Applied Materials Drops 4.11% Amid Geopolitical Risks

On April 10, 2025, Applied Materials' stock price dropped by 4.11% in pre-market trading, reflecting investor concerns and market volatility.

Applied Materials' recent financial performance has been robust, with the company reporting record revenue and profit for the 2024 fiscal year. Despite geopolitical tensions and supply chain pressures, the company has demonstrated strong earnings and cash flow. The Semiconductor Systems segment, which accounts for 73% of total revenue, saw a 35.1% profit margin, driven by high-bandwidth memory and AI chip innovations. However, the segment's reliance on key customers like TSMC and Samsung, along with slowing investment in advanced manufacturing processes, poses risks.

The Applied Global Services segment, which provides long-term service contracts and spare parts, saw a 9% increase in revenue and an 18% increase in operating profit, highlighting its stability and resilience. The Display segment, however, faced challenges due to intense market competition and reduced investment in TV manufacturing, leading to a 55% drop in operating profit.

Geopolitical risks, particularly U.S. export restrictions, have impacted Applied Materials' order backlog, with over $5.49 billion in orders affected. The company's dependence on Chinese customers further exacerbates these risks. Additionally, the concentration of customers, with Samsung and TSMC accounting for over 23% of revenue, makes the company vulnerable to fluctuations in customer spending.

Applied Materials continues to invest heavily in research and development, focusing on material engineering, advanced packaging, and AI computing. However, the long return on investment period and market adoption uncertainties pose challenges. The company has also increased its stock buyback program by 75% and dividend payout by approximately 23%, aiming to return value to shareholders.