Applied Materials dips despite posting modest beats on Q4 sales, EPS as restrictions on sales to China weigh on performance

Solid Q4 results and a slightly better-than-anticipated outlook from Applied Materials still aren’t inspiring investors in premarket trading, with the stock down 4.8% as of 4:40 a.m. ET.

For the three months ended October 26, the firm reported:

• Revenue: $6.8 billion (compared to analyst estimates of $6.67 billion and guidance for $6.2 billion to $7.2 billion)

• Adjusted earnings per share: $2.17 (estimate: $2.11, guidance: $1.91 to $2.21)

Q1 guidance was also modestly ahead of estimates, as management pointed to sales of about $6.85 billion (plus or minus $500 million) with adjusted earnings per share of $2.18 (plus or minus $0.05). The consensus estimates for these figures were $6.81 billion and $2.15, respectively.

The company is preparing to meet a bigger pickup in demand by the middle of next year.

“Based on our conversations with our customers and partners, we are preparing Applied’s operations and service organizations to be ready to support higher demand beginning in the second half of calendar 2026,” Chief Financial Officer Brice Hill said.

Applied Materials was up more than 35% year to date heading into this report. That being said, it’s thoroughly lagged peers KLA Corp and Lam Research in the semi wafer fab equipment space, with the bulk of that underperformance coming after its Q3 earnings report in mid-August included underwhelming guidance for these Q4 results.

The entire space has come under scrutiny for its business with China, but Applied Materials has had the worst go of it: in early October, management flagged a $600 million hit to fiscal 2026 sales because of export restrictions.

“In 2026, we expect wafer fab equipment spending in China to be lower, and we are not anticipating significant changes to market restrictions,” CEO Gary Dickerson said on the conference call following earnings, noting that the share of China’s wafer fab equipment market the firm couldn’t sell to rose to “well over 20%” in late 2024 and early 2025 due to export restrictions, up from 10% early last year.

Needham analyst Charles Shi flagged how export restrictions shifted Applied Materials’ ability to meet demand from other customers, which helped Q4 sales while hurting its Q1 outlook:

“We believe the stock was down in after hours as the buy side bogey for F1Q26 was as high as $7.1B, partially due to buy side viewing the $110MM China revenue in F4Q25 and some of the $600MM China revenue in FY26, which were thought to be lost due to recent BIS 50% affiliate rule, should be added back as the US later suspended the rule for one year. Management clarified that some ex-China revenue were pulled into October when the BIS rule was first announced in late September, and it is the reason why AMAT actually beat the original F4Q25 guidance (which it gets no credit for), and AMAT did not guide a higher number for F1Q26 (which ends up hurting the stock).”