Applied Materials, Inc. ((AMAT)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Applied Materials Reports Record Year Amidst Trade Challenges
Applied Materials recently held its earnings call, revealing a year of record financial performance and technological advancements, despite facing significant challenges. The company reported strong growth, particularly in AI-driven segments, while also navigating the impact of trade restrictions that affected its market share and revenue in China. Looking ahead, Applied Materials maintains a positive outlook for 2026, with anticipated growth in leading-edge and DRAM segments, although the ICAPS market presents potential headwinds.
Record Annual Financial Performance
Applied Materials delivered a record annual revenue of $28.4 billion, marking a 4% increase year-over-year. This growth was observed across all segments, with the company achieving a non-GAAP gross margin of 48.8%, the highest in 25 years. Such financial performance underscores the company’s robust market position and operational efficiency.
Strong Position in AI-Driven Segments
The company has secured the #1 position in leading-edge foundry/logic and DRAM segments, which are expected to be the fastest-growing areas due to the rising demand for AI technologies. This leadership in AI-driven segments positions Applied Materials well for future growth as AI continues to drive semiconductor advancements.
Advanced Packaging Business Growth
Applied Materials is on track to double its advanced packaging business to $3 billion over the next few years. The company has established strong leadership in high-bandwidth memory, which is crucial for supporting the increasing data demands of AI applications.
Significant New Product Launches
The company introduced three new products: the Xtera epitaxy system, Kinex die-to-wafer bonder, and PROVision 10 eBeam metrology. These innovations enhance Applied Materials’ capabilities in leading-edge technologies, reinforcing its commitment to inflection-focused innovation.
Impact of Trade Restrictions
Trade restrictions have significantly reduced Applied Materials’ market access in China, impacting more than 20% of the China WFE market. This has been a notable challenge for the company, affecting its revenue and market share in the region.
China Revenue Decline
The company’s revenue from China has declined to 29% of total revenue, down from a peak of 45% in the first quarter of fiscal 2024. This decline highlights the challenges posed by geopolitical factors and trade policies.
Challenges in ICAPS Market
Applied Materials anticipates some digestion in the ICAPS market, which could impact growth despite the company’s strengths in leading-edge and DRAM segments. This presents a potential headwind as the company navigates market dynamics.
Forward-Looking Guidance
During the earnings call, Applied Materials provided optimistic guidance for the upcoming fiscal year. The company expects strong growth in 2026, driven by leading-edge foundry/logic, DRAM, and high-bandwidth memory segments. These areas are anticipated to benefit from increased AI data center investments. Despite trade restrictions affecting the Chinese market, Applied Materials sees significant opportunities as AI computing continues to reshape the semiconductor landscape.
In summary, Applied Materials has reported a year of record financial performance and technological leadership, particularly in AI-driven segments. Despite facing challenges from trade restrictions and market dynamics, the company remains optimistic about future growth, driven by its strong position in leading-edge technologies and strategic innovations.