Applied Materials (AMAT) 18 May 232023 Q2 Earnings call transcript

Welcome to the Applied Materials Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session.

I would now like to turn the conference over to Michael Sullivan, Corporate Vice President. Please go ahead, sir.

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

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

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

On to I Applied the a and major breakfast and and from lead EV Before have XXth, from AMD, Besi host Semicon Pacific announcement. Group. Qualcomm a.m., announce panel heterogeneous plan X.XX Intel along integration calendar a Time. West with July a begin, We a X:XX technology featuring to executives plans platform we new to

Francisco. You you'll be There us we a so page by hope the San our won't IR webcast, in visiting can of register website. join events

with Gary And call I'd turn over to Dickerson. the introduction, that like to

a solutions Thank quarter, business new products the our you, in with near-term results of customers. introducing strategic for enabling Mike. fiscal making guidance Applied well, our initiatives, environment, our range. Across longer-term teams managing Materials our revenues successfully high-end second dynamic delivered and progress strong and executing our in with the are

CVD, thanks strong which our subscription-based. implant, our driving at thermal business and outperform outlook growing and expect our key technology market service deposition, especially exposure, for processing, is etch, remains our we headwinds, position to Despite which balanced our demand products, metal XXXX increasingly markets in our and ebeam, in to differentiated inflections is macro favorable,

dynamics near-term both create this and the term, for growth perspective our year value cover positioned scale and and thesis, on over company. secular the productively is and prepared to the how industry the remarks our longer-term, I'll today, the my making Applied more finally, our are the In market longer outgrow customers we investments to

levels. and positively. challenging both be inflections strategic, in that driven the and by is macro impacting by electronics have and semiconductor remains weak, driven of spending contrast XXXX, industry conditions key can fab is supply-chain negatively In XXXX. Weakness while customers' customers are Measured regional in in robust. our lowest level This decade. Demand evolving a PCs who consumer as investments significantly reduced investments smartphones than is a clearly their and demand technology seen directly in its tracking in at equipment, a investment for percentage is more memory memory factor wafer total

In leading-edge their adjustments, these have foundry-logic, the fully plans for these we roadmaps companies year. spending trimming seen We as see Automotive, committed investments timing Power, by markets. race as customers their for also being from customers Communications, serve long-term the to remain increased in technology market. who strength win and are leading-edge the in Push-outs to offset IoT, this leadership changes Sensors

Over our the being demand factors. upwards revised past by two driven quarter, XXXX ICAPS we've forecast interconnected with

years group Applied, inflections out are vehicles, and are At large, inflections electric more automation. energy, technology our four significant released customers These driving critically global that next new major products, we since innovation. play ICAPS delivering we enabling ICAPS decade. than First, clean XX have for will ago. the formed include industrial ICAPS over These

of next economies. see are government five support to billion globally industry over being portion verticals is central incentives be build Second, which regionalization capacity directed around their a currently We deployed towards of towards significant ICAPS trend countries there will markets. of supply resilient local chains the to clear as seek that years, to a $XXX

China While a increasing countries higher ICAPS investments at other in spending, rate. see their we currently leads

for our fastest in growing XXXX are Japan. the fact, ICAPS In the business regions and U.S., Europe,

the At end performance, Looking remains new and slows are Semiconductors as beyond digital to time, foundation is puts the growth drive improved XD playbook the of is which decade. market $X traditional driving the of a trillion on power, demand for chip path and XXXX, by unchanged. become the economy, thesis technology time-to-market. scaling PPACt complexity the same increasing the the our a industry long-term industry a to significantly transitions and area-cost to industry

then, inflections than complexity expanding Increasing equipment for rate fab increasingly wafer available technology revenues the spending, by at and within higher a engineering, market enabled Applied semiconductor are means that major grow Materials. equipment can materials

engineering few I'll major materials growth. a to inflections examples of our how contribute highlight

transistors All enabled that materials Around Applied and products Gate XD a example structure great First, including new device by of are areas a removal. leadership epi in has engineering is selective where

Around All In developed we conductor addition, solutions applications. specifically etch have for Gate differentiated

begin We Around in XXXX move to into Gate volume All customers ramping expect leading our of products high shipments production. as

incremental of Applied, we Around. share this of every an the transition overall Gate in expect transistor wafer and FinFET creates For market inflection starts gain XXX,XXX to of to from for billion around $X All capacity, opportunity X points

us customers Adoption of wafer enabled rate Second, at our revenues and metals low-resistance grow further contact innovation XXXX. wiring, of are connectivity of a for High-speed at PVD new fueling we in growth future seeing new in in equipment significant to all key focus our data the remains for fab nodes. Xx interconnect materials.

a million simpler, which for EUV to by each layer customers capital to scaling about $XXX with per faster, a provides It Third, wafer cost Recently, is XXX,XXX Sculpta, adoption and our roadmap. their of Applied patterning. decreases drive customers' alternative double pattern-shaping we cost-effective launched providing new technology a more starts. tools breakthrough technology

of several revenue systems business grow of next We are the shipping dollars of hundreds repeat already annual millions and this to to in years. multiple expect

example packaging. The advanced is final

for growth While we great is phases still industry inflection this area are us. of early in a the adoption, already

to the has revenue doubled over years packaging billion. Our past three in $X

and packaging. enabling micro-bumping believe can Through-Silicon-Via, key adoption We next revenues we leadership multi-die XD few We further hybrid including with in technologies double again years of positions the bonding. have strong in

move our key are customers are solutions R&D, from technology driver deploying next, in high-volume and output their to to the solutions performance, complex device also and and seeing to node Customers support growth business. increasingly transfer value rapidly in The service ramp yield, cost for our a drive our are technologies, one new manufacturing.

base utilization with absorbing rules. service of Our XXXX impact after More grow high on more lower track renewal than and the These control than agreements. form revenue rate business XX% in have nodes long-term is is certain are a the in U.S. growing to and of export the XX%. in a of installed from agreements at than of even service generated our faster subscriptions rate rates

the drive Applied efficiency scales. Materials, the of associated and taking roadmaps productivity industry investments Given as our in confidence customers making we to industry support our and actions our the and and are growth, trajectory accelerate

On strategic next-generation announce a process equipment we May platform and new focused XX, will technologies. a investment on formally in major high-velocity innovation

details industry We'll partners and technologies As structures change optimize the week. our increasingly is and economic the new other returns. materials, look customers, new to devices, collaborate bring suppliers driven innovation goal and way more market next manufacturing with universities, by to faster to in the sharing we overall forward is to

over quickly hand let Brice, I to me summarize. Before

trends, positions to the While market, semiconductor key XXXX product our remains business. areas year to the technology thanks secular exposure Applied's a challenging resilient our business and broad strong inflections, is for and of growing at performance service economy

ourselves R&D To is longer-term opportunities position become trends while industry as Our driving ahead, for are and market outsized Applied. organization. across semiconductors strategically infrastructure outlook very and important and more in positive improvements we making opportunities for productivity speed investments create larger in a and strategic the globally, the

over it's Brice, Now to you.

for provide and are QX discuss infrastructure. I'll making the investment summarize our you, guidance Thank today's QX, On our Gary. in call, R&D our results, we

key I'd remind covering Before of four you the near-term, to points. like

secular for industry by trillion the is a expectations of $X First, XXXX. market semiconductor growth, with on track

materials critical is to Second, our roadmaps. customers' engineering increasingly

Third, invest efficient shareholder And resilient that past business up profitability Applied's than which services growing cash market set strong free in provide attractive markets. to in model growth enables differentiated today outperform and and generates and our make us returns. the fourth, broad we and more to portfolio, us flow, have an us business and diversity

a March, Directors new long-term dividend our growth share authorization. our share manufacturing of industry. repurchase is increase Board in in a for XX% ability in and the approved the billion drive which fact, largest the and per and years market, materials in The to confidence deliver In semiconductor signaled our the new with innovations we $XX the required buyback to increase supplemented five program

continue per double increasing and our grow rate at our next several believe dividend to cash dividend the free an flow the We share. accelerated years which would can over previous support

alone it pay business produces company's profit than grows the with along our dividend. base services installed enough our equipment, of operating to more As

now Moving highlights. to business QX

navigating AGS. revenue job during supply great both the basis. deliver schedule in the grow higher-than-expected quarter, Systems per We we on a and a this earnings year-over-year revenue described situation did supplier share and last enabling of mitigated challenges most and cybersecurity quarter, helped team us us Our to Semi and

our to record memory our trade announced and our declines offsetting headwinds up declined. October. rules Most by times caught generated and offset lead growing Growth businesses of to year-over-year and business and created demand, services as ICAPS QX did in in help it our year-over-year in revenue, inventory levels business the last

X% related restrictions, gross up and results. and $X.XX financial inflation, range upper remaining sequentially OpEx Company I'll rose EPS slightly of year-over-year Non-GAAP quarter's up revenue headwinds Non-GAAP below year-over-year. near-record supply guidance our was XX.X%, offset last at to in trade Now only quarter-over-quarter slightly QX end X% margin flat to results. chain billion. resilient non-GAAP were QX These $X.XX billion, summarize $X, was in we logistics. the results as was our and

to operating nearly grew billion. revenue to AGS year-over-year XX% was billion. Turning non-GAAP XX.X%. margin year-over-year Semi to $X.XX revenue Segment grew the $X.XX X% segments. Systems

approximately margin XXth this In Segment sequentially XX.X%. growth. fact, increased XX%. flat non-GAAP quarter and segment margin sequentially In operating Display, of million was was to to at operating increased non-GAAP year-over-year revenue $XXX AGS's sequentially consecutive

XX% of demonstrates the in billion, the dividends $XXX $X flows. were in of in our including nearly share revenue revenue. generated of in million cash which free flow operating $X.X $X which in billion $XXX We Turning quarter, Shareholder We efficiency model. to the was cash which flow billion over quarter cash nearly over business million buybacks. was produced during XX% and returns

guidance Now, for our I'll QX. share

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

$X.X Within guidance, we EPS Semi nearly revenue minus We expect plus of $X.XX, this around down year-over-year. or Systems to non-GAAP $X.XX. is be billion, which expect X%

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

we at $X.XX sequentially Applied's flat be about to gross We approximately be expect expect billion. XX.X% non-GAAP non-GAAP and margin expenses to operating

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

Finally, on platform the Gary new innovation I'll his in remarks. discussed comment

new the in We'll collaborate with over the investment more We process next technologies more are and next-generation years infrastructure closely multibillion-dollar planning we to our develop amount provide expand significantly as details equipment. about customers and to timing several capacity week. make next and a to materials, productively our

is the scale with Also, What existing today I'd to investment support. will like secure ability depend that is you long-term to our government company's know plans. our consistent strategic the on

expect years, our next there we financial strong change is higher no shareholder expenditures to model several the capital While to longer-term commitment be over and our returns. our to

This become In executing broad resilient. business more the customer and portfolio, has our our and base. and demonstrates advantages Materials summary, how volatile year markets Applied demonstrating is of well and less diverse

and We systems profitability. semiconductor are healthy services generating growing and in year-over-year

free technology invest strong leadership We returns. flow great and and cash growth, increase are in for generate a shareholder to position

Mike, please begin the Q&A.

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

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

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

Your question, please.

Yes. Thank question. for you the Good taking afternoon.

to have beyond XXXX? build are you I rounds for get that I about you of is, DC But SMIC, to sure sustainable are three lagging we'd Huahong, is of, Huali think spending the And we're XX that the the love There emerging that year? in sounds like this new many their of So first all you. China. and that beyond that was players speak visibility it hear how So their XX, spending cetera. aware how we question plans funding. you're hoping sustainability to Thank like in thinking often there et could edge players spending are

that quite Great. ourselves C.J., bullish looked about question. the the in-depth. made investments the in bullish thanks markets this and are China. end very We're for are being customers into driving We've the are that

we it's So at actually looked being being And selling. specifically, we've do that equipment see in we're what looked to We've that's ramped. the see that that installed. see looked to We've China. it's

people asked that. pre-ordering see there don't have us of is So We stocking about, or equipment?

that it's we end mostly ICAPS those in and that all sensors it's that markets, the the types processors, end the markets power, growing mostly right, power the know focused on video You're and of markets. are

about We in incentives China. also think government the

lot So long they but tail investors the incentivized, areas. – any being of don't and there a a installing are of equipment, and in we is are They China. see ramping unused

Anything to add there, Gary?

No. Thank you.

Thank you, C.J.

next from Research. And of Bernstein question Instructions] comes the Stacy our [Operator line Rasgon you. Thank from

Your question, please.

question. that ICAPS growing of China how much is piece a Hi, as Thanks like guys. on revenue? smaller, to it I big, because are said other are how they're that like, relative know regions even that the your of that, taking like percentage for the growing total is faster? growing non-Chinese to you just my guess And like I follow-up faster, much qualitatively but how regions is China those

It I think it's And space, it's They're the are small other a Thanks, growing the lot that country Yes. largest three significant. are but Stacy. ICAPS not numbers. there countries is in faster. because pretty

made So the if of think spaces. mature lot those North technologies America, are investments being will in recognize Europe, of a people China, the that in you

is encourage we and largest investments, that the grower, the believe country. are make behind those And look help programs we to that. across look there's stimulus all when customers government not they're at but demand But the the those world there So real investments. China fastest we

be see at range. in ICAPS look utilization utilization the we space, When healthy a in to we

stable. won't ICAPS. the think look that same to we the back like forward. And trend year. in only percent XX had but our all when that If looks accounts the rate. So plus XXXX, it rate we won't is we It accelerated grow same an rate, from It's this view this demand growth accelerate at ongoing is at

that size. will We expect stay over that same the years market the coming about

companies, say over the this very meaningful. those CEOs several And a to those I as said, is strong they're position. Especially, and and will Brice U.S. they're Europe, and sustainable Gary. Yes. they making Stacy, the those would talk I be in when that investments next are, in years,

Stacy. you, Thank

from America. you. Vivek of question our line Arya Instructions] from of next Thank And [Operator the Bank comes

please. question, Your

very peers Thank so a the get better related you group? Is what your does for difference that QX the Maybe suggested year, question. where be exiting And that half. than between in then two number What's kind of the you it calendar year? ones. to the And Systems? essentially the to of and your of Applied have peer Semi first your backlog half your second seeing? trends similar QX could is that Or would and the create

Vivek. Thanks, Okay.

an is about First What the quarter backlog. talk under tried We dynamics of all, have quarter last elevated to backlog. we've and this that. still

the demand caught had the business underserved have from prior of in We up year. groups the most that to we

thing. good a that's So

period over in is planning have Our the elevated, longer than the lead times a in the are backlog many orders are customers longer placing still that future Having past. think returning they to time. of said we that's because more They're normal.

see it'll be elevated at at end you when year, level. an probably the backlog published still the So of our

and story we the the second to any but the has half, we've expect grown so this memory that weakness dynamic ICAPS the leading market continue. half, year Applied second On that we're business for that logic and in it's guiding market the in not offset seen much slowness been that the has

future next expect continue quarter we But quarters. dynamic that next to seen we've in can quarter. the see business You that the in for growth overall, have that don't the we in

logic consumer the markets. second end and So pretty looks of because half to markets We'll for have and leading QX macros that even next large exposed how see to and XXXX pretty for are that exposed to just memory we or can't call yet year?

Vivek. you, Thank

Thank from you. Sankar line [Operator Instructions] Krish the Cowen. comes And TD of our next question from

please. question, Your

Hi. spending Thanks really is all look had a some in a export these for for play Thank quick big picture, Brice One a of back leading-edge recovery leading-edge the the at Brice, for peers it you. be delay other or like, did might some funding taking of the too. it tied that question. you anything the regionalization, chip is in all all and investments? seems about control clarification When Gary. to and causing China those factors your say orders you that's spoken about half? have some relative permitting like in And I that

Yes. Krish, thanks for question. the

leading-edge, can fast of the their there and road as power intense leadership, companies On cost. is for drive as competition an are trying performance they all on to so maps those

I we What have is going to of node, perspective that demand. next play be there's we a is the right that big customer the see where and out So to certainly also years. that X-nanometer over tape-outs lot say that would is few now continuing a

So we pretty to that's be think robust. going

this significant good there's again, For really going to I position a from than think have And there. to we X-nanometer. that you leading-edge relative see as to number in sustainable move – then for Applied, in government a The in us to X-nanometer. transition to forward. also continue our we're customers that competition XX% up steps that Again, that's of really X that going of lot to more incentives, be go competition

But just So and true. for demand is leadership. competition That supplied incentives next bigger of I factor leading-edge business that have is a that But systems there significant significant being our where significant so years. business few the think the think you for amount over really the do in adder region – are will and an see pretty leading-edge service that's we today I you and for for every be ICAPS. definitely

question. next the I'll And Brice let answer

half the as to do. to factories on We'll we ship able some second China Krish, we're thing export clarified our same see peers in the recently. be the that And Gary. Thanks, controls,

Krish. Thank Okay. you,

our Instructions] line from Citi. Malik question And from comes next [Operator you. of the Thank Atif

question, Your please.

Hi. All question Thank have Gary, your taking Gate for you I on on my a question. Around. comments

X share the from statement contribution FinFET Sculpta? transistor because to question other share from the TAM lithography? of My about coming dollars does Gate talked gaining is are from include You areas points out growing? Or the is And gain, that is All Around. that like

the Thanks question. Yes. for

that complexity opportunity a said really All plus both billion $X there's higher So steps. we've steps deeply and is say very Gate the I great steps engaged would have position those we're And And process again, addition existing technology. strong we're new companies. and increased we that's complexity every growing, the areas a very, one because with are where again Applied, Around, products of for in of single of in

So in but overall we to removal, Around, the have first just areas good deposition, any subsequent of competitive not relative of very those positions Gate and generations. for visibility All selective in generation

so the relative size again, the I the see market thing of we think are the really And gains same to to and FinFET. relative share still

spending the All spending were Gate X – from we're points That's a to share total customers So of percentage from. comes transistor what FinFET for Around. as the of where

relative we what relative increasing forward, road maps in contribution would see to engineering. definitely is the an going materials I say then And that

the So the industry. look certainly That's at about is whole growing fast. that's area if of you I wiring talked in the one MVP the growth transistor very earlier. innovation, issues biggest an resistance

see us. changing and power and nanosheets people a future the is savings without wiring coming. improvements distribution future, transistor great stacking technology performance. that opportunity power again, There also you another feature can Backside size for XX% get In you'll be area the So in to nodes. in up really will for

more we So are materials engineering of to dollars and again, moving go as forward. more those

Atif. you, Thank right. All

Lipacis question Jefferies. of our the And Mark Thank line next you. [Operator comes Instructions] from from

Your question, please.

for for taking Thanks Hi. you. question. Gary, my

really a way curve seems you been for successful guys, of off. guys on it's paying ICAPS. ahead investment phenomenally the You It's

be could. talk calls, be Which a for – you them. that of made, out three, there these these we if you. Thank should now? the about driver size or Is you all you those I of five four were you think you ICAPS of next biggest? right How big to one, this has other to does guys, through chance On always you one to went investments think of one have the the about if chance the single

or – just want just talking Mark, about I the beyond are for ICAPS ICAPS. So you question, you talking understand, thanks but within to are

is – ICAPS, invest Beyond investing made a ICAPS you paying major that guys all in you are things off to a right now, guys in way. heavily the decision great you in and

was my to a investment trying from and lot So on view, that making understand a I'm investments. like of press you're

you're ICAPS? chance ICAPS deliver as You to these be to be the four of talk and to have revenue that the investing in about talked do the the close it big you. on investing profitability calls Materials. or you've five of a Or that what to of as lot that in, amount Of the you has things been chance any Applied about terms things as of Thank could in.

everybody going Mark. you really is two mentioned Okay. – Moore's forward, engineering, Materials spending scaling say Yes. this I on forward, knows percentage Thanks, just things. think look One, XD at going challenged. as I I would the are tremendous question. Law that previous customers if the of

and performance and to the those are can the innovations I one innovations scaling next cost at so complexity in area technology great areas the for again, innovations increase will all memory drive increase growing, going extremely power to the – achieve of – directional future. high much one another much, are we position, and you customers. to double-digit innovating many was number in the we're mentioned in where bring this and tremendous to steps modification that in to Sculpta a transistor numbers steps, And from maps and of and technology in of there. the material have And a really etch technologies, technology wiring, areas share. those going the way we're lower And that in our what's cost one there's there's relative next, from node road example node drive that innovations customers' with

would So say. that one be I area would

term excited is from The innovation and going package. to system going the is other to that about longer all packaging pretty and system-on-chip happen one I'm

be business see today. that next a earlier inflection. going think I the us to tremendous in mentioned That's about a $X doubling years. for I that that's billion few we could

think and have position that we markets – have that the very I in today. we a – there's strong served

pretty but others are bonding as hybrid there that have are will focused one, We big we're on. there we're And on other focused high mentioned areas share. create We opportunities. really that

that the other would So be area.

that, that chiplets heterogeneous movement think I whole to and integration.

Thank you, Mark.

from you. And question [Operator Instructions] Thank Sachs. Toshiya Hari of next the Goldman our line from comes

Your question, please.

afternoon. I AGS you so consistent on Hi. in of Good your do through curious had Thank much for at business. point business a at it's systems I'm as the going taking Clearly, as the pretty memory business, well what trends. patch in expect with I with Gary, a you're question rough CEOs both obviously question. quite terms Korea, moment, your your quick Korea the strong, just business as if and going curious pretty and close on business mistaken. recover. over-indexed you and you're a I'm in quarter forth memory. know your was to timing to CTOs. your But follow-up, there. memory back not the industry And

strength I you're but in the was could Korea. reconcile Thank weakness memory, hoping So seeing the you you. in

it's and that. Gary just can a Yes. Hi, things, of Toshiya, add say on couple I'll Brice.

leading-edge. two-thirds between time. and lows. would memory that of two-thirds evenly an side, think we the between logic our do sort memory think from thought should We the ICAPS and historical it's market memory relatively about be perspective equipment and We've on split balance and So be logic over one-third about of at long-term do

memory, So do think at low. we on it's a the

we we wrong utilization, quarter, However, monitor in moving direction still Those quarter. inventories. monitor monitor the we past the in in pricing, this are

from shipments to do but unique I Korea, the memory we will it's but I see don't it think leading-edge, do long-term moment, quarter. with then good think And a trend call strong just think to hard It's for have the outlook, still exact with and business So it in We to portends in the an do we yet, think hasn't expect quite growing turned weakness around. perspective. ICAPS we turn market. happen. the outlook that anything

for ICAPS We've think see up. Yes. strength really don't I that Again, continuing Brice, term, longer too the long-term two-thirds, leading-edge do to back much We soon. going But mentioned going to before, that's race don't kind have one-third foundry-logic. add. in forward. in two-third, certainly one-third, the and this of sustainable where strength we it and we that's think to comes end leadership

Toshiya. you, Thank Great.

Instructions] And line next our from Harlan the from of Sur [Operator JPMorgan. you. question comes Thank

please. Your question,

and Yes. Good my Typically, driving of a off know I were seeing this first taking spending shipments a stable trend. activity of last you soon you that question. quarters, stabilizes activity the push-outs doing afternoon. Thanks then couple still of follow for cancellation backlog. your with of stabilized? on that weakness, earnings, periods Has customer quite start activity, the push-out and bit rescheduling activity rescheduling, lot

push weakness on some we partly guide our see taking Hi, account and for in NAND, why weakness bumpy, think outs. quarter, you Harlan. push-outs as Thank the bit and that's a next still quarter, into you. saw defined this we little I as don't so. in We those saw saw the still leading-edge, of

overcame the sort ICAPS to this road and business And still catching still and Plus that year, of just those been to had up the trying maps. that So I growth most think the several of optimize has reiterate, so we're of environment to strong noise. most course that that ICAPS us, back business the on units road customers for overcame of reacting current maps it The are orders. checking we of over noise.

still caught as be have component up. mostly goes we're we with working the exception strength, going continue year were as to we've ICAPS units the of where part, up first and said, expect a the demand that implant, behind of forward. important The on, to And catch business the

Harlan. Thanks,

question you. Instructions] the from from of UBS. Timothy comes Thank [Operator our next Arcuri And line

Your question, please.

into modeling. you I to And kind kind demand good go what underlying a to do wondering this demand of a pivoting And they're wanted that's Thanks leading-edge the conclusion topic. I'm Hi. lot. and all think lagging-edge. you with of kind of that guys China kind lagging-edge easy of just back backing the such all coincided this this. just money to bands, of The so is pouring just kind

demand about been European when wasn't new this, think backing actually this was met already, high the that being in and just pretty is is asked China So you it because great demand guys? not and U.S. I chip EV the anyway. and like the haven't by penetration

question. the all this WFE going that's WFE? year's And of Or is be year the then that Thanks. next like part thing? first to it part also, of really is So more

Thanks, Tim. great. Okay,

The the second of part question first.

it be definitely a trend. continuing we will think So

expectations first raised China, the over track the our expectations raised XXX we quarter. for in I as quite there's we there's have globe our and we of I in time So a overall And amount and from is in China. the – list demand the approximately said quarter, fab China The China during number. in may significant a when projects question, during now,

ICAPS markets, I markets So supply when space. they when end think the And much guess as are it's they localizing end have perspective the in of mostly the I can. these is we as ICAPS that about the to

to even some And been building of for power of though the microcontrollers, chips, think think capabilities those out we confirmation recently is internally, you I they're so declined demand that if sensors, local growing. analog they of supply those are components there's China chips, have building imports believe and

put this So in perspective being it China, that's capacity is at extraordinary in our the place isn't point.

yet. matches They're function, over will, to their you of If there you of build a not China trying demand capacity if ecosystem local think time. that

government investments know to that. and the make if we that's incentives accomplish sense these have they So goal,

those say look I we those factories. we modeling ICAPS. One thing would is good these out things. say within We do, is chips The of vertical all a this one at of other as for wafer I Tim, Gary. you that each one and thing, other of – each of lot said, markets is look different would at starts, one fab utilization, of Yes,

And in different as growth when so the the see we assumptions the relative another chips it's at look those look would good when at you look But factor also market, overall that's line I at our what to rates segments. we with of yield out. – again, roughly in

Tim. Yes. Thank you,

Fargo. Quatrochi the Thank Joe line you. question [Operator Our from Instructions] Wells of next comes from

please. question, Your

And higher about, question. of look more a you mature how think relative comment, your intensity nodes like we I to how as you your if at that of time? guess, China's the domestic taking Gary's to of for normalizing multiple for than kind customers? follow-up that experienced I Thanks guess, capital were over think do to about is a more some experienced kind And do customers, maybe Yes.

Yes, is logic I what ICAPS, we or leading five capital eight mostly since like capital was can Joe. ICAPS start, sort see The years is in the of ago. intensity it's intensity,

are that reuse, sites. They in mostly are being lack greenfield there discussion whole those equipment about So of a new China, sets. especially

intense a as think the measure we intensity that's fact is much high. that's why ICAPS time going is going so as that intensity And capital factor over fairly across the additions with on by consistent we So major of And semiconductors the up to WFE globe. most intensity as overall ICAPS the higher. way to the is

Thank you, Joe.

Sidney from comes Ho Thank Deutsche you. the [Operator Bank. from Our next line of Instructions] question

please. question, Your

the about foundry-logic the AGS AGS about the still different at across the despite ask upside this to to about wanted many look of growing I speak AGS the memory. you. in kind you And down the is headwinds. ask suppliers if you. And underutilization quarter, the upside talked AGS that business. perform year and can have this given the now to memory and you half you the the – Gary, just taking drove Thank all Thank what you a range also expect I thinking the about year, we how second utilization there of then growth should do in and segment been year? to the want be of

the for Thanks Yes. question.

you that length business over long-term types with and way And of XX% significant agreements, seeing is subscription service. at high a – agreements spares XX% is very, out look about the rates. a very of if We're percentage breaks renewal years. AGS, So X.X still

thing that helps type one is that still in So on market agreements. a environment business lot is based longer-term of this those of us

helping that's stability this market. in type So level of giving us of a a

AGS, mid-teens of is on is XXX-millimeter robust. part And And that kind then the very other ICAPS. focused really business, of the that's business

our very that the know, add if to So to don't business is again, agreements, growing also stable, Brice, to then renewal I XXXX. grow, would in stable the business, pretty anything And you I and rates. relative else? want XXX-millimeter say strong continuing

we said expect that the I think for and we've it a grow major that's thing, to year.

year. outlook it So you to our for QX. include year-over-year, grow growth it it's And and does we the in see growing slower expect

factories. in of does assume outlook the our So lower be utilization that some there'll

So we've accounted for that year-over-year. Sydney, grow but we do expect it to

had And on model low guess this couple that this that double-digit I year. growing – longer we talked ago we Yes. certainly, would for about of track And term. we the to a still AGS we're other with we're years thing is I still growth add

Sidney. Great. Thank you,

And line of Thank comes our Stifel. from you. Chin question Brian next Instructions] from [Operator the

Your please. question,

quarter, on for Yes. can to a ICAPS Thanks one-for-one back it's Good foundry. afternoon. did bit? the Because bit still there'd a gearing talk that have business. to but expectation almost about increase of sort guess the Lead of of how talked like sort you robust terms I for sort guess ask Obviously, weakness industry some memory half the And a I towards in times letting and I maybe But advanced you levels. the offset normalized. that of was calendar maybe us little doubling linearity a year. question. of logic a of backlog back this in pretty have be think first the at

wildcard how see view this how maybe curious calendar of second some that is half, whether of kind that you I'm been So and that's for discussed you a half? relative to part of still second China

has Yes. been Without it trends about Thanks, getting increasing. gradually specific Brian. quarter-over-quarter,

I each last quarters. those back increased think, of QX So an QX, trend year, think to, have – if of we QX, across we QX, look I QX,

going phenomenon not think but second I front-loaded a to we're don't was don't in half, the I ICAPS. guide think so there And there's

is add implant, supply-constrained the Brice most I of is other earlier, Yes. Brian, our mentioned thing would one as that businesses.

We have and years. very last significant few XX demand. new over products launched We've the around ICAPS

that as supply/demand to to that ramp the gap. through business continue we year is going So close

where the demand for the with a there strength an the customers, significant is area have ICAPS, real we that portion So of inflections is strong. very

that's driving factor strength. ICAPS another So again, our

you. great. Okay, Thank

Thank you, Brian.

Quinn question Instructions] Thank comes you. Bolton next line our And the from [Operator Needham. from of

question, Your please.

a I a have clarification guess I and question.

received. clarification on we clarifications the export Just a that China

of about million the half. in peers to second million cap $XXX benefits some $XXX talked think have your I larger of

probably You million expect have we you have China, in for at half? those in second a benefit clarifications can $XXX the share higher least market I think that export

since it's the Quinn, of number, specific we the small see about but to same a Hi, number situation. customers, we're going not definitely be

have that our in at And in QX, We that's able to second be the guide. half. least will ship to factories for we

just with And weakness ICAPS and Okay. strength in advanced foundry-logic. the relative question the then

might to about think I you've probably XXXX, wondering ICAPS more for think you relative a us strength? talked about you where assume the given give for than of foundry-logic. out being ICAPS I but range if half be able half XXXX that's falls business, the

it has a year, talked been about, is weakened And is significant, we've both think year. growth larger. The we guided long-term, Yes, year as it's little foundry-logic this we last only and really we the thing then stable. and think this bit is

the that of we side WFE. logic on of a more the long-term in think So gets balance in

market. equal. it's This year, we the would long-term, relatively So say is ICAPS largest

you. Thank

Quinn. Thanks,

the Instructions] question Thank Blayne you. next [Operator And from Curtis line Barclays. comes of from our

Your question, please.

last question. on one. a me just curious the I follow-up for Maybe ask a that leading-edge. at was thanks letting Hey,

the really just still of you're leading-edge. walk the you at and through extent seeing pushouts low out, If trying the could utilizations figure us quite to just

when just your rebound? Some half. leading-edge visibility the may that markets of kind second of curious I'm recover But into segment may in the

Blayne. Hi,

low low. is relatively For it the utilization,

I XX%. somebody it's I saw around quoting – for think leading-edge factories,

a this or their Gate-All-Around, into transition will new out probably in are range they process start one will build any earnest and that to that's site-specific of we technologies. our think as that's and leading-edge. of think sense And the right for value of drive direction And and think that customers really think what's terms in in good project-specific big now get ahead Applied. change we pushouts I a the I for for XXXX, signal don't us intent to we that's most important is inflections of

what that's pushouts. the on So anyway, I would say

that's technology would to of I see node. Blaine, we say still be Yes, One, a – things. the that that an everything X-nanometer, going couple – important we

revenue to the be also And initial next And to then year, contribution that certainly, for a XXXX. in way meaningful a in meaningful so think Applied. ramping Brice said, that's for we spending we'll Gate-All-Around, see as going of

Thanks, guys.

Blayne. Thanks,

from Instructions] Mizuho. question Thank Vijay our next you. [Operator line the And Rakesh from of comes

question, Your please.

and Gary Yes. Brice. Hi,

WFE XXXX $XXX or XXXX? to you look expect you at a know quick How much if second question billion. government on Just half, XXXX do the mentioned you global funding. I to or that add

about little think will to the have facility new, and way of won't assets of That's since small their locations years. economies over X% areas, our putting be their that a might the you drive WFE set X% don't they amount it larger have it there's customers right a bit be equipment will phenomenon, place. about some think be in the of in $XXX We will as incremental less number, scale locations, Vijay. the will will because you as of And scale. billion those talked quite economies think about. we Thanks, global does it is five of incremental WFE. Hi. we The is next What add

to years. benefits starting of tax we that X% estimate in are that over to in the companies be the we accrue do were see very So then five to some X% And short-term, the that next group. included for

encourage So I think to incentives the are already investment. starting

then be would on the ICAPS might memory it. to fair Got China? side, China it year hold be again but year-on-year that to could down continue next And spending be for up, assume

On to the then we side, do memory. up. ICAPS hold expect it And

memory I think is market-driven. more

some It's the year. those consumer seeing memory of macro the going So more both to next markets. be leading-edge what for logic for and and dependent on we're

piece. that on TBD So

Thank it. Got you.

next [Operator you. Hosseini from comes question line SIG. And of Mehdi our Thank from Instructions] the

Your question, please.

me a chance. questions. Two giving for Thanks

targets could assume other incentives earnings. of Brice, think $XXX don't close guys equipment demand without in subsidies few understand what ICAPS And the you looking In that reference in hit And how I perhaps could to longer the did years, industry. kind was about and above more cycle the for just want volatile? And can the billion. is some the so almost earnings For of But then WFE to those to billion? you then XX shape past And had forward, in XXXquarter for think context to good cycles And in? we having revenue these Gary, And the well the in form you in government understand like opportunities very WFE that or pulled I given term, cycles the better use of were that I areas. you with and if I'm just think trying correction actually context, the got should of SEMICON? FYXXXX, happened I that make volatilities? I subsidies about

Hi, Mehdi.

continue question, earnings yes, we if as support our would will business understand AGS forward the that, earnings because On grow. larger $XX to billion I go I think

business as expect we go forward. in We our upsides display

couple So upsides Gary, get at on would if we you're display over should looking of then, to and that a to WFE about perspective And the model are of look model And could the today. on in in continued give you thinking if in those, I on top subsidies. where years? AGS growth there's modeling no the next growth where

Yes.

different think, tremendous I invest we the will think based demand it – past. a in But see that years. Brice going customers, of about Mehdi several of competition there's timing I to to they're talked the geographies. Certainly, those spending don't next investments, the the think between significantly incremental different amount X% on over X% they than about way so be where they the thought

new efficiency would I lower. is the up say be going new and a those initial companies into these regions that move is benefit as be that starting should of factories thing to one The they're factories,

help trained the those for place they they're the and that's new in locations. all as into the business and sure, infrastructure in new incremental all because have don't of service also moving For our personnel locations,

think we anyway, way that's it. about the So

time we Okay. Thank have follow-up, question please. for more one a I you, Mehdi. think or And operator,

from Stacy question Rasgon our final then today is Certainly of a the Research. question for Bernstein follow-up line from

please. Your question,

kind crumbs my wondering you on if be for had I you're you resources this investments others the able gives offer us that just here of bit you of you Thanks details is a an you us then, with need to gains? about like edge about little purpose gains talked taking give into what investment kind I follow-up. the that but of guys. I market going in going a points. to bread those offer. like a these is Gate-All-Around to Or and could the question decade, something that half this second the Do week. Hi that five can gave get know not was be talking the support plans on of share are of next you like the to

Just anything be would you that week, could tell next helpful? the of us advance maybe in details

the Yes. question. Stacy, for thanks

I for the that what say to of innovation would So is time success one company is and any time rate. commercialization factors important innovation, the to most

and So that's we've know, you process. of a many, to as And – been takes serial somewhat high-volume it years many manufacturing. from concept

and think to parallel steps significantly time in some with those some to And we drive accelerate innovation. customers, so of opportunities of largest our working there's

gains. week. So materials of there's that's Again, I structures, bigger that's believe definitely think new I the opportunities to be things about bigger And I've inflections, do about going exciting. really some and what that talked do going be a It's to talking there. next percentage we're of

design big part a becoming their customers of talk roadmap computing. co-optimization, our energy-efficient much technology Some of about bigger for

Anyway, accelerate to as customers spend think So I on also R&D node, about on know, we largest of earlier. definitely with this each ways working tremendous the we'll much on next I value event think you cost you SEMICON think, at and we how this but And creation. Stacy, we'll cover opportunity economic on that money week. then that some more about next cover there's our of will for technology of more And cover And optimization, have week, companies dollars a been then Mike if talked these concepts. both there's each innovation.

like than just a it new this is So is more Or that? fab? maiden

going concept I the today. entire work through to what what certainly, the of pretty of I'd ecosystem, concepts, say how than exciting. than are doing pretty we're we're we're think, about it's bigger is talking more And that. significantly The the scale

you, Thank Got it. guys.

All close help us call like right. today? Thanks, Stacy for your question. the to out Brice, would you

described. while position are our we're to making and is Conference Gary the look outperforming see Francisco, close there Mike, collaborate increase Thank we cash with long-term BofA call. our making the and forward today a ahead just Bernstein of you, you My diversity. in customers progress the Applied on in markets, year, to in Gary to the returns future you is thanks York will shareholders. hope productively in We're operating weakness significant unique of opportunity, markets breadth June many New industry's the our June conference great strategic X. and to good see make and this at to closely growth Monday, X, San we're detailing and and investment investments our Mike. at in about please the takeaway areas On I go to and that confident

website call your thank Okay. to for we'd continued today's interest like Time, for in of to And us to of we'd o’clock Pacific IR everybody Applied Thanks, Brice. you today. is by joining the A like be about replay going Materials. page available X thank on our

This Thank you, program. in conference. ladies and gentlemen, does participation for today's conclude your the

now may Good day. You disconnect.