Applied Materials Warns of New Export Restrictions; Analysts Weigh Broader Impacts

Applied Materials (AMAT) became the latest semiconductor equipment firm to highlight the impact of U.S. policy on China, disclosing in an SEC filing that recently expanded export rules will trim revenue both in the near term and over the next fiscal year. The company’s update underscores how Washington’s tightening technology controls continue to ripple across the global chip supply chain—even as investors debate whether the financial effect is more modest than initially feared.

The new BIS Affiliates Rule

On September 29, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an expanded “Affiliates Rule” that broadened the list of companies subject to export restrictions. According to Applied’s 8-K filing , the new rule will further limit its ability to export specific products, parts, and services to designated China-based customers without a license.

Applied estimates that the change will reduce its Q4 fiscal 2025 revenue by roughly $110 million. Looking further ahead, it expects a $600 million hit to fiscal 2026 sales. While the company said these figures are its best current estimates, the caveat is that the ultimate impact depends on how many licenses are granted and how quickly customers adapt their procurement strategies.

Though the numbers are meaningful, they represent a small slice of Applied’s $6–7 billion quarterly revenue base. The filing suggests management is leaning on conservative assumptions in light of Washington’s unpredictability, rather than signaling a material break in long-term growth trends.

Echoes from the August earnings call

The filing aligns with commentary management delivered during its August 14 earnings call . CEO Gary Dickerson pointed to a “large backlog of pending export license applications”, stressing that Applied was assuming none would be approved in the next quarter. The company also flagged “digestion of capacity in China” and “non-linear demand from leading-edge customers” as additional headwinds.

CFO Brice Hill elaborated, noting that China’s share of Q4 revenue was expected to decline to around 29%. The forecast assumed no change in licensing and guided to $6.7 billion in Q4 revenue (±$500 million), non-GAAP EPS of $2.11 (±$0.20), and gross margin of about 48.1%. Semiconductor Systems revenue was projected down 9% year-on-year, while Display was expected to rise sharply on OLED demand.

In other words, the company had already baked policy-driven caution into its guidance before the latest BIS rule was formally announced. The September filing now quantifies the potential drag, confirming that export restrictions will show up in the reported numbers.

Analyst reactions: cautious but not panicked

Sell-side analysts have parsed the dual message of near-term softness and long-term opportunity with varying interpretations.

• KeyBanc recently reiterated an Overweight stance with a raised price target of $220, noting that Applied has lagged peers this year due to China concerns and lumpier leading-edge demand. They argue those issues are well understood and largely priced in, leaving room for upside as AI and DRAM catalysts unfold.
• Morgan Stanley also boosted its target to $209, highlighting that Applied trades at a steeper discount to Lam Research than normal. With what it calls a “3:1 bull-bear skew,” Morgan Stanley views the risk/reward as favorable, particularly given exposure to greenfield DRAM projects.
• Mizuho , however, has been more cautious, cutting its target to $175 and flagging market share losses in sputtering and plasma CVD as Chinese domestic OEMs gain ground. Mizuho notes that Applied’s exposure to mature nodes and etch is higher than peers, making it more vulnerable to substitution.
• Bank of America likewise downgraded the stock to Neutral with a $180 target, citing both mature node exposure and Intel-related headwinds at the leading edge. They suggest that uncertainty could persist and keep shares from outperforming despite a reasonable valuation.

Other firms, including Wolfe and Citi, trimmed estimates but kept Outperform ratings, emphasizing secular AI-driven demand and backside power and packaging innovations that should support earnings power into 2026 and beyond. Citi, however, removed AMAT from its U.S. focus list, citing less favorable mix versus peers like KLAC and LRCX.

A relatively small dent in a big machine?

Taken together, the new BIS restrictions introduce another layer of policy friction at a time when Applied’s China business was already slowing. Yet the estimated $110 million hit in Q4 amounts to less than 2% of quarterly sales, while the $600 million full-year impact in 2026 is still manageable against a revenue base north of $25 billion.

Investors are left to weigh two forces pulling in opposite directions: persistent U.S. regulatory headwinds that cloud visibility and investor sentiment, and secular semiconductor trends—AI acceleration, DRAM complexity, and advanced packaging—that expand Applied’s long-term addressable market.

The market reaction has been swift, with AMAT underperforming peers since August as investors adjust to softer near-term guidance and China exposure. But with analysts split between cautious neutrality and constructive Overweight calls, the consensus appears to be that the export-related hit, while noteworthy, is unlikely to derail Applied’s multi-year growth thesis.

Conclusion

Applied Materials’ 8-K filing puts real numbers on the export-control debate: $110 million in Q4 and $600 million in 2026. Those losses are not trivial, but they must be seen in context of the company’s scale and ongoing secular drivers. The August earnings call already foreshadowed a softer Q4, and the September filing confirms the policy drag. Analysts are divided, but many highlight the company’s positioning at critical technology inflections—gate-all-around, DRAM, high-bandwidth memory, and advanced packaging—as reasons why the long-term story remains intact.

The BIS rules may ding quarterly comparisons and sentiment, but they are unlikely to alter Applied Materials’ trajectory in shaping the semiconductor roadmap for the AI era.