Shares of Applied Materials decline after the company’s third-quarter outlook disappointed investors

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Shares of Applied Materials decline after the company's third-quarter outlook disappointed investors
Shares of Applied Materials decline after the company's third-quarter outlook disappointed investors

Applied Materials predicted third-quarter earnings above Wall Street estimates on Thursday, following strong demand for its semiconductor equipment.

Following robust demand for its semiconductor equipment, Applied Materials (AMAT.O) anticipated third-quarter earnings above Wall Street predictions on Thursday. However, the company’s results fell short of investors’ high expectations.

After rising over 32% in value thus far this year, the company’s shares decreased by roughly 1.2% during extended trading.

With its clients spending extensively on the production of artificial intelligence chips, Applied Materials has benefited from the increased need for wafer fabrication equipment, which is a sophisticated and expensive technology to build semiconductors.

Running Point Capital’s chief investment officer, Michael Ashley Schulman, stated that “investors are nudging the share price down because they were looking for a more solid beat and outlook,” noting that the results do not “knock the wind out of a semiconductor chip recovery theme.”

The need for memory semiconductors like dynamic random-access memory (DRAM) and flash memory has increased due to the growing needs of data centers and high-performance computing, which is beneficial for chip tool providers.

LSEG data shows that Applied Materials predicted third-quarter revenue of approximately $6.65 billion, give or take $400 million. Analysts had predicted $6.58 billion.

In contrast to projections of $1.98, the company anticipates a third-quarter adjusted profit per share of between $1.83 and $2.19.

According to Applied Materials (005930.KS), a supplier of chipmaking tools to Samsung Electronics (005930.KS) and Taiwan Semiconductor Manufacturing Co (2330.TW) (opens a new tab), 43% of their total income in the second quarter came from China.

Applied Materials Chief Financial Officer Brice Hill stated in a teleconference following the company’s earnings that the end markets are a mix of robust image sensors, power chips, microcontrollers, and other sectors, but weak industrial and car markets.

The business, which produces the majority of the nation’s semiconductor equipment, topped analysts’ projections of $6.54 billion with second-quarter revenue of $6.65 billion.

Applied Materials made $2.09 per share on an adjusted basis, vs. projections of $1.99.

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