Important takeaways from Applied Materials’ (AMAT) Q2 2025 earnings report

Applied Materials, Inc. (NASDAQ: AMAT) has reported mixed results for the second quarter, with earnings beating estimates and revenues slightly missing expectations. The Santa Clara-headquartered company, a market leader in semiconductor wafer fabrication equipment, issued third-quarter guidance below analysts’ estimates, driving its stock lower soon after the announcement on Thursday afternoon.

Extending the post-earnings downturn, the stock opened down 6% on Friday and traded lower in the early hours of the session. Investor sentiment has been subdued due to concerns over the potential impact of new import tariffs on the semiconductor industry. In March, AMAT had slipped to the lowest level in nearly one-and-a-half years. However, the stock’s long-term prospects appear to be encouraging. As a leading global semiconductor equipment supplier, Applied Materials is strategically placed to capitalize on the surging demand for AI applications, making it a compelling investment option.

Mixed Outcome

In the second quarter, a 7% growth in the core Semiconductor Systems business drove up total revenues to $7.10 billion. Contributing to the top-line growth, Applied Global Services revenue rose 2% and Display revenues jumped 45%. The company’s adjusted earnings rose 14% YoY to $2.39 per share in Q2. Quarterly earnings have consistently beaten estimates for nearly three years. On a reported basis, earnings moved up to $2.14 billion or $2.63 per share from $1.72 billion or $2.06 per share a year earlier.

Commenting on the results, the company’s CEO Gary Dickerson said, “The major technology trends reshaping the global economy, including IoT, automation and robotics, electric and autonomous vehicles and clean energy are all built on top of advanced semiconductors. Central to our future market outlook is AI, which is the most transformative technology of our lifetimes and has almost limitless potential use cases. While we are seeing remarkable progress in AI capabilities, we are still in the early phases of a multi-decade build-out of applications and infrastructure. Large-scale deployment of AI will require major advances in computing performance and energy efficiency that can only be achieved through disruptive innovation across the technology stack.”

Guidance

For the third quarter of FY25, the company expects revenues of around $7.20 billion and adjusted earnings of approximately $2.35 per share. The guidance is below analysts’ estimates for $7.22 billion of revenue and earnings of $2.36 per share, as of May 16, 2025. The management cautioned about a slowdown in ICAPS investments, but it sees continued strong investments in leading-edge logic and high-bandwidth memory.

Applied Materials attributed its recent underperformance in China to market access restrictions imposed on US companies. Outside China, its largest overseas market, the company grew faster than others due to its strength in leading-edge foundry and DRAM. The firm looks well-positioned to capitalize on the growing AI demand as it is a major supplier of materials engineering solutions needed for AI chip production.

On Friday morning, Applied Materials’ stock was trading close to its early-year levels, maintaining a downtrend. The stock opened about 6% below its 52-week average price, reflecting investors’ concerns over the weak Q2 results.