Applied Materials, Inc. (AMAT) Earnings Call Transcript & Summary

My guest today, Gary Dickerson, the President and CEO of Applied Materials. Before I start, I want to mention, if you have questions that you'd like to get asked during the presentation, you should have a link to the pigeonhole form where you can submit those. We will have time for Q&A at the end. So as many of you know, semicap is sort of an area that's sort of near and dear to my heart. In a prior life, that's what I did. I love this space and I think Gary loves it, too. You can tell. The industry has really been enjoying a renaissance, I think, over the last 5-plus years. I think it's really coming into its own now. It's still cyclical. We all know that. But I think both the underlying industry growth and it seems industry capital intensity have inflected materially higher. I think the contributions from companies like AMAT have become more important than ever as materials-driven innovation moves to the forefront of process technology development. And to that end, the semicap space really has been top of mind for many of my clients. There's all the questions on nearer-term lagging versus leading-edge demand and China dynamics and competition, and now it's tariffs and geopolitics. But I'm also increasing getting people looking at the longer term potential of this industry as it start to be more in secular rather than purely cyclical terms and looking at those new technology inflection points where companies like AMAT are key enablers and beneficiaries. And to tell us all about it, it gives me great pleasure to welcome Gary. So thank you. Thank you so much for being here.

Thank you, Stacy. And I want to say, I do love this. This is so much fun. What we do in this industry, we always make the nearly possible, possible. And what we do is just like magic. I tell everybody, in your smartphones, you have an application processor chip that has tens of billions of transistors and 60 miles of wiring in that one single chip. So you think about it, a wire 60 miles long, you're moving data lightning fast with almost no resistance, that's pretty damn close to magic.

I mean I always say, I'm amazed any of this stuff works at all, like it really should. That's why it keeps me getting up in the morning.

So I want to talk -- I want to start maybe at a high level. So everybody is always concerned about like what's WFE outlook in this. But I'd say, over the last couple of years, things have shaped up far better than anticipated for the industry. And everybody used to have this sort of aspirational $100 billion kind of WFE. We're there, we're kind of there. And things look pretty good. And I was just wondering if you could maybe talk a little bit about, over the last several years, some of the historical contributors that have taken this industry to where it is. I mean it wasn't that long ago, we were talking trough numbers that could have been $20 billion to $30 billion. We're clearly way above that now. I mean what's been driving it, whether it's leading-edge innovations, lagging edge demand, China, packaging, memory inflections and how AMAT has actually been contributing to those and, I guess, to help those WFE numbers drive higher?

Yes. I think for Applied, we've actually grown revenue 5 consecutive years coming into '25. The first 3 quarters of our FY '25 year, we're up about 7% year-on-year. Our semiconductor business in the quarter we guided is up 10%. We're growing our service business at a double-digit compound annual growth rate. That's a $6 billion business today that's growing at a decent rate. And I think that if I look at my time over the semiconductor industry, I've been fortunate to be at 3 different companies that all achieved incredible growth. There's been a major change. You went from mainframes to PCs to mobile, social media. Everybody has a PC or a computer and camera in your pocket. And where we're going with AI and robotics, these are the biggest productivity drivers of our lifetimes. If you think about aging workforces around the world, U.S. productivity has been growing at about 1% over the last several years. Again, AI is by far and away, but robotics, I would say, is another one that are going to drive tremendous growth going forward, significant increase in computing demand. And so -- and computing innovation. We'll talk about that later. But what I've seen is just this increase in pervasiveness of semiconductors in every aspects of our lives and really where we're going is going to be way more significant than anything we've ever seen. I think TSMC is one of our largest customers. They talked about 40% compound annual growth rate over the next 5 years in the AI data center. Data center wafer starts will pass PCs and smartphones as a driver. Those are very large chips. And then AI...

When do you think that happens by the way?

That's in a few years, very soon, it's going to happen. And then AI is really driving the 4 key technologies, the leading-edge foundry-logic, compute memory with DRAM, high bandwidth memory and packaging. And Applied, as the leader in all of those different areas, significantly larger than our next closest competitor, in all of those different areas, we've been gaining share in all of those different areas. And we can talk about what is needed for computing innovation going forward is more significant in performance and power than anything we've seen in the past. But I think, Stacy, it's really this pervasiveness of semiconductors in everything around us.

That's true. And everybody sort of talks about this $1 trillion semiconductor by 2030. I don't know if we get there by 2030, but we will get there. We're not that far off. I think we did $630 billion or something last year in overall semis. Have you guys ever sort of given -- you talked about semicap, I think, outgrowing the market. You talked about AMAT outgrowing semicap. I was wondering if you could maybe give us a little more color on how you view those drivers of outperformance? Like where do you see capital intensity? Actually, we're probably in the upper teens right now.

Yes, I'd say mid-teens. So I think if you have people forecast the semi market to be $1 trillion or higher by 2030. And I really do believe, if you look at computing demand, again, these drivers are more pervasive all the way from the AI data center with the 40% compound annual growth rate. Everything around us to feed the AI, there's more innovation, more content, thousands of chips in an automobile, all of that is driving significant innovation going forward. And really, for more and more of that, innovation is coming from materials and materials innovation. So I would say kind of capital intensity, mid-teens is kind of the right way to think about it. But when we're working with our customers, I've met 4 of the top 5 customer CEOs in the last 6 weeks. We're in very deep relationships that are very different than the way they worked 5 or 10 years ago. So it's really focused on high velocity co-innovation. And for our customers, what they care about are design wins for those future architecture inflections. And for design wins, all of their customers will run test chips. They care about performance, yield and reliability all together. And if they don't have that, cost or price doesn't matter. And if you look at the value, I mean, everyone understands that AI is consuming so much power, there's tremendous value in the race for AI leadership for power and performance. And there's -- we could talk more about that. But materials intensity is rising. If you look at big inflections like gate-all-around, the next-generation transistor to process the data or backside power distribution where you take the power lines from the front of the wafer or front of the chip to the back of the chip, you get 30% area savings, up to 30% better power, better performance, no change in feature size, same feature size. In DRAM compute memory, that's growing. I think the top 3 leading companies were up something like 40% growth. So the compute memory is growing very, very quickly. The next architecture inflection there, 4F-squared or some people call a vertical channel transistor, again, it's much more materials innovation rich versus lithography. So the percentage of spending for materials innovation is going up in all of those different markets. And advanced packaging where Applied is also the leader, it's a $1.7 billion business for us, we said that's going to more than double over the next few years. So I think that materials intensity will remain in that mid-teens range. But I think the great thing for Applied is that when we're working with our customers, we're working a decade out in the future. We have integration innovators inside Applied that are working with those customers to shape those future architectures in power and performance. And for every one of those technology nodes, there's something like 5 or 10 absolutely crucial innovations for those architectures, and Applied is the leader in those key innovations. So that puts us in a really great position.

No, that's great. Let's touch into each of those, and you listed 3 or 4 kind of things that you seem really excited about. Now let's start with like leading-edge logic and gate-all-around. And you've given some numbers for how big that was and how big that's going and where it is. But I'm curious with that. I'm also curious just what are the innovations within like gate-all-around and leading-edge logic that AMAT is bringing to the table right now that others are not.

So when you're building these, whether it's a new transistor or wiring, there are really hundreds of process steps that are needed. And as I mentioned, Applied has, by far, if you look at Applied versus the next closest company, by far, the largest percentage of those steps and especially the critical enabling steps. And what's happening, as you go to these future innovations, some of these films are a few atoms thick. And it's really amazing. You have to control the interfaces, the interface engineering. So there's innovation in the materials. There's innovations in how you shape the structures. There's innovations where we have billions of dollars in materials modification. So again, those are areas where Applied has clear leadership. And we are very unique that when we're working on those innovations with customers, we're in with their integration teams shaping those innovations and super high velocity relationships. I mentioned in the wiring on the backside power, Applied has very, very high share in wiring. We have one platform that Applied -- about 30% of our revenue comes from integrated technologies where we have multiple capabilities on a single platform. So that 50% reduction in wiring resistance, there are 7 technologies, selective ALD, PVD, CVD, copper reflow, metrology, a number of different things under vacuum. And the reason you have it under vacuum is because when you go to air, the interface will oxidize. Again, it's only -- some of these films are a few atoms, and this is increasing. All of this co-optimization as you move through these process flows, it's harder and harder, more complex. That means we have deeper relationships with these customers. And again, just there -- it's very different than the way the industry worked in the past. And then really, our goal is to work with every one of our customers, whether it's in logic, DRAM, NAND, ICAPS, packaging. To enable their competitiveness, it puts us in a very differentiated strategic relationship with all of those different companies.

Got it. So you're going to force me to jump the gun on something, but something that makes me want to go there now and we can come back to some of the stuff in a minute. But on the integrated processing, so there's 2 things I heard there. One is, clearly, you're selling a value-based solution, right? You're not selling a process, you're selling -- I want to make a film that's this thick with this interface and you have these and 7 processes under vacuum. So 2 questions. One is how do you price for that sort of value add? And you said 30% of your revenue is coming from these integrators. So how do you price for that? Are you capturing -- thinking about capturing the integrated value from that? And the second question, just in general on how you work with the customers as these things are getting more and more complex. And it brings up like the EPIC center that you're building and some of the other stuff you're building around the world like to do this customer co-development and customer integration. I'd love you to touch on those points.

Yes. And again, we have -- you talked about how you love this. I absolutely love this. I work every single day with our teams on all of these different kinds of innovations. But those integrated platforms are accretive to our margins. And I think that even beyond that, if you're enabling power and performance and design wins whether it's in memory or high-performance logic or power electronics and ICAPS, it puts you in a different strategic relationship with the customer. So we're able to capture more value because these are the key tipping points for design wins for them. And then it also enables us so that when we're having discussions with customers, we're allocating our innovations, our innovators for them, it enables you to win ties in many other parts of your business. So we're innovating with these enabling technologies that are absolutely crucial for these future architectures. We're also driving -- and there's billions and billions of dollars of new products in our pipeline that strengthen our ability to enable the architectures, expand our total available market. We have products in the pipeline that are significant cost innovations so that I'm in the ZIP code where I can win the ties for those other parts of our portfolio. And then to the EPIC Center in Silicon Valley, the Equipment Process Innovation Center, the concept there is all of these businesses are a race for leadership. And the race for AI is the biggest race of our lifetimes. Everyone understands that power and performance is absolutely crucial. And so we have been, as I mentioned, over the last I'd say 7 years, building capability inside Applied where we have integration innovators across all device segments that are very unique, world-class and we're co-innovating with all of our different customers. And then a real important strategy we're driving is high velocity co-innovation where we have our innovators co-located with customer innovators so that we move at higher velocity in parallel versus a serial type of process.

Your facilities are in theirs?

So we do it both ways. But today, in our current technology center, we do have customers coming, whether it's in Silicon Valley or we have the really only full-flow packaging line, R&D line in the world in Singapore. So we have leading customers coming to those locations. But the concept with EPIC is really to innovate the way we innovate to drive even higher velocity because that's what determines winning and losing in any of those different markets. So we'll have top innovators from our leading customers located inside the EPIC Center. We have all of the capability. When we're in those types of facilities, we're running short loops where you have test vehicles for transistors, test vehicles for wiring, test vehicles for new patterning applications, test vehicles for new DRAM architectures. And so we run at very high velocity, and it's all about learning rate and the customers are co-located -- will be co-located inside that facility. The great thing for them is that it accelerates their time to market for design wins in power and performance. They're spending an enormous amount of money for every R&D technology node. So it makes -- if they can bring the device to market faster, it gives them higher R&D efficiencies. And of course, for Applied, it enables us to design in their new architectures our equipment and our advanced services. So when we came up with this concept for EPIC, this was really in alignment with our leading customers and helping to shape that platform. So we'll have innovators there. We have customer space where we could have certain key innovations that we're codeveloping with certain customers. And then we have other partners that are part of that innovation network with EPIC. But it's really -- the focus is innovate the way we innovate, go to even higher velocity and improve R&D efficiencies.

How far ahead are the customers running in, say, EPIC or in the Maydan Center versus when they're actually delivering those products to market?

So we're working with people really maybe 4 technology nodes out in the future. So obviously, there's an enormous amount of focus on [ N+1 and N+2 ] because that's life and death. When they're thinking about design wins and power and performance for every one of those technology nodes, we're engaged with leading customers every week. We have, again, a list of prioritized innovations that we're driving, and those are the critical tipping point innovations for them. But then when you're thinking about materials innovation, 3 or 4 technology nodes out in the future, CFET technology, for instance, where you're going vertical, again, more materials intensive.

So stacking transistors on top?

Stacking the transistors vertically. Again, there's tremendous innovations. This stuff is so complex in creating those materials, shaping those structures, modifying those structures to end up with the right electrical performance and power. So again, it takes time. It takes a long time to bring those innovations to market. The earlier you start working, the earlier you're going to bring those technologies to market. And then co-locating innovators. I mean, again, Applied is coming up with innovations that people don't know are possible. And we're doing the same thing in power electronics. Power electronics are really important for electric vehicles, renewable energy, the grid, and we're bringing to market major new products that expand our TAM in power and also innovating in new power architectures. And again, this is going out several years into the future to bring those technologies to market faster for the innovation and then also the commercialization because just because you have the power and performance, if you can't yield or you don't have the reliability or you can't build it at the right cost, you can't insert that technology.

Got it. Maybe your comments on power there are a good segue into your ICAPS business. ICAPS is industrial comm...

It's IoT, Communications...

Automotive, Power and Sensors. Okay. Got it. And investors tend to think of it as just your trailing node or lagging edge. Although I think it's a lot more complex than that, and you're even still innovating in there. It's not just like it's old. But maybe you can talk about -- this has clearly been a key focus area for AMAT. And it's in a bit of a trough right now after some very strong years and there's some of the China dynamics that we can talk about. But maybe just talk a little bit about like why that was such an important initiative for AMAT? What got you focused there and where are you focused now?

So if you look at the business, about 1/3 is leading-edge foundry-logic, 1/3 is memory, more weighted towards compute memory versus storage memory, 1/3 of the market is ICAPS.

This is the market, not AMAT necessarily?

Well, yes. It's the market overall. The wafer fab equipment market is split in those different categories. And then -- so April 12, 2019, I still remember, was the day we formed our ICAPS group. So we could see that this market was going to be a significant market. And if you think about it, I mentioned how AI, robotics, industrial automation, all of these things are going to be transformative, drive dramatic productivity for every country, will be at the foundation for competition for every industry. And the content, the computing content is increasing in all of those AI edge devices going forward. So again, we knew this was going to grow at a very high rate going forward. So we -- just like we have on the leading-edge, we brought into the company some outstanding integration innovators for Applied. And we have -- again, this is really very largely enabled by materials innovation in this particular space. And there is tremendous innovation still. I mentioned in power. If you look at what's happening in automotive or what's happening in the grid, there's going to be tremendous innovation that's happening there. And then in CMOS image sensors and a number of these different markets. So this has been a focus for us for a number of years. And we have, again, just like we do on leading-edge, we have these deep strategic relationships with customers. Since we formed the group, we brought 20 major new products to market. We've gained several points of share in that ICAPS space. And I would say that our innovation pipeline going forward is actually stronger than ever. We're continuing to bring new technologies to market that will expand, significantly expand our total available market in ICAPS, enable new chip architectures. And again, in terms of that strategy of winning the ties, we're also driving significant cost innovations in major products within that space. So this year, if you look at ICAPS, it is lower as a percentage of our total revenue being offset, we're still growing with the leading-edge foundry-logic and memory business. But going forward, we believe that ICAPS will grow. Again, this is all the edge computing types of applications at a 5 -- or mid- to high single-digit growth rate going forward. And then for us, how we compete inside of that market, whether it's inside China or outside China, again, same playbook. We're innovating with new capabilities. We're expanding our total available market with significant new products that don't exist today. We're bringing those cost innovation products to market and innovating with new chip architectures inside of ICAPS.

So let's talk about China. And there's 2 areas I want to hit. One is clearly the geopolitical environment and export controls and tariffs and everything else. So what has been the impact of that, number one? And then number two, I really want to get your opinion on some of the local Chinese players who are taking share because they have no choice, right? I mean they're -- you're impaired in terms of what you can sell and what they can buy. But how do you view, I guess, the state of local Chinese competition? How do you -- with that in the wake of the regulatory headwinds that for better or for worse are on you?

A lot inside of that question. So let me start with export controls. So the export controls.

Several waves, by the way.

Yes. So several waves and have been largely focused on leading-edge technologies and especially technologies that are focused on winning the race for AI. So that has restricted some part of our ability to compete inside China. So if you look at leading-edge foundry-logic, we really can't sell into any of those technologies. In memory, we really can't also sell into the memory market inside China. And again, despite the really significant decline in memory in China, we offset that by significant growth in leading companies outside of China. So that -- those restrictions certainly have helped the local Chinese companies because there, we just can't compete in those segments of the market. But again, our strategy in every one of these device verticals is to really work. I always want to run the fastest with the leading companies. I want to know who is moving fastest on any innovation, and then I want to partner and be ahead of them. So the same thing is true with ICAPS. We have very deep partnerships. We will be expanding some of those partnerships soon in terms of ICAPS innovations and then bringing these new products to market, cost innovations and architecture innovations in those businesses. So I have high confidence ICAPS will grow at a kind of mid- to high single-digit growth rate, and I have high confidence in being able to compete where we can compete. In terms of the Chinese companies, again, they are filling the gaps in the areas where we can't compete. They're coming out with products, not so much in the critical enabling technologies, more in noncritical technologies. But again, that's why we have a playbook where we have what is absolutely crucial for companies to achieve design wins in their business crucial to how they compete. And that enables us, along with cost innovations, to compete across our entire portfolio. So that's the strategy there. Relative to tariffs, during the COVID time frame, I kind of felt like I was the Chief Supply Chain Officer in Applied because even though we made the equipment that makes the chips, we also had trouble getting chips into our supply chain. So I was calling many of those companies' CEOs, accelerating chips for our equipment. But it also -- during that time period, we focused on really innovating in our operations, in our supply chain at all tiers within our supply chain so that we could remain the most trusted partner for our customers and have supply chain resilience. So Applied has a platform where in our operations, we can manufacture in the United States, we can manufacture in Asia. And regardless of what happens with tariffs, the key thing for us is to really optimize our agility so that we can remain a trusted partner for all of our customers. So there's lots of things we've driven. We're driving sustainable cost innovations that is helping us to drive our margins to the highest level in 25 years. But also tremendous innovation or tremendous agility in our supply chain so that I can't anticipate exactly how all of this is going to play out. It seems like it changes on a pretty rapid basis. But the main thing for us is we want to be agile no matter what scenarios emerge.

Got it. On the margin front, I ask you this question every year. But is there any reason your margins have to start with a 4 forever? I always wonder why.

I would say the answer to that is no.

I'm not asking for a time frame or anything.

Last quarter, we hit 49.2%, which was the highest since 2000 within Applied Materials. We are driving sustainable cost innovation inside the company and then also from a value capture standpoint. Again, as we're bringing these enabling technologies to market, our customers are in a position where these innovations that they're delivering really shape competitiveness of industries, they shape overall productivity growth and they're highly valuable. And so we are focused on being the most valuable partner for all of those customers that enables us to capture more value with those companies. So it's really 2 things: sustainable innovations in cost and then innovations in value capture. And I do believe that's sustainable. And I do believe there's no reason that the margins won't start with a 5 going forward.

Got it. I want to ask about DRAM. This is a market that's been really good. I can't remember, 10 points of share over the last 10 years, whatever the time frame is?

Yes, 10 points in a little over a decade we've gained in terms of DRAM share, overall spending from DRAM customers.

So can you tell us a little bit, how has that happened? And what gets you excited in that space going forward? Is it all about compute memory and HBM? Is there -- what are the innovations?

Yes, I think there's a difference between compute memory and storage memory. If you look at AI servers and the demand drivers for compute memory. I mentioned from our leading 3 customers, our business is up dramatically, strong double-digit growth year-over-year. When your high-bandwidth memory is an increasing part of the wafer starts in DRAM, you need to start 3x or 4x more wafers for HBM because chip sizes are larger, yields are lower. So we think that, that part of the market is going to have, along with high-performance logic, very healthy growth rates. And then for us, we have in the memory cell, a lot of strength in enabling customers to continue to scale those technologies. And also high-speed I/O for memory chips is incredibly important, especially for AI. You're moving the data on and off those chips and you want to move that as fast as you possibly can. So DRAM has been adopting logic processors or processes in the periphery of those chips. And we have for transistors tremendous leadership, we have leadership in wiring. So how you're moving the data on and off the chip is an area where Applied has clear leadership. That's enabled us to grow our share. And as you go forward, they're going to continue to innovate in the CMOS, the I/O portion of their chips and they're going to go to this new architecture, 4F-squared in just a few years, that architecture is more materials intensive. And what we said for the next architecture will capture over 50% share. We'll gain even more share as they go to the higher speed I/O, the new vertical channel transistor, that positions us for additional growth there. And then in HBM, that's another part of compute memory where Applied is the clear leader and we have clear strength. So you're right, a little over a decade, we've gained 10 points of share, positioned for many points of share gains going forward to enable those architecture inflections.

Too early still to talk about 3D DRAM?

Yes. I think 4F-squared is the next big architecture inflection that will happen in a few years. Typically, what happens is that when someone brings a new architecture to market, you go at least 2 or 3 technology nodes, 3D DRAM would be after that. And that really, it's different than when you went from 2D to 3D NAND because the materials are not dielectric materials, they are materials that -- where Applied has clear leadership when you move to that structure. There are incredible innovations. This is where we -- I talk about working a decade out in the future. Some of these processes, to enable that chip architecture, you have to improve by an order of magnitude. And it's nearly impossible. I'm highly confident we will make it happen. But again, it will be after the 4F-squared inflection.

Got it. And just to touch on the storage memory on the NAND space. You don't play as much like in dielectric etch, which is more important in that space. But at the same time, that market in the near term is starting to pick up. It looks like more upgrades, maybe all upgrades versus capacity. But what are your thoughts on that NAND upgrade cycle? And where does AMAT benefit? Because you're actually benefiting more than I even expected you to. You had a pretty, at least in the near term, a pretty sizable inflection in NAND this quarter on the back of that.

Yes. I think in DRAM, also in conductor etch, we've grown a lot. We've grown in many different areas. I talked about that. In the patterning for NAND and then also you have the CMOS bonded to the array. So those are packaging process steps where Applied, again, is the leader in packaging technologies. So those are areas where we are benefiting. But you're right. I think that storage memory doesn't have the same drivers that you have with compute memory. So when we think about what the industry looks like going forward and the percent spending, we think memory still remains about 1/3 of the total spending, but more heavily weighted towards compute memory versus storage memory. But the areas for us, that business did grow for us, is growing for us this year a fair amount, but it's off a very low base of where it was before. And in NAND, you don't have the big architecture inflection like you have in some of these other markets. So the industry went many years ago from 2D NAND where, again, it was litho-enabled scaling, but you ran out of electrons in the cell, that was hitting both technical and cost barriers. And then you went vertical, just like you're going vertical in a lot of these other segments going forward. But as you said, the most enabling technology is how you drill that memory hole in dielectric etch. We made a decision years ago to focus more on conductor etch. So we didn't play as much in that part of the market. But the patterning, the hard mask films, packaging for CMOS under array, those are the areas where we have strength.

Got it, got it. I'd be remiss if we didn't touch on services, right? And you talked about it a little bit. How do you view growth in that business? And in particular, I'd like to hear your thoughts on -- you talked a lot about the move to subscription contracts with customer service contracts. And I guess, how does that both drive growth and maybe smooth volatility as well? Like what does it mean for margins?

Yes. So service, our core service business is growing at a double-digit compound annual growth rate. And since I've joined Applied a little over a decade, we went from about 40% of our service revenue coming from long-term agreements, subscription revenue to about 2/3 today. And that's still growing. And I'm actually very optimistic that we're going to continue strong double-digit growth in services going forward. If you think about these architecture inflections. I mentioned that performance, power, yield, reliability. For customers to ramp these very complex integrated platforms, to ramp these new architectures, we have tremendous service innovation that enables them to ramp to high yield faster with our service technologies. So when you're developing a process, it's incredibly complex in terms of the optimization. And then you want to transfer that to hundreds of chambers in high-volume manufacturing. So being able to go from one golden chamber to all of them golden is very, very challenging, very difficult, time to ramp is important, how you can hit the high yield, high performance, low-cost. There's tremendous service innovation in our pipeline. And then also, we've increased the number of tools that we have connected remotely. We have thousands of tools today connected remotely so that we can deliver these advanced services immediately versus putting someone on a plane and going to a customer site. That is growing at a significant rate. So then you have off of these tools a tremendous amount of data. We're innovating with sensor technologies. All of this will enable us to help customers ramp these new technologies at much higher velocity, higher yields, better performance than what they've had in the past.

Got it. Well, we're under 10 minutes left. Do you want to go to the lightning round?

I'm happy to do it, whatever you want.

Got it. Here's a good -- all semicap companies always say that they're going to outgrow WFE.

I'm surprised.

How, I guess, is that? I mean if you believe the same for AMAT.

Well, I would say...

I always wonder about that.

I did take advanced math. I don't think it's possible for everybody to outgrow in terms of a market share standpoint. I think the key thing for us is that we have this unique and connected portfolio. I mentioned that we were 4 technology nodes out. We have deep engagements with customers. We have extremely high visibility on those architectures, enabling the architectures we're designed in with our equipment and our services. So we certainly look across the entire portfolio and all the innovations that we're driving. But as I said, the thing that is really different than the way the industry worked a few years ago is that the way we engage with customers. For them, it's life and death to bring those architectures to market ahead of others. And materials intensity is going to increase going forward, that puts us in a good position. We have, by far, the biggest engagement and most strategic engagements with our customers. And so I don't know about the other people, but I have high confidence that we will outperform going forward.

Got it. Among the technology areas you're investing in today, which have the greatest potential to open entirely new product categories for AMAT?

I have a lot of excitement around a number of different areas. AI, I would say, is the biggest driver overall. So I mentioned in high-performance logic, that business is going to grow at a very fast pace. And if you look at the combination of gate-all-around and backside power, we said we'd capture over 50% of those inflections, that will grow our total available market about 30% or our revenue 30% for an equivalent number of wafer starts. So we're really well positioned there. DRAM, compute memory, I said that's another area, along with HBM. We're really well positioned there to outperform as we go forward. And there are incredible innovations that are critical for 4F-squared and future generations of high-bandwidth memory that are going to be needed for AI. And then I'm also extremely focused on packaging. If you think about an AI server, you have 72 GPUs connected together that consume about 1 megawatt of power. There's going to be tremendous innovation in how you connect all of those compute components together. In Applied, I said that's a $1.7 billion business. And we will double that in a few years, but it's going to keep going because the way you move the data at high speed and low power is absolutely crucial to the way you connect all of those chip technologies together. And so Applied has a number of innovations that are in the pipeline that strengthen our ability to enable those architecture inflections, expand our total available market and really reshape some of these architectures.

How do you think about a natural ceiling for service intensity?

I think we've grown our subscription revenue from about 40% to 2/3. It's going to keep going. I think that...

Your services revenue for tools has been going.

Our service revenue for tool, that's a key metric that we look at. Our ability to connect these tools, that's going to keep growing at a very, very high rate. We have several thousand that are connected today. And our ability to create value for service, again, ramping these architectures really hard to high yield, maintaining high yield and high-volume manufacturing, that's also very difficult. So we've been growing at a double-digit compound annual growth rate. I'm actually even more optimistic with what we're doing going forward. And I mentioned also AI. We're using AI in a number of different areas with inside Applied. And there are some tasks within our service organization we can improve that consume a lot of hours, a lot of manpower, we can improve an order of magnitude. So that gives us the ability to deliver higher value services at much higher productivity, but I have high confidence in that double-digit compound annual growth rate.

I'm going to ask this one anyways. Maybe I shouldn't, but I'm going to ask it.

Keep playing, Stacy. Go ahead.

You recently personally purchased $7 million of shares. What does this equate to your conviction level?

Well, we purchased -- me personally?

You personally.

Yes. Look, I think Applied is in a great position. And I look at the market opportunity. There's -- we talked about computing, computing demand. We're at a point -- and I look at my career over decades in the semiconductor industry, computing demand going forward is really at the foundation of how every company, every industry competes. And I am highly confident that this will be the biggest productivity accelerator with AI that we've ever seen. And it's really important for competitiveness of every single country. So I'm very optimistic on edge AI and content growth in all of those different kinds of applications. And then, again, I'm in deep partnerships with all of these different companies. I mentioned I met 4 of the top 5 CEOs in the last 6 weeks. We're working a decade out in the future to enable their new chip architectures, which are absolutely crucial for them in how they compete. So I can see very clearly the market growth, we can see very clearly our position in those markets, and that gives me conviction to put my own money into Applied stock because I think it's going to be a great return.

Got it. Maybe time for one more. Why did you need to invest equity in BE Semi and Kokusai? What do you get from those? What do those investments provide for you?

So I think I talked about these integrated platforms and co-optimizing for architectures. When you're innovating with these new architectures, it's incredibly difficult. And that process flow, you have to co-optimize the interface engineering from one step to subsequent steps is very important. In Besi, they're the world leader in hybrid bonding. And again, we created this partnership with them more than 5 years ago. And this technology is going to be really important for power and performance going forward. Again, you increase the I/O density. You shrink the length of the wiring. That improves power, that improves performance. And we have an integrated platform with their bonder with 5 Applied technologies into this integrated platform. So it's really taking the best of what they bring to the market with the best of Applied Materials. In a different world, if we could do M&A, we would have likely have done that, but that's not possible. So creating this innovation network and the unique and connected capabilities, we have the most unique, the most connected portfolio inside the entire industry, but we're not stopping there. And that's why we're looking at strategic partnerships with companies like Besi, like Kokusai, and there are others also that we're working together with because innovating across this flow is incredibly critical. It's unique. So when our customers are trying to bring these new innovations to market, Applied is their most strategic partner, we want to strengthen that.

I should have asked the $7 million question last because I usually ask finally, why should this crowd buy AMAT stock? But I think you've answered that one already and since we're out of time, I think we'll close it out there.

All right. Thank you, guys.

Thank you so much.

Thank you, Stacy.