Applied Materials 2025 Q4 Earnings Beats Expectations with 9.6% Net Income Growth

Applied Materials (AMAT) reported fiscal 2025 Q4 earnings that exceeded Wall Street expectations, with revenue declining 3.5% to $6.8 billion but EPS rising 13.3% to $2.39. The stock dipped post-earnings, reflecting mixed investor sentiment. Management provided Q1 2026 guidance, forecasting $6.85 billion in revenue and $2.18 in non-GAAP EPS, signaling confidence in sustained demand for AI-driven semiconductor tools.

Revenue

Applied Materials’ total revenue for Q4 2025 fell to $6.8 billion, a 3.5% decline from $7.04 billion in the prior year. The Semiconductor Systems segment, which accounts for the majority of revenue, generated $4.76 billion, down from $5.18 billion in Q4 2024. Applied Global Services contributed $1.63 billion, slightly below $1.66 billion a year earlier. The Display segment saw a significant rebound, reporting $355 million in revenue, a 68.3% increase, driven by advanced screen technology adoption.

Earnings/Net Income

Earnings per share surged to $2.39 in Q4 2025, a 13.3% increase from $2.11 in Q4 2024, while net income rose 9.6% to $1.90 billion. The company’s profitability strengthened despite revenue contraction, reflecting cost optimization and operational efficiency. This EPS growth outperformed the sector’s typical performance, underscoring AMAT’s resilient financial management.

Post-Earnings Price Action Review

The strategy of buying AMAT shares after earnings announcements and holding for 30 days showed mixed performance over three years. Cumulative returns reached 20%, with annualized gains at 7%, though volatility and drawdowns—particularly in 2024—highlighted risks. While 2025 delivered a strong 25% return, the approach underperformed the SPY ETF, emphasizing sector-specific risks. Despite this, the strategy capitalized on AMAT’s AI-driven growth, making it a potential fit for portfolios with medium-term horizons and risk tolerance.

CEO Commentary

CEO Gary Dickerson emphasized fiscal 2025’s sixth consecutive year of growth, driven by AI computing and wafer fab equipment. He acknowledged challenges from trade restrictions, which reduced China’s revenue contribution to 28% in 2025. Strategic priorities include innovation in logic, DRAM, and advanced packaging, with new products like Xtera and Kinex poised to lead in AI technologies. Dickerson expressed optimism for 2026, citing customer readiness for production ramps and AMAT’s leadership in high-growth areas.

Guidance

CFO Brice Hill outlined Q1 2026 guidance: revenue of $6.85 billion (±$500 million), non-GAAP EPS of $2.18 (±$0.20), and a non-GAAP gross margin of ~48.4%. Revenue is expected to be weighted toward 2026’s second half, with leading-edge foundry logic, DRAM, and high-bandwidth memory as key growth drivers. Capital spending will remain elevated due to the EPIC Center construction, and cost optimization measures will offset compensation increases.

Additional News

Applied Materials announced a 4% workforce reduction, impacting ~1,400 employees, to enhance productivity and competitiveness. The company also raised its quarterly cash dividend by 15% and launched a $10 billion share repurchase program, underscoring commitment to shareholder returns. Additionally, AMAT increased its strategic investment in BE Semiconductor Industries to strengthen hybrid bonding technology collaboration. These moves aim to bolster long-term growth amid evolving market demands.