5.15.25
Following a substantial jump in the prior quarter, Applied’s DRAM equipment sales declined 5% during their FQ2, to $1,419M. This is still in a near-record regime and is the fourth highest DRAM quarter the company has ever had. Their DRAM sales stepped up to around $1.5B per quarter in the last third of calendar 2025 and have been oscillating around that level for the last year and a half. I think in the first part of that period, DRAM sales were led by China, with some leading edge and HBM from the Big Three mixed in. More recently, I believe the sales mix is led by the Big Three and their AI investments. I don’t think this level of DRAM equipment spending is clearly going to cause oversupply in that market, but it may be enough to do so. NAND showed surprising strength in the quarter. Applied’s NAND sales almost doubled sequentially, to $420M in the second fiscal quarter. Prior to this, Applied’s NAND sales had been around $200M per quarter for the last eight quarters. This is one data point. If it continues, it will be a thawing from the nuclear winter that has gripped NAND for the last two years.
Industry-wide, the WFE companies have said sales to China will decline this year from the levels seen last year. That trend began last quarter (FQ1-25) for Applied, when their percent of revenue from China was 31% of total, down from mid-40% prior. In this quarter, FQ2-25, sales into China as a percent of total dropped further, reaching 25%. Total company revenue in this quarter was $7.10B, a slight sequential decline. They are guiding for revenue of $7.20B in FQ3. Within FQ2’s results, system sales declined a bit and field services rose a bit. In 2025, the company expects spending for leading-edge DRAM to be “up significantly.” In China, they forecast investments in both DRAM and mature logic to be down for the year. In 2025, they see an “uptick in NAND investment, albeit from the very low levels seen over the past several years.” Applied believes revenue from advanced DRAM customers (that means the Big Three) to grow more than 40% as they ramp DDR5 and HBM. The growth they believe will be seen in NAND in 2025 will come from upgrades.
Within DRAM, HBM will be 16% of wafer starts in this year (they probably mean calendar 2025). HBM starts are growing at a 40% rate (they probably mean annual rate). “DRAM is very strong.” They see bit demand growth in NAND to be low 20% range in the future. NAND fab utilizations are down right now yet sales of WFE equipment to make NAND are up. I think this seeming contradiction is because NAND fab operators are taking this lower utilization period as a chance to upgrade their process technology to more advanced nodes. They see continued strength from DRAM, but it is concentrated at the leading edge. The first couple of quarters last year (I think they mean calendar quarters, but I’m not certain,) they had shipments to China customers. The reduction in those shipments hasn’t completely been offset by leading-edge investment, which is why DRAM will be down some calendar year-over-year, yet the DRAM market is strong. The non-Chinese DRAM market will continue to be strong. I will bring up here that last quarter, management said they have seen sales of equipment for HBM slow recently. They didn’t comment on this in the current quarter, but that slowdown may be continuing now, which would help explain the year-over-year decline in DRAM equipment sales that management is forecasting.
– S. Hughes (short MU)