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Applied Materials Misses Q2 Revenue Target as Export Controls Weigh on Sales

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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:

  • Revenue from Semiconductor Systems, the company’s largest business segment, came in at $5.26 billion, below analysts’ forecast of $5.32 billion.

  • 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:

  • The U.S. government’s export restrictions, announced in December, now prevent shipment of advanced chipmaking tools to China — Applied Materials’ largest overseas market.

  • As a result, revenue from China fell to 25% of total sales, down sharply from 43% a year earlier.

  • 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:

  • Despite the revenue miss, adjusted Q2 earnings per share were $2.39, beating the $2.31 consensus.

  • Applied Materials provided Q3 revenue guidance of $7.20 billion ± $500 million, roughly in line with analyst estimates of $7.19 billion.

  • 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.

ASM to Pass Tariff Costs to Customers, Maintains Competitive Edge

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ASM International, Europe’s second-largest semiconductor equipment supplier, announced it will pass on any tariff-related cost increases to customers and the broader value chain. In a meeting with Bank of America analysts, ASM’s CEO and CFO emphasized that the company’s manufacturing flexibility ensures it won’t be at a disadvantage compared to global peers.

Key Points:

  • ASM said it would adjust pricing to offset potential cost pressures from U.S. trade tariffs, a strategy aligned with competitors like ASML, which previously stated that U.S. chipmakers would bear the bulk of such costs.

  • The Dutch company manufactures wafer fab processing equipment, vital for chipmakers like Intel and TSMC as they adopt next-gen Gate-All-Around transistor designs.

  • In other areas, ASM competes with major U.S. firms like Applied Materials and LAM Research, and is noted to be more exposed to the U.S. market than other European peers such as ASML and BE Semiconductor.

Market Outlook:

ASM also provided a bullish forecast for China, saying Chinese sales could hit the high end—or exceed—their 2025 guidance. The company previously estimated that China would represent between 20–29% of its total sales in 2025.

This positive outlook aligns with ASML’s recent commentary, which noted stronger-than-expected Chinese demand in its own Q1 report.

Despite rising geopolitical tensions and trade restrictions, ASM appears confident in navigating the shifting global semiconductor landscape, leveraging pricing power, regional flexibility, and strong demand from Asia.