Applied Materials Gives Tepid Forecast as China Sales Slip

Applied Materials Inc., the largest American maker of chip-manufacturing equipment, gave a lackluster forecast for the current period, highlighting the potential cost of the US trade dispute with China.

Sales will be about $7.2 billion in the fiscal third quarter, plus or minus $500 million, the company said in a statement Thursday. That was roughly in line with Wall Street estimates, though some analysts projected as much as $7.4 billion. Profit will be approximately $2.35 a share.

Applied Materials and other chip-industry companies are adjusting to restrictions on sales to China, one of the biggest markets for their products. The impact of tariffs imposed by Washington also are making it more difficult to project future revenue.

“There is more uncertainty in the market,” Chief Executive Officer Gary Dickerson said in an interview. “Despite that, the company is performing incredibly well.”

Applied Materials shares fell more than 4% in extended trading following the announcement. They had earlier closed at $174.75, leaving the stock up 7.5% for 2025.

Three months ago, Applied Materials said rules adopted in the final months of the Biden administration will knock about $400 million off fiscal 2025 revenue. That’s because Applied Materials will have to stop servicing equipment at some customer sites in China. But technology export restrictions have continued to evolve under Trump.

China accounted for 25% of Applied Materials sales last quarter, down from 43% a year earlier.

Fiscal-second quarter profit was $2.39 a share, excluding some items, compared with an analyst prediction estimate of $2.31. Revenue rose 7% to $7.1 billion in the period, which ended April 27, in line with estimates.

Demand remains strong for machines needed to make high-end processors for AI computing. But orders for less complex machinery used to make automobile and industrial components have slowed, Dickerson said. 

Applied Materials’ management argues that the industry is in a historic period of expansion. The rapid spread of semiconductors to new products and the AI boom will help maintain demand, Dickerson has said. The sheer complexity of chips also has added pressure on customers to upgrade their equipment. 

Applied Materials’ customer ranks include some of the biggest names in the chip industry, including Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. Those manufacturers order gear well ahead of starting production, making Applied Materials’ forecasts a barometer for future demand.

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