Applied Materials Forecasts Lukewarm Revenue Amid Export Control Concerns

Revenue and Profit Guidance

Applied Materials Inc., the leading U.S. chip equipment manufacturer, projects revenue of approximately $7.1 billion for its fiscal second quarter (April), slightly below Wall Street estimates of $7.22 billion. The company anticipates earnings per share of $2.30, aligning with projections.

Export Control Impact

Applied Materials CFO Brice Hill acknowledges the "export control-related headwinds" affecting the company. China accounts for roughly one-third of its sales, and tighter U.S. trade restrictions have hampered sales in that market.

Share Price and Long-Term Outlook

The news caused a 5% decline in extended trading. However, Applied Materials shares have gained 13% year-to-date. CEO Gary Dickerson expressed optimism about the long-term recovery of its service operations in China.

Industry Trends

Despite weaker demand for less advanced chips, Applied Materials is experiencing strong demand for equipment used in artificial intelligence (AI) components. Dickerson highlights the AI sector as the primary driver for industry growth.

First Quarter Results and Singapore Tax Impact

In the first quarter, excluding certain items, Applied Materials reported earnings per share of $2.38, exceeding estimates. Revenue increased by 6.8% to $7.17 billion, slightly higher than analyst projections. However, the company faces tax changes in Singapore, resulting in a charge of $644 million ($0.79 per share) in fiscal 2025.

Customer Base and Future Demand

Applied Materials boasts a customer base that includes industry giants like TSMC, Samsung, and Intel. Their orders typically reflect future demand, making the company's forecasts a significant indicator. Dickerson maintains confidence in the industry's long-term growth, driven by the proliferation of semiconductors and AI advancements.