Applied Materials Sales Forecast Misses Estimates On Supply Chain Woes

Applied Materials Inc forecast first-quarter sales and profit below market estimates on Thursday, as chip shortages slowed the supply chain of the world’s biggest maker of tools for making chips.

The forecast sent its shares down nearly 6.7% in extended trading.

Applied, which makes machines used to manufacture semiconductors and other high-tech components, expects current-quarter net sales of $6.16 billion, plus or minus $250 million, compared with analysts’ estimates of $6.50 billion, according to Refinitiv IBES data.

On a conference call with investors, Chief Executive Gary Dickerson said demand remained strong and that Applied’s fourth-quarter sales would have been $300 million higher without supply constraints, which he said will persist into the company’s fiscal 2022.

“Factory capacity is not a limiting factor for us. Like many in the industry, the primary challenge we face today is availability of certain silicon components,” Dickerson said.

Chief Financial Officer Bob Halliday said on an investor call that Applied’s machines involve thousands of components and that he and Dickerson were closely tracking about 100 of them.

About 10 components out of those thousands caused supply chain problems and the company expects supply issues to get better each quarter through its fiscal 2022, he added.

Chipmakers are ramping up output and buying new tools as the world shifts to 5G and consumers upgrade their phones, laptops and gaming consoles. The broader shift to remote work and learning during the pandemic has also powered demand for chips.

Applied, which counts top chipmakers such as Intel Corp and Taiwan Semiconductor Manufacturing Co Ltd as its customers, also forecast adjusted earnings between $1.78 and $1.92 per share, compared with estimates of $2.01 per share.

For the fourth quarter, the company’s sales rose 31% to $6.12 billion, below estimates of $6.35 billion. On an adjusted basis, the company earned $1.94 per share, a cent short of expectations, according to Refinitiv data.

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