Applied Materials (AMAT) Q1 2025 earnings summary

Executive summary

• Achieved record Q1 FY2025 revenue of $7.17B, up 7% year-over-year, driven by strong demand in advanced semiconductors, AI, and foundry-logic, with gross margin expansion and robust shareholder returns.

• Non-GAAP EPS reached a record $2.38, up 12% year-over-year, while GAAP EPS fell 40% to $1.45 due to a $644M Singapore tax charge.

• Outperformed the market in leading-edge foundry logic, DRAM, advanced packaging, and ICAPS outside China in 2024.

• Strategy centers on high-velocity co-innovation, integrated solutions, and leadership in device architecture inflections critical to energy-efficient AI.

• Major technology inflections, such as Gate-All-Around transistors and Backside Power Delivery, are expanding addressable markets and supporting long-term growth.

Financial highlights

• Q1 FY2025 net sales were $7.17B, up 7% year-over-year, with growth in Semiconductor Systems and AGS; GAAP gross margin was 48.8%, non-GAAP gross margin 48.9%.

• Non-GAAP operating income was $2.19B, up 11% year-over-year; GAAP operating margin at 30.4%, non-GAAP at 30.6%.

• Net income was $1.19B, down from $2.02B year-over-year, mainly due to higher tax rate and lower other income; non-GAAP net income was $1.95B, up from $1.78B.

• Free cash flow for Q1 was $544M; operating cash flow was $925M.

• $1.64B returned to shareholders via $1.32B in share repurchases and $326M in dividends; $7.6B remains under repurchase authorization.

Outlook and guidance

• Q2 FY2025 revenue expected at $7.1B ± $400M; non-GAAP EPS at $2.30 ± $0.18; non-GAAP gross margin at 48.4%; operating expenses at ~$1.3B; tax rate at ~13%.

• Semiconductor Systems revenue projected at $5.3B (+8% YoY), AGS at $1.55B (+1% YoY), display at $250M.

• China revenue as a percentage of total expected to be 5 points lower in Q2, below the normalized 30% level.

• $400M revenue headwind in FY25 from expanded export controls, with nearly half impacting Q2.

• Guidance incorporates headwinds from new U.S. export regulations and anticipates more measured investment levels.