Can Applied Materials’ Revenue Grow 21% By 2021, Having Been Stagnant Over The Past 2 Years?
Applied Materials’ (NASDAQ: AMAT) total revenue has not seen any growth between 2017 and 2019, but we expect it to grow by more than $3 billion by 2021. Revenue growth of $3.05 billion over the next 2 years is to be driven primarily by growth of $2.03 billion in silicon systems revenue.
Applied Materials’ total revenue has remained more or less flat over the last 2 years, going from $14.54 billion in 2017 to $14.61 billion in 2019. This has largely been due to a slowdown in the semiconductor industry, as a supply glut has led to a slump in demand. Besides, a drop in mobile phones and TV demand has hurt display revenues, that dropped from $1.9 billion in 2017 to $1.65 billion in 2019. However, with the semiconductor downcycle expected to turn around by Q2 2020, we expect total revenue to grow, reaching $17.66 billion by 2021.
Takeaway
- Applied Materials’ Silicon Systems division, which sells equipment used in the manufacture of semiconductor devices, is expected to bring in $10.11 billion in 2020, which is 62% of the total revenue estimate.
- The Silicon Systems division is almost 2.5x bigger than Applied Global Services, which is expected to add $4.24 billion in revenue for 2020.
- The Display segment, which provides products used in display manufacturing, is expected to make up 12% of 2020’s revenue estimate, adding $1.9 billion in revenue.
- However, since 2017 the company’s revenue has remained stagnant, going from $14.54 billion in 2017 to $14.61 billion in 2019.
- In our interactive dashboard AMAT Revenue: How Does Applied Materials Make Money?, we take a look at Applied Materials’ business model, followed by sections reviewing past performance, and 2021 expectations for Applied Materials’ revenue.
A look at Applied Materials’ segments and their contribution to total revenue
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(A) Revenue from silicon systems to grow by around $2.1 billion over the next 2 years, to make up 63% of total revenue in 2021
- Silicon systems revenue grew from $9.52 billion in 2017 to $10.9 billion in 2018, before dropping to $9.03 billion in 2019, due to cooling memory prices and a drop in capital spending by semiconductor manufacturers.
- However, we expect semiconductor demand to pick up, driving revenue from this segment to around $11.12 billion by 2021.
(B) Applied global services revenue to grow by $480 million by 2021, to make up 25% of total revenue
- This segment includes sales from the global services business, which primarily provides integrated solutions to optimize equipment and fab performance and productivity.
- Revenue from this segment has grown from $3.12 billion in 2017 to $3.93 billion in 2019, as semiconductor companies have increased focus on improving the overall utilization and reducing the total cost of ownership.
- We further expect this metric to grow to $4.41 billion by 2021.
(C) Revenue from display products to grow by around $500 million in the next 2 years, to make up 12% of total revenue in 2021
- Revenue from this segment grew from $1.9 billion in 2017 to $2.5 billion in 2019, before dropping to $1.65 billion in 2019 on the back of a drop in TV and mobile phone demand.
- However, we expect demand to grow through 2020, and with the growing transition to OLED displays, this metric could see substantial growth.
- We expect revenue from this segment to rise to $2.13 billion by 2021.
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