Applied Materials reported fiscal‑fourth‑quarter revenue of $6.80 billion, a 3% year‑over‑year decline, but the company beat consensus estimates of $6.68 billion. Non‑GAAP earnings per share rose to $2.17, surpassing the $2.10–$2.11 range expected by analysts. The earnings beat was driven by a stronger mix of high‑margin semiconductor systems and a 12% increase in services revenue, offsetting a 7% drop in display sales that reflected a slowdown in consumer electronics demand.
The company warned that new U.S. export controls will reduce its ability to ship certain equipment and services to Chinese customers. Management projected a $710 million revenue hit from the restrictions, with $110 million affecting the current quarter and roughly $600 million impacting fiscal year 2026. China’s share of systems and services revenue fell to 25% in the quarter from 28% for the full year, underscoring the growing exposure to the Chinese market and the severity of the export‑control headwind.
Segment analysis shows that semiconductor systems revenue grew 9% to $4.12 billion, driven by strong demand for advanced logic and memory equipment from U.S. and European customers. Applied Global Services revenue increased 5% to $1.45 billion, supported by higher service volumes in the U.S. and Asia‑Pacific regions. Display revenue declined 12% to $0.78 billion, reflecting a broader industry slowdown. The mix shift toward higher‑margin systems and services helped lift gross margin to 48.8%, a 25‑year high, while operating margin expanded to 9.9% from 9.5% in the prior year.
For the first quarter of fiscal 2026, the company guided revenue of $6.85 billion (±$500 million) and non‑GAAP EPS of $2.18. CEO Gary Dickerson noted that AI‑driven demand is accelerating investment in next‑generation computing infrastructure, which should offset the China headwind in the second half of the calendar year. CFO Brice Hill added that the impact of the export controls is equivalent to about 10% of the China market in fiscal 2024 and more than double that amount in fiscal 2025, but the company is preparing its operations and service organization to support higher demand beginning in the second half of 2026.
The warning has tempered investor enthusiasm, with some market participants adjusting their expectations for the company’s growth trajectory. While the earnings beat and record annual revenue of $28.37 billion demonstrate operational resilience, the significant revenue hit from China and the uncertainty surrounding future trade policy create a cautious outlook for the near term. Management’s emphasis on AI demand and margin strength signals confidence in long‑term upside, but the China exposure remains a key risk factor for the company’s future performance.
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