Semiconductor industry giant Applied Materials Inc. beat expectations for its latest financial results and forecast higher sales in the coming year thanks to artificial intelligence demand, but its stock moved lower in late trading.

The company reported fiscal fourth-quarter earnings before certain costs such as stock compensation of $2.17 per share, easily clearing Wall Street’s target of $2.11 per share. Revenue for the period fell 3% from a year earlier, to $6.8 billion, but it was still above the $6.7 billion analyst target. Despite generating lower revenue in the quarter, Applied Materials managed to increase its bottom line, as its net income rose to $1.89 billion, up from $1.73 billion a year ago.

The company wrapped up its fiscal 2025 year with record annual revenue of $28.37 billion, up 4% from a year earlier. In addition, it offered an optimistic forecast for the current quarter, saying it sees revenue of $6.85 billion at the midpoint of its range, just ahead of the Street’s consensus view of $6.8 billion.

Applied Materials President and Chief Executive Gary Dickerson (pictured) said AI adoption continues to drive substantial investments in semiconductor and wafer fab equipment, contributing to the company’s sixth successive year of overall revenue growth. “We are well positioned at the highest value technology inflections in the fastest growing areas of the market, enabling us to extend our leadership in leading-edge logic, DRAM and advanced packaging as next-generation technologies ramp in volume production over the coming years,” he said.

The company’s earnings results tend to be closely watched because they are seen as one of the most accurate barometers of future demand in the chipmaking industry. Applied Materials is one of the world’s leading suppliers of the sophisticated machinery used by semiconductor manufacturers, including Taiwan Semiconductor Manufacturing Co., Intel Corp., Samsung Electronics Co. Ltd. and GlobalFoundries Inc.

Very few companies in the world possess the technical expertise required to make the kind of machinery Applied specializes in, so its financials offer a good indication of where the chipmaking industry is headed. Its customers generally order new machinery prior to opening or expanding new production lines. As such, if Applied performs better than expected, it indicates chipmakers are anticipating higher demand. If its results come in lower, it suggests they’re bracing themselves for tougher times ahead.

On a conference call with analysts, Dickerson said the company’s customers are planning significant increases in chip production for the second half of 2026, stoking greater demand for its machinery and services. “AI is driving a tremendous amount of computing demand, so it’s really about ramping up to meet that increasing demand,” he said.

The CEO said some of Applied Materials’ customers anticipate their AI businesses will grow by more than 40% in the next few years. Because of this, his company’s visibility into its customers has improved significantly in the last few months. “They want to make sure our supply chains, our operations, our service teams are ready to meet that demand,” he explained.

Dickerson’s talk bodes well for the future, but Applied Materials’ stock fell more than 4% in late trading, having lost 3% during the regular trading session. It’s not clear what sparked the decline, but investors may have been looking for a stronger forecast given the CEO’s optimistic comments.

Holger Mueller of Constellation Research said Applied Materials deserves credit for delivering to expectations, but pointed out that investors will have noticed that its year-over-year picture doesn’t look all that good, with revenue barely growing above inflation. “The question is whether or not the company will grow from this plateau or fall back further, and it’s hard to tell,” he said. “Behind the curtains, there were a lot of shifts in its business, with U.S. and European revenue shrinking. It was saved by substantial growth in Korea and Japan, but it has a lot of work to do if it wants to keep growing.”

Last month, the company announced it would be laying off 4% of its workforce in a strategic move that aims to drive “continued growth as a more competitive and productive organization.”

Despite today’s slide, Applied Materials stock is up 37% in the year to date, outpacing the broader iShares Semiconductor exchange-traded fund, which has gained 34% over the same period.

Photo: Applied Materials