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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.

HCLTech Shares Plunge 10% After Missing Quarterly Revenue Estimates

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Shares of HCLTech (HCLT.NS) dropped nearly 10% on Tuesday, marking their worst session since September 2015. The decline came after India’s third-largest software services provider missed revenue estimates for its third quarter and adjusted only the lower end of its full-year sales guidance.

Revenue Miss and Analyst Reactions

HCLTech reported a 5.1% year-on-year rise in consolidated revenue to 298.9 billion rupees ($3.45 billion), falling short of analysts’ expectations of 300.68 billion rupees. The miss was attributed to underperformance in the company’s software business.

Following the earnings release, at least 11 brokerages downgraded their ratings on HCLTech, and four brokerages reduced their price targets, according to LSEG data.

Guidance and Market Sentiment

Despite the disappointing results, HCLTech CEO C Vijayakumar projected an improving demand environment in 2025, echoing optimism expressed by larger competitor Tata Consultancy Services (TCS). The company revised its fiscal year 2025 revenue growth forecast to 4.5%-5% from the earlier 3.5%-5%, factoring in acquisitions.

However, analysts remain cautious. Goldman Sachs noted that the midpoint of HCLTech’s revised revenue guidance fell slightly below expectations, citing weaker growth in the software segment and the gradual ramp-up of discretionary projects. Sanjeev Hota, vice president at Mirae Asset Sharekhan, commented that the lack of an increase in the upper range of revenue guidance further dampened investor sentiment.

Market Performance

HCLTech’s shares were the worst performers on India’s blue-chip Nifty 50 index (.NSEI), which rose 0.5% on Tuesday after a 1.5% drop in the previous session. Despite Tuesday’s plunge, HCLTech had outperformed its peers in 2024, posting a 31% gain compared to a 22% rise in the Nifty IT index (.NIFTYIT).

In contrast, competitors Tata Consultancy Services and Infosys recorded gains of 8.5% and 22.5%, respectively, over the same period. On Tuesday, TCS and Infosys shares dipped by 0.31% and 0.61%, respectively.

 

L&T Technology Misses Q3 Revenue Estimates Due to Softer Automotive Spending

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L&T Technology Services (LTTS), an Indian engineering and technology services firm, reported a smaller-than-expected revenue for the third quarter, primarily attributed to reduced spending from its automotive clients. The company posted a 9.6% year-on-year revenue increase, amounting to 26.53 billion rupees ($307.14 million) for the quarter ended December 31. However, this fell short of analysts’ expectations of 26.65 billion rupees, according to LSEG data.

Revenue and Profit Performance

The company also revised its revenue growth forecast for fiscal year 2025, raising it to near 10%, up from the earlier range of 8%-10%, following the acquisition of U.S.-based software firm Intelliswift. Despite this, its net profit fell 4.1%, totaling 3.22 billion rupees, below analysts’ estimate of 3.32 billion rupees. The decline in profit was attributed to increased sales and administrative costs.

Mobility Business Challenges

L&T Technology’s mobility business unit, which includes services to the automotive sector, posted its slowest revenue growth of 4.1% since the company began disclosing such figures in the first quarter of the fiscal year. Analysts noted that the ongoing challenges faced by automakers, including labor strikes and the shift toward electric vehicles, have had a significant impact on L&T Technology’s performance. These factors contributed to the company’s weaker-than-expected earnings.

Market Reaction and Industry Context

Despite the disappointing results, shares of L&T Technology closed 3.1% higher ahead of the earnings announcement. In a broader context, engineering, research, and design (ER&D) services, including technology support for industries like transportation and communications, make up a significant portion of India’s $254 billion technology sector. L&T Technology’s performance reflects the ongoing challenges in the automotive industry, which is grappling with the global shift toward electric vehicles and labor disruptions.

L&T Technology’s results follow a similar trend seen in peer Tata Elxsi, whose shares tumbled 7.6% last week after missing revenue estimates.