Applied Materials (AMAT) 18 Nov 222022 Q4 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’d now turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir.

thank Earnings joining Call. and of Fourth 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

is and our begin, I'd like plans of Group. over calendar stay introduction, Keith that I eBeam a.m. Pacific a hold join presenter, Process Time. with an turn invitation And Group XX Wells, X:XX tuned new the Dickerson. Imaging Vice an have webcast we at and to announcement. product our Please to call to to Before General Applied for Control Manager and on December President Wednesday, technology Gary who

meet navigating Applied are to customers' would possible the team everything commitment while Thank COVID-related performance. I year a with work environment. our our restrictions, Throughout like recognize and doing challenging and our finish who chain delivered geopolitical record Materials you, macroeconomic execution to supply to Mike. needs. global of hard suppliers and in quarterly demonstrated has XXXX, strong a our solid fiscal the shortages, company

in and XXXX with months. begin for I'll unprecedented describing As of latest review the Brice in our our been of After this and give growth performance past XX remarks year-end focus. technology color the of others priorities over will by the before for on areas sector, prepared key XXXX provide industry operational set financial an is a outlook Like progress our challenges. our quick longer-term performance Applied. and many our more thesis I'll then that, my have call, performance and our shaped

priority top demand. we few progress, made supply to next fully continue QX, us supply from and has chain Our been gaps customer over constraints In we prevented incremental meeting quarters. that expect mitigating closing the

As been addressing causes and well our scalable has a with chain suppliers. as building relationships more finding short-term creative stronger and team solutions, supply strategic resilient, our root

are manufacturing, chain and strengthening addition, In own logistics our supply we management.

is of still these business, in for expanding are for supply considerably. constraints chain metal While I'm limited and supply differentiated pleased This customer The QX. are foundry/logic demand largest across our our have business in we deposition chain enable grew a is lines the wiring, recent and advanced supply where improvements our performance, we solutions where which biggest products, with backlog number highly key strong. in and market The DRAM. next-generation unit very is product

U.S. government and equipment as export in the includes October related These parts are technology semiconductor regulations In a on shortages, to complex we're that and geopolitical and navigating wafer addition reflected enacted broad also rules the range cover difficult X. services. fabrication new new control a environment of by supply

part This unmitigated where revenues be investments. actions government licenses impact the billion quickly can including companies necessary We and depend support approvals $X taken to to provides the their how in how $X.X to XXXX estimate could fiscal to We on and impacted as well will believe to reduced actual be as shipments We these billion. required. have impact all the refocus $X.X rules, up billion. the with new suspending our comply that

we the the also of inflationary price driving are demand. initiatives offset softening multiple implementing and products reengineering and are To adjustments. including facing, our inflation are consumer include that we headwinds, macroeconomic mindful cost We increases

while year-on-year renewable relative consumer demand in currently IoT, what automation expected early power describe for demand the inflections customers chips and is competitive are to markets, transition mixed. to down investments the robust. XXXX I PCs including seeing precision, electric racing clearly hearing underpinned are as growing customers. that for solutions, electronics is too industrial adoption it's determine any can large ICAPS, with forecast Those and driving While In Consumer-driven leading-edge remain market and the in sensor with major and spending leadership with industrial auto, our power capacity and Starting defer especially softer, Europe. additions. strong, their we're memory, positions. the some prompts looks weakness be communications, and for automotive, in foundry/logic, customers markets by inflections, technology to markets accelerated of energy demand to vehicles, In from

be three for in more underlying an While the Applied's resilient pullback than we this spending expected all year, market of wafer key up overall believe that adds to fab will next business reasons. equipment

demand where backlog, First, have significant revenue an remains our business this business both capacity of to our measured converted uniquely percentage we we increasingly subscriptions. an the large have higher fulfill third, basis; to than in much that service and is positioned technology our steady some of our growth being highest portion for second, for and enabling demand; differentiated with of most history, absolute on a product lines

the months, rate well XX%, grew which is our Over in XX contracts of service installed agreements comprehensive the base under the for demonstrates of XX%. The subscription long-term see value systems over services. grew past number tools these renewal customers X% our and

for Applied are foundation will touch on transformation of the that digital thesis Semiconductors coming our and the of almost ahead, every economy over sector changed. overall industry path the clear. the an industry the decade. further a Materials up will not by year, year semiconductor not Looking growth has $X long-term a of the is every the puts This market while And years. trillion to trajectory the end be

ecosystem. the plays within Materials Applied where like also We

time. think at is of dollars likely than industry's equipment equipment and advanced terms new materials fab five shifting the map faster means complexity to The structures, grow architectures, Within with cost markets engineering, equipment each materials, time Applied's playbook new overall increasing, further. made market. packaging, available power, in pillars: technology inflections to semiconductor we by over are market. new new to inflections. technology major road We to today's has remain and enabled XD future area performance, more This is or up PPACt the As wafer intensity spending, about shrink ways technology rise to expect pillar multiple levels of

For distribution market. grow materials inflections that engineering example, like our enabled power transistors backside and new total networks available XD structures gate-all-around Applied's

key steps for chip is power and a significant our materials. As is performance X-nanometer innovation driving XX% X- more almost nodes. new And at the advanced growing node, than I wiring bottleneck are metallization and Between total referenced contact XX%. market and this available is earlier, in expanding

revenue are added opens triple Advanced expect process circuit and for era design solutions. for of to a our opportunity interconnect For packaging these faster, steps through Advanced major chip node new transitions. vectors engineering materials that enabled by integrated even new also innovation being we layers, approximately packaging represents new is designers.

billion. still our of packaging industry in grown the adoption, $X business already have is nearly to equipment stages we early the Although

diagnostics delivered growth and these process inflections significant XXXX. has in exposure and controls Our broad business to also

e-beam briefing. progress opportunities focus and of in be our the Our will December technology

we within the global company for growth Applied in R&D making incentives, to market, the infrastructure the market support industry position opportunities view the of Given our semiconductor and future favorable success. and government long-term Materials investments are and positive for outsized

to the coming with At current macroeconomic provide in are plans the strategic same only we more details time, limiting discretionary the will hiring We months. about carefully positions. managing our and specific conditions, spending

the made the quickly Materials constrained challenges Before fiscal incremental record progress past overcoming over summarize. supply hand that I year Brice, have we to with call performance I'll strong ended quarter, the In our performance. in Applied XXXX. the

backlog is to there and our do grow. work to However, continues still

for the down-year for differentiated We customer Applied’s key believe to expect products XXXX but PPACt more inflections. strong the our growing leadership will technology trends of semiconductor for spending, opportunities and backlog, we our enabling with equipment business service that to business roadmap Applied enable wafer solutions. demand thanks to portfolio engineering Longer-term, fab be that market resilient outgrow secular materials our be large by a create

for spending near-term. in We growth the investments the slowing are future, while strategic making

I’ll Brice. over Now, hand to

our customers. our On the our Gary. by and start our to Thank and like recent for for results thanking QX. of impact summarize as also call, partners revenue as provide discuss and chain gross I'll on helping output I'll I'd supply team today's U.S. regulations our QX you, margin. increase guidance our for fiscal our well further export year the to for

Before points. I'd to going like the into three make results,

product year of QX our the weakness some areas. with the customer year. outlook, we First, resiliency strong puts demand the a of ended our with some position backlog leadership good despite particularly weaker next AGS and us backlog, offset in expected to the record orders a in Combined business, strong market of in generated

Second, growth expand leadership faster develop headcount We changed and in further complexity. with semiconductor for due view we grew XXXX in CAGR trillion or high spending R&D $X have and equipment of to added market similar broad a not by our semiconductors to a products for process XXXX new and our significantly single-digit our portfolio.

shares equivalent we a future. shareholders growth past at and inflections growth to position of are and committed our this returned of billion period. X% and results outstanding With $X the customers' buybacks XXXX current that strong year, and unique critical and in in of we confident spending development, support we're environment, opportunity XXXX, portfolio to to the the slowing record third, remain enabling financial demand broad services, beginning And While our our including research our through in and financial we our systems roadmaps. nearly

I'll summarize results. fiscal year our Next,

We over free in million past XX% flow. operating cash we impacted repurchases. points operating delivered We billion. $X.X XXX basis, a to profit XX.X%. XX.X%. all cash in margin to annual dividends generated $XXX supply our basis to Non-GAAP non-GAAP flow XX% including XX billion to shareholders, X% $X.X $X.X in decreased and billion by this grew revenue and in basis $X.XX. XXX% output by cash Although flow around increased EPS share On Non-GAAP increased free constraints $X.XX operating about year-over-year nearly And gross EPS. margin nearly billion year, over decreased of billion. returned points $XX.X to revenue and Non-GAAP by chain to record year

free with years demand equivalent semi three past billion. in the AGS. record were and services year, ending $XX In for On backlog was very our returns annual for XX% basis, of our to XXX% products flow. over systems to cash year-over-year increased and cash Our bookings total a the strong

nearly semi systems Our increased $XX.X backlog XX% billion. to

chain We backlog expect our performance improves. supply systems semi reduce as to

business. increased service confidence large increase gives to a backlog Our reflects backlog in long-term AGS The this us over growth in the continued strong which XX% AGS $X.X of billion. agreements,

results. sales QX OpEx our We margin billion sequentially with and of And basis EPS record most to delivered to net Non-GAAP record nearly Moving non-GAAP to X.X% the XX points in $X.X nearly R&D. of increase quarterly sequentially $X.XX. non-GAAP $X.XX gross billion, of declined grew XX%.

Semi increased key performance systems, XX Turning billion. flat segments. X% $X.XX continue indicators to sequentially to margin be in agreements. to basis Systems at revenue year-over-year positive XX.X%. points grew Segment margin non-GAAP the subscription strong with declined and quarter-over-quarter base AGS installed to more was $X.XX operating operating billion. to intensity revenue service AGS non-GAAP Segment growth than sequentially XX.X%.

to AGS continues to revenue targets. pace needed achieve the result, faster long-term a than As our grow

operating Display. million. Segment Moving $XXX to non-GAAP to declined on Revenue as XX.X%. margin expected also declined to

cash We flows. cash million price We $X.XX returned average operating was shareholders, $XX.XX. during an revenue. $XXX over billion XX and our of at the shares XX% of repurchased in $X.X billion to quarter, $XXX generated including We in million in buybacks. million which to Turning flow dividends

to Next, that new the export Applied be I'll currently regulations fiscal of could the U.S. $X.X unmitigated in impact discuss We rules of XXXX. up new billion expect to revenue impact the Materials. the

of billion We revenue work seeking a requirements, million billion. hope regulatory impact to to approvals We the and appropriate. reduce through and billion net $X.X impact to to by $X continue licenses $X including $XXX the where between

up by to We our margin the rules expect point. non-GAAP X percentage also to reduce gross

basis. rules a reduce in million, creates XXXX, range were margin new our goals charges $XXX assessment. we was for to around margin this revenue our expectation rules unmitigated we committed we Inventory Systems believe $XXX approximately QX preliminary our to the remain October on our even the on QX, and reduce lower million AGS In exceed XX. combined expect our our in Systems While them Semi the by and and time. targets approximately can over and than gross AGS headwind by which of In percentage meeting X both gross revenue an new point, reduced to Semi by QX,

our guidance QX. for share I'll Now

non-GAAP be be and year-over-year. expect $X.XX. $X.X revenue nearly revenue we $X.XX, Semi $X.XX expect this million, billion, EPS about Within minus or up Systems is $XXX which to plus we expect minus of plus or billion, outlook, We to XX%

up revenue $XXX expect We to slightly AGS revenue year-over-year. million. about be around is Display billion, should which be $X.XX

expect billion. margin to XX.X% non-GAAP We $X.XX operating we be be non-GAAP and to expenses gross approximately expect

modeling are XX%, which rate is year. mandatory from R&D last We expenses primarily new XX.X% a up effective in our tax to of due fiscal capitalization year, of

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

record have in the notably enabling technologies backlog, for highly nodes. We next-generation

output chain are improving. incrementally manufacturing Our supply and

semiconductor great revenue Applied and flow and industry a flow. growth strong cash to business free services the cash position future in in growth the our strong. to and shareholder remains deliver outlook longer-term returns. expect We will continue profitability, for and And strong invest is generate grow free recurring

begin please Mike, Q&A. the Now

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

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

question our ISI. line from Muse first of [Operator with the comes Instructions] Evercore C.J. And

between things like And thing Yes. release it like on are is, there top-down press question for then you guess, providing about my much question as I that looks -- And where wasn't changed and then China. the XX, your of calendar is, October at WFE really are really, I all? look -- first clarify to XX was of one a WFE, and impact real it with view an what hoping kind declining. weak 'XX sounds companies think October

optimistic much based bottoms more outlook. are However, every company the up revenues on backlogs deferred on and

year-over-year can talk or So 'XX? range through outcome for parts in calendar of silicon see kind the today you declines kind there? moving what of you And

on one. start Hi, I'll Sure. C.J., it's this Brice.

plus we the the relative did, minus work change. or to million as million. So then preannouncement impact, talked $XXX impact that a about it, for we trade we it's that And through $XXX million China ended estimate, an the perspective. a around did better that And transactional just quarter. little being end less $XXX initial the bit was the element at estimating so up of from we It elements

more at The was the of in chain other flawless happened end a parts supply of quarter from the end We was really thing that in almost execution the perspective. the got quarter. logistics

of perspective, in the execution million delivery completions finishing $XXX product good over an so, and And news field. from and

it our two quarter. better So give 'XX, really too we to it's of for WFE was 'XX was in think was It the execution question of on weeks things. And of those 'XX. early excellent last bit little than preliminary. initial estimate that estimate It's the then couple an and -- the

in our backlog did the backlog. QX what grown our order about see see QX weakness to in a So of what trying how for we're really to they our business, and We memory has We we're our solid. seeing bookings in talked the in did share script, level We record in QX. QX, and business were patterns -- pushouts. is but for or in

So QX when constrained. We that to equipment supply we a our lines have still have we're QX, significant we backlog. trying of number about orders. We're and think to still customer up catch different

on signals on customers. the catching we our us work output our work work and that chain, on have so to And improving supply are to with really up

make call beyond So we're just to WFE not for a that, able 'XX. on yet

is this C.J., Yes. Gary.

position. for said, our the we're in guide overall give a We're perspective going 'XX. very business. But we on Brice certainly -- As a strong not can to WFE on

some towards supply-demand business, very If and we backlog, in it's weighted memory. And significant more areas. we products of strong the working have versus you close where profile the we're kind foundry/logic to at the look still have of those gaps

our for So on big And really from power is the know, chain #X again, gaps. supply positioned for you all performance customers, standpoint, and as all inflections. and leading it's race we're those focus of Applied's the our and with well about closing products

you. Thank

Our Stacy Rasgon comes next with line the of Bernstein. from question

you impact I wanted versus China. from unmitigated to about ask mitigated the

bring and mean, element those licenses. be the multinational? to down to mitigated be do to was Chinese billion, some the licenses coming given to only licenses -- the number? I the What a by unmitigated Is you gotten? that number that $X.X that like the billion. I how Where happen? which guys gave getting hoping expect number But expect big versus unmitigated to Do you folks? of to numbers, gathered how versus the the you So in -- $X.X could of you come that the mechanism is at to

probably versus we Chinese important for to ship customers. to with unmitigated it's customers. customers do China Yes, the has are referring whether shipments it it's product the and to can Stacy, a it's making we everything say to this words, other In to Brice. not that mitigated, impact and those non-China

way at that's to the unmitigated, total, is as order the we the for and $X.X what So see customers, mitigate the we billion. that you affected calculated have the orders we looked this that... In

Does that include too? multinationals,

Say again?

that Chinese Does just Or guys…? multinationals, the sorry. is that local I'm include too?

It does It does not. not.

So just local okay. semis,

Yes.

so once can that for that they clarify And get for that, looked customers for authorizations are guidelines. we're the establish is to their within we or some way we that there the licenses technology we can apply at trying

go And by decide or to So we this on customers have the above it change threshold at the rules affected a that. so some process their technology, the not we plan other their expect change that's to do side, may does point.

the on technology would able we'll that ship customers clarify for their to two customers or So with them or elements some were qualify side shipments. be ship to to able plans allow those to it's really changing that some that

built else that Would like though? like like essentially. you're just by gotten the suck think adding lagging-edge order somebody about up effects supply Because What vacuum, supply do that would would have into a otherwise, mean ordinarily How we though? that here? second

so. don't We think Yes.

utilized. to We equipment that expect be all

And we that has else backfilled so expect purpose, equipment for sense. somewhere if makes if a demand original its use, then moved different will it to be that

Like, one that guess mitigated point? last just up think you're I the at do at unmitigated And at you one. will it. I When it’d Got it likely you level. now, be Right level? end the be the do you some guess, at think running level mitigated how

a It's hard to say. It's process.

on a working there's large this. of people imagine can You number

In fact, working this. the whole industry is on

it's increasing this job output. at two point behind So

say still good and throughout we'll today, -- would on I we estimate a number to. improving the it's year plants customers ship So we're that working can the be and of

And our Arya Vivek with from of line next question Bank comes the America. of

than I caught that CapEx Brice, has could XX% to I then still, in that. translated customers I'm that reasonable down backlog spending even down but for any size next year? a cut that. thinking it's benign more it said I you're any of memory Micron to and memory you just memory that for of to about be the I less you curious, I cancellation versus said trying understand several next thought, year. course, very clarify. more or that that Have that could their your supportive foundry/logic, over versus don't customers somewhere your your sounds reduction just you from your your more in memory of think commentary XX% exposure. some change them? in Because providing. of China, I'm XX% outside noticed look guidance are horrific reconcile Recently, wanted provided orders said just QX. And be almost to exposed

Vivek. Thanks, Okay.

for So we're QX. a not guide giving

behind that the we're record constrained backlog the the and fact we're several are that customer and We highlighting in orders. on lines, equipment fact

comment increase both going QX. output. QX for we're So and to try I'd that true say And is to

we're much shaping providing for that's So as QX. as

demand. there just positioned 'XX. about in is side, course supply of the think demand to What the On did amount during that had that kind last click memory quarter is more we have quarter we overall pushouts demand for we significant this of the happen the of back a amount to and and reductions ability significant than environment, a

QX. see you result. We now a the Now -- disclosed. bookings still end backlog had record We in still created we can solid that's

in And some would business of for the I some -- So would say the and I I'm I say 'XX. of it going was, space. what not pushouts that definitely most those the reductions wouldn't in in that reductions to but that's of pushouts terms characterize percentage and affected memory those were area

versus ground XX% So the you seeing hearing seeing to just your what we customers what align reduction? business. a type are are I'm are trying from in you those on

Yes.

just quantify that area. the reductions Sorry, what what that, is biased, I I'll it's can't were that is. exactly say -- biased it in

next comes Your Krish Sankar Cowen. line question from of the with

is like but you But you risk be pretty words, you auto other just and year, I over wanted mentioned drop? China. in is memory edge lackluster do analog still the auto edge lagging find rolls to holds Gary, up, going ever how to in I out, XXXX be analog could have if that or two to down WFE? of edge next especially lagging Brice in the strong, lagging And years think that next wonder what is

even maybe when all markets there we our we the We to areas some what say the say We have I'll other know has think in don't positive would on industrial have mature But and growth end solar think of markets, call strong. that Okay. mixed. Gary automotive significant specific What guide and was And been feeds some the seen markets about XXXX. start, and wants the we businesses. a weakening. side, the is EV ICAPS, and for node really end are consumer market we power something.

highlight just a critical strong. growth this investors for this very We're us, market. has and in focus continuing to been we invest area, the So to that and to is would continuing

business. have today, our years products other more we're group. would of that at we're change have ago, we add are for three I and look organization -- our than the some the technical in side our a engagements forming made business. a set on a And those ICAPS. with the innovative is at both deep where customers, FY areas customers. that and backlog. And ICAPS that significant have 'XX -- for areas where are MDP similar very, in strong in to is all is are race very really the and enabled. these where our we -- demand power, a of of implant us. from always -- have for Those broadest of I thing relative cost. And we support This all a of the significant Krish, is customers Yes. the we've very, just ICAPS we materials ICAPS our rest to very performance And If of

a We really there. have team strong

a enabling We to will very we’ll in for going you have not great be inflections. pipeline but products relative guarantee year in we not good up. 'XX, ICAPS sure. future That's every I to of We're technology position are for guide a

And our Lipacis question comes the with Jefferies. from of line next Mark

customers say like an cautious because wondering at for conversations in leading are too next But the drivers you. where outlook people as or customers this you next number the year. or the is? bigger like invest your drivers, end would What consensus is $XX for upside? suggesting Gary, secular -- what have -- that surprise new about seems I your grew an what driving they that regardless with could are to next that some be guidance would the It like of the not a edge biggest enabled the And is don't just to you is there's do want or competition WFE your by $XX came billion give subsidies? to somewhere or down, orders just year. long talked mean, proven customers, advanced memory the you of maybe packaging range. times into the or on even be lead think you of things to the I'm what billion more, that, and are on outlook for in whatever trailing Based like for to I'm node, or chips to you've year backlog And you scenario cancel year, asking

question. the thanks for Mark, Yes,

these any markets, in So very different all is of of quickly. technology our the very, customers moving

So racing they're competitive performance each cost, all relative for their other against power, position.

competitive currently structures and different you there, understands We're is in billion about more as we've than real are wafer reduction X in for those Gate-all-around for again, Applied markets. our computing to edge And a points XXX,XXX gate-all-around. amount focus, high-performance and an is to capturing tremendous the probably technologies enabling strength. talked foundry/logic, customers. of that an don't transition is in #X that a for together. strength have gain what customers. focus of with where positions we're path area That's to share FinFET. we really on that how for wiring what is of inflection FinFET there's important mentioned enabling combine incremental that new our many tremendous Wiring know the XX% critical We're Applied, $X everyone from certainly, leading starts So with in number resistance integrated platforms the a for I

technology I served where broad positioned. nearly So and the for share in very well ICAPS, ICAPS of including $X some where our that's also a innings still all billion, packaging, people, -- on call. talking peers you've period Those surprising seen mentioned think it's in those our markets very are the over earlier of strong growth our implant, longer where And are deposition technology the that of part that's by have early very, we broadest customers. far, we time, is we're for grown enabling XX% Packaging over of -- there. as advanced this we're metal areas earlier, that's, of again, mentioned there with market. inflections inflection. that I But position race positions And customers. to Applied our the in really have, I about in to has are and another one Applied in all

the XX% in go I with of grew, continue XX% FY outperform will Applied, business big for thing outperforming think up is other and high-speed 'XX. we different DRAM forward. think, areas, of PDC we FY logic-like was all as I think around all structures, these it beyond business We're our inflections, those -- to that That also in 'XX.

standpoint, it's Applied really all So we're inflections those how inflections. positioned -- and from those big an at least major for around

know you if don't add I anything? Brice, to -- if want So

the several have No. to would we -- demand customer that areas. that comment still I just in to we catch highlighted up that

some cetera, these in data adds other energy to it that clear things, momentum seems have just So into resilient drive that the lot then a market, demand. 'XX. of center And et market, piece in like the the productivity productivity world, still is

the with Citi. next Atif our from line comes And question of Malik

multinational restrictions capital outgrown over China question by years, China for of Gary, last Xx. in and Xx above-average spend. replaces I and intensity five it the have I at impact you? a to WFE spending both profitability domestic on of terms this to long-term If pending What look has

Yes. start. This is I'll Atif, Brice.

the part think on And we very larger be the that for a also at Applied. see we we China nodes projects us, that expect the geography. monitor multinationals still I look business end other for in the from we to will some markets question different trailing that that has of impact, and way in of way been the we if And don't. the another globally both that demand factory on do and a strong either side, be the in to when it and where We demand to some satisfied or investments. move be it's will WFE expect China, away on either It by then or there's in leading-edge, in taken business permanently?

focus in ICAPS be that, the especially a over on I an that mature just time, we circling will back So would be grower, the we strong impact. just to China And around, don't market space. believe node expect

from line comes question Toshi next Sachs. our Hari with Goldman the of And

the and in year. to grower fiscal I for and memory you ask over believe, overall Obviously, leading-edge it's about business process Many industry. for calendar and of going year logic starts, guys of next cutting your very foundry of the the next I wanted customers, wafer into AGS a been and customers quarters. steady couple the are potentially

given be guess is, business outperform transform as and that services is baseline the you the you installed question growth reasons base the the year, of but less? given I of into next cite grow could how So continues business? down that you'll why Or assumption it mix the when one it’s to

of drivers couple here. a Yes, you. Thank Toshi. Thanks,

QX which we've rest of quarter unusual. You'll China outlook we serve of our the is a won't for year. reduction have able the approximately the the And see in quarter for that AGS, be is that million got impact, we for a $XXX customers reason full for to the down

a definitely base installed nail the Every of But with time base the year. in it the hit installed you a ship the head our X% respect grew We last headwind on grows that's tool, to So QX. dynamics equipment. thereafter. we

and we last to or Beyond year. ability installed typically provide agreements, and those services outgrow that, after on services subscription did base put -- our we the

is that the services reason sticky. is So driver the business the for

serve. The the more have equipment service becomes And We terms to more time, business. over that grows equipment intensive in of needs.

the do the quarter. portion and would point utilization still transactional. business that forward. is, dynamic what a We expect I pointed was the is Now 'XX, we And headwind to What China year next business. point, this we your that to to be services we -- going of see where lower pointed have to quarter this besides out, lower even utilization, we there and in grew the of

add bit color. Gary. more a Toshiya, little this is I'll

services up And Renewal our of up stickiness length The be continuing with gives comprehensive So to at year. that to But rates expect the service on amount utilization. are mentioned, will tenure XX%. being our business up us XX% agreements and our of to is be significant a Brice in 'XX. we agreements, profile, agreements, The spares agreements the do last going of the X.X capacity as based forward. years. down transactional -- increase,

all we're people part so availability able it time. to and was to services managed could services the accelerate -- demonstrate an We yield of through So -- increase chip for output, services ramp and were of value period thing productivity. customers managed tool chip that with shortage optimizing the -- and interesting for output,

we've helped communicated double-digit in again, So then all is our our business to And gives us customers. the confidence model position continue higher for growth 'XX. that's we the that. achieve have and value what a we'll us into to And longer-term still ability of high service that grow

the Sur with from line question next JPMorgan. our of And comes Harlan

Another AGS. follow-up on

on declined business But near back your sustained basis due obviously growth, inflationary the strong pressures. margins Semi XX%. record operating XXX your about looking operating on 'XX, AGS So Systems cost to at fiscal revenue points margin

for inflationary able sustain a this been year, importantly, next AGS I call, of how think And sustainability guess should near-record a down talked to call, this AGS more margins potential you year we the the or last about in has So environment? profitability team in AGS? down the record from or operating year guys sustainability of perspective. revenue operating How

Yes. thank it's you. -- Harlan,

the repair is or is had to largely that and do China on we there and we else reposition thing specific in margins will the plans to somewhere I either that have amount that's your business has the call would for to have gross one bring back of for profit, out QX, move did or margins to we customers we that one customers. operating inventory operating products scrap. of the point improve looking at to But lower due So

customers. And the goods the so of of lower sold that that's and helps the our profit and we And with ways margins business. that gross us of that cost improve ultimate cost one

just is other efficiency. The increased

capability As provide drivers. we are maintain we customers, with more that Those two then the profile, and the us the more helps services and the key spending demonstrate with same more profitability.

from of with comes the And next our question Wells Fargo. Joe Quatrochi line

think recapture margin that you do you potentially Can I how outlined? from ask that the restriction. And wanted driving you to could gross the the point what's about percentage scenario impact? about talk we what mitigated about then impact in China X

you. Thank Yes.

really margin time you that So we two at. But look customers. -- we depends on look impact the is period forward, it they're generally smaller things. And if gross which if

go what to for we we forward, and the it's we of sell And as to those product mitigation, going profitability customers about the is Applied is. So TBD to that be talk as when who higher. profitability

So impact look we current that's that specific customers at at if did you for this expecting point, the described. have we're unique. And inventory quarter, the we

we that have inventory did degree, qualify specific a inventory, but we to on. working reserve a and successful demand that to were are some We of we had take to

Arcuri next our line the Timothy Securities. comes of with question And from UBS

about WFE a had I intensity. Gary, question

So going than exiting to were faster and this is XXXX, you saying semiconductors. through year think we're XX.X%, WFE grow at you that

certainly a the pressures. well there obviously, going for WFE up. intensity while ordering now of building But tools of China been is been upward obviously that bans. You've that And capacity due to underlying keep part fear beating drum ahead to are in has and these going some demand now,

reset So a maybe it bit? bit China a has WFE argue that little that a becomes if more lagging intensity and a wouldn't region, lower tier maybe to of

for here, I the in a use. because jump mind graph that I'll have second just my in the of Tim, picture we

of a projects been equipment, And see of So specifically, gradually and process described. reasons a talked happening lot -- reuse that Gary complex that's what's China of additions. process the with and think think we there's of increasing, low becoming more the about are factory number because intensity. the about is do see. and And past, years fabs existing we we for in been A more we then when steps We've recent of And intensity that the past lot tools. the allowed not existing in in and few and and it's that. ICAPS require

the in the an like you also that's even added, raise space, And average ICAPS what level gets overall were leading-edge is a capacity serving the years intensity. that's intensity just ago. on see what of as we to more experiencing So few

to So we're pretty confident that intensity will rise. continue

time ICAPS, stuff a relative time and And period, of during there of of that that movement a Tim, were to that where just people period many -- lot there factories on to that you on came the business tools market, had gone. reminding all is the foundries. was

Brice key to the if inflections around ICAPS technology for we're all to And the gave and segments that I wiring customers look what through relative of what intensities. are all went of was -- number color increasing. the That's inflections So of really that's capital of I you different some then and steps referring seeing at in of a list the business.

look So if capital intensity that is through right I probably ZIP we the code XXXX. think

from Moore next And line comes question Morgan of with our Stanley. the Joseph

multinationals. but license. a it's Great. could need they Obviously, with in about I if license, you XX-month talk they the get immediately wonder to environment China license, did a a get the

generally customers? multinationals Do So see would you were moving issue you Can say that the the you road? away that the from see for footprint an just fact become you included that generally in with talk to those the potential down multinational to any China this?

really comment the have to today. Gary. question. them is multinationals Thanks rather that. not this for are The Joe, impacted on we'd Yes, strategies, Relative their

geographically, they businesses just impacted. How So their position up again, that's today, to really them. not they're

Ho Our with the Bank. next Sidney question from line of comes Deutsche

up the longer-term I earlier want follow on question to on the WFE.

grow? growth I your type years, mix you customers WFE Meaning, five deposition about versus that litho think about call it, process you the tools, to different change? would and could also how three to roadmap will maybe As as market about -- of talk control, understand to and addressable next, to you think expand, that I help much but between how served of the do in that ask how And about edge the us the your assume continue technology inflections. the want versus

the for Sidney, thanks Yes. question.

architectures. customers workload-specific new materials, roadmaps, structures, technologies you drivers if forward, are for really, look inflections new relative to talking five about new shrink, advanced their So going at to There are customers. big ways our are of what new the our packaging there

look gate-all-around innovations And relative about materials. power the you a new and so structures tremendous foundry/logic you The to at advanced what on map, see transistor wiring. I essential new talked wiring. road we see, performance. if lot a focus and are around

business metal resistance thinner Our getting are and goes the is wires up. largest deposition and

served big for -- business that moving us the more -- areas And innings big market packaging the for sure, is So for around XX% five that's that's billion participate. you're for early drivers $X the for we customers. we the roadmaps Advanced one another in over still an see direction. seeing of where area today, in our dollars

through memory important. And include a is area together high technology layers different attract as And you that investment. material logic will very, XD to moving to of competition relative so customers we that to to ways or That's and more other customers memory, In NAND scaling DRAM are see inflections. moving in certainly between is an tremendous one. speed. very amount see

so have there. And and metal logic-like you structures gate high-K

want is moving know, to add don't I really tremendous So towards that's a lot more anything you Applied where technologies, investment there? has and of if that materials-enabled a Brice, strength.

No. Good. Thanks.

next And from Needham & question of Bolton comes Quinn our the line Company. with

to you see any Act submitted with the 'XX hits Or beyond question before in from benefits do Chips timeframe. I'm applications do February a sort to really think a Act beginning and the had Just spending of WFE received outlook, it at 'XX expected you look your spending? it's be of as 'XX? expect you WFE Chips or more wondering

Quinn, expect, in amount 'XX. small small, We do really a

projects There us will it a side, will 'XX start are those start of construction. 'XX equipment in likely really as start a more be with equipment, really, will for the are it the -- number that On few timeframe. with but

investments thing I'd are add bound. one that those is time Quinn,

And so timing starting so not associated Brice those much 'XX, in there as is in -- incentives. said, there but are with

have for more two time questions we Thanks, Quinn. operator, And today.

line New the from next our And Ferragu comes question with Street. Pierre of

your like of intensity trailing come I'd you edge at to and to back Gary, about the comments part the portfolio. capital specifics the made

I like why capital intensity mean, -- two three very there. is the past. reasons reasons why I capital you higher intensity high mean, so described And than think, there, I

The first there no going is one that innovation is on.

fact high there been that year. the pause. the drives a of mentioned even at is that or justifies to some year And be very, used the we've capacity a you my a a is is very was there So which like intensity is very to today, capital growth that chance down point going feeling kind this And then that like element capacity going fast market away. secondhand slow question also is that significant capital trailing and growing last intensity must that that up. And to there edge be third

it like And intensity. shorter so that term to the how I'd in impact a capital maybe could thoughts hear about sense much your and of

the Pierre, this question. Gary. is Thanks for

becoming technologies pick They're lot much inflections, growth fair these So you And of rate. think edge do of really to I see, industrial will markets number all technologies are be terms I if much, also. devices gas what compound seeing about we're by people a certain that's that annual if grow say of are number, that year. think these about more other we different up you in computing every a XXXX. XXX% These will But not smart or vehicles, a are going automation of what a electric at ICAPS to -- think pervasive.

that's healthy looks So like of is to think the that not significant why every ago. also going single year, a how that -- business from growth. to that, three our that, years be going we what growth that. shape different we're the that see all together was do formed we of saw ICAPS technologies. market forecast that organization to perspective We and going But pulled And

annual So again, significant if term, all longer I think look rates. across there those will ICAPS, be over growth we the of compound segments within

not strong we're very, going give positions technology of have a enabling some ICAP, specific to year-by-year but on in a basis. very inflections We those profile in

final question BNP. Exxon with comes David O'Connor our of line the from And

to Great. a expect Follow-up up PPACt backlog on about those previous that -- to getting should you level get think how backlog of or running to normalized or caught products hot back demand on question. the do the Brice, more side? a are for Gary time the when the kind we on of pretty frame

us to We're expecting it's going two quarters. take Yes. than more Thanks, David.

internal our So two estimate. between depending on is the four line and of equipment, I would say quarters

on. focused And so -- that's what we're

week. the Thanks We are every we're working behind the on customers, output increasing with question. for and

Brice, you David, like for And us closing thoughts would your your question. give today? to Thanks, Yes.

happy near Clearly, customer backlog Absolutely. healthy and described our we for see it's part, is I increasing it hope in and broad trillion eventually, that Thanksgiving. areas a inflections market. hope we you let's our to the our Fargo develop drive enjoy the we get and to you. there a in are $X at conferences. strong upcoming record the have meet and output Suisse Mike, up. the of and leadership technology had drive inflections. continue product orders, But and Credit we for a that the term. mostly Wells big QX one market the we us to many you questions We're close financial Job of Yes. meantime, safe support, to semiconductor in to technology our critical about to demand. portfolio In Thank position

Okay. Great, Brice.

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