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Applied Materials Cuts Forecast Amid China Slowdown and Export-Restrictions

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Applied Materials (AMAT.O) forecasted fourth-quarter revenue and profit below analyst expectations on Thursday, citing weak demand in China and uneven orders from customers impacted by tariff uncertainty. Shares fell nearly 13% in after-hours trading.

The ongoing U.S.-China trade tensions and export restrictions on advanced semiconductor equipment have complicated forecasting, weighing on orders for chipmaking tools suppliers like Applied Materials. China accounted for 35% of Applied’s total sales in the July quarter, making it a critical market.

CFO Brice Hill said the company expects a revenue decline in the fourth quarter due to both the absorption of recently added capacity in China and non-linear demand from leading-edge customers. Tightened export controls prevent sales of the most advanced chipmaking equipment to Chinese clients. Meanwhile, Chinese chipmakers are pausing new orders for older-generation chips used in automotive, industrial, and consumer electronics.

Applied projected fourth-quarter revenue of $6.70 billion, plus or minus $500 million, below the $7.33 billion analysts had anticipated. Adjusted profit per share is expected at $2.11, compared with estimates of $2.39. The forecast assumes no approvals for pending U.S. export license applications.

The company’s third-quarter results exceeded expectations, with revenue up 8% to $7.30 billion and adjusted earnings per share at $2.48, above analyst estimates of $2.36.

Cisco Forecasts Strong Q1 Revenue as AI Drives Networking Demand

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Cisco Systems expects first-quarter revenue between $14.65 billion and $14.85 billion, exceeding Wall Street estimates, fueled by surging demand for networking equipment driven by artificial intelligence. Hyperscale cloud and enterprise AI investments are boosting orders, with Cisco reporting over $2 billion in AI infrastructure sales for fiscal 2025, more than double its target. Networking product orders rose in double digits across webscale infrastructure, enterprise routing, switching, industrial IoT, and servers. Cisco is also partnering with state-backed AI initiatives in Saudi Arabia and Bahrain. CEO Chuck Robbins expects AI-driven opportunities to further expand in fiscal 2026.

TSMC to Phase Out 6-Inch Wafer Production Over Two Years

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Taiwan Semiconductor Manufacturing Co. (TSMC) announced on Tuesday that it will gradually phase out its 6-inch wafer manufacturing business over the next two years, while continuing to consolidate 8-inch wafer production to improve operational efficiency.

STRATEGIC MOVE

  • The decision was made after a thorough evaluation of market conditions and aligns with TSMC’s long-term business strategy.

  • The company emphasized that the transition will be managed closely with customers to ensure their needs are met.

  • TSMC stated that this move will not impact previously announced financial targets.

MANUFACTURING CAPACITY

  • TSMC currently operates one 6-inch wafer fab and four 8-inch wafer fabs in Taiwan for mature-node chip production.

  • Advanced-node chip manufacturing, used by clients like Apple and Nvidia, is conducted in 12-inch fabs.

  • In July, TSMC forecasted annual revenue growth of approximately 30% in U.S. dollar terms.

RATIONALE
The phase-out reflects market trends and efficiency goals, allowing TSMC to focus resources on more in-demand wafer sizes and advanced technologies.