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(Bloomberg) -- Applied Materials Inc., the largest US maker of chip-manufacturing equipment, fell after issuing a lukewarm revenue forecast for the current period, citing the risk of export controls crimping its business.
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Sales will be about $7.1 billion in the fiscal second quarter, which runs through April, the company said in a statement Thursday. That compares with an average Wall Street estimate of $7.22 billion. Profit will be $2.30 a share, Applied Materials said, in line with projections.
Chief Financial Officer Brice Hill said the company was “taking into account export control related headwinds.” China makes up roughly a third of the company’s sales, and stricter trade curbs from the US have made it harder to sell in that country.
The company’s shares were down 5.3% on Friday at $174.53. Through Thursday’s close, the stock had been up 13% for the year.
Export rules adopted in the final months of the Biden administration will knock about $400 million off fiscal 2025 revenue, the company said.
About half of the reduction will come in the current period, with much of it hitting Applied Materials’ service business. That’s because the company will have to stop servicing equipment at some customer sites in China, Chief Executive Officer Gary Dickerson said on a conference call with analysts. In the long term, he expects its service operations to resume healthy growth.
China accounted for 31% of sales last quarter, down from 45% a year earlier. A surge in orders from Chinese memory makers hasn’t continued into this year, the company said.
Meanwhile, Applied Materials is enjoying high demand for the most advanced types of equipment needed for artificial intelligence components, he said. That’s making up for weaker demand from makers of less complicated chips.
“The biggest driver for the whole industry is AI,” he said. The amount of silicon going into data centers — facilities that handle much of the AI workload — will soon surpass the level consumed by personal computers and smartphones. Those have traditionally been the two biggest markets for chipmakers.
First-quarter profit was $2.38 a share, excluding some items, compared with an estimate of $2.28. Revenue gained 6.8% to $7.17 billion. Analysts projected $7.15 billion. The company is facing tax changes in Singapore, resulting in an expense of $644 million, or 79 cents a share, during fiscal 2025.