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Chemical company DuPont (DD) may not be the first name that comes to mind when thinking about AI plays, but the emergence of new AI technologies was a key factor behind the company's better-than-expected Q3 earnings and raised FY24 EPS guidance. The positive impact of AI can also be seen on the top-line. After ten consecutive quarters of yr/yr revenue declines, DD has now posted back-to-back quarters of positive growth with revenue growth improving to 4.4% in Q3 from 2.5% last quarter.

• While DD is experiencing stronger results across most of its business, the Electronics & Industrial segment is the engine behind the accelerating growth. In Q3, organic sales for the segment jumped by 10%, fueled by a 20% increase for Semiconductor Technologies. The Semiconductors Technologies business produces materials used during the fabrication, assembly, and advanced packaging of semiconductors.
• The 20% growth, which matched last quarter's increase, was a result of rising demand for AI-related technologies and an associated demand recovery for consumer electronics, as well as stronger demand in China. 
• DD's Water & Protection segment also experienced an upswing in demand, especially for its medical packaging products, as net sales decreased by just 2% compared to last quarter's 7% decrease. On a sequential basis, medical packaging sales grew by 10%, helping to offset softness in Shelter Solutions, which serves the residential and commercial construction markets with its protection and insulation products (Tyvek, Styrofoam, ArmorWall).
• As a result of the stronger top-line growth, DD achieved better operating leverage, leading to a 150-bps improvement in Operating EBITDA margin to 26.8%. In turn, the company handily exceeded Q3 EPS expectations, enabling it to raise its FY24 EPS guidance to $3.90 from its prior outook of $3.70-$3.80.
• Lastly, CEO Lori Koch, who was appointed to that position on May 22, 2024, commented that the company is making good progress on the business separation plan that it announced in conjunction with the CEO transition. Under the plan, DD would separate its Electronics business from the Water business, with the new DuPont being comprised of the existing businesses within the Water & Protection segment (excluding Water Solutions) and the majority of businesses within Industrial Solutions (including healthcare). DD is expecting the separation to be completed within the next year-and-a-half.

The main takeaway is that DD's exposure to the semiconductor industry is sparking a turnaround after a couple of challenging years that were marked by consistent revenue declines. Along with lower interest rates, which should be beneficial to DD's Shelter Solutions business, the emergence of AI should continue to act as a potent growth catalyst for the company.