Applied Materials Plunges 5.38% on Q2 Earnings Miss

Applied Materials drop 5.38% in pre-market on May 16, 2025.

Applied Materials, a leading provider of materials engineering solutions for the semiconductor, display, and related industries, recently released its Q2 fiscal report for 2025. The company reported a 6.84% year-over-year increase in revenue, totaling $142.66 billion for the first six months of the fiscal year, compared to $133.53 billion in the same period last year. However, net income for the same period decreased by 11.20% to $33.22 billion, down from $37.41 billion in the previous year. The company's earnings per share for the fiscal year stood at $4.10, a decrease from $4.50 in the prior year.

The company's core business, the Semiconductor Systems segment, contributed $52.6 billion in revenue for the quarter, falling short of analyst expectations of $53.2 billion. The slowdown in investment in the ICAPS market, which includes the Internet of Things, communications, automotive, power, and sensors, was cited as a significant factor in the underperformance. However, substantial investments in advanced process chips partially offset this impact. The company's management also noted the ongoing challenges posed by the U.S.-China trade tensions, which have led to a significant reduction in sales to China, a key market for the company. The company's revenue from China has decreased from 43% to 25% of its total revenue. Additionally, the U.S. government's export restrictions and tariff policies have added to the uncertainty surrounding the company's future revenue projections.

Despite these challenges, the company remains optimistic about the long-term prospects of the semiconductor industry. The demand for high-end chip manufacturing equipment, driven by the AI computing boom, continues to be robust. The company's CEO, Gary Dickerson, highlighted that while the demand for conventional equipment in the automotive and industrial sectors has slowed, the semiconductor industry is experiencing a historic expansion cycle. This expansion is fueled by the widespread adoption of smart devices, the explosive growth of AI, and the increasing complexity of chip manufacturing processes, all of which are driving the need for equipment upgrades. As a key supplier to major chip manufacturers such as TSMC, Samsung, and Intel, Applied Materials' performance is closely watched as an indicator of the industry's health.