Contradictions Unveiled: Applied Materials' Q3 2025 Earnings Call Highlights China Revenue, Logic Spending, and Growth Prospects

China revenue and market uncertainty, leading-edge logic spending and market visibility, China revenue and market share, leading-edge logic demand and visibility, and advanced packaging growth are the key contradictions discussed in Applied Materials' latest 2025Q3 earnings call.



Record Q3 Performance and Guidance:
- Applied Materials reported record revenue of $7.3 billion for Q3 2025, up 8% year-on-year, surpassing the midpoint of their guidance range.
- The growth was driven by strong demand for semiconductor systems and services across foundry/logic, DRAM, and NAND, bolstered by a robust gross margin of nearly 49%.
- The company expects revenue and earnings to be sequentially lower in Q4, primarily due to uncertainties in their China business and nonlinear demand from leading-edge customers.

Challenges and Outlook in China:
- China accounted for approximately 35% of Applied Materials' revenue in Q3 2025, with expectations for China's revenue contribution to decrease to around 29% in Q4.
- The decrease is attributed to moderated customer spending after several periods of increased investments and uncertainties related to pending export license applications.
- The company anticipates lower business in China to continue for several more quarters due to significant capacity builds in 2023 and 2024.

Leading-Edge Logic Demand Dynamics:
- Demand from leading-edge foundry/logic customers was initially anticipated to ramp linearly throughout 2025 but has shown unexpected unevenness.
- The uneven ramp is due to market concentration, resulting in fewer customers dictating the timing of capital commitments, and uncertainties in the macroeconomic environment, including tariffs and trade policies.
- Despite the variability, Applied Materials remains confident in the long-term growth potential of the leading-edge market, with significant investments from major customers expected to support future growth.

Strong DRAM and packaging Growth:
- Revenue from leading-edge DRAM customers is expected to increase by around 50% in fiscal 2025, driven by customer investments for AI-enabling advanced DRAM.
- The advanced packaging segment, which has high market share, is on track to more than double to greater than $3 billion over the next few years, supported by strong demand for high-bandwidth memory and heterogeneous integration.
- This growth is attributed to significant customer investments in advanced packaging solutions and robust customer demand for performance and reliability in packaging technologies.