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APPLIED MATERIALS INC /DE (AMAT)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered revenue of $6.80B and non-GAAP EPS of $2.17, beating S&P Global consensus estimates of $6.67B and $2.09 respectively; GAAP EPS was $2.38. Gross margin improved year-over-year, though operating margin contracted due to higher OpEx and restructuring charges .
  • Guidance for Q1 FY2026 implies flattish sequential trends: revenue $6.85B ±$0.50B and non-GAAP EPS $2.18 ±$0.20; margins are guided ~48.4% until second-half 2026 demand ramps with leading-edge logic and DRAM inflections tied to AI .
  • Management highlighted strong strategic positioning at key technology inflections (Gate-All-Around, Backside Power, HBM, advanced packaging), with visibility to higher demand beginning in 2H CY2026; China exposure normalized around ~29% of revenue in Q4 and is expected to digest into 2026 .
  • Reporting changes starting Q1 FY2026: 200mm equipment moves from AGS to Semi Systems; AGS becomes entirely recurring revenue; full allocation of corporate support costs to segments, reducing reported segment margins but improving transparency .
  • Potential near-term catalysts: clearer H2 2026 order visibility, advanced packaging product adoption (Kinex hybrid bonding, Xtera epi, PROVision 10 eBeam) and incremental pricing improvements supporting margin trajectory .

What Went Well and What Went Wrong

What Went Well

  • Record annual revenue ($28.37B) and record annual GAAP EPS ($8.66) and non-GAAP EPS ($9.42), with non-GAAP gross margin up 120bps year-over-year to 48.8% .
  • Strategic wins and leadership at AI-driven inflections: CEO emphasized “we are well positioned at the highest value technology inflections in the fastest growing areas of the market,” citing leading-edge logic, DRAM, and advanced packaging as demand ramps in 2026+ .
  • Product innovation momentum: new Kinex integrated hybrid bonding, Xtera GAA epi, and PROVision 10 eBeam metrology targeting AI chips with higher performance and yield—key differentiators for share gains .

What Went Wrong

  • Q4 revenue fell 3% year-over-year and non-GAAP EPS fell 6% year-over-year; operating margin contracted 380bps to 25.2% on higher OpEx and restructuring charges ($181M) .
  • Segment margins compressed: Semi Systems operating margin declined to 32.1% (from 35.2%); AGS margin fell to 27.9% (from 30.0%), reflecting mix and trade-restriction impacts .
  • China-driven headwinds and market access restrictions reduced accessible market, contributing to YoY declines and uneven leading-edge order linearity; management expects continued digestion in China into 2026 .

Financial Results

Quarterly Results vs Prior Periods

MetricQ4 FY2024Q3 FY2025Q4 FY2025
Net Revenue ($USD Billions)$7.05 $7.30 $6.80
GAAP Diluted EPS ($)$2.09 —$2.38
Non-GAAP Diluted EPS ($)$2.32 $2.48 $2.17
Non-GAAP Gross Margin (%)47.5% 48.9% 48.1%
GAAP Operating Margin (%)29.0% —25.2%
Non-GAAP Operating Margin (%)29.3% —28.6%
Net Income ($USD Billions)$1.73 —$1.90

Q4 FY2025 Actual vs S&P Global Consensus

MetricActualConsensusSurprise
Net Revenue ($USD Billions)$6.80 $6.67*+$0.13B; bold beat
Non-GAAP Diluted EPS ($)$2.17 $2.09*+$0.08; bold beat
EBITDA ($USD Billions)—$2.02*—

Values with asterisk (*) retrieved from S&P Global.

Segment Breakdown (Q4 FY2025 vs Q4 FY2024)

SegmentQ4 FY2024 Revenue ($MM)Q4 FY2025 Revenue ($MM)YoYQ4 FY2024 Op MarginQ4 FY2025 Op Margin
Semiconductor Systems$5,177 $4,760 -8%35.2% 32.1%
Applied Global Services (AGS)$1,639 $1,625 -1%30.0% 27.9%
Corporate & Other (incl. Display)$229 $415 +81%$(270) $(269)
Display (reported within C&O)$211 $355 +68%$5 $91

KPIs and Geography (Q4 FY2025 vs Q4 FY2024)

KPIQ4 FY2024Q4 FY2025
China Revenue ($MM; % of total)$2,136; 30% $1,964; 29%
Taiwan Revenue ($MM; % of total)$1,284; 18% $1,834; 27%
Korea Revenue ($MM; % of total)$1,172; 17% $1,219; 18%
United States Revenue ($MM; % of total)$1,153; 16% $655; 10%
Employees (Regular FT, ‘000s)35.7 36.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Net Revenue ($B)Q4 FY2025 vs Q1 FY2026$6.70 ± $0.50 $6.85 ± $0.50 Raised
Non-GAAP Diluted EPS ($)Q4 FY2025 vs Q1 FY2026$2.11 ± $0.20 $2.18 ± $0.20 Raised
Non-GAAP Gross Margin (%)Q4 FY2025 vs Q1 FY2026~48.1% ~48.4% (to remain until volumes ramp in 2H CY2026) Raised
Non-GAAP OpEx ($B)Q4 FY2025 vs Q1 FY2026~$1.31 ~$1.33 Slightly Raised
Tax Rate (%)Q4 FY2025 vs Q1 FY2026~12.6% ~13% Raised
Semi Systems Revenue ($B)Q4 FY2025 vs Q1 FY2026~$4.70 ~$5.025 Raised
AGS Revenue ($B)Q4 FY2025 vs Q1 FY2026~$1.60 ~$1.52 Lowered (due to reclass)
Corporate & Other ($B; mainly Display)Q4 FY2025 vs Q1 FY2026~$0.35 ~$0.305 Lowered
Reporting ChangesEffective Q1 FY2026N/A200mm equipment moves to Semi Systems; AGS becomes fully recurring; corporate costs fully allocated to segments Structural changes

Earnings Call Themes & Trends

TopicQ2 FY2025 (May)Q3 FY2025 (Aug)Q4 FY2025 (Nov)Trend
AI/Technology InflectionsEmphasized AI as dominant driver; GAA + Backside Power increases WFE intensity; integrated systems ~30% of systems mix Gate-All-Around capacity nearing ~100k WSPM; order linearity uneven; continued acceleration expected Preparing for higher demand in 2H CY2026; strong leadership in logic/DRAM/HBM; visibility improving Strengthening; 2H26 ramp
China/RegulatoryRestricted access muted growth; China ICAPS moving to 28nm; mid-20s % revenue exposure China at ~29% in Q4 guide; digestion expected; license backlog noted China ~29% Q4 actual; expect digestion; affiliate rule shipments timing clarified; normalized levels where allowed Normalizing, digesting
Advanced PackagingPortfolio/wins; >$3B target over next few years; leadership and Singapore lab 2025 flat vs 2024 due to HBM timing; still on track to double to $3B+ New products (Kinex, etc.) to enable larger packages connecting GPUs/CPUs; leadership reiterated Structural growth
Margins/PricingNon-GAAP GM 49.2% in Q2; low-48% as “floor”; value-based pricing improving margins Q3 non-GAAP GM 48.9%; margin uplift largely pricing; gross margins to improve with volume/pricing Q1 FY26 guided ~48.4%; sustained pricing progress; expect margin lift with volume in 2H CY2026 Improving with volume
R&D/EPIC & Co-innovationEPIC Center on track for Spring 2026; high-velocity co-innovation strategy Co-innovation visibility across N+1..N+4 nodes; integrated platforms combining ALD/PVD EPIC flagship facility begins operations next year; targeted R&D for faster/more energy-efficient systems Execution milestones
Regional MixTaiwan/Korea records; US/Europe lower in Q4 China elevated in prior quarters; sequential normalization in Q4 Taiwan 27%, China 29%, Korea 18%; US 10% in Q4 Shift to Taiwan/Korea

Management Commentary

  • “As AI adoption drives substantial investment in advanced semiconductors and wafer fab equipment, Applied Materials delivered its sixth consecutive year of growth in fiscal 2025.” – Gary Dickerson, CEO .
  • “We are preparing our operations and service organizations to be ready to support higher demand beginning in the second half of calendar 2026.” – Brice Hill, CFO .
  • “We are very well positioned at the most valuable technology inflections… enabling us to extend our leadership in leading-edge logic, DRAM and advanced packaging.” – Gary Dickerson .
  • “We increased non-GAAP gross margin by 120 basis points to 48.8%, the highest level in 25 years… price improvement more than offset cost increases.” – Brice Hill .
  • “PVD is doing great where we can compete… we see strong demand and strong growth into 2026 and into the future.” – Gary Dickerson .

Q&A Highlights

  • Leading-edge and DRAM outlook: Management expects 2026 growth led by leading-edge foundry/logic and DRAM; semi revenue flattish until late 2026; margin lift with volume and continued pricing initiatives .
  • China dynamics: Q4 included ~$110M shipments deferred to Q1 on affiliate rule suspension; ~$600M potential shipments spread across 2026 due to build cycle times; China exposure guided at ~29% in Q1 and likely lower through the year as digestion occurs .
  • Segment reporting changes: 200mm moves to Semi Systems (~$125M quarterly impact), AGS becomes fully recurring; corporate costs fully allocated, reducing reported segment margins but improving cost visibility .
  • Advanced packaging trajectory: 2025 roughly flat vs 2024 given HBM timing; still targeting ~$3B over next few years; Kinex hybrid bonding system and broader packaging portfolio underpin share .
  • Margin strategy: 2025’s 120bps GM uplift driven mainly by pricing process improvements; expect additional uplift with H2 CY2026 volume and ongoing pricing/cost programs .

Estimates Context

Applied beat Wall Street consensus for Q4 FY2025 on revenue and non-GAAP EPS; consensus was $6.67B and $2.09 respectively, versus actuals $6.80B and $2.17.

MetricQ4 FY2025 ActualQ4 FY2025 ConsensusQ1 FY2026 ConsensusQ2 FY2026 Consensus
Net Revenue ($USD Billions)$6.80 $6.67*$6.88*$6.97*
Non-GAAP Diluted EPS ($)$2.17 $2.09*$2.20*$2.25*
EBITDA ($USD Billions)—$2.02*$2.14*$2.18*
Target Price (Consensus, $)—$240.28*$240.28*$240.28*
Recommendation (Text)————

Values with asterisk (*) retrieved from S&P Global.

Consensus appears to be modestly rising for Q1–Q2 FY2026, consistent with management’s expectation of flattish early-2026 followed by a second-half ramp tied to AI-led leading-edge logic and DRAM .

Key Takeaways for Investors

  • Q4 FY2025 was a clean beat on both revenue and non-GAAP EPS versus consensus; however, YoY revenue and non-GAAP EPS declined due to margin compression and mix—balance the beat with underlying margin trends .
  • Near-term set-up: Q1 FY2026 guide implies flattish sequential performance and stable margins until volumes ramp in 2H CY2026; traders should watch order linearity and any early signs of H2 demand scheduling .
  • Structural catalysts: leadership at AI-related inflections (GAA, Backside Power, DRAM/HBM, advanced packaging) positions Applied for share gains and top-line acceleration as advanced nodes scale; product launches (Kinex, Xtera, PROVision 10) support thesis .
  • Margin trajectory: pricing programs produced 120bps GM uplift in FY2025; expect additional improvement with scale in 2H CY2026; segment margin optics will change with cost allocation and 200mm reclass .
  • China digestion and regulatory risk: exposure normalized to ~29% in Q4 with expected lower run-rate through 2026; monitor export license dynamics and competitor activity, but management indicates stable share where permitted .
  • Segment mix: strength in Semi Systems and Display offset softer AGS margin; AGS transition to fully recurring revenue improves quality and transparency starting Q1 FY2026 .
  • Medium-term thesis: AI secular trends plus innovation pipeline and co-optimization partnerships (EPIC) support durable growth beyond 2026; PMs should consider buy-the-dip on any near-term order timing volatility if H2 scheduling firmed .