Applied Materials (AMAT) J.P. Morgan 54th Annual Global Technology, Media and Communications Conference summary

Market and growth outlook

• Systems business growth outlook raised to 30% for the year, driven by accelerated greenfield projects and technology migrations, especially in advanced logic, DRAM, and advanced packaging.

• Incremental upside comes from both new facility buildouts and creative repurposing of existing fabs, with customers optimizing production lines and replacing older tools for higher productivity.

• Advanced packaging and DRAM conversions are major growth themes, with customers seeking to maximize good die output and optimize factory throughput.

• Eight-plus quarters of backlog visibility supports confidence in strong WFE spend through 2027 and 2028, with over 100 projects in the pipeline, mainly focused on greenfield capacity in advanced logic, DRAM, and packaging.

• The semiconductor industry is on track to surpass $1 trillion in revenues by 2030, with spending increasingly concentrated in leading-edge logic, DRAM, and advanced packaging.

Technology and product innovation

• Integrated Material Systems (IMS) platforms now represent about 30% of system sales, offering technology enablement, better defectivity, higher throughput, and lower system footprint.

• IMS platforms drive higher service intensity due to increased complexity and unique parts requirements, creating more opportunities for value-added services.

• Co-optimization of applications and integration of metrology and inspection tools enable faster process optimization and flexibility for customers.

• Recent product launches include advanced tools like Trillium and selective nitride deposition, supporting higher gross margins and addressing complex customer challenges.

Services (AGS) business performance and strategy

• AGS services franchise accounts for 20%-22% of total revenue, with recurring revenues and operating margins near 30%.

• Long-term contracts drive two-thirds of AGS revenue, with renewal rates above 90% and contract lengths averaging 2.9 years.

• Growth outlook for AGS raised to sustainable mid-teens annual growth, supported by managed/performance contracts, on-demand services, and a growing software franchise (SmartFactory, CIM).

• AIx platform, digital twins, and predictive maintenance models are key to optimizing customer output and increasing recurring revenue per tool.

• Advanced packaging and heterogeneous integration are creating new service opportunities as complexity shifts to the back end, with AGS well positioned to support these trends.