In This Article:
Key Points
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Applied Materials beat analyst expectations for earnings but missed on revenue.
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The company said that customer demand hasn’t changed due to an uncertain economic environment.
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Applied Materials’ outlook for the third quarter included wide ranges for revenue and adjusted earnings per share.
Here's our initial take on Applied Materials' (NASDAQ: AMAT) second-quarter financial report.
Key Metrics
| Metric | Q2 2024 | Q2 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $6.65 billion | $7.10 billion | +7% | Missed |
| Earnings per share (adjusted) | $2.09 | $2.39 | +14% | Beat |
| Operating margin (adjusted) | 29% | 30.7% | +1.7 pp | n/a |
| Semiconductor systems revenue | $4.90 billion | $5.26 billion | +7% | n/a |
No Change to Customer Demand
Semiconductor equipment manufacturer Applied Materials reported second-quarter results that were mixed relative to analyst expectations. Revenue rose by 7% year over year, a bit short of the consensus estimate, while adjusted earnings per share beat expectations and rose by 14%. The company managed to increase its operating margin to 30.7%.
While the global economy is loaded with uncertainty right now, Applied Materials has seen no change to customer behavior so far. Speaking about the current economic and trade environment, Applied Materials CFO Brice Hill said that "... we have not seen significant changes to customer demand and are well-equipped to navigate evolving conditions with our robust global supply chain and diversified manufacturing footprint."
Foundry and logic semiconductor equipment accounted for 65% of semiconductor systems revenue during the second quarter, unchanged from the prior-year period. DRAM-related revenue brought in 27% of systems revenue, down from 32%, while flash memory-related revenue surged to 8% of systems revenue from just 3% in the second quarter of 2024.
Looking ahead to the third quarter of fiscal 2025, Applied Materials expects to generate revenue between $6.7 billion and $7.7 billion, along with adjusted EPS between $2.15 and $2.35. The wide guidance ranges likely reflect the heightened level of uncertainty facing the company.
Immediate Market Reaction
Applied Materials stock was down about 4% in early after-hours trading soon after the second-quarter report was released. With revenue missing analyst estimates and an outlook that baked in plenty of uncertainty, investors weren't particularly impressed with the company's results.
What to Watch
While Applied Materials isn't seeing an impact on customer demand from U.S. tariff policies, that may not remain the case as the company goes deeper into fiscal 2025. A potential economic slowdown could hurt demand for end-user devices, eventually translating into lower capital spending from Applied Materials' customers. Another risk is any slowdown in AI infrastructure investments. The company will likely share more details on its outlook during the earnings call on Thursday evening.