Applied Materials (AMAT) forecast fourth-quarter revenue and profit below analyst expectations on Thursday, citing weak demand in China and erratic customer orders amid tariff uncertainty, sending its shares down nearly 13% in after-hours trading.
President Donald Trump’s ongoing tariff negotiations, along with tightened export restrictions to China, have complicated economic forecasts and dampened new orders for chipmaking equipment suppliers like Applied Materials. Dutch rival ASML, the world’s largest chip-equipment maker, had warned in July that it may not achieve revenue growth in 2026 as U.S. chipmakers await clarity on the effects of tariffs.
“We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing,” said Applied CFO Brice Hill. Advanced export controls prevent companies from selling their most cutting-edge semiconductor tools to Chinese customers.
In China, chipmakers are pausing new equipment orders to absorb recently added capacity for older-generation chips used in autos, industrial applications, and other everyday electronics. China remains a key market for Applied, accounting for 35% of total sales in the July quarter.
“Many peers have shown surprising China strength and given expectations for a decent pullback, but Applied Materials’ results show much more volatility,” said Brooks Idlet, senior analyst at CFRA Research.
Applied’s quarterly forecast assumes no approvals of its pending U.S. export license applications. The company projects revenue of $6.70 billion, plus or minus $500 million, compared with analysts’ average estimate of $7.33 billion, and adjusted earnings per share of $2.11, plus or minus $0.20, versus the $2.39 consensus.
The company’s third-quarter results had topped expectations, with revenue rising 8% year-over-year to $7.30 billion, above the $7.22 billion forecast, and adjusted EPS of $2.48, beating estimates of $2.36.
Bank of America’s Vivek Arya downgraded shares to a neutral rating and lowered his price target, citing ongoing China and leading-edge headwinds.
“The uncertainty could persist, making it tougher for the stock to outperform despite reasonable valuation,” he wrote. “We suspect the slowdown is more company specific.”
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