clarification and side? of these question. when dates out customers? that canceling that about on reschedules, equally customers to some are Thank predominantly question

Okay. Quinn, thanks.

clarification, and are there’s so there changes. are all basically both happening the there with customers, there’s On there’s events adds, drops schedule -- all three

are more adds think on there’s in than memory, short-term the drops I there window. the

So plenty adds those are cancels and are and of some even there memory. reschedules are there for

the was memory clarifies, overall, last would cycle-over-cycle lower it So it’s a mix. in cycle. is than what But, say, I hope memory we that

And it’s DRAM across NAND? equally and

have I think off part the specify that. would I don’t top. That don’t we

So answer that can’t I one.

you. Thank Understood.

Yeah.

Thank you.

of Ho question next Stifel. Our comes Patrick from

open. is line Your

For answered. have you, questions the been industry lot Gary, a of since

a driver it, of You the are ICAPS seeing Process terms it advanced penetration big Control Process talked Control your particularly the side, of in average Obviously, any entirely nodes? is or foundry/logic is growth about your the in in above advanced business on business. node you within

are performance and breakdown is Hi, in we XX% strong would Patrick. almost is high company. in I any it’s markets, up overall part certainly, very is different question. other XX% the the for fiscal ICAPS -- market. in for say, of the of the our than No. in XXXX. XXXX very to up ICAPS for the Thanks strong logic What stronger relative PDC

last growth and us, Although, memory business we in The at much pretty our for are thing eBeam seeing biggest are definitely ICAPS. you doubled. year, if PDC in we seeing also growth look

also then very, So integration strong vertical our and we very have business and imaging optics, with technologies in forward. into resolution also that electron XXXX is leadership and going

inflections. strength optical has believe market to tie incremental strong are really and we PDC outperform overall We inspection in overall and the inspection seeing a also in optical will we PPACt

gate-all-around our those and look processes these big some enables us to of better at other you inflections, in map capability than out faster when imaging fingerprints or else. unique anyone So

synergy strong So our real but that really strong synergy, rest not PDC, with of only portfolio. semi do we see the growth in

you. Thank

for more Great. one question, time Operator, And we Thanks. have please.

Thank you.

from comes Mehdi Hosseini. question next Our

is Your open. line

had WFE be shift a your needed you to what you guide that demand? the follow-ups, question, two if revenue would all Asking components to

That’s since million. the supply constraints a say, quarters Since But level. think, that it’s that by we Mehdi. to did difficult quarters good predict. us been ago It’s several have been probably impacted $XXX I at two question, we

more forward. would say going would supply had curve zero higher be on we and we that if a constraints I So and

Thank about you. the or think inventory, how of finished system I and mix finished should WIP And your of goods? --

across number, -- balanced relatively across ecosystem. inventory right entire the the But it’s both, inventory, looking the for the changes the at Well, sorry, I am increase now…

Yeah.

… here’s here’s relatively dynamically. happening I happening what’s -- what’s balanced, mean on

is available we shows raw coming We inventory trying and more chain the parts build are inventory much goods, customers tools in do finished growing. XX% or we inventory of have what’s awaiting are that that is more supply nearly issues and have to that also part and and one solve up or or our are in raw in are are material. shipped to or to close that as happening WIP a our And on complete we to able being complete material

all So I think it’s relatively components. across those balanced

by out memory is in factor a driving days customers not the So in push your of inventory? increase

not. Absolutely Yeah.

relative We are market. total to the in still underserved

we cancels another when tool a tool to that moving for at So next customer or any point, will customer quarters several those to plus. expect parts delays the be and and a dynamic that this we be inventory the

Thank you. for Thanks detail.

perspective Yeah. And we just -- emphasize everybody, is yes, to our that’s on for what output.

We to supply. raising the will than demand ship that on the higher be expect able based be our we to being output current for and several quarters next

give like a Okay. your you summary? would question. to for And Thanks, Brice, Mehdi, us

Yeah. Absolutely.

strength So we we demand story about to have us in quarters is backlog. have output the and as and customer multiple meet of The for weakness is of increase talked areas our market. as possible. Job one quickly takes, overall and puts our

in gross and do this, revenue we our margin quarters. will we coming incrementally increase As both

our Sachs Gary road to and on Goldman and we York continue power, and customers. to focus events. I at conferences. Francisco, confident performance maps of you look and just cost before long-term and will in at seeing the New in We growth I Evercore to the the in upcoming semi will Citi the market are the conference to investments in supply the that, chain, R&D the working San of for be and especially our forward be are I many to area increase of drive

Okay. close. please Mike,

Applied of the going continued you be X our us of Materials. Pacific on like available today. today the be going to replay like website Time on call A by call joining for o’clock A in and your -- everybody we interest for thank thank to is would I’d to our to website available replay is

you participating. and you. today’s this Thank for conclude gentlemen, conference. Thank Ladies all does

You disconnect. now may