Applied Materials missed Wall Street expectations for second-quarter revenue, reporting $7.10 billion versus the estimated $7.13 billion, as U.S. export restrictions on semiconductor equipment to China and slower investment in certain markets impacted performance.
Shares of the Santa Clara-based chipmaking equipment giant fell more than 5% in extended trading following the earnings release.
Segment Performance and Key Challenges:
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Revenue from Semiconductor Systems, the company’s largest business segment, came in at $5.26 billion, below analysts’ forecast of $5.32 billion.
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Sales in the ICAPS market — covering IoT, communication, automotive, power, and sensors — slowed, although this was partially offset by strong demand for advanced-node chipmaking equipment.
Impact of Export Controls:
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The U.S. government’s export restrictions, announced in December, now prevent shipment of advanced chipmaking tools to China — Applied Materials’ largest overseas market.
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As a result, revenue from China fell to 25% of total sales, down sharply from 43% a year earlier.
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Analyst Kinngai Chan of Summit Insights Group said the export controls are clearly impacting results, but added:
“We think the company can overcome this headwind over time as spending on advanced process nodes picks up in the second half of 2025 and into 2026.”
Profit and Outlook:
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Despite the revenue miss, adjusted Q2 earnings per share were $2.39, beating the $2.31 consensus.
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Applied Materials provided Q3 revenue guidance of $7.20 billion ± $500 million, roughly in line with analyst estimates of $7.19 billion.
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CFO Brice Hill downplayed concerns, stating:
“Despite the dynamic economic and trade environment, we have not seen significant changes to customer demand.”
Summary:
While strong demand for advanced chips offers a long-term buffer, current headwinds from trade restrictions and market softness in core segments are affecting short-term performance. Investors remain cautious amid geopolitical friction and shifting global chip manufacturing strategies.