Applied Materials, Inc.(NASDAQ:AMAT) forecast third-quarter sales above analysts’ estimates, betting on sustained demand for its semiconductor manufacturing tools against the backdrop of a global chip shortage and efforts in several countries to subsidize chip factories. Net income rose to $1.33 billion, or $1.43 per share, in the quarter, compared with $755 million, or 82 cents per share, a year earlier. On a non-GAAP adjusted basis, the company posted gross margin of 47.7 percent, operating income of $1.77 billion or 31.7 percent of net sales. The company generated $1.19 billion in cash from operations and returned $952 million to shareholders including $750 million in share repurchases and $202 million in dividends. Applied Materials got a boost from a pick up in demand for laptops, PCs and gaming consoles across the world during the pandemic, as people began to lean more on technologies for virtual interaction.

AMAT in the second quarter of FY 21 has reported the adjusted earnings per share of $1.63, beating the analysts’ estimates for the adjusted earnings per share of  $1.51, according to analysts polled by Thomson Reuters. The company had reported the adjusted revenue growth of 41 percent to $5.58 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $5.41 billion. Revenue from Applied Materials’ semiconductor systems unit, which supplies gears to chip makers, was $3.97 billion in the reported quarter, above FactSet estimates of $3.86 billion.

The company expects third quarter net sales to be of $5.92 billion, plus or minus $200 million, compared with estimates of $5.54 billion, according to IBES data from Refinitiv. Non-GAAP adjusted diluted EPS is expected to be in the range of $1.70 to $1.82. For the third quarter, the company expects Semiconductor Systems revenue to be $4.25 billion, AGS revenue to be $1.23 billion and Display revenue to be about $415 million.

For 2021, there is strong demand for semi equipment & service and strength in ICAPS and advanced packaging. With the semiconductor industry grappling with a shortage in chip supplies, automakers are facing production disruptions, while chipmakers such as Qualcomm Inc are finding it hard to keep up with the increased demand. The analysts expect Applied Materials could also benefit in the next several years from efforts in several countries, including the United States, to subsidize chip factories.