Applied Materials, Inc. ($AMAT)

Thank you for coming, everyone. I'm Stacy Rasgon. Hopefully you know I'm Bernstein's Senior Analyst. I cover the U.S. semiconductor and semiconductor capital equipment space. And it's my honor to welcome our guests here today are Gary Dickerson, the President and CEO of Applied Materials. Before we get started, I want to remind you if you have questions you'd like to ask during the presentation, you should have a link to our Pigeonhole forum, where you can submit those, and we will have time for Q&A at the end. So look, semi cap has been pretty remarkable. We've had a renaissance in the industry over the last several years, but it's really shifted into overdrive recently as AI has gone mainstream. The demand profiles that we're seeing are calling for -- I mean just simply more, more chips, more wafers, more tools. In that world, like companies like AMAP, the contributions that they are bringing to that world are more important than ever as materials-driven innovation moves to the forefront of process technology development and enables the industry to satisfy this incredible amount of demand that at least for now, we still have. And to tell us all about what he thinks about it, it gives me great pleasure to welcome Gary and I've been looking forward to this conversational conference. So this should be. Gary, thank you so much for coming.

Thank you, Stacy. Really glad to be here. Always fun to hang out with you.

Yes. like -- maybe just to start on that point, I mentioned sort of a renaissance. So it wasn't that long ago that $100 billion in WFE was seen as just like aspiration. And we've blown through it, right? We might be 50% higher than that, like this year and growing potentially like for multiyears, I mean, you guys have talked about significantly increased visibility and a multiyear long-term growth cycle. Maybe just to start there, I mean, clearly, this is all driven by AI. AI is sort of dragging everything in the space along with it, which certainly helps you guys. And -- what is AI actually done for wafer and equipment demand? Why are we seeing what we're seeing right now in this environment? And then maybe as you go through your -- think through your -- the business and the different segments and how AI is impacting all those, whether it's logic or DRAM or packaging?

Yes. I mean, again, AI is the biggest technology inflection of our lifetimes, really -- and we're using AI inside Applied Materials.

I want to ask you about that a little later, but...

Innovation, product development, operations, supply chain, our service, engineering, process engineering. And for me, the really big driver is top line growth. I mean, certainly, we're going to be more efficient and more productive. But I will bring multibillion-dollar products to market faster, even some later this year using AI technologies, and we will make our service engineers more productive so that we can deliver higher value services and increase the compound annual growth rate for that business. And so I think that, again, this is just driving tremendous computing demand. And for Applied Materials, we're the leader in materials innovation in the most important and fastest-growing segments that are enabling AI. So leading-edge foundry logic, DRAM and advanced packaging. Those 3 segments are way more than 80% of the incremental WFE spending in '26. We think that profile continues going forward. And you talked about all of the discussions with customers, I'm in very frequent discussions with customers on delivery times, and we can talk about that. We've done a lot to improve our operations and supply chain. So we have ramp agility. But the other thing, again, I'm meeting CEOs and R&D leaders all the time is the AI computing innovations. So 1 thing everybody is focused on is tokens per second per watt tokens per second is performance. per watt is power and cost. And again, those 3 segments, leading-edge foundry, logic, DRAM and advanced packaging are the most important for chip architecture innovations. So again, Applied as the leader, where we've said we're growing our systems equipment business more than 30% this year mid-50s gross margins and continuing to go higher. So again, that's making a major difference for Applied. And then advanced packaging is the other segment that is growing very quickly. Again, those architecture inflections, how you connect computing components together and how you move the data is incredibly important for tokens for second pro watt. So again, Applied has the most enabling portfolio. We're in deep engagements deeper and longer than ever before, because we are co-innovating with 20 billion transistors, 60 miles of wiring and it cost $30. So what we do in the semiconductor industry is we're delivering miracles every year. I mean that's basically what...

As I've said, I'm amazed any of it works at all .

And so again, for gate all around, which is how you process the data and a transistor. There are more innovations on next-generation gate all around. In the future, they're going to stack in and transistors for CFAT. In the wiring, there are tremendous innovations customers are also putting the power lines on the backside of the wafer, which gives them better power performance, 30% area scaling. So all of those areas applied as those architectures are adopted, we'll capture over 50% of those available markets and gain share. And so what we've said for foundry logic is with gate all around and backside power, it increases our revenue per wafer start about 30%. So we're the dollar you gave one.

I can't remember what it was.

Yes. So basically, the combination of transistor and wiring goes from $12 billion to $14 billion and then for 100,000 wafer starts, but there's also share gains for us. And 1 thing I would say that is also very different, and this is -- we can talk about DRAM or foundry logic that's changed in my time in the industry. I think in the past, Applied was more providing equipment to customers. But over the last 7 or 8 years, we've built a team of integration innovators that are as good as any of our customers. And if you -- in a transistor, you have something like 500 steps and wiring as many steps. And so there's co-innovation and co-optimization across that flow -- and about 30% of our revenue is also integrated systems where we're combining multiple technologies under vacuum because some of these films are and atoms or 2 atoms thick. And so if you go to air, you oxidize you damage electrical properties. So I think 1 thing that is really important for Applied Materials in enabling these AI computing innovations is this portfolio we have our ability to optimize, and that's why our customers are joining EPIC. That's why we have these very, very deep partnerships with these customers enabling AI computing innovation. So foundry logic is certainly an area where Applied has tremendous strength, and we will grow share as these new architectures are adopted.

Got it. I'm going to get back to the EPIC center stuff and .

Okay. .

But I want to get DRAM now -- you've picked up -- I can't remember something 10 points of market share over 10 years. .

Overall DRAM spending. Overall DRAM spending.

And now, I mean, clearly, I mean, if I'm looking at like 1 of these Iraq and I look at like just the wafer area of the semiconductors within the search, I mean, HBM-DRAM must be 80%-plus. Yes, there's a lot of DRAM that that's going .

No, no question. And then HBM, you have to start 3 or approaching 4x the number of wafers because you're stacking and you have some yield loss to have the equivalent number of bits versus standard DRAM. So I mean that -- obviously, DRAM demand is extremely high. And for Applied Materials, again, as you said, we gained 10 points in a little over a decade in overall DRAM share -- and Applied is by far the leader in wafer fab equipment, process equipment for DRAM. And so there, again, for AI computing, people want really fast memory. And so in the CMOS logic, they're innovating with Metal Gate and new versions of Metal Gate where Applied again, has very, very high share to go faster. They're moving to FinFET where, again, the logic portion of the DRAM, Logic portion of the DRAM because, again, how you move the data is incredibly important. So those are all areas where Applied has tremendous strength. So -- and again, we're in these multi-node many-year engagements with these different customers. We have a great portfolio of products -- and we're also in these high-velocity co-innovation relationships with customers. So as they're innovating with the CMOS logic for higher speed, as they're innovating for vertical channel transistor for Fred or 3D DRAM, again, we have very deep partnerships just like we do in leading-edge foundry logic where those innovators, integration teams, architecture teams are working with Applied Materials, creating those future architectures. So what we've said in DRAM is that, again, we're positioned as these new architectures are adopted, the CMOS logic, the 4F-squared 3D DRAM for significant share gains continuing what we've been able to deliver in the last little over a decade.

What kind of time frames are we talking about for like 4F squared or 3D DRAM?

Well, I'd rather have the customers give those time lines. So people are extending 6F square. And then between the 3

4F square will be a smaller sale size, so a higher density of the memory bits on the .

Higher performance, lower power higher area density, all of those things. But again, the bets that people are placing are not exactly the same in terms of time lines -- so I'd rather have them talk about -- but that's coming over the next -- again, the CMOS logic is the most near term because high-speed memory is so important. And that's, again, a tailwind for Applied from a market share standpoint. And then most people are 4F squared and then 3D DRAM in that kind of sequence. And that's going to happen over the next number of years. .

But I mean, it really sort of brings you really are engaged, I mean, 10 years out. .

Oh, absolutely. Yes, again, for these architectures to be adopted, this is where -- this is really the strength of Applied's portfolio. If you look at these inflections when we look at leading-edge foundry logic, when you go to 14A or 1.4 people use different terminology or you go to these DRAM architectures, they're somewhere between 5 and 10 key innovations that determine timing of those architectures. Applied is by far the leader. If you look at 3D DRAM, really, the top 3 key technologies are all from Applied Materials.

So -- what are those technologies.

Well, I don't know if I want to go into exactly what all of those things are -- but again, this is where we do this high-velocity co-innovation because in some cases, you need an order of magnitude improvement in the equipment to enable the performance, power, cost, yield of those new architectures. And that's where -- so for DRAM, again, high confidence that we're going to continue to gain share there. And that's from a memory standpoint, especially for AI, fastest-growing segment in memory. And again, Applied is in a great position. We can talk about EPIC again, how we work with people with all of these architectures. .

We'll get there next -- but first, I want to talk about packaging because this is another huge I mean, look, as Moore's Law slowing, just which the transistor scaling is slowing and you have to do other things. Packaging is certainly one of the how do you put together these different chips in new and interesting ways. And for AI, clearly, it's enormously important. You guys must be the biggest advance .

We are vendor. Yes, we are. So again, packaging, I think is 1 of the most exciting inflections in the entire industry. It's really how you connect computing components together. And so in Jensen and others they talk about wanting to make the packages as big as they can to connect as many computing components as possible at the highest density because it's so important for tokens per second per watt. So applied, we have, again, a very unique broad portfolio. That business this year is growing more than 50% for Applied Materials, multiple billions of dollars. And again, we're also deeply engaged through the ecosystem on new packaging architectures. So if you look at an AI server today in 3 or 4 years, the way you connect those computing components are going to be very different than what you see today. So there, again, people want larger body sizes. They want higher I/O density. Applied has the leading portfolio in enabling those inflections. And we have deep relationships with companies that are currently leading and also companies that are bringing new architectures, new packaging architectures for AI to market in the coming years.

Is this like panel or?

Panel is definitely 1 of those architectures that people are focused on. Again, warpage is an issue for packaging. So if you want to have higher I/O density dealing with that is very important. And then just getting a larger body size I mean if you look at a ton glass up trades or if you look at some of our largest customers, tech symposium, they talk about a number of reticle fields that you can connect in a single package. And so this is really important technology. And again, Applied is the leader. We've been investing for a number of years. We knew these inflections we're going to have an enormous impact on AI energy-efficient computing. And so again, over 50% growth this year, and that will be a very high compound annual growth rate for Applied going forward.

And the visibility that you have now seems better than probably you've. I don't know if it ever -- is it ever. Yes. I can't reel you said you're getting the 8-quarter like rolling forecasts.

Oh, yes. Yes. So I'd say the visibility we have in the technology road maps because we're cocreating those road maps is better than ever. And also from a demand standpoint, again, frequent conversations with customers on delivery times and -- so we do have 8 quarter forecasts from every one of our customers and longer commitments from the customers. What's really important for us. Again, we did anticipate that WFE could grow a significant amount. So we made investments to nearly double our operations capacity. But in the supply chain, you also need the lead time so that we have that ready to ramp. And so for customers, it's not only that visibility or orders sooner, it's also exact configurations because you need to know what components in the supply chain you need for this -- for customers. So for us, for us to be able to ramp to meet the need, again, we're getting much better visibility from our customers than ever.

Got it. And I guess that gives you -- people to talk about a multiyear.

Yes.

Sound pretty confident of that. .

Yes. No, look, I think that what we've been seeing is that computing demand is continuing to increase. Recently, people are talking a lot about a genetic AI. And so Agentic AI is layering on top of the demand that was already there. And that's more weighted to CPUs. The CPU GPU ratio is more weighted versus where we've been. And then also DRAM is up higher, NAND is up higher, what we're modeling is 90% of the incremental WFE is in the leading foundry logic and DRAM. So again, and then after a genetic A, you have physical -- and so .

They never stop again. How much of a constraint is clean room space? I had this view that like as strong as this year is this is -- we might grow WP 20% this year. I know you guys have not given a WP number, but the growth is going to be strong. But it's a constrained year because we don't have the clean rooms and they're coming online. I guess how many -- you guys always talked about you track that, how many fab projects are you tracking? What kind of clean room space is coming online. I don't know if you have a point of view on where growth could be if like right now were unconstrained. Like how much unconstrained demand is actually out there. .

Yes. I don't -- again, we certainly have a forecast for where we think WFE is going, base case, bull case, bear case and it's been hitting at the bull case, pretty consistently.

Got objectively in the bear case probably isn't that .

No, absolutely. No, absolutely. So we're tracking over 100 fabs. As you can imagine, there are a lot of incremental spending in the areas that are fastest growing. I said over 80% is in those 3 areas. So that's basically what we're seeing. And I think relative to -- obviously, with 8 quarters, we have great visibility into '27. And from my perspective, I think I again, really changes how we work, how we live, I look at -- I told you earlier how we're using AI inside Applied Materials. The ROIs are tremendous, and we can see already that we are accelerating product time to market. So I believe that demand -- this is a multiyear wave that Applied is in the best position because we're in the -- we're leading in the fastest-growing segments that are enabling the tokens per second per watt.

Got it. Got it. So let's talk about this co-innovation with customers. Tell me about the EPIC center. Yes. So it's coming into its own now. .

It is. Yes, we've announced 10 partners for EPIC. We have TSMC, Samsung, Micron, Hynix, Broadcom. We have Advent test, screen, some universities. You'll see more announcements coming. And again, this is what I said earlier, relative to the chip and packaging AI architecture inflections is incredibly important for the ecosystem, but certainly for our customers because whoever is first to market with design wins that has an enormous impact on their business. So Applied -- we have these new innovations that will enable these new architectures in EPIC. And so for customers to have first access to those innovations. Like I said, some of these technologies, you need an order of magnitude improvement or the architecture won't happen. So having their innovators locating --

How does it work, so they have personnel facility working with your personal to developing their processes that they're bringing into production. .

Yes. And again, it's really this co-innovation, high-velocity co-innovation concept. So we're -- we have customer reticles -- we're focused on enabling those architectures, as you can imagine. And by the way, we focus on high velocity and secure innovation is incredibly important. So a firewall innovators between the different customers, and we've been doing this for a while. But now having those people co-located, especially, again, in Silicon Valley within 50 miles, I think, is 40% of the S&P 500. And so if you think about materials to systems innovation through the technology stack, which is more and more important, when I talk about packaging or I talk about chip innovations, those kinds of things, -- having these people co-located is incredibly important for velocity because you can move in parallel versus a serial process. So our goal really is to accelerate the time to market significantly incredibly important for our customers and then for us, being designed in with our equipment and our advanced services for those architecture inflections obviously, is really important for our growth going forward. And the other thing I would say that's a real advantage for us is our visibility into those road maps, where to invest, if we have -- if we're creating those architectures, it gives us a great idea how to optimize our R&D -- and again, for customers, not only is it important for their design wins, but their R&D efficiency. If you can bring these architectures to market because every 1 of them cost an enormous amount of money, there's an incredible efficiency. So this co-innovation. We have very deep partnerships through the ecosystem and EPIC, again, this is where the key materials innovations for chips and packaging will first be available and we don't have an infinite number of innovators. So having people co-located there really increases that velocity.

stuff they're working on in Epic, how far out is it?

Oh, gosh. So I mean, we -- again, we have incredible visibility. We know performance yield of every 1 of these different partner .

Stuff that's going to be in production like in 10 years or... .

Yes. I mean we're out to -- I mean, 2 is ramping now next is A14. We're doing 10, 7, 5 -- so again, I talked about these miracles, Stacy, that we deliver in this industry. And so we're working on those miracles that enable those future architectures or again, the DRAM road map. I mean some of these technologies are extremely compelling for the AI computing, but they're also incredibly challenging to create the innovations that enable those architectures. So we're working 10 years out in the future, in multiple technology nodes -- and again, for us, it's being designed in with our equipment and services. Also, it creates a deep strategic relationship with these customers. So when I'm with the CEOs of our customers, -- we're focused on those future technology nodes. And for them, it's design wins in certain time frames, technologies that they need to hit those road maps that is really essential for their business.

Do you need other players' tools in there as well? I mean, I assume there's litho and other things in .

So we do have partners that are -- some -- announced some that aren't announced relative to those innovation flows. The great thing for Applied is we have more of those innovation technologies than anybody -- it's not just the strength of our -- people talk about deposition. Again, we have technologies that are completely unique, Epi, PVD, in addition to the rest of our deposition portfolio. So creating the materials. People really also don't understand the modification of the materials. So that's a multibillion dollar business for us and then there's shaping and then also the -- our -- we're the world leader in e-beam technologies for analysis of the materials. But that combination of technologies enables you to create these future transistors or wiring or memory or packaging, all of those things. So I think this portfolio strength that we have -- and the way we're engaging with customers is really unique versus where we were, let's say, more than 5 years ago.

Yes. Now that makes a lot of sense. I want to talk about the services business. And I guess maybe you can talk a little bit about how it's changed over the last 5 to 10 years. I know there's a lot more you talked about recurring. You talked about use of AI. I mean, this has got to be a year area where we're -- so how has this business changed? And -- maybe talk a little bit of what the services brings to you and to your customers? .

Yes. So services, right now, we're growing high teens compound annual growth rate. It's a little over 20% of Applied Materials revenue -- and we said through cycle longer term, we'll grow mid-teens. I think there's an opportunity for even to drive that faster over the longer term. As you can imagine, for customers one thing that's super important right now is output per square meter. Again, so square meter of fab spacing unit. . The more output, they can have, the better yield is really important. Edge die yield is really important. And Applied, I really love this part of our business. We've driven tremendous service innovations -- over 2/3 of our business are service agreements and prescription -- or subscription revenue. So that's been growing actually faster than our overall service business. . And we have over 35,000 chambers connected to AI servers in customer fabs. And the majority of those are remotely connected. So that is really important, because, again, as we're bringing these new service technologies using these digital solutions, we're optimizing output, chamber matching. That's a really important technology. So there are hundreds of thousands of opportunities per year. When -- and again, we're using AI to optimize with all of these different parameters for all of our process tools. But then once we make 1 golden in high-volume manufacturing, you want to make them all golden. You want the biggest process window to give you the highest yield -- and so we're innovating there with these service technologies. We're also innovating with predictive models versus reactive corrective maintenance. Again, all of those things, I think, are great opportunities for us to grow this. What we said is, again, kind of mid-teens growth rate going forward. It's a little over 20% of applied revenue today. And I really believe, again, the value of the services are increasing as you're ramping these complex new architectures. Great opportunity for Applied .

Got it. How much of that growth is like -- because it is an installed base business as part of just the installed base growing? And some of it is this SP-8 Content per tool, I guess. How do those contribute to this or either cell I got to imagine maybe the revenue per tool.

Revenue per cell is growing faster than the installed base. And again, these services as we're -- and again, this is where I'm also focused on AI. In some cases, where the dollar per task or hours per task were improving many, many, many times. So for me, the real important part is not -- are we saving thousands of service engineers. The important part is I can deliver high-value services and scale that much faster and drive the top line growth with those technologies. So again, really fantastic opportunity for Applied.

Got it. Got it. I want to about China. Okay. There's a few things going on there. Number 1 is there's been regulatory and other issues that have impacted your abilities as well as your peers to sell everything you would like to sell in which is there's also the growth of local competition. I got to be honest, 1 of the biggest questions I get is what is the impact of some of these local players. I think etch and deposition as 2 of the areas where there's probably like a larger piece of the TAM is satisfied by the local guys. And as I would say, these are real companies there. They're not jokers. Yes. Just maybe talk a little bit about what is going on in China. What do you see on the competition front there? I guess anything you can tell us on the regulatory front 1 or the other? I think there's some other stuff coming on the Match Act and other things that may be coming. So how should we think about China? .

Yes. So '25, there was a large increase in restrictions. We had said that our business was restricted at about 10% more than double in '25. So that did have a big impact .

In sales were still very good.

Yes. And so for today, for us, it's kind of mid-20s as our semi equipment and service business. So for us, China is really an ICAP business, the IoT, communication, auto power sensors. And this is where Edge AI is also a driver for that particular market. So in China this year, and ICAP globally, we believe that business will be flat to slightly up. .

Your foundry logic is ICAP today, by the way? .

Well, we haven't -- we had said in the past, it was kind of equivalent. But actually, again, going forward, the leading edge, driven by AI is growing much faster. So we think over time that ICAP will grow kind of mid- to high single digits -- and if you look at actually data center, wafer starts, this is an interesting statistic. Our will pass smartphone wafer starts, we believe, next year. So these large die you're driving a tremendous growth. So again, the growth rate for the leading edge is faster than the ICAP market. But again, for us, that business is kind of flat to slightly up. We do have innovations. We started our ICAP group. I remember April 12, 2019, because I thought that was a really good strategy for Applied. have a great portfolio there. We're bringing new ICAP's innovations to market, new products that expand our total available market, new products in large segments that improve our competitiveness. So we are driving innovations there. We have deep connectivity with customers on architecture innovations and power electronics, this co-innovation sensors, photonics, a number of different areas where we're engaged. So I think, again, that business, I have high confidence that we'll perform well there over time, but the growth rate is not going to be as fast as the leading edge, which is driven by AI.

Sure. To go back to China, the competition front, the low. .

Yes. So again, that's where we're bringing these new products to market. And -- if you look at where we were able to compete, if you take out the restrictions, we performed well in China. And I think that with the pipeline of products that some later this year, some over the next 24 months, we'll expand our total available market. We have products that will improve our competitiveness. So I think where we can compete, I feel good about our ability to compete. .

Can't compete everywhere, unfortunately. .

Unfortunately, yes. .

I want to talk about margins. So and I said this to Tim yesterday, but I always ask you the same question. So always why do your gross margins have to start with a 4. I don't have to I don't anymore, right? -- as they don't start with 4 anymore. I guess what's gotten you there, number one? And then number two, how should we think about the evolution of that margin structure going forward -- there's a whole bunch of drivers. There's clearly operational efficiencies that you guys are driving. There's mix. Maybe there's pricing, like I don't know, like Oh, for sure. Yes. So like how do we think about that? .

Yes. I think that if I look at our conversations with customers, they're very different. Now it's about delivery times, access to our technology innovations to enable the new architectures -- so we have been growing margins pretty consistently. I think you're going to continue to see us growing margins, both gross margin and operating margin, a fair amount as we keep going forward. And so again, it's really the value that we're delivering and pricing, we have been increasing pricing. I think 1 thing that .

You've been increasing pricing of like stuff you already sell? Or is it more on like new.

Both. Okay. Yes. And so -- and again, different for different situations in terms of how we optimize all of that. But again, what's really important for customers is that we are able to make the investments in our operations, supply chain and infrastructure for the deliveries. And what's incredibly strategically important for them is the investments in the enabling technologies for these AI compute architectures for chips and packaging. So again, those are the discussions that we have. And then for me, what I think about is winning these architecture inflections and creating value, if we're creating value, we also have a great opportunity to capture value. And one other thing I would say in the ecosystem, the profit pools are way larger than they have ever been. And so again, that gives us an opportunity to create value and share value with our customers. And again, I feel really good about our positions in these future AI chip and packaging architectures -- and we have an incredible pipeline of numericles that will enable these architectures and give us a great opportunity to create and capture value. .

Got it. Maybe on the value capture. You talked some about like integrated tool sets. So I think you said it -- so does that percentage go up over time? I have to imagine is this stuff features get smaller and this stuff gets harder. You're not really just selling a single process. You're literally selling a solution. We want to create a film that's this thick and it's conformal, and this and it takes 10 processes to -- and then how do you -- like how do you think about capturing that incremental value versus sharing it with your customers? .

Yes. So I talked about the 60 miles of wiring, which is kind of mind-boggling. When you think about moving data with almost no resistance. -- through a wire, and it's even going higher than that. So some of these platforms, we have 7 technologies integrated under vacuum because, again, -- if you go to air, you can oxidize those few ADAM interfaces. So that business of our business is growing. And the the number of technologies that we're integrating is also growing. We announced some new ALD technologies. And then, again, in those technologies, the surface interface is really, really important for electrical properties. Our PVD business, combined with selective ALD and CVD and copper reflow and all of these kinds of things. That's a unique capability Applied has to enable these future architecture inflections -- and then it's not only the integrated products, the strength of our portfolio is our ability to optimize across these modules. So there's co-optimization to enable this tokens per second per watt across the portfolio. But the integrated is about 30%. The number of technologies we're integrating in the platform is increasing and super strategically important for customers for these architecture innovations.

Got it. I guess on that note, like I always think about the semi cap industry, I mean it's competitive that everybody kind of has their own niche. But at the same time, you clearly do compete -- I'm going to leave the Chinese guys out of it, but -- you got the Lams and the Tokyo elections of the world -- what is it that customers are looking for when they're choosing a new solution? Like what is that -- do -- what does that bake-off process look like? When does it happen? Is it the new node transition what is it that customers are looking for when they decide to actually award the process of record to you versus your competitors? .

Yes. So I think the most important thing for customers is the race for these new architectures. That is the most important thing. And whoever -- so when they're competing for design wins, they care about performance, yield and reliability. That is the most important thing. And when their customers are evaluating them for design wins, if you don't have performance yield and reliability, they don't care about the cost because they can't risk their system architectures on those technologies. So for Applied, we're working through the whole tech stack and working with these customers on these new architectures, that is the most strategically important. I mentioned high-speed DRAM with the CMOS logic or any of these different types of inflections. So the first thing for Applied is Again, connecting with them on what's critical for their design wins -- and then inside of that, you have a portfolio of solutions where Applied is driving innovations in each one of those different pieces or those integrated platforms. But that connectivity, I think, is more and more and more important. So when we're engaging with someone on an N plus 1 architecture or an N plus 2 architecture, we're really focused on the electrical, like resistance, capacitance, threshold voltage or high-speed memory or those kinds of things. And then the technologies that enable those key performance, the tokens per second per watt and then there's a portfolio of Applied solutions in key unique Applied solutions that enable those technologies. So again, the great thing for us, we have leadership -- we're in great positions in the fastest-growing segments that are enabling AI computing in leading-edge foundry logic, DRAM and packaging. So again -- and then the other part of our portfolio that is actually growing very fast -- 1 of the fastest growing businesses in Applied is our inspection and measurement business. So we said our semi business is growing over 30% this year Actually, that part of Applied Materials is growing much faster. We're the world leader in e-beam technologies. We have the lead in resolution and imaging speed with coal field emission. That will be over $1 billion in revenue this year. And we have an incredible pipeline Stacy of new products that are coming over the next couple of years. So I have high confidence. That 1 is 1 of our fastest-growing businesses. The revenue growth there is going to be multiple billions of dollars. But the other thing that's really important is that when you're when you're building all of these new architectures, the learning rate is crucial. So Applied's e-beam technologies, we can see into those architectures and collect data, orders of magnitude faster. So again, that connectivity with our leadership and the materials innovation is also strategically important for Applied when we're engaging with these customers on the architecture innovations.

That makes a lot of sense. -- 1 other segment that you don't talk that much it's small, but like why do you still have a display segment what strategic value does that play for you? .

Yes. So display today is a little over 20% operating profit. we -- and it is growing at a decent rate. The biggest opportunity there for us is we do have an opportunity to enable a new OLED architecture for IT and TV. And so there has been a technical barrier. So today, you have single-digit adoption of OLED in those segments of the market. Applied has come up with an innovation. We're working with the leaders that overcomes that limitation. So it would take some time for that adoption. But I believe that, that can be a good growth rate for Applied, expanding the operating profit. And so that's one thing. Just that business by itself, there is synergy when you talked earlier about panels being processing. So if we think about our leadership in handling glass, or all of the glass processing applied is the global leader in those technologies. We're taking that learning into these new packaging architectures. So there's synergy -- we have -- by the way, this is an incredible team of innovators inside Applied Materials. So there's that synergy with where packaging innovation is going in the future.

We've got a few minutes left as you go to the lightning round .

Sure. Let's go .

And if anybody has other questions that you want to submit, you can do that. -- are there any areas where you think you're participating less than your fair share in the super cycle due to competition or anything else? .

No. Again, I mentioned earlier, we have really great visibility in the architectures, chip and packaging architectures that will enable AI computing innovation, the tokens per second per watt. So I feel great. And again, the really great thing for Applied is that -- we have incredible visibility because we are working and co-innovating and co-creating these architectures through the tech stack and through the ecosystem. So we are investing in the areas that we think are going to drive the highest growth -- we've made some small acquisitions. It's not possible to do the large acquisitions with the current situation. But there are areas where that can add hundreds of millions of dollars of growth and create synergies with the rest of Applied Materials. So I feel really good about that. .

Here's an interesting one. Is Huawei's logic folding economically real or road map theater. .

Well, I don't know if I want to comment on -- what I would say is that there's this concept of design technology co-optimization. Some of our largest customers have talked about that. you're moving the power lines from the front of the way or to the back of the wafer. You're getting a 30% area savings, better power and performance. You have isolation walls in the transistor -- so there are those kinds of innovations that are being driven in the industry. And so I would say this is kind of along the same lines, and 1 of our largest customers, they talk about how the percentage of their innovation enabled by design technology co-optimization, going up significantly, which is, by the way, great for Applied Materials. But that particular one I think it's too early to tell. I mean you have thermal issues, yield issues, many different kinds of things that are yet to be determined. By the way, that's using bonding technology. Applied has the leading hybrid bonding technology and an integrated platform. So as those architectures are adopted, we also have innovations there. I think it's fair to say that those particular architectures are not unique to Huawei to the industrial looking at. Now, if you look at even like future transistor technologies, you're stacking NNP transistors. So it's really going more vertical. -- and -- or like say, power lines or transistors or all of those kinds of things or CMOS bonded to the array and memory. So separating out those IP blocks and connecting them in different ways is a trend that the overall industry is focused on. .

Got it. Maybe 1 more. Do you think there's a disconnect between spending expectations from the hyperscalers and the labs versus what the semi industry can realistically deliver. .

I feel very good about demand going forward, I would say. I do think, again, this is going to change how we work, how we live AI is going to be an enormous inflection. That's going to drive tremendous computing demand and the need for computing innovation and tokens per second per watt. And Applied, like I said, we have made investments in our operations so we can scale our operations. It's really making sure that we have that alignment with customers. We have to have that early visibility to ramp our supply chain. So I feel good. I mean, we've made enormous improvements in operations and supply chain over the last few years, and we're in a way better position than we've ever been in that aspect. .

So we've got about 1 minute left. I'll close out the way I always do. We've got a full room here, Gary. Why should they buy your stock? .

We're in a great position. The fastest-growing areas in the industry, leading-edge foundry, logic, DRAM, packaging, that's over 80% of the growth in WFE -- those are areas where Applied has clear leadership. And those are the areas that are continuing to grow significantly over the next several years. And as I mentioned, our connectivity, our relationships with our customers are deeper than ever critical to them winning designs with their customers. . So those future AI chip architectures, packaging architectures, Applied is in a great position to gain share, create value and capture value. So I have high confidence the growth rate for Applied is going to be very strong, both top line and bottom line going forward. .

Got it. I think that's a wonderful place to leave. Thank you so much. .

Thanks, Stacy. Thank you, guys.