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Following peers ASML and Tokyo Electron signaling caution on 2026 prospects, U.S. chipmaking equipment leader Applied Materials forecast a drop in fourth-quarter revenue, blaming sluggish demand in China and choppy orders from customers rattled by tariff-driven uncertainty, according to Reuters.
Notably, China’s share of Applied’s sales, as per its press release, jumped to 35% in Q3 FY2025 (ended July 27) from 25% in the previous quarter, underscoring the company’s reliance on the market. Taiwan ranked second with 25%, followed by Korea (16%), Japan (10%) and the U.S. (9%).
Citing Applied CFO Brice, Reuters notes the company’s fourth-quarter revenue will drop as Chinese chipmakers halt new orders to absorb a surge of older-generation capacity. Demand from leading-edge customers is also proving “non-linear” amid market concentration and fab construction schedules, Brice added.
Applied Materials forecast fourth-quarter revenue of $6.70 billion ± $500 million, signaling an roughly 8% drop from the prior quarter, with adjusted EPS projected at $2.11. In Q3, the company posted revenue of $7.30 billion—up 8% year-on-year and above the $7.22 billion estimate—while adjusted EPS of $2.48 also beat expectations of $2.36, Reuters reported.
According to CNBC, Applied Materials said its quarterly forecast assumes none of its pending U.S. export license applications will be approved, despite holding a large backlog with the government.
Chip Equipment Rivals Turn Cautious on Outlook
Applied Materials isn’t alone in signaling caution. In mid-July, ASML warned it could miss 2026 growth as U.S. chipmakers delay projects amid tariff uncertainty, potentially ending a streak of uninterrupted revenue gains since 2012, Reuters reported.
Meanwhile, Tokyo Electron (TEL) cut its FY2026 operating profit forecast from JPY 727 billion , up 4.3% YoY, to JPY 570 billion, down 18.3% YoY. Strong AI server demand is being offset by delayed investments from advanced logic chipmakers and weaker-than-expected spending by emerging Chinese semiconductor firms, MoneyDJ noted.
Applied’s U.S. chipmaking tool peer, KLA, warned in a shareholder letter that overall demand from China is expected to decline this year, as per Reuters. China accounted for 30% of KLA’s revenue in the June quarter, but ongoing U.S.-China trade tensions and export restrictions threaten American chipmakers’ access to the market, the report suggested.
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(Photo credit: Applied Materials)
