rewrite this title Earnings Preview: Applied Materials expected to post strong Q3 results on AI demand | AlphaStreet

Applied Materials, Inc. (NASDAQ: AMAT), a market leader in materials engineering solutions for chipmaking, is preparing to report results for its third quarter this week. The market will be closely watching the event, looking for signs of resilience amid a complex industry landscape marked by supply chain normalization, strong chip demand, and geopolitical tensions.

Of late, Applied Materials has been expanding the production capacity of advanced chips to meet the AI-fueled demand growth. Its third-quarter report is slated for release on Thursday, August 14, at 4:00 pm ET. It is estimated that the company earned $2.36 per share in the July quarter, excluding special items, on revenues of $7.21 billion. That is an increase from earnings of $2.12 per share and $6.78 billion of revenue reported in Q3 2024.

The Santa Clara-headquartered tech firm has consistently met or exceeded consensus earnings and revenue estimates for nearly three years, underscoring its operational resilience. In a recent statement, the management said it expects third-quarter sales to be approximately $7.2 billion and adjusted earnings per share to be around $2.35.

The Stock

Shares of Applied Materials have averaged $175.09 over the past 52 weeks and are up 14% year-to-date, despite notable volatility. After rebounding from a two-year low earlier this year, the stock has largely maintained its upward trajectory. Analysts remain broadly optimistic about AMAT’s outlook, with many expecting further upside ahead of earnings and a potential move past the $200 mark over the long term.

Gary Dickerson, the company’s chief executive officer, said during the Q2 earnings call, “The impact of AI datacenter innovation and investments is apparent in the wafer fab equipment market, where there are significant shifts in the spending mix this year. We see investment in leading-edge foundry logic growing substantially in 2025, and we also expect spending for leading-edge DRAM to be up significantly. We see lower spending in China with investments in both DRAM and mature logic down for the year. And, finally, we are seeing an uptick in NAND investment, albeit from the very low levels seen over the past several years.”

Earnings Beat

In the second quarter, adjusted earnings rose to $2.39 per share from $2.09 per share in Q2 2024, exceeding consensus estimates. Net income, including special items, was $2.14 billion or $2.63 per share in the April quarter, compared to $1.72 billion or $2.06 per share a year earlier.

The positive bottom-line performance was driven by an increase in Q2 sales to $7.10 billion from $6.65 billion in the corresponding period of the previous year, aided by the stable demand environment. The semiconductor systems business, which accounts for nearly three-fourths of total revenue, grew 7%.

Extending a strong uptrend from last week, Applied Materials’ shares opened higher on Monday and maintained that momentum mostly during the session.