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Semiconductor machinery manufacturer Applied Materials (NASDAQ:AMAT) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 6.8% year on year to $7.1 billion. Its non-GAAP EPS of $2.39 per share was 3.4% above analysts’ consensus estimates.
Is now the time to buy AMAT? Find out in our full research report (it’s free).
Applied Materials’ first quarter performance was shaped by increased investments in leading-edge foundry and logic, as well as continued demand for semiconductors used in artificial intelligence (AI) applications. CEO Gary Dickerson highlighted the company’s focus on enabling next-generation technologies such as gate-all-around transistors and advanced DRAM, stating, “We are very well-positioned at major technology inflections in fast-growing areas of the market.” Despite challenges from trade restrictions, especially in China, Applied Materials saw broad-based growth across business segments, with the Semiconductor Systems segment benefiting from customers’ accelerated adoption of new chip architectures. The company also cited gains in its advanced etch and process diagnostics products as contributors to margin expansion.
Looking ahead, Applied Materials’ guidance is underpinned by anticipated acceleration in leading-edge foundry-logic and continued strength in DRAM and NAND upgrades, particularly those tied to AI data center investments. CFO Brice Hill explained, “We expect the core [services] to grow at low double digits during the year, even with the impacts from lower China business due to trade restrictions.” Management emphasized the durability of demand for AI-enabling semiconductor technologies and highlighted ongoing investments in new product innovation and high-velocity co-innovation with customers. The company cautioned that macroeconomic volatility, tariffs, and evolving trade policies remain risks to its outlook, but maintained that its diversified manufacturing and supply chain footprint provide flexibility to navigate these challenges.
Management pointed to robust demand for AI-related semiconductor technologies and highlighted recent product advances, while acknowledging near-term headwinds from China trade restrictions and segment-specific softness.
Applied Materials’ forward outlook is shaped by accelerating AI-related demand, ongoing product innovation, and the company’s ability to manage external risks such as tariffs and trade dynamics.
In the coming quarters, the StockStory team will focus on (1) the pace of adoption for new AI-related semiconductor technologies and the resulting impact on leading-edge foundry and logic revenue, (2) whether service segment growth can maintain momentum despite ongoing China trade restrictions and 200mm equipment headwinds, and (3) progress toward sustainable margin expansion through cost management and product mix. The continued ramp of advanced packaging and further penetration of subscription-based services will also be key indicators of execution.
Applied Materials currently trades at a forward P/E ratio of 17.2×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).
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