Earnings Call Insights: Applied Materials (AMAT) Q4 2025
Management View
- Gary Dickerson, President and CEO, stated Applied Materials delivered fiscal fourth quarter results above the midpoint of guidance, marking the sixth consecutive year of growth. He highlighted that “over this period, we have grown revenue and earnings at annualized rates of approximately 12% and 20%.” Dickerson acknowledged that growth was tempered by increased trade restrictions and an unfavorable market mix, particularly in China, where revenue declined to 28% of total systems and service revenues for fiscal 2025 and to 25% in Q4.
- Dickerson emphasized that “in the areas of the market where we can operate, we are competing well and maintaining market share” and pointed to significant strength in DRAM, where revenue from leading-edge customers grew by more than 50% over the past four quarters.
- He noted that Applied is positioned to benefit from AI computing demand and recent product launches, including the Xtera epitaxy system, Kinex die-to-wafer bonder, and PROVision 10 for eBeam metrology, which targets 3D devices and advanced packaging.
- Brice Hill, Senior VP and CFO, reported “record annual revenue, gross margin dollars, operating profit and earnings per share in fiscal 2025.” Hill shared that revenue grew 4% to $28.4 billion, with growth across all segments, and highlighted actions taken to streamline the organization, such as headcount reduction and increased R&D investment.
- Hill explained, “We shipped a richer mix of advanced systems and increased prices broadly, helping to more than offset cost increases,” and pointed to a non-GAAP gross margin increase by 120 basis points to 48.8%.
Outlook
- Hill guided for Q1 revenue of $6.85 billion, plus or minus $500 million, and non-GAAP EPS of $2.18, plus or minus $0.20. He forecast Semiconductor Systems revenue of around $5.025 billion and AGS revenue of around $1.52 billion. Non-GAAP gross margin is expected to be approximately 48.4% in Q1 and remain at that level until volumes ramp in the second half of the calendar year.
- Dickerson stated, “We expect 2026 to be another growth year for Applied with our revenue being weighted toward the second half of the calendar year,” attributing this to accelerating AI adoption and demand for advanced semiconductors and wafer fab equipment.
- Hill added, “Our customers are indicating to us that wafer fab equipment spending is likely to accelerate beginning in the second half of calendar 2026.”
Financial Results
- Hill reported that Semiconductor Systems and AGS revenue exceeded expectations for the quarter, but non-GAAP operating margin for both segments declined year-on-year. Display revenue was up 68% year-over-year.
- Applied generated nearly $8 billion in cash from operations and free cash flow of $5.7 billion, with $2.3 billion in capital spending, mainly for the new EPIC Center.
- The company paid $1.4 billion in cash dividends, increasing the quarterly dividend per share by 15% to $0.46, and allocated $4.9 billion to share repurchases, reducing shares outstanding by more than 3%.
Q&A
- Christopher Muse, Cantor Fitzgerald, asked about visibility and supply chain preparations for AI-driven growth. Dickerson responded, “AI is the biggest focus for all of our customers… we’re getting more than 1-year visibility, in some cases, 2 years visibility with a number of these different customers.”
- Sreekrishnan Sankarnarayanan, TD Cowen, questioned competition and product momentum. Dickerson explained, “We have very strong positions, gate-all-around backside power… I’m extremely confident that we will grow share, especially in these segments that are enabling AI energy-efficient computing.”
- Vivek Arya, BofA Securities, probed on market growth potential for 2026. Hill replied, “We do expect strong growth in ’26, led by leading edge and DRAM… a little bit of digestion on the ICAPS side, but we do think it will be a growth year.”
- Stacy Rasgon, Bernstein, sought clarification on gross margin trajectory. Hill stated, “The 48.4% guide for Q1 is good for this level of business… when we do get to the second half, added volume will help with cost improvements.”
- Atif Malik, Citi, asked about China revenue share. Hill noted, “We do expect it — if we do have the digestion that we’re expecting in China, then we will see it lower during the course of the year.”
Sentiment Analysis
- Analysts focused on China trade restrictions, competitive positioning, and the timing of AI-related demand, with a slightly cautious tone in their inquiries.
- Management projected confidence in both prepared remarks and Q&A, frequently citing strong visibility, market share gains, and product leadership. Dickerson used phrases such as “very high confidence we’re going to outperform” and “I’m extremely confident that we will grow share.”
- Compared to the previous quarter, management maintained a similarly confident tone, but the improvement in customer visibility and demand for AI infrastructure was more pronounced this quarter.
- Analyst sentiment was slightly more constructive than last quarter, shifting from concerns about near-term uncertainty to questions about upside from AI and product innovations.
Quarter-over-Quarter Comparison
- Q4 guidance was more detailed and optimistic, forecasting revenue and EPS growth for Q1 and a second-half weighting for 2026.
- Management now explicitly highlights improved customer visibility and demand driven by AI, compared to last quarter’s focus on uncertainty and digestion in China.
- Strategic focus has shifted further toward advanced logic, DRAM, and packaging, with a clearer expectation of share gains and product launches.
- Analyst questions have evolved from probing on near-term weakness to exploring how Applied can capitalize on AI growth and technology inflections.
- Management’s confidence in outgrowing the market and gaining share in leading-edge segments is stronger than in the previous quarter.
Risks and Concerns
- Management cited increased trade restrictions as a major challenge, especially in China, which now comprises a smaller share of revenue.
- Hill noted, “The impact of these restrictions was equivalent to around 10% of the China market in fiscal 2024 and more than double that amount in fiscal 2025.”
- Analysts continued to question China market share, competitive threats from domestic and international rivals, and the timing of AI-related equipment ramps.
- Management outlined mitigation strategies, including co-innovation with customers, new product introductions, and supply chain alignment for future demand.
Final Takeaway
Applied Materials concluded the year with record financial results, while navigating significant trade-related headwinds and an evolving market mix. Management projects that 2026 will be another growth year, driven by accelerating AI infrastructure investments, increased demand for advanced foundry logic and DRAM, and a product portfolio positioned at key technology inflections. Customer engagement and forward visibility have improved, setting the company up for strong performance as next-generation technologies ramp in the second half of the year and beyond.