APPLIED MATLS INC earnings calls

semi systems growth outlook

Q (C. J. Muse · Cantor Fitzgerald): Analyst asked how to think about the current growth outlook for semiconductor systems and for calendar 2027 given prior >30% guide. Also asked about implications for gross margins from pricing.

A: Management said demand strengthened during the quarter, with new factory projects and rising CapEx forecasts. They said growth now looks greater than the >30% cited last quarter and they expect another strong year in 2027. On margins, they cited value-based pricing and said semi systems gross margins are already >55% and should continue improving.

"So our key comments there and the way that we are seeing the business is that demand strengthened again during the quarter." — Brice A. Hill (CFO)

longer-term customer visibility

Q (Vivek Arya · BofA): Analyst asked how multi-year customer agreements and better alignment with end customers translate into visibility beyond the 8 quarters the company cites. Also asked about gross margin gap versus peers and prospects for expanding margins.

A: Management said for the largest customers they have roadmap visibility and a perspective out about 5 years, while the detailed planning is for the 8 quarters so supply chain can act. They noted longer lead-time POs, cancellation and expedite charges have appeared, and they expect continued gross margin improvements driven by portfolio strength and value pricing.

"So you know, what we have from customers, of course, the large customers, we actually have visibility to the road map." — Brice A. Hill (CFO)

gross margin outlook near term

Q (Stacy Rasgon · Bernstein): Analyst asked why company-level gross margins are being guided flat in the near term despite strong revenue growth and pricing gains. Also asked how long ramp costs will last and the pace of margin improvement.

A: Management said some near-term headwinds come from ramp costs as they add customer service engineers and other resources while scaling the semi business. They expect slow, continued margin improvement over the longer horizon as those headwinds recede and revenues grow, and they highlighted that semi systems margins are already >55%.

capacity versus revenue forecast

Q (Timothy Arcuri · UBS): Analyst asked whether the company would commit to systems growing 40% or more and whether doubling manufacturing capacity implies revenue doubling by calendar 2028.

A: Management said they expect to outgrow the market but would not give a precise systems growth number for the year or Q1 guidance. They explained the comment about doubling capacity refers to capacity plans (clean room and supply chain readiness), not a direct revenue forecast for 2028.

"It is more nuanced. I think you should take it explicitly. it is capacity." — Brice A. Hill (CFO)

technology versus capacity visibility

Q (Krish Sankar · TD Cowen): Analyst asked whether customer conversations out to 2013 (typo likely meaning multiyear) were about technology or capacity scaling. They also asked how two-year visibility affects pricing and expense decisions.

A: Management said large customers provide detailed road maps so they can plan both technology and capacity, with the 8-quarter detail used to pass specifics to suppliers. They said those conversations include technology planning and allow detailed planning for about 5 years, so they can prepare tooling and supply chain accordingly.

"So especially with the large customers or mature customers, you know, we know the fab projects that are on the road map." — Brice A. Hill (CFO)

ICAPS and services margins

Q (Harlan Sur · JPMorgan): Analyst asked whether global ICAPS customers outside China are starting to increase spending and whether the ICAPS business will grow this year. He also asked if AGS (services) margins and gross margins can rise as revenues scale.

A: Management said they see a change in ICAPS dynamics and expect ICAPS overall to grow this year and next, noting China will grow and non-China customers should see positive growth. For services, they expect gross margins to improve over time driven by AI-enabled solutions, higher installed base, and innovations that optimize yield and output.

"We do think that ICAPS overall will grow this year and will grow next year." — Brice A. Hill (CFO)

NAND trend and CapEx outlook

Q (Blayne Curtis · Jefferies): Analyst asked about the sharp percentage growth in NAND off a small base and whether that growth will continue. He also asked about CapEx and OpEx expectations into the October quarter and next year.

A: Management said NAND had good percentage growth this year off a small base and they expect NAND to grow but be a slower grower in the out year compared with leading logic, DRAM, and packaging. On CapEx, they said CapEx will still be higher than normal this year and will decline as a percentage of revenue in 2027 as planned investments are completed.

"Good growth. In NAND this year from a percentage perspective. Small base, like you say, but we think this year is a strong year of growth for NAND." — Brice A. Hill (CFO)

ranking strength: logic, DRAM, packaging

Q (Jim Schneider · Goldman Sachs): Analyst asked management to rank incremental strength between foundry logic, DRAM, and advanced packaging for fiscal 27 and calendar 2027. He also asked about risks to seeing accelerating revenue in 2027.

A: Management said they do not distinguish among those segments because AI-driven system-level demand is similar across leading logic, DRAM, and advanced packaging, and all will be strong. They added that clean room availability will largely govern how much can ship next year, since projects take years to build.

"We think the system level pull, you know, that, AI provides is similar across those different end markets." — Brice A. Hill (CFO)

WFE scenarios and margin targets

Q (Mehdi Hosseini · Susquehanna International): Analyst asked how management thinks about revenue growth and operating margin targets for a WFE environment of $150 billion to $175 billion.

A: Management said they will provide more detail at the October investor event but emphasized they see strong multiyear compute-driven demand and expect to outperform given leadership in the fastest-growing segments. They also said increasing customer value, yield/output innovations, and a unique portfolio support continued margin expansion, with more color to come in October.

"I think, you know, when we have the October investor event, we will give more color relative to growth rates." — Gary E. Dickerson (CEO)

panel packaging and hybrid bonding

Q (Srini Pajjuri · Royal Bank of Canada): Analyst asked when panel level packaging will become mainstream and what opportunities it presents versus current advanced packaging. He also asked about hybrid bonding timing and opportunity. He then asked about the 14-week quarter impact on sequential revenue.

A: Management said packaging is a major growth area with over 70% growth this year and they expect significant panel revenue growth next year and continued ramp thereafter; they also highlighted strong positioning and co-innovation with customers. On hybrid bonding they said it is an important inflection across logic, DRAM and HBM, and Applied has strong technology and adjacent steps supporting it. For the 14-week quarter, management said services tend to be ratable while equipment planning is quarterly, so most spending occurs in the quarter.

"what I would say is that, you know, we will see a pretty significant growth in next year in our panel revenue." — Gary E. Dickerson (CEO)