(Bloomberg) — Applied Materials Inc., the biggest maker of machinery used to manufacture semiconductors, slumped in late trading after supply-chain constraints forced it to give a downbeat forecast.
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The company expects sales of roughly $6.16 billion in the fiscal first quarter, which runs through January. Analysts estimated $6.45 billion on average, according to data compiled by Bloomberg. Profit will be $1.78 to $1.92 a share in the period, excluding some items, compared with an average prediction of $1.97.
The outlook sent the shares down as much as 8.8% in extended trading after closing at $158.74 in New York. The stock had jumped 84% this year, fueled by a boom in chip production.
Production and shipment snags have created global shortages of key parts, wreaking havoc on the chip industry. That’s made it harder for Applied Materials to capitalize on surging demand.
“Our supply chain cannot keep up,” Chief Executive Officer Gary Dickerson said in a statement. “We expect supply shortages of certain silicon components to persist in the near term, and managing these constraints in partnership with our suppliers and chipmakers is our top priority.”
Results also trailed estimates last quarter. The Santa Clara, California-based company posted earnings of $1.94 in the fourth quarter, compared with a prediction of $1.96. Sales rose 31% to $6.12 billion, missing the $6.35 billion projection.
Applied Materials said on a conference call that supply constraints will persist into fiscal 2022. Without the shortages, revenue would have been at least $300 million higher last quarter, Dickerson said.
“Our near-term results do not fully reflect the underlying strength of our business, or the progress we are making against our long-term strategy,” he said.
Soaring sales of semiconductors have generally been good news for Applied Materials because chipmakers have ordered more manufacturing equipment from the company and its peers.
But the chip industry is famous for its boom-and-bust cycles, and investors have long worried about the next crash. The last one happened in 2019, when customers curbed spending to head off a potential glut. Applied Materials’ revenue fell 15% that year.
Management has sought to assure everyone that things are different this time. Dickerson has argued that the growing use of semiconductors in areas outside of personal computers and smartphones means that the industry will expand to record levels.
Applied Materials’ customers include Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Intel Corp., making its projections a window into the spending plans and confidence levels of some of the biggest companies in technology.
(Updates with remarks from conference call starting in seventh paragraph.)
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