Applied Materials, the world’s largest supplier of equipment used to make chips, forecast current-quarter profit and revenue below Wall Street estimates, adding to fears that a two-year chip boom may be losing steam.
Shares of the company, whose results are seen as the bellwether for the chip industry, were down 4 percent at $45.55 in extended trading on Thursday. Rival Lam Research also dropped about 2 percent.
Investors have worried that slowing smartphone growth and newer technologies would prompt chipmakers to rein in capital spending and lower demand for chip-making equipment.
“As foundry customers optimize existing capacity, they have trimmed their capital spending plans for the year,” Chief Executive Officer Gary Dickerson told analysts on a post-earnings call.
Adding to the worries, NAND flash memory chip prices have nearly halved from a peak in 2017.
Morningstar analyst Abhinav Davuluri said he expects relatively weaker spending in 2019 for memory, resulting in modest declines in overall equipment spending.
Dickerson said the fourth-quarter forecast assumes a decline of about 4 percent in the company’s semiconductor systems revenue.
Applied Materials expects fourth-quarter adjusted profit of between 92 cents and $1 per share and net sales of between $3.85 billion and $4.15 billion. The midpoint of the revenue range forecast would be about flat from a year earlier, the company said.
Analysts on average were expecting a profit of $1.17 per share and revenue of $4.46 billion, according to Thomson Reuters I/B/E/S.
Samsung accounted for about 23 percent of Applied Materials’ revenue in fiscal year 2017.
The weak forecast clouded yet another quarterly beat on revenue and profit by Santa Clara, California-based Applied Materials.
The company’s net income jumped about 27 percent to $1.17 billion in the third quarter ended July 29, while total net sales rose 19 percent to $4.47 billion.
Excluding items, the company earned $1.20 per share.
Analysts on average had expected a profit of $1.17 per share and revenue of $4.43 billion.
Applied Materials’ also topped analysts’ estimates for revenue growth in its semiconductor and display businesses.
Sales in the semiconductor division rose 8.5 percent to $2.75 billion, slightly ahead of FactSet estimates of $2.74 billion.
Revenue in its display business surged 80.7 percent to $741 million, also above FactSet estimates of $722.1 million. The division makes flat panel displays for televisions, PCs and smartphones.