Applied Materials predicts upbeat revenue as chipmakers ramp up capacity

By Tiyashi Datta

(Reuters) -Semiconductor equipment maker Applied Materials Inc on Thursday eased fears of a slowdown with a strong revenue forecast for the fourth quarter, though sticky supply chain snarls pinched its margins.

Chipmakers Intel and Micron Technology Inc have recently warned of an inventory build-up and declining spending on electronics, sparking worries that the industry's years-long growth run was at an end.

Chief Executive Gary Dickerson allayed the concerns, saying Applied Materials can overcome the dour economic outlook and that he remains positive about the prospects of the sector.

Revenue is expected to be $6.65 billion, plus or minus $400 million, in the current quarter, compared with the $6.57 billion estimated by analysts, according to Refinitiv data.

Shares rose 4% in extended trading as Applied Materials also beat third-quarter expectations with a record revenue of $6.52 billion, thanks to a flurry of orders from chipmakers building capacity in a bid to ease a widespread supply crunch.

Investors are relieved to see the outlook, said Summit Insights Group analyst Kinngai Chan, but warned of risks from the weakness in end markets such as electronics.

Demand has also been weakening from memory-chip makers who had hoarded supplies over the quarters to meet a strong demand and are now facing a sales drop.

"Semiconductor equipment supply will catch up with orders and then (orders will) weaken as capital spending must match up to end demand," Chan said.

Applied Materials has also been struggling to source components essential to its equipment due to supply chain bottlenecks that have been worsened by COVID-19 flare-ups in China.

That has forced the company to spend more on logistics, driving up expenses. Quarterly gross margin fell to 46% from 47.9%, pushing the profit down by 6%.

"We expect Applied to remain supply-constrained for the next several quarters," said CEO Dickerson.

(Reporting by Chavi Mehta and Tiyashi Datta in Bengaluru; Editing by Aditya Soni)

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