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Applied Materials positive on Q2 on resilient demand for AI chips

Applied Materials Inc on Thursday projected quarterly revenue broadly above estimates as it fills a backlog of orders and benefits from resilient demand for its tools used to make chips for the automotive and artificial intelligence industries.

The results from one of the biggest producers of chip-making equipment are welcome news for an industry that has in recent months been buffeted by worries over slowing demand.

Applied Materials expects second-quarter revenue of $6.40 billion, plus or minus $400 million. The midpoint of the range was higher than the $6.29 billion estimated by analysts, according to Refinitiv.

The outlook, which sent Applied Materials’ shares 2% higher in extended trading, was in contrast to weak forecasts from peers Lam Research Corp and KLA Corp.

While consumer-driven markets such as smartphones and personal computers are weaker, demand from AI, automotive and industrial automation industries remains resilient, Applied Materials Chief Executive Gary Dickerson said on a post-earnings call.

The company is also benefiting from easing supply chain constraints, allowing it to fill an order backlog that had built up during the pandemic.

“We think that more than half of that backlog will be executed this year,” said finance chief Brice Hill, adding the company was still working to meet some orders from last year.

Applied Materials said its second-quarter revenue outlook includes a negative estimated adjustment of $250 million related to a recent cybersecurity event at one of its suppliers.

The company expects to recover all of this revenue, with the majority of it set to be booked in the third quarter.

For the first quarter, Applied Materials reported revenue of $6.74 billion that was higher than expectations of $6.69 billion. The company’s adjusted profit also beat expectations. Reuters

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