Welcome to the Applied Materials Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Liz Morali, Vice President of Investor Relations. Liz, you may begin.

Thank you. Good afternoon, and thank you for joining us for today's call. With me today are Gary Dickerson, President and CEO; and Brice Hill, CFO. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties. Information concerning these risks and uncertainties is discussed in our most recent Form 10-K, 10-Q and 8-K filings with the SEC. We do not intend to update any forward-looking statements. During today's call, we will also reference non-GAAP financial measures. Reconciliations of GAAP to non-GAAP results can be found in today's earnings press release and in our quarterly earnings materials, which are available on our Investor Relations website at ir.appliedmaterials.com. I will now turn the call over to Gary.

Thanks, Liz. In our third fiscal quarter of 2025, Applied Materials delivered record performance, fueled by strong broad-based demand for semiconductor systems and services. However, as you will see in our guidance, we expect revenue and earnings to be sequentially lower in our fourth quarter, primarily due to uncertainties in our China business. Even with this Q4 forecast, we remain on track to achieve a mid-single-digit growth rate in fiscal 2025, which will be our sixth consecutive year of revenue growth. In my prepared remarks today, I'll give some additional color on our near-term outlook, provide an update on the longer-term secular industry growth drivers and describe Applied's leadership position at the major device inflections that enable our customers' road maps. The dynamic macroeconomic and policy environment, including trade and tariffs, has wide-ranging implications for the semiconductor industry, increasing uncertainty and lowering visibility in the near term. For Applied's business, there are 3 main factors that mute our outlook for the quarter ahead. First is digestion of capacity in China. Second is our large backlog of pending export license applications, where we have taken a conservative position and assumed none of these licenses will be issued in the next quarter. And third is nonlinear demand from leading-edge customers, which is primarily linked to market concentration and fab timing. None of these near-term considerations change our perspective on the longer-term opportunities for the industry and Applied Materials. Leadership in AI remains a major focus for both companies and countries, driving large investments in infrastructure and R&D. Governments around the world, especially the United States government, are taking major steps to incentivize companies to build advanced manufacturing capacity onshore. One example of this is Apple's American Manufacturing Program, which was announced last week. We are excited to be a partner in this…

Thank you, Gary, and thank you to everyone joining us for today's call. In fiscal Q3, we delivered a record quarter with growth across all 3 segments and with a robust gross margin of nearly 49%, we also achieved record non-GAAP earnings per share. In Semiconductor Systems, the overall demand environment for equipment was largely in line with our expectations with broad-based customer investments across foundry/logic, DRAM and NAND. In Applied Global Services, we achieved record core services revenue with positive trends across our key performance indicators. And in Display, we recorded our second consecutive quarter of revenue growth as the industry invests in equipment to support the further adoption of OLED technology in consumer devices. Let me now turn to the financial details for Q3. Total net revenue was approximately $7.3 billion, up 8% year-over-year and about $100 million above the midpoint of our guidance range. Non-GAAP gross margin was 48.9%, up 150 basis points year-over-year. The strong margin in Q3 was driven by the combination of product and segment mix and pricing as we work to offset tariff-related headwinds. Non-GAAP operating expenses were $1.3 billion, down slightly as a percentage of revenue as we optimized our G&A spending to help offset investments in R&D to support leading-edge technology inflections for our customers' road maps. Non-GAAP earnings per share was a record $2.48, up 17% year-over-year, given the revenue growth, better profitability and share repurchases. Moving to the segments. Semiconductor Systems revenue was $5.43 billion for Q3, up 10% year-over-year, with growth in foundry/ logic driven by customer investments to support the ramp of gate-all-around nodes, partially offset by decreases in the ICAPS nodes, which we define as those greater than 7 nanometers. Compared to our expectations at our last earnings call, we saw slightly less-than- anticipated growth in…

Thanks, Brice. [Operator Instructions]

[Operator Instructions] And our first question for today comes from the line of Jim Schneider from Goldman Sachs.

I was wondering if you could maybe talk to the incremental source of weakness in the outlook. Specifically in China, do you see the decrease in visibility there being extended well into 2026? Or do you think that is more of a short-term thing? And then secondly, on the leading-edge logic weakness, do you have any sense of whether you expect that to recover in the next couple of quarters? Or is that similarly lower visibility into next year?

Jim, thanks for the question. So on the outlook, 2 factors, as you suggest. One is the lower China, and we've foreshadowed this over the last year. We had very large shipments into China in 2023 and 2024. And we expected lower business in 2025. And we actually expect this to continue for several more quarters as we look forward. It's hard to give a specific guide. As you know, those numbers have changed over time. But with such a large build in China in those 2023 and 2024, we call it digestion. It's not unexpected that we would have lower business, especially given the restrictions in our Q4 guide, much like we experienced in Q2, if you recall. And then turning to leading logic. Here, this was different than our expectations. We have underlying demand that we think is very strong. You've got 100% utilization on the leading edge. You've got reportedly more design wins. You've got CapEx going up at cloud service providers. You've got a lot of pull from AI-related technologies, especially on the leading edge in DRAM, in HBM also. And so we expected and modeled a relatively linear ramp that would accelerate through 2025 and into 2026. And we're not seeing that in the order pattern for Q4. And so at this point, it's just uneven. We attribute some companies have been waiting longer to make capital commits in this environment that we're all going through with tariff and trade and other uncertainties. And also with the concentration on leading edge customer concentration, it's a little bit harder to achieve an even ramp. In past years, you have multiple customers to try to achieve a level load in your factories. Now with one customer being larger than the other customers, it's more attached to their ramp and their loadings. So that's a factor in the unevenness of the ramp going forward. But I'll just say that we're not changing our expectations. We expect gate-all-around nodes to be very large. We think it will grow to be more than 300,000 wafer starts of capacity per month as that ramps. And it's just going to be a little bit uneven going forward. And as far as our visibility into following quarters, we're working on that. I think investors should know we're -- we always have high confidence in the quarter that we guide. In the out quarters, they're typically not completely scheduled. And so we're working on that for the out quarters, and that's one of the reasons why we don't guide the out quarters. So I'll have to take a rain check on answering exactly when we'll know the shape of the ramp, but we're confident that we'll ramp on leading edge going forward.

And our next question comes from the line of Stacy Rasgon from Bernstein Research.

China is 35% of the revenue in the current quarter. I didn't get the impression last quarter that you expected China to be that strong. I think it was 25% the quarter before. So I guess the question is, was China significantly stronger than you expected? And if that's the case, it feels like the non-China business feels weaker than you were sort of alluding to in your comments just because the overall numbers weren't that far off of where you had guided. Just can you give me a little more color on what your expectations had been for China relative to where it came in, in the quarter relative to the rest of the business?

Yes, absolutely. Thanks, Stacy. I think the quarter played out just pretty much exactly as we expected, the mix across. And I don't know if we gave the 35% number exactly or not, but it's certainly, I think we -- okay, thanks. I think we indicated that it was growing. And yes, from our expectation, you don't know until the end what the percentage will be, but we expected it to be higher. And yes, no real change in the flow from that perspective during the quarter. The only thing that I highlighted in the script was there was a little bit less activity on leading edge in the quarter, which we highlighted. So we had said that we expected acceleration through the year. We expected nearly $5 billion of gate-all-around related purchases in 2025, and now we're seeing that be lower, probably just over $4.5 billion. So 80% growth instead of 100% growth. Those are really the dynamics. So the change for us, even in our outlook, we expected China to be lower in Q4. The change for us is just the linearity of the leading edge.

Got it. I mean if I dig into that a little bit, so if you're guiding China to like 29% of revenue, versus $35 million. So that's -- I don't know, it's a $600 million decline. Display is $100 million, give or take, stronger. So it's something like a $500 million decline in China equipment. And then the total equipment guide is down $700 million plus. So that incremental $200 million to $250 million, is that like the lower leading edge? Is it all -- so it's all in like the foundry/logic leading? Like how do I think about like the components of that guide?

I think you got your equation right. So approximately $500 million China, approximately $500 million leading edge, which I alluded to with a $4.5 billion instead of $5 billion. And then there's some upsides in rest of world ICAPS that explain the difference that you're looking for.

Do you think the non-China leading edge is down another $500 million sequentially? Or that's what you're saying? Or that was an annual number?

That was not. So reconciling the down of $700 million, I would say it's $500 million China, $500 million leading edge and then a plus factor for rest of world ICAPS.

Okay. Where is that coming from though?

Well, we're not going to be specific. It would be too indicative of a particular customer, but it's not China.

And our next question comes from the line of Vivek Arya from Bank of America Securities.

Gary, the question is for you. So both kind of near and medium term. So if you look at Q1, if these trends persist, should we be assuming any sequential growth into Q1, right, based on what we know. I know you only guide one quarter at a time. And then if I kind of zoom out, same question for fiscal '26, that if China, right, may not grow and if your one kind of leading-edge customer in the U.S. is going through its issues, do you think memory growth is enough, DRAM growth is enough for Applied to grow overall as a company? Just if you could just give us the contours of how you're thinking about Q1 and fiscal '26, even if it is not in terms of absolute dollars. But just the shape and direction, I think, would be extremely helpful to investors on this call.

Vivek, I'll probably start. On the guide for Q1, as I highlighted earlier, we're sharing that there's more uncertainty and a little bit lower visibility in the current environment. Customers are later in making their commits. And so we're definitely not able yet to give any specific color for our Q1. But having said that, as you're sort of alluding to, the trends underneath for strong DRAM and strong leading logic, we think, are continuing. We're just going to have to wait for more time to go by to understand the linearity of demand, specifically on the leading edge. On DRAM, we almost -- we'll either have a record or we'll almost have a record this year. And what that is, is you recall the prior year, there was a couple of quarters of shipments to China customers. You don't have that this year. So you've got the leading-edge memory players all growing nearly 50%, as Gary said in his script. So DRAM is very strong. leading logic, I sort of clicked off all the factors that we look at. It's a great process for gate-all-around. It's got significant performance advantages. It's got design momentum. You have 100% utilization on leading edge processes. You've got cloud CapEx going up from the cloud CapEx or the cloud service providers. So just a lot of momentum in that space. And we think that's plenty of pull on the leading edge, and we're just going to have to work on the linearity as this build-out occurs over the next couple of years. So on your specific question, will memory growth be strong enough and will leading edge be strong enough to offset a China year that will be lower than '24. We don't know exactly what it will be, but it will be lower than '24. That's going to be the question. It was much like 2025. We said if we have growth, which we have, it would be strength of leading edge and DRAM that offset any slowness in China. And that's going to be the same question for '26, and we're just going to have to see how it works forward.

And our next question comes from the line of C.J. Muse from Cantor Fitzgerald.

I guess I was hoping to probe the different areas of weakness that you cited for October. So for the first part, with China, it sounds like for many of your peers that the concentration is the 6 large players who don't require licenses. So I'm curious why your shipments could be so robust through July, but now in October, licenses are now the challenge. And then from a foundry perspective, can you be more specific? Is that just timing of clean room space availability? What's causing the lack of kind of visibility there, particularly given that utilization, like you cited, is at running 100%. And then on the HBM side, can you clarify what you're seeing there? Is that a function of waiting on contract pricing for 2026 before signing for tools or something else?

Okay. C.J., thank you. So first on China, I think that -- as I said earlier, I think China played out as expected. So a good question on why is there more business in Q3 than Q4, I think just the customers, there may have been some strategic placement of having more deliveries in Q3. There were certainly different uncertainties resolving at different speeds as we went through the first half of the year. So I think the delivery schedule for us or the way it played out on the business side was pretty much as expected. And so I would say Q4 is just back to the level that we have been expecting all year long, just something lower than what we saw in 2024. And as I alluded to, we expect that to last a little bit longer, several quarters longer where the business will be less than 2024. But just so investors understand, there's new fabs, there's lots of new investment in China. It's just not quite at that 2024 rate. And then when we shift to leading logic, of course, we model all of the factories of our customers, the amount of capacity they're putting in, the applications that we have. And I'll just say that our model had a more linear assumption than reality. So no significant changes to point to in customer availability. I think there were some, but it's nothing like that. It's just that we assumed a more linear ramp, and we're not seeing that. So we'll work with the customers on that as we look at the coming quarters. And then -- yes, go ahead.

Can I just clarify on China? You talked about waiting on licenses. Could you speak to that?

Yes. We have -- we do have a backlog of licenses, and we're just highlighting we did not include any revenue in our outlook from that backlog. So it's been growing over the past quarters, and it's getting to be a significant backlog in terms of the number of licenses. So I know the government is aware of that, but we're just being conservative and not including any of that in the outlook. And so back to -- just to be clear, the customers we're serving and the outlook that we have, we are not waiting on licenses for that outlook. We're comfortable with what we've guided, and there's no contingency there.

And our next question comes from the line of Melissa Weathers from Deutsche Bank.

I also wanted to ask on the leading edge, but more specifically on the second-tier players. There's obviously a higher degree of uncertainty around their CapEx outlooks for like the Intels and Samsungs of the world. So can you help us understand what are you baking into your own planning? And what assumptions are you making on what their spending outlook -- where their spending outlook could shake out as it relates to your own outlook?

Yes. Thanks, Melissa. When we take this question, we don't talk about specific customers. But when we take this question, what we do highlight is we're up to date with our customers and their forecast. So we typically update the medium-term forecast with our customers twice a quarter, and that will be the case for those customers. And we highlighted that we do have more concentration in our demand on leading edge than we've experienced before. And that's probably the best we can say, but I think we definitely understand where they are in their plans today.

And our next question comes from the line of Harlan Sur from JPMorgan.

Advanced packaging, a lot of good stuff happening there. It was a $1.7 billion business for the team last fiscal year. I think it's grown at about a 35%, 40% CAGR over the prior 4 years, lots of inflections, right, HBM3 to HBM4, 2.5D to 3.5D packaging. Can the team just throw us up like what type of growth are you expecting this fiscal year in advanced packaging? And is this segment also being impacted by the weaker advanced logic spending dynamics that you're seeing in the second half?

Thanks, Harlan. I'll start, and I think Gary will add on here. On the advanced packaging, we're seeing about a steady pace relative to last year, minus the burst capacity, initial burst capacity we saw in HBM at the end of last year. So I'd say similar to last year from a pacing perspective for that business. And I -- we don't see any change related to the leading-edge schedules and the purchasing behaviors there. So -- and Gary, on the positioning.

Yes, Harlan, packaging is really the highest market share area for Applied Materials. We have a broad portfolio. We're the largest supplier of all the materials innovation inside packaging. We have a unique integrated packaging R&D center in Singapore, where we have a lot of our leading customers co-innovating with us on next-generation architectures. And we have a strong pipeline of new capabilities coming, including an integrated hybrid bonding system and other technologies that will further strengthen our market share in packaging. And what I talked about earlier on the call is that we're on track to more than double this business going forward to more than $3 billion per year. And I would say that for me, personally, again, AI, energy-efficient computing, this is really 1 of 4 areas that is really important for power and performance. So I'm personally spending a tremendous amount of time with our customers. We're also working with customers in the ecosystem on new architectures that I think are going to have a big impact on energy efficiency, but also create further opportunities for Applied Materials. So I'm -- again, we have high visibility into this segment of our business. This is the highest share, well positioned. And again, on track to more than double this to more than $3 billion in the next few years.

And our next question comes from the line of Krish Sankar from TD Cowen.

I had a question for Brice, and sorry for harping on China sales. A clarification on the question. The first one on the clarification, your April quarter China revenues were $1.8 billion and July was $2.6 billion. Did the liberation day in the month of April push some of your China sales from April into July quarter? And then on the question on October quarter weakness, you said China is $500 million. How much is the licensing amount you backed out of that? And if that comes through, how to think about the revenue upside in October from getting the licenses and any implications on gross margin?

Okay. Thanks, Chris, for the question. So on the first one, you're definitely remembering the dynamics correctly. There was a lot of uncertainty towards the end of our Q2 as I think some of the trade and tariff uncertainties were resolved towards the end of our quarter. So it was we were scrambling to ship what we had planned on shipping. But as I articulated last time, we pretty much made the quarter exactly as we expected, even though there was a lot of uncertainty in the last few weeks of that quarter. So as we think about the higher number in our Q3 results here for China, I don't think it was a push from Q2. That's not the dynamic. It was just more business, and I assume there's reasons at each customer for making that quarter larger. But I would also say that the Q2 and Q4 are more indicative of the level of business we've been expecting this year given some digestion in China. And then on the licensing, I wouldn't look for upside to our outlook quarter. I think even if that situation changes, it will take time to plan and build equipment or turn on services. So I don't think there's any immediate upside that anyone should expect from that. We're just highlighting that it is affecting the trajectory of the business, which is unfortunate.

Is there a way to quantify that licensing amount dollars or no?

No, we're not going to offer that, but it is a large number of licenses.

And our next question comes from the line of Charles Shi from Needham & Company.

I noticed that you actually upsized your leading edge DRAM growth for the fiscal -- current fiscal year from 40%, which was what you said last quarter to 50%. But the fiscal Q3 DRAM number, you said it is slightly better than you expected. That was down, right, sequentially, but that kind of implies October quarter, it may bounce back a little bit. So my question is, is that really just a temporary pop given all the things you talked about timing, uncertainties among your leading customers? Or maybe there's still more of a durability into early part of fiscal '26 for the leading-edge DRAM?

Yes. Thanks for the question, Charles. Yes, I certainly don't want to draw the conclusion that there's any pop or some unusual increment there. We view DRAM as very strong. We view what's happening in DRAM to be sustainable from a trend perspective without making a specific guide. So like we said, it should be either a record year or a second best year this year. And it's really those leading edge customers growing. And I think our investors know underneath what's happening for DRAM is you have HBM growing at 30% to 40%, depending on which report you look at. About 15% of DRAM capacity is allocated towards HBM. There's a trade- off, as you know, between making high-bandwidth memory and not in terms of the amount of silicon required. So there's a significant demand pull in DRAM. And our forward-looking outlook and our perspective is that it's not a blip.

And our next question comes from the line of Brian Chin from Stifel.

Just to be clear then, I guess, relative to that commentary or clarification around leading edge DRAM spending, that timing or fab timing and sort of this linearity sort of impact to next quarter's -- the October quarter revenue, that's really mainly focused in advanced foundry, it sounds like. But more broadly, I also heard something about thinking that at full scale, gate-all-around could be something like 300,000 wafer per month. Are we exiting this year maybe something like around 10% or a little bit higher than that. So basically suggesting that we have a pretty long runway there in terms of that expansion.

Brian, thanks for the question. So you're right. Our comments on concentration are directed towards leading logic, not DRAM. I'm sure there's some of the same factor in DRAM. But in terms of the nonlinearity of builds and the things that we're working on, that's directed towards a foundry comment, leading logic comment. And we just went through DRAM. We think that's strong. It continues to be strong. And then on the gate-all-around nodes, based on our numbers of $4.5 billion and what we shipped last year, $2.5 billion, we'd estimate close to 100,000 wafer starts of capacity are in the field or will be in the field as we close the quarter. And so you're in the first 3 innings of the build-out there from a gate-all-around, at least the initial node and then, of course, there'll be subsequent nodes.

And our next question comes from the line of Chris Caso from Wolfe Research.

I guess a 2-part question on China. One is how significant was the multinationals in China? That sound like it was a source of strength last quarter. Was that very significant? And then going forward, you've given China as a percentage of revenue and what you thought in the past, and that's something you talked about for Q2. I guess what I'm hearing now is that the Q2, Q4 China revenue numbers, we should kind of stay at those levels over the next couple of quarters. And it sounds like that happens regardless of whether or not you get incremental licenses. Is that the correct interpretation?

Yes, Chris, thanks for the question. So on the multinationals, we did have multinational, we did have revenue from that in our Q3, and it was noticeable. We wouldn't share the exact number, but it was noticeable and definitely part of our revenues in the quarter. And there is a little bit in Q4, although very small in Q4. And then on the second piece -- sorry, can you repeat the second piece? I can't read my own writing.

That's Okay. You had given in the past your expectation as a percentage of revenue. So is it sort of Q2, Q4 levels, we'll just take that and assume that's flat the next couple of quarters regardless of whether or not you get incremental licenses.

Yes, I think in that range. So we were okay to share that with our guide, we're probably 15% to 20% down for China relative to 2024. And that's probably the right level to think about for the next few quarters.

And our next question comes from the line of Timm Schulze-Melander from Redburn Atlantic.

So I just wanted to build on the question or the response to Jim Schneider's question. So you talked about in China, you have the visibility that lets you kind of guide for a pretty stable reset to revenues for the next few quarters. Just want to come back to the logic/ foundry sort of leading-edge part of your business. You talked about how you update with customers kind of a couple of times a quarter. So just as you see this now, is it that a visibility for the next few quarters isn't possible or the spread is too wide? I just wanted to understand why we have kind of a reasonable shot here in China and maybe why that doesn't exist in logic/foundry leading edge?

Yes. Thanks, Tim. I think I definitely wouldn't want to create the perspective that we have more visibility in China than we do in the other end markets. That's not the case. I think what's shading our comments on China is just our expectation that it can't run at the same rate in the short term that we saw in 2024. We know there was a lot of incentives to make the level of investment in 2024. So we've been expecting it to be lower than 2024 until utilizations across all those factories become higher. So I guess that's more of intuition matched by, of course, what we're hearing from the customers and the accounts. On the leading edge, it's a good question. And what we're doing is just realizing that we had a lot of effort during COVID put into building good visibility with our customers into multiyear demand and multiyear build plans. And in this uncertain environment, what we're saying is we've kind of fallen off that. Customers have been less certain and that added visibility that we had put in place just isn't there right now. We do have a good perspective of factories and capacity that's being put in place. And so then it comes down to the actual build order and linearity, and that's what we're working on.

Our next question comes from the line of Shane Brett from Morgan Stanley.

So sorry for harping on the leading-edge logic piece here. But so on that $4.5 billion of GAA revenue, how would you characterize your share position kind of 1 year into this GAA ramp? And has this tracked in line with expectations? Or are there things that haven't gone as planned? And I'm asking this because just $500 million is not nothing. It's a bit of a step down from the $5 billion that you earlier mentioned. Just want to get assurance that this isn't a share issue.

Shane, thanks for the question. So we have very high visibility on the architecture inflections for our leading-edge logic customers. The big inflections that are really crucial for AI, energy-efficient computing are gate-all-around and backside power distribution. And as we've talked about before and as I talked about earlier on the call, we expect revenue for Applied to increase about 30% on the same number of wafer starts as those 2 nodes ramp over the next couple of years. So Applied is in an extremely strong position with all of those leading-edge logic customers. And I would say that our engagements with customers are earlier, deeper and broader than they've ever been. And when you think about gate-all-around or backside power in the transistor and the wiring, those are areas where Applied has tremendously enabling technologies and that -- those are also inflections where there's significant demand for our integrated systems. When you're thinking about these chips, there are over 2,000 steps. Some of those materials are a few atoms thick. And so those interfaces are really difficult and have a big impact on the overall electrical performance. So what we're seeing is an increased adoption of integrated systems, the number of steps, the number of technologies you're integrating into a single platform. And I would say that very high visibility, very high confidence that we are outperforming as gate- all-around is ramping first generation, next generation. And also, we're positioned to outperform on backside power. Again, these are essential for our customers for their design wins for their key AI customers and super high confidence that we are gaining share and positioned for significant revenue growth going forward.

And our next question comes from the line of Vijay Rakesh from Mizuho.

Just to follow up on the previous question. In terms of the ramps, given your more than 50% share on gate-all-around and backside power, when do you see that start to get more material, if you can give us some more color there?

Yes. I think -- thanks for the question, Vijay. We won't get specific. We do expect it to ramp. So we did expect in the prior quarter that we would see continued acceleration. And so we can't -- right now, we're going to have to work on what the loading plan is for the next couple of quarters. So I think we'll just have to wait for more visibility as we work with the customers across. So just generally, we do expect investment to increase -- when we think across the long term, we have leading-edge logic and DRAM as the 2 fastest-growing end markets. So we think we have double exposure to the 2 fastest end markets with both being exposed to the markets themselves and having technologies that will allow us to gain share. That's the strategy that we're putting in place and we have for the company. But we'll just have to wait as we work with the customers on the next couple of quarters.

Got it. And then quickly on the OpEx side, Brice, just with the revenues being a little challenged there. Any thoughts on where OpEx should trend? I think it's like 16% is your long-term target. Where do you see that trending on OpEx?

Yes. Thanks for the question. We've been closer to 18% for some time. I think 16% was an aged number probably from the model of years ago. But to your point, given the revenue guide, we'll be very cautious on spending as we go through the next quarter. And so you should see us behave that way.

And our final question for today comes from the line of Joe Quatrochi from Wells Fargo.

I was wondering if you could kind of comment on the ICAPS business. I understand the weakness in China, but as non-China ICAPS, have you started to see that business stabilize? Or should we think about both China and non-China being -- continue a headwind for growth in the coming quarters?

Thanks for the question, Joe. It is -- we do still see lower utilizations across the ICAPS. Having said that, and ICAPS being our mature nodes, IoT, communications, auto, power and sensors for investors listening where that acronym is new. I think what we've said for several quarters is with utilizations low and some of the end markets slower that the investment levels would still be muted. And we did see some green shoots in the quarter. We saw some pickup on the industrial side. And as I highlighted, we do see rest of world investments this quarter in ICAPS picking up. So I think this one will just be a space to watch. Over time, we do expect the ICAPS market to grow. It's just a question of how much digestion we have in China for the overall market going forward. Thanks for the question.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Brice Hill for any further remarks.

Thank you, and thank you, everybody, for attending today. In summary, during this period of lower visibility, we're leveraging our global supply chain and manufacturing footprint to stay flexible and adapt to a dynamic range of scenarios. As I've highlighted in the past, we understand that quarterly growth may be uneven at times, but that doesn't deter us from our strategy to focus on the highest growth areas of the market, which are directly enabling secular trends like AI. Thank you. And Liz, please close the call.

Thank you, Brice. I'd like to call your attention to some upcoming investor events. On August 28, Brice will attend the Deutsche Bank Technology Conference. And on September 9, Gary will attend the Goldman Sachs Communacopia and Technology Conference. And then lastly, a replay of today's call will be available on the Investor Relations website by 5:00 p.m. Pacific Time today. Thank you for your continued interest in Applied Materials.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.