AMAT · Q4 2025 Earnings

Bullish

Applied Materials

Reported November 13, 2025

30-second summary

Applied delivered Q4 revenue of $6.80B (-3% YoY) and non-GAAP EPS of $2.17, both landing in the upper half of the reset guide management issued last quarter, with Semi Systems at $4.76B beating its ~$4.7B point guide. The Q1 FY2026 guide of $6.85B ±$500M is essentially flat sequentially, but management — for the first time in two quarters — committed to 2026 as a growth year and is now actively prepping operations for an H2-calendar-2026 demand inflection tied to leading-edge logic, DRAM, and HBM. The tone reversed from defensive (Q3) to forward-leaning, anchored in 1–2 year customer visibility and AI infrastructure design wins; the cost is that near-term semi revenue stays flattish through Q3 before the lift.

Headline numbers

EPS

Q4 FY2025

$2.17

Revenue

Q4 FY2025

$6.80B

-3.0% YoY

Gross margin

Q4 FY2025

48.0%

Free cash flow

Q4 FY2025

$2.04B

Operating margin

Q4 FY2025

25.2%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$6.80B	-3.0%	$7.30B	-6.9%
EPS	$2.17	—	$2.48	-12.5%
Gross margin	48.0%	—	48.8%	-80bps
Operating margin	25.2%	—	30.6%	-540bps
Free cash flow	$2.04B	—	$2.05B	-0.3%

Guidance

Guidance is issued one quarter forward. The Prior-guide column references the guide issued last quarter for the period just reported; the New-guide column is for next quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q4 FY2025	$6,700M +/- $500M (range: $6.2B–$7.2B)	$6,800M	in-line	Met
Non-GAAP EPS	Q4 FY2025	$2.11 +/- $0.20 (range: $1.91–$2.31)	$2.17	in-line	Met
Semiconductor Systems Revenue	Q4 FY2025	~$4.7B (down ~9% YoY)	$4.76B	+$60M above guide	Beat
Applied Global Services Revenue	Q4 FY2025	~$1.6B (down 2% YoY)	$1.625B	in-line	Met
Non-GAAP Gross Margin	Q4 FY2025	48.1%	48.0%	in-line	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q1 FY2026	$6,850M +/- $500M (range: $6.35B–$7.35B)	—
Non-GAAP EPS	Q1 FY2026	$2.18 +/- $0.20 (range: $1.98–$2.38)	—
Semiconductor Systems Revenue	Q1 FY2026	approximately $5.025B	—
Applied Global Services Revenue	Q1 FY2026	approximately $1.52B	—
Non-GAAP Gross Margin	Q1 FY2026	approximately 48.4%	—
Non-GAAP Operating Expenses	Q1 FY2026	approximately $1.33B	—

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Semiconductor Systems	$4.76B	-8.0%
Applied Global Services	$1.625B	-0.9%

Capacity & utilization

Q4 FY2025

Segment	Q4 FY2025
Foundry, Logic and Other Mix	65% of Semiconductor Systems
DRAM Mix	29% of Semiconductor Systems
Flash Memory Mix	6% of Semiconductor Systems
Q1 FY2026 Guidance - Revenue	$6,850M +/- $500M

Profitability

Q4 FY2025

Segment	Q4 FY2025
Semiconductor Systems Operating Margin	32.1%
Applied Global Services Operating Margin	27.9%
Non-GAAP Operating Margin	28.6%
Q1 FY2026 Guidance - Non-GAAP EPS	$2.18 +/- $0.20

Other KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
United States	$0.655B	-43.2%
China	$1.964B	-8.0%
Taiwan	$1.834B	+42.8%

Management tone

Narrative arc: Q2 widened ranges → Q3 led with pullback and removed China optionality → Q4 commits to a 2026 growth year and prepares supply chain for H2-2026 inflection.

The biggest shift is on visibility — from "shorter window" to "1–2 year line of sight." Last quarter management explicitly said customers were taking longer to commit and the visibility window had compressed; this quarter, in answer to CJ Muse's question on whether the NVIDIA $3–4T announcement changed conversations, Dickerson said "my discussions with customers and partners reinforce my view that opportunities for the semiconductor industry and applied materials have never been greater" and described 1–2 year visibility with multiple customers planning large factory ramps. That is a 180-degree reversal in posture in 90 days, and it's the single most important tone signal this quarter.

Supply chain commentary moved from passive risk mitigation to active capacity preparation. Two quarters ago management repeated "global supply chain and diversified manufacturing capabilities" as a tariff defense; this quarter the line is "we are preparing our operations and service organizations to be ready to support higher demand beginning in the second half of calendar 2026." This is what a company does when customers are already booking against forward capacity — not when it's hoping orders materialize. The shift from defensive supply-chain rhetoric to proactive capacity build is the operational analog of the visibility shift.

China reframed again — but this time as a known, structurally smaller envelope, not a deteriorating one. Q3 was "we have taken a conservative position and assumed none of these licenses will be issued." Q4: "In 2026, we expect wafer fab equipment spending in China to be lower, and we are not anticipating significant changes to market restrictions." The difference matters. Q3 modeled zero policy improvement as a downside scenario; Q4 treats the smaller China as the planning baseline and pivots the entire narrative to growth segments where Applied has high share (leading-edge logic, DRAM, HBM). The mid-20s steady-state framing from Q2 — which looked optimistic in Q3 — is now management's anchor again.

AI moved from a growth opportunity to the operating model. Three quarters ago AI was framed as a multi-decade build-out among other secular trends; this quarter Dickerson opened with "AI has reached a tipping point that is accelerating investment in next-generation computing infrastructure and advanced silicon" and identified five concurrent technology inflections (logic, DRAM, HBM, advanced packaging, power electronics) reshaping manufacturing. The substance of the message hasn't changed, but the conviction level has — and management is now translating that conviction into specific share claims (>50% of served market in gate-all-around, "number one in leading-edge and DRAM") rather than abstract opportunity-set language.

Hedging remains around timing, not direction. Management was explicit that the inflection is H2-calendar-2026, that Semi will be flattish through Q3, and that they've "been wrong for two years in a row" on China. This is not a clean bull-case quarter — it's a confident inflection-timing call with honest near-term flat-lining acknowledged. That combination is more credible than wall-to-wall optimism would be.

Recurring themes management leaned on this quarter:

AI-driven infrastructure investment acceleration and virtuosity cycle of innovationChina market structurally smaller; growth concentrated in foundry logic, DRAM, HBM outside ChinaSystem-level co-optimization and co-innovation as core competitive moatTechnology inflections in five key areas: logic, DRAM, HBM, advanced packaging, power electronicsProcess tool of record positions establishing leadership at highest-value nodesService business recurring revenue model and double-digit growth trajectory

Risks management surfaced:

Trade restrictions and market access limitations in China expected to persistExecution risk in ramping EPIC Center facility and new co-innovation modelCompetitive risk in NAND where Applied has historically lower shareTiming risk: growth weighted to second half of calendar 2026, not evenly distributedSupply chain and manufacturing capacity constraints if customer demand accelerates faster than prepared

Q&A highlights

CJ Muse · Cantor Fitzgerald

How have customer conversations evolved since NVIDIA's August 26th announcement of $3-4 trillion AI infrastructure spending? How has visibility changed and how is the supply chain being prepared?

Gary highlighted major improvement in customer demand visibility with 1-2 year visibility from multiple customers planning large factory ramps. Applied has very high share in leading-edge foundry logic (gate-all-around, backside power) and DRAM, with strong co-innovation relationships across 4 technology nodes a decade out. Customers want confirmation supply chain is ready for significant second half 2026 ramps.

1-2 year visibility with multiple customersNumber one positions in leading-edge foundry logic and DRAMStrong visibility in gate-all-around and backside power across 4 technology nodesSignificant factory ramps expected second half 2026

Krish Sankar · TD Cowen

How will Applied maintain leadership in PVD, CVD, CMP as these products face technology transitions (PVD to ALD) and increasing competition from China? What about the $125 million 200mm product reclassification?

Gary emphasized PVD is doing great and growing in 2025-2026, enabled by low-resistance wiring critical for AI chips. Applied has clear leadership in wiring innovation with hundreds of miles of wiring per chip. New selective ALD and selective MOLLE innovations are winning in critical applications. Bryce confirmed $125 million reclassification from AGS to equipment business for Q1 and approximately same amount in Q4.

$125 million Q1 reclassification (and similar Q4 amount) from services to equipmentPVD enabling 50% improvement in resistivity as integrated platform$1 billion annual business in integrated PVD/ALD/MOLLE platformsStrong demand for PVD with positive 2026 outlook

Vivek Arya · Bank of America Securities

Do you expect WFE to grow high single-digit to double-digit in 2026? What is Applied's view on WFE per $100B of data center spending and how does Applied benefit from this mix?

Bryce expects strong growth in 2026 led by leading-edge and DRAM, with some China/ICAPS digestion headwind similar to 2025. Applied believes 15% of leading-edge and DRAM wafer starts are allocated to AI data center solutions, growing at mid-30% CAGR. Gary emphasized Applied is number one in leading-edge and DRAM, gaining share in gate-all-around and HBM, positioned to capture more than 50% of served market in gate-all-around.

15% of leading-edge and DRAM wafer starts allocated to AI data centerMid-30% CAGR growth rate for AI capacityApplied positioned to capture >50% of served market in gate-all-aroundStrong visibility through multiple generations

Stacy Raskin · Bernstein Research

What is the revenue trajectory for first half 2026 versus second half? Can you quantify the split or expected margin improvement when the second half lift occurs?

Bryce stated semi-business will be flattish in first half until Q4/Q1 calendar inflection, with AGS growing low double-digits continuously. Semi-business margin at 48.4% for Q1 is appropriate for current business size. Gross margin improvement will come from added volume reducing costs in second half, while pricing programs continue over time. Gary added that customers' improved profitability enables sustainable margin improvements going forward.

Semi-business expected flattish through Q3, significant uplift Q4 and Q1 2027AGS expected low double-digit growth throughout yearQ1 gross margin guide 48.4%China shipment expected ~29% of total in Q1

Timothy Arcuri · UBS

Why won't the China affiliate rule reversal result in more than $600M in shipments if Chinese customers typically rush to procure equipment? Also, is PVD franchise being eroded by ALD adoption?

Bryce explained the $110M in Q1 represents tools already built, while the remaining ~$490M of the $600M requires new supply chain builds and customer finalization of delivery dates, spreading shipments through the year. Gary strongly disagreed that ALD is eroding PVD, citing deep customer visibility into 4-generation roadmaps and high confidence in PVD ramp. Applied has integrated PVD with ALD and other technologies enabling 50% resistivity improvements, demonstrating unique platform advantage.

$110 million of $600M China relief in Q1 (pre-built tools)~$490 million spread through rest of 2026 pending supply chain buildsDeep visibility into customer roadmaps 4 generations outPVD continues to ramp with high confidence

Answers to last quarter's watch list

Whether Q4 Semi Systems prints above or below the ~$4.7B guide — Semi Systems printed $4.76B, $60M above guide and 100bps better than the -9% YoY guide (actual -8%). The print confirms the Q3 reset was sized appropriately; the bigger signal is the Q1 step-up to ~$5.025B, which suggests the Q3-Q4 trough is now behind.

Resolved positively

Any update on Chinese export license approvals — The China affiliate rule was partially reversed, surfacing a $600M shipment opportunity, of which $110M ships in Q1 and ~$490M is spread through 2026. Management is not modeling zero anymore, but is also not embedding the full upside in the Q1 guide.

Resolved positively

Whether management can offer initial FY26 directional commentary on the Q4 call — Yes, and explicitly: 2026 is a growth year for Applied, weighted to H2 calendar 2026, with semi flattish through Q3 and material inflection in Q4 FY26 / Q1 FY27. WFE acceleration begins H2 calendar 2026. The inability to commit in Q3 was indeed a tone signal; that signal has now reversed.

Resolved positively

Whether the GAA full-ramp revenue uplift translates into a Semi Systems re-acceleration in Q1/Q2 FY26 — Partially. Q1 Semi guide of ~$5.025B is +5.6% QoQ and supportive, but Bryce explicitly said Q2/Q3 will be flattish — the GAA-driven re-acceleration is now Q4 FY26 / Q1 FY27, not Q1/Q2 FY26 as last quarter's watch list framed it. The thesis is intact but the timeline slipped one to two quarters.

Continue monitoring

Free cash flow margin sustainability — Q4 FCF was $2.04B at a 30.1% margin, well above Q3's 28.1% and despite the $670M Semi Systems sequential decline. Working capital discipline held; FY25 FCF margin of 20.1% reflects full-year mix.

Resolved positively

AGS YoY trajectory — AGS came in at -0.9% YoY in Q4 (better than the -2% guide), and management guided AGS to low double-digit growth throughout 2026. The Q1 sequential step-down to ~$1.52B reflects the $125M reclassification (AGS → equipment), not a demand break. Adjusting for the reclassification, AGS is back to a recurring-growth trajectory.

Resolved positively

What to watch into next quarter

Whether Q1 Semi Systems prints at or above the ~$5.025B point guide — the cleanest test of whether the H2-2026 inflection narrative is anchored in real bookings or aspirational customer conversations

Whether management can quantify the 2026 WFE growth rate on the Q1 call — Bryce gave "growth year" but no number; a specific WFE range would either confirm or soften the inflection case

The $490M China affiliate shipment cadence through FY26 — how much actually converts to revenue each quarter vs. slipping

Whether Q2 FY26 Semi Systems guidance lands flat or starts inflecting — Bryce said flattish through Q3, so a Q2 guide of materially above $5.025B would signal the inflection is pulling forward

Gate-all-around volume ramp visibility — last quarter the FY25 GAA-related figure was cut from $5B to $4.5B; watch whether the FY26 GAA number is now sized larger and whether Applied's >50% served-market share claim is reaffirmed at a specific dollar level

AGS organic growth ex-reclassification — with the $125M shift moving the comp, parsing whether the underlying low-double-digit recurring growth narrative holds in the reported numbers

Sources

Applied Materials Q4 FY2025 earnings press release — https://www.sec.gov/Archives/edgar/data/6951/000162828025051998/exhibit991q42025earningsre.htm
Applied Materials Q4 FY2025 earnings conference call commentary and Q&A

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