Applied Materials (AMAT) Stock: China Concerns Overshadow Strong Quarterly Beat

TLDR

• Applied Materials stock fell over 4% in premarket trading Friday after warning that Chinese chipmaking equipment spending will decline in 2026
• The company couldn’t ship $110 million worth of goods in Q4 due to U.S. export restrictions, which were later suspended after Trump-Xi meeting
• Fiscal 2026 revenue faces a $600 million hit from expanded U.S. export controls on chip equipment to China
• Fourth-quarter results beat expectations with earnings of $2.17 per share on revenue of $6.8 billion
• AI spending boom expected to boost semiconductor equipment sales in second half of 2026

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Applied Materials shares dropped more than 4% in premarket trading Friday after the semiconductor equipment maker warned about weakening demand from China. The decline came despite the company posting better-than-expected quarterly results.

Applied Materials, Inc., AMAT

The chipmaking equipment supplier said spending on its gear in China is expected to fall next year. U.S. export controls are the main culprit behind the anticipated downturn.

Applied Materials couldn’t ship about $110 million worth of products during its fiscal fourth quarter due to export restrictions. Those restrictions were later suspended following a meeting between President Donald Trump and Chinese President Xi Jinping last month.

The company’s fiscal 2026 revenue outlook took a hit. Applied Materials expects a $600 million impact from expanded U.S. restrictions on exports of advanced chip equipment to China.

Despite the China headwinds, the company sees a silver lining. Rising business spending on artificial intelligence should drive increased sales of its semiconductor equipment in the second half of next year.

Beating the Street

The company’s fourth-quarter performance exceeded Wall Street expectations. Applied Materials reported adjusted earnings of $2.17 per share on revenue of $6.8 billion.

Analysts had predicted earnings of $2.11 per share and revenue of $6.68 billion. The beat shows the company’s business remains strong outside of China-related challenges.

Looking Ahead

Applied Materials provided guidance for its current quarter that also topped estimates. The company expects adjusted earnings of $2.18 per share on revenue of $6.85 billion at the midpoint.

Wall Street had been looking for earnings of $2.15 per share and revenue of $6.80 billion. The forecast suggests resilience in core markets.

Stifel analysts weighed in on the China situation. They noted that Applied Materials was the first semiconductor equipment provider to predict and experience a slowdown in China.

The analysts expressed optimism about the future. They believe quarterly China sales could stabilize sooner than expected, especially given the reversal of prior restrictions.

Applied Materials stock has performed well this year despite Friday’s premarket decline. Shares have climbed about 36% so far in 2025.

The company operates in a crucial sector of the semiconductor industry. It provides the specialized equipment needed to manufacture chips.

The China market has been important for Applied Materials and other U.S. chip equipment makers. But geopolitical tensions continue to create uncertainty.

The $600 million revenue impact represents a substantial portion of the company’s business. But the strong AI-driven demand could help offset some of those losses.

Applied Materials guided for current-quarter revenue of $6.85 billion at the midpoint, beating consensus estimates of $6.80 billion.

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