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Applied Materials Announces Fourth Quarter and Fiscal Year 2023 Results

  • Quarterly revenue $6.72 billion, flat year over year
  • Quarterly GAAP EPS $2.38 and non-GAAP EPS $2.12, up 29 percent and 4 percent year over year, respectively
  • Annual revenue $26.52 billion, up 3 percent year over year
  • Annual GAAP EPS $8.11 and non-GAAP EPS $8.05, up 9 percent and 5 percent year over year, respectively

SANTA CLARA, Calif., Nov. 16, 2023 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its fourth quarter and fiscal year ended Oct. 29, 2023.

Fourth Quarter Results

Applied generated revenue of $6.72 billion. On a GAAP basis, the company reported gross margin of 47.1 percent, operating income of $1.97 billion or 29.3 percent of net sales, and record earnings per share (EPS) of $2.38.

On a non-GAAP adjusted basis, the company reported gross margin of 47.3 percent, operating income of $1.98 billion or 29.5 percent of net sales, and record EPS of $2.12.

The company generated $1.56 billion in cash from operations and distributed $968 million to shareholders including $700 million in share repurchases and $268 million in dividends.

Full Year Results

In fiscal 2023, Applied generated record revenue of $26.52 billion. On a GAAP basis, the company recorded gross margin of 46.7 percent, operating income of $7.65 billion or 28.9 percent of net sales, and record EPS of $8.11.

On a non-GAAP adjusted basis, the company reported gross margin of 46.8 percent, operating income of $7.72 billion or 29.1 percent of net sales, and record EPS of $8.05.

The company generated a record $8.70 billion in cash from operations and distributed $3.16 billion to shareholders including $2.19 billion in share repurchases and $975 million in dividends.

“Applied Materials delivered record revenue, earnings and cash flow in fiscal 2023 and is outgrowing the wafer fabrication equipment market for the fifth year in a row,” said Gary Dickerson, President and CEO. “Applied’s broad product portfolio, strong customer relationships and leadership at major technology inflections put us in a great position to profitably grow the company as powerful trends fuel the semiconductor industry’s expansion in the years ahead.”

Results Summary

             Change
 Q4 FY2023  Q4 FY2022  FY2023  FY2022  Q4 FY2023
vs.
Q4 FY2022
 FY2023
vs.
FY2022
 (In millions, except per share amounts and percentages) 
Net sales$6,723  $6,749  $26,517  $25,785  —%  3% 
Gross margin 47.1%  45.9%  46.7%  46.5% 1.2 points 0.2 points
Operating margin 29.3%  29.5%  28.9%  30.2% (0.2) points (1.3) points
Net income$2,004  $1,591  $6,856  $6,525  26%  5% 
Diluted earnings per share$2.38  $1.85  $8.11  $7.44  29%  9% 
Non-GAAP Adjusted Results               
Non-GAAP adjusted gross margin 47.3%  46.0%  46.8%  46.6% 1.3 points 0.2 points
Non-GAAP adjusted operating margin 29.5%  29.8%  29.1%  30.5% (0.3) points (1.4) points
Non-GAAP adjusted net income$1,786  $1,741  $6,802  $6,756  3%  1% 
Non-GAAP adjusted diluted EPS$2.12  $2.03  $8.05  $7.70  4%  5% 
Non-GAAP free cash flow$1,246  $634  $7,594  $4,612  97%  65% 
                      

A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.

Business Outlook

In the first quarter of fiscal 2024, Applied expects net sales to be approximately $6.47 billion, plus or minus $400 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.72 to $2.08.

This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes a net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax-related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

Fourth Quarter and Fiscal Year Reportable Segment Information

Semiconductor SystemsQ4 FY2023 Q4 FY2022 FY2023 FY2022
 (In millions, except percentages)
Net sales$4,883  $5,038  $19,698  $18,797 
Foundry, logic and other 69%  71%  77%  66%
DRAM 27%  16%  17%  19%
Flash memory 4%  13%  6%  15%
Operating income$1,791  $1,849  $7,090  $6,969 
Operating margin 36.7%  36.7%  36.0%  37.1%
Non-GAAP Adjusted Results      
Non-GAAP adjusted operating income$1,801  $1,858  $7,129  $7,000 
Non-GAAP adjusted operating margin 36.9%  36.9%  36.2%  37.2%


Applied Global ServicesQ4 FY2023 Q4 FY2022 FY2023 FY2022
 (In millions, except percentages)
Net sales$1,471  $1,420  $5,732  $5,543 
Operating income$431  $402  $1,657  $1,661 
Operating margin 29.3%  28.3%  28.9%  30.0%
Non-GAAP Adjusted Results      
Non-GAAP adjusted operating income$431  $402  $1,657  $1,661 
Non-GAAP adjusted operating margin 29.3%  28.3%  28.9%  30.0%


Display and Adjacent MarketsQ4 FY2023 Q4 FY2022 FY2023 FY2022
 (In millions, except percentages)
Net sales$298  $251  $868  $1,331 
Operating income$67  $34  $133  $260 
Operating margin 22.5%  13.5%  15.3%  19.5%
Non-GAAP Adjusted Results      
Non-GAAP adjusted operating income$67  $34  $133  $263 
Non-GAAP adjusted operating margin 22.5%  13.5%  15.3%  19.8%
                

Use of Non-GAAP Adjusted Financial Measures

Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring and severance charges and any associated adjustments; impairments of assets; gain or loss, dividends and impairments on strategic investments; certain income tax items and other discrete adjustments. On a non-GAAP basis, the tax effect related to share-based compensation is recognized ratably over the fiscal year. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied's ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast and related slide presentation will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statement

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the first quarter of fiscal 2024 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products, our ability to meet customer demand, and our suppliers' ability to meet our demand requirements; global economic, political and industry conditions, including rising inflation and interest rates; the implementation and interpretation of new export regulations and license requirements, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the effects of geopolitical turmoil or conflicts, and of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations and other risks and uncertainties described in our SEC filings, including our recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible a better future. Learn more at www.appliedmaterials.com.

Contact:

Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 Three Months Ended Twelve Months Ended
(In millions, except per share amounts)October 29,
2023
 October 30,
2022
 October 29,
2023
 October 30,
2022
Net sales$6,723 $6,749 $26,517 $25,785 
Cost of products sold 3,554  3,648  14,133  13,792 
Gross profit 3,169  3,101  12,384  11,993 
Operating expenses:       
Research, development and engineering 789  726  3,102  2,771 
Marketing and selling 192  183  776  703 
General and administrative 217  198  852  735 
Severance and related charges       (4)
Total operating expenses 1,198  1,107  4,730  4,205 
Income from operations 1,971  1,994  7,654  7,788 
Interest expense 58  57  238  228 
Interest and other income (expense), net 259  12  300  39 
Income before income taxes 2,172  1,949  7,716  7,599 
Provision for income taxes 168  358  860  1,074 
Net income$2,004 $1,591 $6,856 $6,525 
Earnings per share:       
Basic$2.40 $1.86 $8.16 $7.49 
Diluted$2.38 $1.85 $8.11 $7.44 
Weighted average number of shares:       
Basic 836  854  840  871 
Diluted 842  859  845  877 
             


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)October 29,
2023
 October 30,
2022
ASSETS   
Current assets:   
Cash and cash equivalents$6,132 $1,995
Short-term investments 737  586
Accounts receivable, net 5,165  6,068
Inventories 5,725  5,932
Other current assets 1,388  1,344
Total current assets 19,147  15,925
Long-term investments 2,281  1,980
Property, plant and equipment, net 2,723  2,307
Goodwill 3,732  3,700
Purchased technology and other intangible assets, net 294  339
Deferred income taxes and other assets 2,552  2,475
Total assets$30,729 $26,726
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Short-term debt$100 $
Accounts payable and accrued expenses 4,297  4,237
Contract liabilities 2,975  3,142
Total current liabilities 7,372  7,379
Long-term debt 5,461  5,457
Income taxes payable 833  964
Other liabilities 714  732
Total liabilities 14,380  14,532
Total stockholders’ equity 16,349  12,194
Total liabilities and stockholders’ equity$30,729 $26,726
 


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
 Three Months Ended Twelve Months Ended
(In millions)October 29,
2023
 October 30,
2022
October 29,
2023
 October 30,
2022
Cash flows from operating activities:       
Net income$2,004  $1,591  $6,856  $6,525 
Adjustments required to reconcile net income to cash provided by operating activities:       
    Depreciation and amortization 130   123   515   444 
    Severance and related charges          (4)
    Share-based compensation 115   99   490   413 
    Deferred income taxes 198   (14)  24   (223)
    Other (149)  22   40   36 
    Net change in operating assets and liabilities (743)  (964)  775   (1,792)
Cash provided by operating activities 1,555   857   8,700   5,399 
Cash flows from investing activities:       
Capital expenditures (309)  (223)  (1,106)  (787)
Cash paid for acquisitions, net of cash acquired       (25)  (441)
Proceeds from sales and maturities of investments 297   350   1,268   1,363 
Purchases of investments (477)  (317)  (1,672)  (1,492)
Cash used in investing activities (489)  (190)  (1,535)  (1,357)
Cash flows from financing activities:       
Proceeds from commercial paper 99      991    
Repayments of commercial paper (200)     (900)   
Proceeds from common stock issuances 116   103   227   199 
Common stock repurchases (700)  (1,500)  (2,189)  (6,103)
Tax withholding payments for vested equity awards (14)  (7)  (179)  (266)
Payments of dividends to stockholders (268)  (223)  (975)  (873)
Repayments of principal on finance leases 1      (7)   
Cash used in financing activities (966)  (1,627)  (3,032)  (7,043)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents 100   (960)  4,133   (3,001)
Cash, cash equivalents and restricted cash equivalents—beginning of period 6,133   3,060   2,100   5,101 
Cash, cash equivalents and restricted cash equivalents — end of period$6,233  $2,100  $6,233  $2,100 
        
Reconciliation of cash, cash equivalents, and restricted cash equivalents       
Cash and cash equivalents$6,132  $1,995  $6,132  $1,995 
Restricted cash equivalents included in deferred income taxes and other assets 101   105   101   105 
Total cash, cash equivalents, and restricted cash equivalents$6,233  $2,100  $6,233  $2,100 
        
Supplemental cash flow information:       
Cash payments for income taxes$588  $246  $1,006  $1,869 
Cash refunds from income taxes$2  $23  $53  $156 
Cash payments for interest$68  $68  $205  $205 
                


APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
 
Corporate and Other
        
(In millions)Q4 FY2023 Q4 FY2022 FY2023 FY2022
Unallocated net sales$71  $40  $219  $114 
Unallocated cost of products sold and expenses (274)  (232)  (955)  (807)
Share-based compensation (115)  (99)  (490)  (413)
Severance and related charges          4 
Total$(318) $(291) $(1,226) $(1,102)
                


Additional Information

 Q4 FY2023 Q4 FY2022 FY2023 FY2022
Net Sales by Geography (In millions)     
United States$803  $830  $4,006  $3,104 
% of Total 12%  12%  15%  12%
Europe$441  $375  $2,152  $1,674 
% of Total 7%  5%  8%  7%
Japan$681  $606  $2,075  $2,012 
% of Total 10%  9%  8%  8%
Korea$745  $1,082  $4,609  $4,395 
% of Total 11%  16%  18%  17%
Taiwan$922  $2,068  $5,670  $6,262 
% of Total 14%  31%  21%  24%
Southeast Asia$168  $451  $758  $1,084 
% of Total 2%  7%  3%  4%
China$2,963  $1,337  $7,247  $7,254 
% of Total 44%  20%  27%  28%
        
Employees (In thousands)       
Regular Full Time 34.3   33.3     
            


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended Twelve Months Ended
(In millions, except percentages)October 29,
2023
 October 30,
2022
 October 29,
2023
 October 30,
2022
Non-GAAP Adjusted Gross Profit       
Reported gross profit - GAAP basis$3,169  $3,101  $12,384  $11,993 
Certain items associated with acquisitions1 8   6   29   26 
Non-GAAP adjusted gross profit$3,177  $3,107  $12,413  $12,019 
Non-GAAP adjusted gross margin 47.3%  46.0%  46.8%  46.6%
Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,971  $1,994  $7,654  $7,788 
Certain items associated with acquisitions1 11   10   43   39 
Acquisition integration and deal costs 2   6   22   38 
Severance and related charges2          (4)
Non-GAAP adjusted operating income$1,984  $2,010  $7,719  $7,861 
Non-GAAP adjusted operating margin 29.5%  29.8%  29.1%  30.5%
Non-GAAP Adjusted Net Income       
Reported net income - GAAP basis$2,004  $1,591  $6,856  $6,525 
Certain items associated with acquisitions1 11   10   43   39 
Acquisition integration and deal costs 2   6   22   34 
Severance and related charges2          (4)
Realized loss (gain), dividends and impairments on strategic investments, net (2)  (2)  107   (3)
Unrealized loss (gain) on strategic investments, net (147)  11   (134)  (4)
Earn-out (15)     (15)   
Income tax effect of share-based compensation3 6   22       
Income tax effects related to intra-entity intangible asset transfers (65)  132   (40)  252 
Resolution of prior years’ income tax filings and other tax items (9)  (26)  (31)  (80)
Income tax effect of non-GAAP adjustments4 1   (3)  (6)  (3)
Non-GAAP adjusted net income$1,786  $1,741  $6,802  $6,756 
 
1  These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2  The severance and related charges primarily related to a one-time voluntary retirement program offered to certain eligible employees.
3   GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
4   Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended Twelve Months Ended
(In millions, except per share amounts)October 29,
2023
 October 30,
2022
 October 29,
2023
 October 30,
2022
Non-GAAP Adjusted Earnings Per Diluted Share       
Reported earnings per diluted share - GAAP basis$2.38  $1.85  $8.11  $7.44 
Certain items associated with acquisitions 0.01   0.01   0.05   0.04 
Acquisition integration and deal costs    0.01   0.02   0.03 
Realized loss (gain), dividends and impairments on strategic investments, net       0.13    
Unrealized loss (gain) on strategic investments, net (0.18)  0.01   (0.16)  (0.01)
Earn-out (0.01)     (0.01)   
Income tax effect of share-based compensation 0.01   0.03       
Income tax effects related to intra-entity intangible asset transfers (0.08)  0.15   (0.05)  0.29 
Resolution of prior years’ income tax filings and other tax items (0.01)  (0.03)  (0.04)  (0.09)
Non-GAAP adjusted earnings per diluted share$2.12  $2.03  $8.05  $7.70 
Weighted average number of diluted shares 842   859   845   877 
                


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 Three Months Ended Twelve Months Ended
(In millions, except percentages)October 29,
2023
 October 30,
2022
 October 29,
2023
 October 30,
2022
Semiconductor Systems Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$1,791  $1,849  $7,090  $6,969 
Certain items associated with acquisitions1 10   9   39   31 
Non-GAAP adjusted operating income$1,801  $1,858  $7,129  $7,000 
Non-GAAP adjusted operating margin 36.9%  36.9%  36.2%  37.2%
AGS Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$431  $402  $1,657  $1,661 
Non-GAAP adjusted operating income$431  $402  $1,657  $1,661 
Non-GAAP adjusted operating margin 29.3%  28.3%  28.9%  30.0%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income       
Reported operating income - GAAP basis$67  $34  $133  $260 
Certain items associated with acquisitions1          3 
Non-GAAP adjusted operating income$67  $34  $133  $263 
Non-GAAP adjusted operating margin 22.5%  13.5%  15.3%  19.8%
 
1  These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.
 


APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 Three Months Ended
(In millions, except percentages)October 29,
2023
  
Provision for income taxes - GAAP basis (a)$168 
Income tax effect of share-based compensation (6)
Income tax effects related to intra-entity intangible asset transfers 65 
Resolutions of prior years’ income tax filings and other tax items 9 
Income tax effect of non-GAAP adjustments (1)
Non-GAAP adjusted provision for income taxes (b)$235 
  
Income before income taxes - GAAP basis (c)$2,172 
Certain items associated with acquisitions 11 
Acquisition integration and deal costs 2 
Realized loss (gain), dividends and impairments on strategic investments, net (2)
Unrealized loss (gain) on strategic investments, net (147)
Earn-out (15)
Non-GAAP adjusted income before income taxes (d)$2,021 
  
Effective income tax rate - GAAP basis (a/c) 7.7%
  
Non-GAAP adjusted effective income tax rate (b/d) 11.6%
 


 
 
    
        
                
                
                
                
 
UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
 
 
    
        
                
                
                
                
 
 
 
 
    
        
                
                
                
                
 
 Three Months Ended Twelve Months Ended
 
 
    
        
                
                
                
                
 
(In millions)October 29,
2023
 October 30,
2022
 October 29,
2023
 October 30,
2022
 
 
    
        
                
                
                
                
 
Cash provided by operating activities$1,555  $857  $8,700  $5,399 
 
 
    
        
                
                
                
                
 
Capital expenditures (309)  (223)  (1,106)  (787)
 
 
    
        
                
                
                
                
 
Non-GAAP free cash flow$1,246  $634  $7,594  $4,612 
 
 
    
        
                
                
                
                
 
 
 
 
    
        
                
                
                
                
 

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