Applied Materials Sounds Alarm: China Slowdown and Market Uncertainty Hammer Growth

Semiconductor giant hits turbulence as geopolitical headwinds bite.

Chipmaking domino effect

Applied Materials' warning lights are flashing red - with China's cooling economy creating ripple effects across the tech supply chain. When the $100B+ equipment leader sneezes, the whole sector reaches for masks.

Wall Street's selective hearing

Analysts nod gravely at 'uncertainty' while quietly downgrading targets - another case of 'bad news is good news' for short-sellers. Meanwhile, treasury yields spike as if the Fed needed more excuses to keep rates punishingly high.

The tech cold war's latest casualty? Quarter-over-quarter predictability.

Key Takeaways

• Applied Materials said macroeconomic uncertainty is hurting its business, especially in China.
• The maker of equipment for semiconductors gave current-quarter guidance that was short of forecasts.
• Applied Materials beat third-quarter earnings and revenue estimates as sales at all three of its segments beat estimates.

Shares of Applied Materials (AMAT) sank 13% in premarket trading Friday, a day after the semiconductor equipment manufacturer gave weaker-than-expected guidance as global economic and tariff worries impact its business, especially in China.

The company sees current-quarter adjusted earnings per share (EPS) between $1.91 and $2.31, and revenue between $6.20 billion and $7.20 billion. Analysts surveyed by Visible Alpha were looking for $2.37 and $7.30 billion, respectively. 

CEO Gary Dickerson said Applied Materials was "currently operating in a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the NEAR term, including for our China business."

CFO Brice Hill added that the company anticipates lower revenue "driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing."

Q3 Results Top Analysts' Estimates

The warning came as the company reported strong third-quarter results. Adjusted EPS came in at $2.48, with revenue rising 8% year-over-year to $7.30 billion. Both were ahead of Visible Alpha consensus estimates. 

Sales at all three Applied Materials units—Semiconductor Systems ($5.43 billion), Applied Global Services ($1.60 billion), and Display ($263 million)—beat forecasts.

Entering Friday's session, Applied Materials shares were more than 15% higher year-to-date.

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