Applied Materials Reports Strong Q1 2025 Results, Driven by AI and Advanced Compute Innovations
Applied Materials, Inc. (NASDAQ: AMAT) today announced its financial results for the first quarter of fiscal year 2025, ended January 26, 2025. The company delivered robust performance, achieving record revenue, gross margin expansion, and strong shareholder returns. These results underscore Applied Materials’ leadership in enabling cutting-edge technologies for advanced compute and artificial intelligence (AI).
Accelerating Innovation in AI and Energy-Efficient Computing
“The industry’s drive to accelerate the development of advanced compute and more sophisticated AI is gaining momentum,” said Gary Dickerson, President and CEO of Applied Materials. “Applied Materials is enabling the major device architecture inflections critical for energy-efficient AI. Our focus on high-velocity co-innovation creates unique collaboration opportunities with our customers and partners, positioning Applied for continued growth and outperformance in the years to come.”
The company’s strategic investments in next-generation technologies are paying off, as evidenced by its strong Q1 performance and optimistic outlook for the second quarter.
Financial Highlights for Q1 FY2025
Applied Materials reported impressive financial metrics for the first quarter:
- Net Revenue: $7,166 million, up 7% year-over-year.
- Gross Margin: Expanded to 48.8%, a 1.0-point increase from Q1 FY2024.
- Operating Margin: Grew to 30.4%, reflecting a 1.1-point improvement.
- Net Income: $1,185 million, impacted by one-time tax adjustments.
- Diluted Earnings Per Share (EPS): $1.45, a 40% decrease due to tax-related charges.
On a non-GAAP basis, the company demonstrated even stronger performance:
- Non-GAAP Gross Margin: 48.9%, up 1.0 point year-over-year.
- Non-GAAP Operating Margin: 30.6%, an increase of 1.1 points.
- Non-GAAP Net Income: $1,946 million, up 9% year-over-year.
- Non-GAAP Diluted EPS: $2.38, a 12% increase compared to Q1 FY2024.
- Non-GAAP Free Cash Flow: $544 million, reflecting ongoing investments in innovation.
A significant factor impacting GAAP results was a $644 million income tax expense related to new tax incentive agreements in Singapore, which reduced diluted EPS by $0.79.
Segment Performance Overview
Semiconductor Systems
- Net Revenue: $5,356 million, up from $4,909 million in Q1 FY2024.
- Foundry, Logic, and Other: 68% of revenue, up from 62%.
- DRAM: 28% of revenue, down from 34%.
- Flash Memory: 4% of revenue, unchanged.
- Operating Income: $1,986 million, with operating margins expanding to 37.1%.
Applied Global Services
- Net Revenue: $1,594 million, up from $1,476 million in Q1 FY2024.
- Operating Income: $447 million, with stable operating margins at 28.0%.
Display
- Net Revenue: $183 million, down from $244 million in Q1 FY2024.
- Operating Income: $14 million, with operating margins at 7.7%.
Corporate and Other
- Unallocated Expenses: $(272) million, reflecting ongoing corporate investments.
Outlook for Q2 FY2025
Applied Materials anticipates continued momentum in Q2 FY2025, driven by customer investments in leading-edge technology. However, the company remains mindful of export control-related headwinds. Key projections include:
- Total Net Revenue: $7,100 million (+/- $400 million).
- Non-GAAP Gross Margin: 48.4%.
- Non-GAAP Diluted EPS: $2.30 (+/- $0.18).
This outlook excludes certain items such as acquisition-related charges, gains on asset sales, and intra-entity intangible asset transfers, ensuring transparency for investors.
Strategic Focus on AI and Co-Innovation
Applied Materials’ success is rooted in its ability to collaborate closely with customers and partners to drive technological breakthroughs. According to Brice Hill, Senior Vice President and CFO, “We delivered strong financial performance in the first fiscal quarter, with record revenue, gross margin expansion, and robust shareholder distributions. For the second quarter, we are encouraged by the trends supporting continued customer investments to enable leading-edge technology inflections.”
The company’s emphasis on high-velocity co-innovation positions it as a key enabler of AI and advanced compute solutions. By leveraging its expertise in materials engineering and device architecture, Applied Materials is helping customers overcome the challenges of energy-efficient AI and next-generation computing.
Industry Recognition and Partnerships
Applied Materials’ innovations continue to earn recognition from industry leaders. Collaborations with global OEMs and semiconductor manufacturers highlight the company’s role in shaping the future of AI and compute. As demand for AI-driven technologies grows, Applied Materials remains at the forefront, delivering solutions that enhance performance, efficiency, and scalability.
Understanding Non-GAAP Financial Measures
To provide a clearer view of its operational performance, Applied Materials uses non-GAAP financial measures, which exclude certain costs, expenses, gains, and losses. These adjustments help investors assess the company’s core business performance and compare results across periods consistently. Reconciliations of non-GAAP measures to GAAP metrics are included in the financial tables accompanying this release.
While non-GAAP measures offer valuable insights, they should not be viewed in isolation or as substitutes for GAAP-based metrics. Applied Materials acknowledges the limitations of these measures and emphasizes their use as supplementary tools for evaluating performance.
A Future-Ready Strategy
Applied Materials’ Q1 FY2025 results reflect its commitment to driving innovation in AI, advanced compute, and energy-efficient technologies. With a strong financial foundation, strategic partnerships, and a focus on co-innovation, the company is well-positioned to deliver sustained growth and outperformance in the years ahead.
For more details, visit Applied Materials’ investor relations page or review the full earnings release. Stay tuned as the company continues to shape the future of technology with groundbreaking solutions designed to meet the demands of tomorrow’s digital world.
