Is There Another Beat In Store For Applied Materials?

by Trefis Team
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Applied Materials
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Applied Materials (NYSE: AMAT), one of the largest providers of material engineering solutions used in semiconductors and displays, has delivered strong results in recent years, with earnings beating market expectations more often than not. The company is scheduled to announce third-quarter earnings on August 16, and we expect it to report another robust quarter driven by growth across segments. We expect Applied Materials to report earnings of about $1.29 per share on revenues of $4.78 billion for the quarter, based on our interactive model on Applied Materials’ outlook for Q3’18. Below we take a look at some of the key trends that we will be watching when the company reports earnings.

Display And Adjacent Markets Segment Set To Report Another Strong Quarter

Applied Materials is one of the leading providers of components that are required to manufacture LCDs, OLEDs, and other display technologies for consumer devices such as TVs, smartphones, and personal computers. Over the last few years, demand for OLEDs in televisions has increased at the expense of LCDs as OLEDs deliver better quality more efficiently, and we expect this to continue in the near term.  Rising OLED demand also bodes well for the company because of their comparatively low production costs and the ability to support high volume production. In smartphones, the efficiency of OLED screens leads to higher battery life, which is of paramount importance to customers. While Samsung was one of the early adopters of this technology, several smartphone manufacturers have now listened to customer demands and are shifting to OLED displays. This, along with the fact that several high profile smartphones are released in the second part of the year, should drive the top line of this segment.

Smartphones, Cloud Computing To Drive Growth In Semiconductor Systems

To differentiate itself in the market, smartphone manufacturers are continuously trying to evolve their products by adding more functionalities. As a result, mobility content per box is growing. Applied Materials expect the growth in mobility content to drive 35% NAND growth and 20% DRAM growth in the next three years. Furthermore, the explosive growth in IoT (Internet of Things) has generated demand for storage, and Applied Materials is right in the thick of this projected growth as it one of the leading suppliers of components for server DRAM. This should fuel growth in the segment.

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