AMAT to Post Q4 Earnings: Time to Buy, Sell or Hold the Stock?

Applied Materials AMAT is scheduled to report fourth-quarter fiscal 2025 results on Nov. 13.

For the fiscal fourth quarter, AMAT expects revenues to be $6.7 billion (+/- $500 million). The Zacks Consensus Estimate for revenues is pegged at $6.7 billion, suggesting a decline of 4.8% from the year-ago quarter’s reading.

Applied Materials projects non-GAAP earnings to be $2.11 (+/- 20 cents). The Zacks Consensus Estimate for earnings is pegged at $2.11 per share, indicating a decline of 9% from the year-ago quarter’s reported figure. The figure has been revised downward by a penny in the past 30 days.

AMAT has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 4.4%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 5.6%.

Earnings Whispers for AMAT

Our proven model predicts an earnings beat for AMAT this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

AMAT’s Earnings ESP, which represents the difference between the Most Accurate Estimate ($2.09 per share) and the Zacks Consensus Estimate ($2.11 per share), is -1.33%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

AMAT carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Consider

Applied Materials’ leadership across gate-all-around (GAA) transistors, backside power delivery, high-performance DRAM, advanced packaging, and power electronics is likely to have added to its top-line growth.

The company’s Semiconductor Systems segment is likely to have benefited from robust demand for equipment supporting leading-edge logic and DRAM technologies, driving revenues of this segment in the to-be-reported quarter.

The company’s Applied Global Services segment is also likely to have seen steady growth, aided by strong demand for comprehensive service agreements and the expansion of its subscription-based business.

The Display and Adjacent Markets segment is likely to have benefited from the growing adoption of OLED displays and rising equipment demand from consumer device manufacturers.

However, AMAT’s business is likely to have faced challenges in China, primarily due to continued digestion of prior capacity expansions, pending export license approvals, and ongoing trade restrictions affecting the top-line performance in the to-be-reported quarter.

Moreover, persistent tariff pressures, macroeconomic uncertainty, and slower ICAPS (mature-node) investments in China further constrain growth, which is likely to be a headwind for the fourth-quarter fiscal 2025 results.

Applied Materials’ Price Performance & Valuation

Applied Materials shares have plunged 18% over the past year, underperforming the Zacks Electronics – Semiconductors industry, which has returned 18%.

Let us now look at the value Applied Materials offers to its investors at current levels. AMAT is currently trading at a discount with a forward 12-month price-to-sales (P/S) of 4.6X compared with the industry’s 7.51X.

Investment Thesis on Applied Materials

Applied Materials operates in a highly competitive market space where it faces competition from players, including Lam Research LRCX in the semiconductor space, ASML Holding ASML in the photolithography and advanced manufacturing equipment segment. KLA Corporation KLAC is a dominant competitor in the wafer inspection space.

For instance, Lam Research develops Atomic Layer Deposition tools like AT200M, AT410 and AT650P that are similar to the devices made by AMAT. Both ASML and AMAT specialize in advanced semiconductor nodes, although they develop solutions for various stages of semiconductor production. ASML Holdings develops lithography solutions, including EXE and NXE systems.

Applied Materials and KLA Corporation offer similar solutions like Wafer Inspection, Yield Enhancement and Process Control inspection systems. KLA Corporation develops inspection systems, including 3935 and 3920 EP broadband plasma defect inspection systems. Although Applied Materials is dealing with a broader market sell-off and growing competition, not everything is gloom and doom for the company.

However, Applied Materials leads the market with its superior design wins. It is well-positioned to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging.

Moreover, AMAT is likely to capitalize on AI-driven semiconductor demand. The company has made significant strides in cutting-edge chip manufacturing, particularly in GAA transistors, high-bandwidth memory and advanced packaging. These innovations are critical to enabling faster, more energy-efficient AI processing.

Conclusion: Hold AMAT Stock for Now

Applied Materials has the right mix of innovation and market positioning to thrive in the AI-fueled semiconductor boom. Its leadership in advanced chip manufacturing, combined with the steady expansion of its service business, provides strong growth avenues. This makes AMAT stock worth retaining at present.

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This article originally published on Zacks Investment Research (zacks.com).

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