Chip equipment maker Applied Materials reported earnings for its fiscal third quarter last night. While results actually exceeded expectations, management's outlook for the next quarter didn't even come near the consensus expectation, so why on earth was the stock seen rising today?
The reason likely lies in expectations for ramped-up capital spending by semiconductor companies at the end of the calendar year and into next year. The company's CEO, Michael Splinter, remains optimistic about customer spending as Applied Materials exits the calendar year, implying that while next quarter's earnings might be a bit dull, looking out a little further offers some hope.
A recent report by research firm IC Insights suggests that he might be right, as two of Applied's biggest customers -- Taiwan Semiconductor and Intel -- are both on tap to spend a boatload of cash in the back half of the year. In fact, Intel is forecast to deploy 15% more capital for the full year, and is only 45% of the way to IC Insights' target of $13.1 billion, suggesting accelerating spending in coming months. Also, Taiwan Semiconductor's board recently approved about $2.8 billion in additional spending for advancing capacity, and you can bet Applied Materials will take its fair share.
So are there brighter days ahead for the chip equipment makers? We'll have to wait a few more months to really find out. In the meantime, follow along in the video below as analysts Brenton Flynn and Austin Smith discuss the news further.
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