Shares of Applied Materials Inc. (NASDAQ: AMAT) declined on Friday after the company admitted to “challenging” times for the semiconductor industry following a better than expected fiscal third quarter.

 

Q3 Earnings Summary

  • Earnings$0.74 (adjusted)
  • Revenue: $3.56 billion
AMAT has outperformed comparable semiconductor plays thanks to strong guidance and better than expected earnings.

Applied Materials’ fiscal third quarter results exceeded expectations on both top and bottom lines, the company announced Thursday after the bell. The California-based chipmaker earned an adjusted $0.74 per share on revenue of $3.56 billion. Analysts in a median estimate had called for adjusted per-share earnings of $0.70 on revenue of $3.53 billion.

“Applied Materials is delivering solid financial performance in a market environment that remains challenging for the time being,” Applied Materials president CEO Gary Dickerson said in a press release. “We are excited about the company’s future opportunities and are fully funding our R&D programs to develop new products and capabilities that will accelerate customers’ roadmaps and underpin our growth in the years ahead.”

Applied Materials is part of the fledgling semiconductor industry that has been caught in the trade-war crosshairs of the United States and China. All things considered, the company has outperformed comparable semiconductor plays thanks to strong guidance and better than expected earnings.

On the guidance front, Applied Materials has assured investors that it will benefit from new growth drivers tied to emerging technologies like cloud computing, 5G, and internet of things. The company is banking on the fact that China doesn’t have many comparable players in these markets.

 

AMAT Stock Edges Lower

Better than expected financial results didn’t seem to help AMAT shares. The stock drifted lower in after-hours trading Thursday and continued lower on Friday. The stock declined by as much as 5.3% before paring gains later in the session. It closed down 1.1% at $46.63 a share, vastly underperforming the Nasdaq Composite Index, which rose 1.7% on Friday.

Since peaking at $52.14 last month, AMAT has declined more than 10%. The share price is down more than 24% from its record high last set in March 2018. At current values, Applied Materials has a total market capitalization of $43.7 billion.

Despite its recent struggles, AMAT has gained nearly 40% year-to-date. That’s nearly double the growth rate of the Nasdaq Composite Index.

 

Conclusion

Applied Materials recognizes that the current macro climate for semiconductor industries is a challenging one. Earlier this year, CEO Gary Dickerson said the U.S.-China trade war “can put decades of economic growth at risk.” Against this backdrop, Applied Materials is still holding up fairly well.

Disclaimer: The author has no investment stake in Applied Materials at the time of writing.