Applied Materials at Cantor Conference: Strategic Growth Amid Challenges

On Wednesday, 12 March 2025, Applied Materials (NASDAQ: AMAT) participated in the Cantor Fitzgerald Global Technology Conference, offering insights into the semiconductor equipment industry. The discussion highlighted both promising growth prospects and challenges, particularly in China, while emphasizing the company’s strategic focus on innovation and capital allocation.

Key Takeaways

• Applied Materials is experiencing record revenue and non-GAAP earnings, with a robust gross margin of 48.9%.
• The company is focusing on advanced technologies like gate-all-around and backside power to drive future growth.
• Trade restrictions have impacted the ICAPS market in China, with a quantified effect of $400 million.
• A 15% dividend increase was announced, reflecting strong cash flow and shareholder return strategy.
• The advanced packaging segment is seeing significant growth, driven by trends in COOS and HBM.

Financial Results

• Record revenue and non-GAAP earnings achieved, supported by strong operational performance.
• Gross margin stands at 48.9%, with future guidance at 48.4%.
• The impact of trade restrictions is expected to be $400 million, split between Q2 services and equipment.
• Services business projected to grow at a low double-digit rate year-over-year.
• Dividend increased by 15%, following previous increases of 23% and 25%.

Operational Updates

• Significant investments in mature technologies in China are driving the ICAPS market.
• Leading-edge nodes are fully utilized, indicating strong demand.
• HBM capacity is expanding, growing at a 30% CAGR.
• A new advanced packaging platform is being developed in Singapore.
• Focus on cost reductions through engineering and supply chain efforts.

Future Outlook

• Secular growth expected in the semiconductor equipment business.
• Continued growth anticipated in the ICAPS market, despite lower utilization rates.
• Services business projected to grow at a low double-digit rate.
• OLED expected to penetrate more into laptops, tablets, and larger screens.
• Potential upside in domestic China demand and increased spending from Samsung.
• Leading logic companies likely to increase capacity due to high utilization.

Q&A Highlights

• Concerns about the ICAPS market in China were addressed, with no change in plans for capacity expansion despite lower investment rates.
• No capacity digestion observed in HBM, with the market growing at a 30% CAGR.
• Incremental growth drivers for 2025 include improved demand in China and leading logic companies expanding capacity.

Readers are encouraged to refer to the full transcript for a detailed understanding of Applied Materials’ strategies and market insights.

Full transcript - Cantor Fitzgerald Global Technology Conference:

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Welcome everyone to Cantor’s day two technology conference. My name is CJ Muse, semiconductor semiconductor equipment analyst, and it is my pleasure to host Applied Materials.

And we have Bryce Hill, chief financial officer. Welcome. Good morning, CJ. Thanks for inviting Applied Materials. Great to be here.

Awesome. So, I I thought for for all semi equipment companies, I’d start with, your favorite question, the industry’s favorite question. Where are we in the cycle? I think across the board, most equipment companies espoused a view of WFE up mid single digits with everyone taking share, which likely means maybe the growth rate could be a little bit better than that. But to take a step back, I guess, how are you seeing the landscape?

You know, what are the puts and takes that you’re focused on? And, if you have an early view or or or thoughts on ’26, we’d love to hear that as well.

Bryce Hill, Chief Financial Officer, Applied Materials: Alright. Thanks, CJ. Well, definitely, you know, we view the market as secular growth. If you look at the last ten years from a semiconductor equipment perspective, I think there’s growth in eight out of those ten years. And And either in the two that were not growth were very small.

So our very small declines. So our perspective is that, this is a secular growth business. You should, if you zoom out far enough, you should expect it to grow every single year. And if you look at our year. And if you look at our planning, what Applied Materials does from an investment, from a CapEx, from an R and D perspective, certainly, that should come through in our business model that we’re planning for secular growth.

Over those ten years? Sorry, I lost the mic.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: You have the mic?

Bryce Hill, Chief Financial Officer, Applied Materials: Okay. Alright. Thank you. How’s that? Yeah.

Good. Great. Okay. So secular growth, we’re planning for secular growth. We’re investing in secular growth.

If you look over those years, CJ, semiconductors grows at a multiple of GDP. That’s our expectation. And the view underneath that is that semiconductors become, more and more core and more and more integral in the economy. And part of the underlying view of that is, the world needs productivity. There’s in a lot of places fewer workers.

We need the power and productivity of semiconductors to continue driving growth for the industry. So, applied looks and plans for that secular growth. And then where are we in the cycle? I think it’s an interesting question. Mixed markets, as you know, leading edge is certainly the highest energy area of the cycle right now.

When you look at the cloud service providers making their CapEx forecast, I think the CapEx forecast I’ve seen is over $325,000,000,000 for the cloud service providers adding, you know, high performance computing for AI and other uses as we go forward. That’s an example that’s driving so many underlying technologies in the industry, and we certainly feel that it applied. So you think of leading edge, you think of leading edge DRAM and memory capabilities, you think of a high bandwidth memory that’s being stacked in those systems to drive performance, And then you think of the packaging requirements. One of one of the systems design companies we recently spoke to said there was 8,000 millimeters squared of leading edge logic on a system, that they’re planning. So not just one chip at the reticle limit, 800 millimeter squared, but 10 times that from a silicon perspective.

And of course, all of that has to be interconnected on some sort of substrate. Those are driving all types of new technologies in the industry. And so back to the question of where are we in the cycle, from that perspective, it seems early in the cycle, it seems like there’s going to be a build out of capability, especially around those technologies for the next many years. And we can feel that in the industry.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. And maybe, we talked about the haves. How about the have nots? How are you thinking about those markets? And any signs of kind of a recovery at some point, whether it’s second half ’twenty five or 2026?

Bryce Hill, Chief Financial Officer, Applied Materials: Yes. The market that’s been slower than the other markets has been the NAND market. We do see some improvement in the NAND market. And it’s kind of a it’s an interesting story, at least from my perspective. There’s no decline in storage memory needs.

In fact, that’s increasing at the same rates as probably it always has been. What’s been happening in a good way is as the technology is involved, you have a bit density that’s increasing faster than demand. So they they upgrade the layer count and you can create more bits, on the same silicon size, you know, 40% increases in some of these nodes and that’s outrunning supply. So from a WaferStar perspective, the NAND business is actually able to more than serve full demand from the existing footprint of wafers, which makes it mostly an upgrade business from an equipment perspective. So the market hasn’t actually been weak.

It’s just that the investment required to deliver that output has been lower. I think underneath, if you look at the systems and you look at the requirements for storage memory, it’s still running at a very significant rate.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Makes sense. Maybe specific to applied materials, I think, Gary Dickerson was pretty early with PPAC, and most companies now in the industry kind of refer to that as a key area of focus. So using maybe that as the starting point and thinking through the technology inflections that are most exciting specific to applied materials. Could you kind of walk through, you know, what gets you excited into ’twenty five, ’twenty six? First, maybe starting off leading against foundry, I think you’ve talked about a 15% increase in TAM related to gate all around in backside power.

Could you elaborate on that? How how you see that progressing? What kind of visibility that gives you to growth, this year, next year?

Bryce Hill, Chief Financial Officer, Applied Materials: Sure. So so let’s start with you brought up the acronym, PPAC, which the company has talked about regularly. PPAC, power, performance, area, and cost. So when the semiconductor companies are designing a new chip, they’re looking to put more transistors on that chip and hopefully and the transistors are what delivers performance. And they’re hoping to do that at lower power, and ideally same cost.

So more performance at the same cost. The new technologies gate all around, as a starting point. That’s a new transistor. It operates at a lower power level and more efficiently than the FinFET transistor. And that the dimensions of, that architecture are more complex than the FinFET architecture, which is why companies like Applied Materials, our TAM grows in making that new transistor.

Similarly, the backside power distribution moves the power delivery from being, congested on top of the wafer and on top of the transistor like it used to be and puts that underneath the wafer, that opens up more room for more transistors. So it creates another density advantage, that the designers will love to have. So if you look at the combined benefit of a new transistor that has probably 20% or more and more performance, and you take the power wires and you move them out of the way and bring them underneath the wafer, that also gets you a performance improvement in terms of power and density. Those are two big generational improvements that have been difficult to get without more, you know, the typical Moore’s law, litho driven density functions in the past. So it’s very exciting from perspective, huge performance gains.

And then what applied materials does, for those transistors, there’s a significant TAM increase, a billion dollar TAM increase for the gate all around portion and a billion dollar TAM increase for the backside power portion. And Applied Materials expects to win more than 50% of our SAM, for the incremental capacity.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. Maybe moving over to kind of the overall foundry logic landscape. I think a common theme from yesterday is that with the challenges at Intel that coupled with the fact that in TSMC has sold out on two nanometer into 2627, that something has to change. And and and I know you don’t you will not speak about specific customers. But, I guess, do you agree that, at some point this year, decision will need to be made to add incremental capacity somewhere to support, you know, the the pent up demand from Foundry Logic and whether it’s Intel internally or externally at TSM, that that’s a tailwind that we should have some sort of clarity on in the next three to six months.

Bryce Hill, Chief Financial Officer, Applied Materials: I think that’s, I think we would agree with that from many different perspectives. One, we started with the market in the macro and all of the energy around leading edge compute. And as you said, the leading edge nodes are 100% utilized and there’s a lot of demand there. Continuing, if you look at our estimate for what we’re selling for the leading edge nodes, it, it implies about a hundred thousand wafer starts of capacity between ’24 and ’20 ’5. We understand that the two nanometer node has lots of designs on it.

The design rate, tape outs is very high. That means it should be a good landing spot from a node perspective. And you would expect a lot more capacity being put in place. So I think we would agree with that expectation. It’s 100% utilized.

There’s a lot of demand on the leading edge. And we expect this particular node because of the benefits that I just described, gate all around, backside power delivery, we expect there to be a significant amount of investment there.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. And then maybe tangentially, you have a very strong business in advanced packaging, 1,750,000,000.00 in fiscal ’twenty four. How are you seeing, you know, both COOS and and HBM trends here in 2025? Is is there some digestion that’s going on from a capacity perspective, specific to HBM? Is there sort of a necessity of Samsung getting qualified at HBM four to kind of open up the aperture of spending?

How are you thinking about kind of the growth trends for that business?

Bryce Hill, Chief Financial Officer, Applied Materials: Yeah. I think we would say no digestion to HBM only because that’s probably not a good way to think about that market. About 10% of DRAM wafers right now are being allocated to HBM HBM high bandwidth memory production. And that’s growing. Our data tells us that’s growing at about a 30% CAGR.

So every day, capacity is being added, for HBM memory. The issue when people ask about digestion or think about digestion, I think it’s that at the end of twenty four, we had a very high rate of sales for capacity for HBM because it was initial launch volume for our customers. They continue to buy. They continue to add capacity. That should be a 30% growth function.

It’s just not quite at the same rate as it was at the very end of last year. But it’s going to be a great market. It’s going to be a huge build out for Applied Materials. There’s about 19 extra steps to the DRAM process that are associated with bonding those memory chips. And Applied Materials has a preferred 50% plus share of those steps.

And so that is a, it’s a good market for us.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. And maybe following on with COOS, obviously, an HPC led market should be very strong as well. I would assume there’s less kind of digestion there relative to HPM. Is that

Bryce Hill, Chief Financial Officer, Applied Materials: fair? Yeah. You know, I don’t have a sense for the capacity utilization, but I would say demand function is extreme at this point. So every system designer that we’re aware of is looking at these two and a half d and three d solutions. Two and a half d means it includes like a memory stack in the complex of chips.

And three d means it actually stacks some of the logic chips on top of each other in addition to the memory stacks. And so you’ve got, basically all of the complex system designers looking at ways to interconnect these chips more and more efficiently. And, you know, going forward, that will mean new inter interconnect capabilities, new be a lot of experimentation in this space and it’s a focus area for applied materials. We recently announced an advanced packaging platform that we have in Singapore and had an event with a lot of our partners that do development with us. This is a large focus for the company and how to advance the packaging capabilities.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: So maybe just to double click on that, could you could you elaborate on on kind of what’s exciting there? Is that a focus in terms of hybrid bonding and kind of the partnership you have there? Is it moving to glass substrates? What what what is the kind of critical areas of focus for Applied?

Bryce Hill, Chief Financial Officer, Applied Materials: All of the above. So every area that you can think about whether it’s different substrate types, silicon, glass, and others, whether it’s new interconnect capabilities, also just the hybrid bonding. I think in our earnings call, Gary mentioned, our CEO mentioned that, we’re in advanced qualification for our hybrid bonding capability, which is an integrated tool. Six chambers, from us and then, one with a partner in that particular tool. So we expect, you know, these bonding capabilities and stacking capabilities and then the different techniques to build a complex of chips, we expect that to be one of the frontiers of innovation for, you know, the next ten years.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: We’re already doing stacking for NAND, but within the design win or the partnership or not partnership, but the work that you’re doing, is that on the DRAM side?

Bryce Hill, Chief Financial Officer, Applied Materials: I think, my understanding is it would be more logic to logic. But I suppose there’s not a reason why you can’t stack the DRAM, but I think it’s logic to logic. Gotcha. Yeah.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Maybe moving to ICAPS in China, obviously, has been a great market for Applied over the last handful of years. But when I talk to investors, that’s the one kind of area of concern. So could you level set kind of where are we in terms of your outlook for that business in ’twenty five? What were the implications to the incremental kind of embargoes and restrictions? And where do we go from here?

Bryce Hill, Chief Financial Officer, Applied Materials: Sure. So first of all, great market for Applied Materials. You know, we we had, if you look back to ’24 and ’23, we had a low NAND market. We also had a low leading logic market. To your earlier question about is there under underinvestment in LeadingLogic, we certainly went through a couple of years where LeadingLogic was lower.

So but Applied Materials is operating at record levels. We just had record earnings, in terms of our non GAAP earnings. We have record revenue. And so what was happening, what’s happening is the ICAPS market, which is IoT, communications, auto power sensors, the more mature, technologies, That market had just exploded over the last few years, a lot of that driven in China. So significant investments in that market.

In fact, it’s the largest market, that we serve at this point. And so when you zero into China, there’s been a lot of investment there. We think it’s been a national strategy to create self sufficiency in a lot of those nodes. We don’t view that as, you know, being in a cliff situation or ending. We think we’re tracking a large number of factory projects there.

We’re adding customers as time goes on. There doesn’t seem to be any change in the plans to continue to build out capacity. The only thing that’s changed is it’s not quite at the same rules changes of those sorts of things. So there was a heavy rules changes of those sorts of things. So there was a heavy investment in 2024, but we think the investment just continues.

We expect the chip market itself to grow at mid to high single digits over time. Utilization is a little bit lower in the ICAPS space. It’s probably in the high 70s at this point. So the rate of investment is a little bit less, but we expect this going back to secular trends. We expect this market to grow over time and be a very healthy market.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: So maybe drilling into the restrictions, I think you talked about 200,000,000 impact to April. Is that now out of the model and completely derisked from a go forward perspective?

Bryce Hill, Chief Financial Officer, Applied Materials: Sure. I think definitely from a modeling perspective, it’s derisked. We talked about a $400,000,000 impact to Applied Materials. About half of that would be in our Q2 and it’s roughly split between our services business and our equipment business. And so if you think about the services business, there are just some customers that we can’t serve anymore.

And so you take that business away in Q2. And after that, we expect to resume growing at the low double digit rate that we’ve talked about in the past. So if you had a line that was your forecast line in the past, then you just step it down to what we guided in our Q2, ’1 point ’5 ’5 billion, and then it should grow at the same rate from there would be our perspective. And then for the equipment, it’s a little bit more sporadic, but I don’t think it’ll be a reconciling item going forward.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. And then maybe just going back to the utilization comment of high 70s. Do you have a view on kind of multi net versus domestic China? Is there much variance?

Bryce Hill, Chief Financial Officer, Applied Materials: Within ICAPS?

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Yeah.

Bryce Hill, Chief Financial Officer, Applied Materials: I’m just trying to think, if you go outside of China, the rate of utilization in China has been higher actually than rest of world. That’s something that we’ve shared before. And that’s probably true in a number of the markets. So, you know, from that perspective, rest of world.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. And I guess maybe just to finalize kind of the thinking of drivers in ’twenty five. You talked briefly about AGS. So just to confirm, we should be growing low double digit year over year on kind of a new reset number? And I guess as part of that, are there kind of design wins that are coming off warranty that could enable a step up or no?

Bryce Hill, Chief Financial Officer, Applied Materials: So low double digit growth is what we’ve shared in the past. And, yes, that’s still consistent with our view. What happens in the services business is the footprint of installed capacity grows every day. Basically, every day we ship a tool, the installed base grows and our attach rate to those tools right now, it’s about a third of the tools that we actually, put under contract. So the footprint grows all the time.

Our service intensity on those installed tools grows as the generations become more complex, and we’re adding new services. So when you think about AI and you think about, the capabilities that data provides us to give to our customers to help tune their tools, that adds to the value that we’re providing or the dollars, per tool. Those three things multiply together to give you a faster growth rate than the core business. So the installed base is growing. You add service capability and it’s more intense.

Those things add to a faster growth rate, which should be low double digits. And then you may have seen that our board announced a 15% dividend increase, just last week, after a 23% and a 25% increase the prior years. We’re working to get our dividend, at approximately the level of profitability of the services business, both to highlight, you know, the growth there in that business and then also attach it to those recurring revenues and recurring profits. So our services business, about 85 of that is recurring revenue. About two thirds of that is under contract.

So subscription type agreement with high renewal rates and, those terms are fairly long. I think two point nine years is our average contract length, at this point. So if you think from an investor perspective, we have attached our dividend stream to the recurring revenues and recurring profits of that service business, which makes sense, I think, to a lot of investors.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. Now maybe moving to display. I guess, how are you thinking about the business today? I know there’s excitement around your OLED vertical deposition tool. So I guess, is that something that could deliver incremental growth sometime in the near future?

And then from a kind of rightsizing perspective, are you at the right place for that business today or are there considerations to try to figure out ways of delivering higher profitability?

Bryce Hill, Chief Financial Officer, Applied Materials: We’re definitely excited about this business. It’s been obviously low levels of investment for the past few years with LCD technologies sort of, mature and lower demand function over the last few years. But what’s happening going forward is OLED should become a higher and higher penetration for laptop screens, for tablet screens, as well as larger form factors going forward. So we recently announced a new technology. It’s a patterning technology for OLED that we think is a breakthrough, better brightness, better lifetime, lower power.

And, if that demand function and if that penetration of OLED across those larger screen sizes plays out, which is what we expect, then we’ll have a much healthier business and good growth rates. We did announce that technology recently. So we’re nearing the point where we expect that demand function to improve. And so no announcement today, but, we think that’s right in front of us.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: And I can’t recall. Is that a Gen 8.5, Gen 10?

Bryce Hill, Chief Financial Officer, Applied Materials: It’s 8.5.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Yeah. Alright. Maybe to finalize kind of thoughts around 2025, I think well, I’ll give you my view and then you can tell me what you think. That if I were to think about where there might be upside, it would be domestic China and Samsung, given the pullback in their spending and requirement of getting kind of qualified HBM four as as really like the the two incremental drivers. I think the third would be, you know, if, TSM and or Hynix could get cleanroom space.

But dinner last night with another equipment company suggesting just there isn’t that availability. They’d like it, but it’s a challenge. Would you generally agree with that kind of vision for 2025?

Bryce Hill, Chief Financial Officer, Applied Materials: I think so. In the short term, what’s changed for us over the past couple of years is our China forecast generally comes up as the year goes along. And it’s just because you have a larger number of customers in China. Our visibility, those are less mature customers from a demand forecast perspective. So their lead time and their signals to their equipment providers are not as, you know, as not as robust as the larger, more mature companies.

And so I think in the short term, CJ, you’re right. Without reformatting capacity footprints and factory spaces and things like that. It would just be that the demand function in China could improve, which we’ve actually seen so far this year. And we saw that the last couple of years. I think that’s probably number one.

Number two would be, as you suggested, suggested, leading logic. There’s just a lot of demand there. That’s where there’s 100% utilization. So I think companies will work to see how they can increase capacity there.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. So I guess longer term focusing in on kind of where you’re investing from a technology inflection perspective, we hit briefly on a few areas. Anything that we missed, I know as an example, we were out at SPY and we met with you and we discussed eBEAM or DRAM 4F2. You recently added power electronics to your list of technology inflections. Is there a kind of, I don’t care about the rank order, but is there, in your view, areas that we should be talking about, today?

And if so, let’s go.

Bryce Hill, Chief Financial Officer, Applied Materials: I think that I think that probably the largest one would be the DRAM, four f squared. That’ll be another, you know, another inflection for us that will add to our TAM. So I think there’s a $500,000,000 uplift. No. Sorry.

That’s a wrong number. I think it goes from $600,000,000 to $650,000,000 So it’s a $50,000,000 TAM uplift per 100,000 wafer starts for the 4F2. So that’s an added function for us. And then when you get to, you know, you’re talking about e beam. E beam, I don’t know if we would call that an inflection.

It’s just that when the technologies, when the dimensions are becoming so tight, defect investigation capabilities are much more important. E BEAM is a much better technology for looking at at specific defects. It’s just that it operates at a slower rate than, the optical, but it’s becoming more deployed as the technologies become more advanced. And so I don’t think of that as an inflection in the same way, but the demand functions increasing for that type of inspection capability.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Okay. So taking a step back, get all around backside power, advanced advanced packaging, those are the real trends.

Bryce Hill, Chief Financial Officer, Applied Materials: Those are the big ones with DRAM also. Yes.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Okay. Perfect. Maybe moving to gross margins. You just reported a robust 48.9% and China contribution slowing, guiding to still robust 48.4%. I guess, as you look ahead, what can get you kind of to that, you know, hopeful 50 kind of number?

What what are the key drivers to that?

Bryce Hill, Chief Financial Officer, Applied Materials: Well, there’s there’s two things primarily. The first is pricing. We’ve talked about pricing. You know, we’ve been asked before, where are we in our pricing journey? I’ve said that we’re probably in the third inning.

And so, when we went through the COVID impact, we went through supply chain impacts, we saw inflation. We had to change the pricing dynamic for the company. In the past, you didn’t have inflation. You didn’t have some of those supply chain functions. I think the company had been used to offsetting any inflation with cost reductions and being able to roughly keep pricing flat.

It’s no longer true. Now you have those tensions. And so you really have to think through your value proposition for the equipment and what the right pricing function is company to train your salespeople and to have those conversations with your customers. When do you schedule them? You think about an industry that does that regularly, perhaps the auto industry, you know, you have a new model every year and a new price every year.

We didn’t have that sort of construct in place with our customers. So you have to build the capability to do the analysis to set a price target and then have the conversations with your customers. It’s a whole new infrastructure that has to be put in place, which we’re, implementing at this point. I think we’re implementing at this point. I think we’re still in early days.

And then cost reductions, we’ve added a significant amount of effort in terms of engineering on working with our supply chain and then also working with our tool designs on cost reduction opportunities. Those things combined have helped us improve to the low Those things combined have helped us improve to the levels that you just described. Plus it was benefited by mix in Q1 and Q2, but we expect to continue to make improvements using those two levers, cost and price, over time. And when I’ve characterized that, I said it’s slow improvement.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Perfect. Maybe on capital allocation. Since your arrival, I don’t recall kind of a set strategy. I think it’s pretty clear that you’re returning all excess free cash flow. But previously or some of your peers really drive to kind of a net cash breakeven.

And that’s kind of where you are now. But I guess just taking a step back, is there a philosophy that investors should kind of think about in terms of how you and the board think about, returning free cash flow?

Bryce Hill, Chief Financial Officer, Applied Materials: So the you know, when you ask about a target, we don’t have a cash target. So we’ll we look at cash as flexibility. It provides strategic flexibility. And so we’ll move that cash number depending on what the opportunities are within a quarter. But I guess the the the biggest takeaway would be, in an environment where you don’t have much M and A and we certainly haven’t been able to do any significant M and A, you’re going to return all of your uninvested cash to your shareholders.

We say 80% to 100%, but without, you know, M and A would basically be 100%. So that’s our strategy. You see that and we’re we use a grid each quarter to guide our share repurchases and that’s worked fairly well.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: So just to follow-up on that, in terms of the grid, does that mean you have a 10b5 in place, so you can be more aggressive at a certain price?

Bryce Hill, Chief Financial Officer, Applied Materials: We usually do. Yes. Yes. And then what I would say also is if you look, you know, when you think about cash and you think about cash management, again, if you look at the investments for the company, Gary likes to talk about, our EPIC project, which is, you know, about a mile west of our Santa Clara campus, where we’re building a large, lab infrastructure. And that’s a collaboration platform with our customers that we’re putting in place called EPIC.

And so when you look at the company, we’re increasing our R and D, we’re growing our footprint, we have record profits and record revenues. You know, you can see from the investments that we’re making the confidence we have in the business and back to the secular growth of semiconductors and the underlying demand function we see in the market today, especially driven by AI and cloud service providers. You can see in our behavior what the forecast is that’s implied.

CJ Muse, Semiconductor Semiconductor Equipment Analyst, Cantor: Well, perfect. Well, appreciate the time. Thank you very much.

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