Live: Applied Materials (AMAT) Sinks 14% After Hours

Well, nothing was said on the Applied Materials call to change around steep after hours losses. The company is down 14% as of 5:25 p.m. ET.

Will this be the start of long-term troubles or a buying opportunity?

It’s our opinion that over a long-term time frame a company like Applied Materials remains a compelling investment opportunity. With that being said, the coming quarters are very challenging for companies as the Trump Administration has made limiting semiconductor equipment a primary focus during trade negotiations.

Here’ s what AMAT CEO Gary Dickerson had to say about the company’s guidance and defense of their long term opportunity:

“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 initiative that is designed to strengthen the end-to-end silicon supply chain in the U.S. As part of this endeavor, we plan to invest more than $200 million in Arizona to establish a state-of-the-art facility for manufacturing specialized components for our equipment. This builds on the more than $400 million we have invested in our U.S. manufacturing infrastructure over the past 5 years to provide the needed capacity and agility to support growing customer demand. Globally, we are now tracking more than 100 new fabs or major fab expansion projects, an increase of about 10% in the past year.

In addition to robust supply chains, deploying AI at large scale requires significant innovation at every level of the technology stack from models, software and data center design to chip architectures and materials. AI’s need for abundant, high-performance and energy-efficient computing is reshaping the semiconductor road map and changing the way chips are designed and manufactured. This next wave of AI semiconductor innovation will be concentrated around 5 key areas: Leading edge logic next-generation high-performance DRAM, high bandwidth memory or DRAM stacking, advanced packaging to connect logic and memory chips together and innovations in power electronics to address energy consumption within the data center and more efficient grid to data center power delivery.

In each of these critical areas, major device architecture inflections are shifting value towards material science and materials engineering, growing Applied’s addressable market and driving closer collaboration with customers. On top of this, these inflections create opportunities for us to grow faster than the underlying market. Based on our deep customer engagements, we have focused our investments in product portfolio on the most enabling applications, and we expect healthy market share gains as these new technologies ramp in volume production. Let me walk you through some examples. — in leading-edge foundry logic, the transition from FinFET to gate-all-around transistors with backside power delivery grows our revenue opportunity by 30% for the equivalent fab capacity. And we are on track to gain multiple points of market share when these nodes ramp in the second half of 2026 and 2027. “

Applied Materials conference call is starting. A few notes.

1. We will be listening and post notes on the most important areas to watch from the call. These updates will post automatically, all you have to do is leave this page open.
2. The company will almost surely be down tomorrow. However, if executives can explain their guidance next quarter as something temporary, losses could be trimmed.

If you’re just catching up, Applied Materials is down big after hours. The stock has dropped 11% after announcing poor guidance. It’s a bit of a replay of Tokyo Electron’s recent earnings.

Here’s exactly what management had to say about why their guidance is so far below Wall Street expectations:

“Applied Materials delivered record performance in our third fiscal quarter, and we are on track to deliver our sixth consecutive year of revenue growth in fiscal 2025,” said Gary Dickerson, President and CEO. “We are currently operating in a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the near term, including for our China business. Despite this, we remain very confident in the longer-term growth opportunities for the semiconductor industry and Applied Materials.”

“We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing,” said Brice Hill, Senior Vice President and CFO. “We are navigating and adapting to the near-term uncertainties by leveraging our robust supply chain, global manufacturing footprint and deep customer relationships.”

Adjusted EPS of $2.48 last quarter was a beat versus Wall Street expectations.

The stock is falling due to guidance.

Wall Street expected $7.32 billion in guidance next quarter and the company guided to $6.7 billion at th emidpoint.

That’s a massive shortfall and this kind of reaction is to be expected.

AMAT | Applied Materials Q3’25 Earnings Highlights:

• Adj. EPS: $2.48 [✅]; UP +17% YoY
• Revenue: $7.30B [✅]; UP +8% YoY
• Adj. Gross Margin: 48.9% [✅]; UP +150 bps YoY
• Net Income: $1.78B [✅]; UP +4% YoY

Outlook:

• Revenue: $6.70B ±$500M [⚠️]
  • Expected decline in revenue driven by digestion of capacity in China and nonlinear demand from leading-edge customers.
  • Management is adapting to near-term uncertainties by leveraging a robust supply chain and deep customer relationships.

Q3 Segment Performance:

• Semiconductor Systems Revenue: $5.43B [✅]; UP +10% YoY
• Applied Global Services Revenue: $1.60B [✅]; UP +1% YoY
• Display Revenue: $263M [✅]; UP +5% YoY

Other Key Q3 Metrics:

• Adj. Operating Income: $2.25B [✅]; UP +15% YoY
• Adj. Operating Expenses: $1.33B [✅]; UP +5% YoY
• R&D Expenses: $901M [✅]; UP +8% YoY
• Free Cash Flow: $2.05B; DOWN -2% YoY
• Effective Tax Rate: 30.6% (vs. 30.6% YoY)

CEO Commentary:

• Gary Dickerson: “Applied Materials delivered record performance in our third fiscal quarter, and we are on track to deliver our sixth consecutive year of revenue growth in fiscal 2025. We are currently operating in a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the near term, including for our China business. Despite this, we remain very confident in the longer-term growth opportunities for the semiconductor industry and Applied Materials.”

CFO Commentary:

• Brice Hill: “We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and nonlinear demand from leading-edge customers given market concentration and fab timing. We are navigating and adapting to the near-term uncertainties by leveraging our robust supply chain, global manufacturing footprint and deep customer relationships.”

Where does Applied Materials stack up next to other large semiconductor peers in 2025? Here’s a comparison of the year-to-date performance of the largest semi equipment stocks:

• Applied Materials: Up 15.3%
• Lam Research: Up 48.7%
• ASML: Up 7.3%
• Tokyo Electron: Down 4.8%
• KLA Tencor: Up 50.1%

As you can see, KLA Tencor and Lam Research lead the pack. Applied Materials is in the middle of the ‘Big 5’ semi equipment companies, but a 15% gain in a little more than 7 months is something most investors would gladly accept.

We saw Lam Research beat earnings earlier this season, but uncertainty from Tokyo Electron pulled down stocks across the sector. Applied Materials will give us the best insight yet into the overal healthy of the industry.

Consensus Rating:

• 13 Strong Buy
• 13 Buy
• 12 Hold
• Rating: Buy

Price Targets:

• High: $250.00
• Low: $165.00
• Average: $205.84

But Wall Street isn’t liking the bottom line numbers as the stock drops another percent down to negative 11% after hours.

EPS $2.22 vs $2.36. Stock down more than 10%