The China Show 7/04/2025
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5 Must-Read Analyst Questions From Applied Materials's Q1 Earnings Call
Applied Materials met Wall Street's expectations in the first quarter of 2025, but the market reacted negatively, reflecting concerns that surfaced during the earnings call. Management highlighted strong demand for AI-enabling semiconductors and robust performance in leading-edge foundry and DRAM segments as primary growth drivers. CEO Gary Dickerson noted, 'Our customers remain focused on winning the race to be first-to-market with transformative new technologies,' yet acknowledged that trade restrictions and a weaker 200-millimeter equipment market, especially in China, affected the company's service segment. CFO Brice Hill cited the 'rapidly evolving economic and trade policy environment' as a challenge that the company continues to navigate. Is now the time to buy AMAT? Find out in our full research report (it's free). Revenue: $7.1 billion vs analyst estimates of $7.13 billion (6.8% year-on-year growth, in line) Adjusted EPS: $2.39 vs analyst estimates of $2.31 (3.4% beat) Adjusted EBITDA: $2.28 billion vs analyst estimates of $2.24 billion (32.2% margin, 2% beat) Revenue Guidance for Q2 CY2025 is $7.2 billion at the midpoint, roughly in line with what analysts were expecting Adjusted EPS guidance for Q2 CY2025 is $2.35 at the midpoint, above analyst estimates of $2.31 Operating Margin: 30.5%, up from 28.8% in the same quarter last year Inventory Days Outstanding: 142, up from 136 in the previous quarter Market Capitalization: $153.3 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Stacy Rasgon (Bernstein Research) asked about ongoing weakness in the AGS segment, especially due to China trade restrictions. CFO Brice Hill explained that core services will continue to grow at a low double-digit rate, but 200-millimeter equipment sales remain subdued. Vivek Arya (Bank of America Securities) questioned the impact of mature node (ICAPS) exposure on growth. Hill clarified that ICAPS markets are expected to grow mid-to-high single digits, with China's 28-nanometer investments seen as an opportunity for Applied Materials. C.J. Muse (Cantor Fitzgerald) probed gross margin sustainability amid tariff pressures. Hill stated that flexible manufacturing, value-based pricing, and cost management should hold margins in the low 48% range, with ongoing improvements anticipated. Melissa Weathers (Deutsche Bank) asked about DRAM spending trends and the balance between cyclical lows and AI-driven growth. CEO Gary Dickerson emphasized strong DRAM demand led by high-bandwidth memory and the company's market share gains in this segment. Krish Sankar (TD Cowen) explored competitive dynamics in process tools and the rationale behind the BESI investment. Dickerson highlighted Applied's positioning at key technology inflections and deep customer collaborations as differentiators. In the coming quarters, the StockStory team will be monitoring (1) the pace of adoption for advanced AI and memory products, (2) the impact of evolving trade restrictions and tariffs on both equipment and services revenue, and (3) the ability of Applied Materials to sustain margin improvements through manufacturing efficiencies and cost controls. Progress on these fronts will help determine whether recent investments translate into durable, profitable growth. Applied Materials currently trades at $190.86, up from $174.59 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it's free). Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today. Sign in to access your portfolio
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US eases chip software export rules to China
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Taiwan vehicle market down 17% in June
Taiwan's new vehicle market declined by 17.5% to 34,320 units in June 2025 from 41,587 units in the same month last year, according to registration data compiled by Taiwan's Ministry of Transportation. Vehicle demand in the country has weakened significantly in recent months, following two years of strong sales growth, despite a pick-up in economic activity in the country. The country's economy exceeded expectations in the first quarter of the year, with GDP expanding by 5.5% year-on-year, driven by a rebound in exports. Domestic consumption remains sluggish, however, reflecting growing uncertainty regarding global trade following the recent US import tariff hikes. In the first half of the year, the vehicle market declined by over 14% to 198,967 units from 232,511 units in the same period last year, with sales of domestically-produced vehicles falling by 12% to 101,817 units, while import sales dropped by almost 17% to 97,170 units. Sales of battery electric vehicles (BEVs) amounted to 12,748 units in this period, led by Tesla with 4,689 units, followed by local automaker Luxgen with 1,930 units, BMW 1,764 units, and Mercedes with 1,195 units. The performances of the individual brands varied significantly year-to-date, with market leader Toyota enjoying a 3% increase to 61,145 units; followed by its Lexus division with a 2% rise to 15,422 units; CMC 13,144 (+27%); Mercedes-Benz 12,982 (7%); Honda 9,591 (-29%); Hyundai 9,328 (-25%); BMW 8,949 (-10%); Mitsubishi 6,581 (-17%); and Ford 6,283 (-13%). Last year, Taiwan reintroduced minimum local content requirements for locally-assembled vehicles – regulations that had been discontinued more than two decades ago. Under the new rules, locally-assembled vehicles are required to have a minimum local content of 15% in their first year of production, rising to 25% in the second year and 35% in the third year. The government claims the new regulation is mainly aimed at ensuring minimum safety standards while also protecting the country's component supply chain. "Taiwan vehicle market down 17% in June" was originally created and published by Just Auto, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
