Applied Materials (AMAT.US) held its Q4 2025 earnings call, highlighting key business outlooks. The company noted that its semiconductor business will remain stable before growth resumes. The Applied Global Services (AGS) segment is projected to grow modestly at a low double-digit rate (11-13%) with relatively consistent growth throughout the fiscal year.
The semiconductor business is expected to stay flat in the short term, with significant improvements anticipated in Q4 and the first quarter of the following fiscal year. Applied Materials foresees a stronger DRAM business, supported by customer investments, driving healthy growth. Market share gains are expected across multiple areas, including leadership in high-bandwidth memory (HBM), innovations in DRAM I/O leveraging the company’s leading products and foundry logic technologies, strong positioning in capacitor scaling, and high share in DRAM etching and patterning.
Looking ahead, as DRAM manufacturers adopt hybrid bonding for HBM, FinFET technology, and 4F² vertical channel transistor architectures, Applied Materials is well-positioned to capture additional market share.
**Key Takeaways from Q&A Session:** - **AI-Driven Demand:** AI remains a major focus for customers, accelerating wafer fab equipment (WFE) spending toward AI-driven segments like leading-edge foundry logic and DRAM, where Applied Materials holds strong leadership positions. - **Supply Chain Readiness:** Customers are planning significant capacity expansions, providing Applied Materials with extended visibility—sometimes over one to two years—to ensure supply chain readiness for 2026’s expected ramp-up. - **Margin Outlook:** Q1 2026 gross margin guidance stands at 48.4%, with improvements expected in the second half due to higher volumes and cost efficiencies. Long-term pricing optimization and cost control initiatives are ongoing. - **China Market Dynamics:** While restrictions impacted ~20% of China’s WFE market in 2025, Applied Materials maintained share in accessible segments. DRAM business with global customers grew ~50% year-over-year despite China-related headwinds. - **Technology Leadership:** The company emphasized its competitive edge in gate-all-around (GAA) and backside power delivery technologies, with potential to capture over 50% of these markets long-term.
**Business Segment Highlights:** - **DRAM:** Strong growth expected, driven by HBM adoption and technology transitions (e.g., hybrid bonding, FinFET). - **Foundry Logic:** Leading-edge logic is anticipated to outpace DRAM growth, supported by AI demand. - **Advanced Packaging:** The business is poised to double from $15B to $30B+ in coming years, with Applied Materials holding a top position in HBM.
**Challenges:** - **China Restrictions:** An estimated $600M in delayed shipments due to export controls will be recognized gradually through 2026. - **Competition:** While PVD faces competition, Applied Materials highlighted integrated solutions (e.g., selective ALD + PVD) as differentiators, with $1B+ annual revenue potential.
**Outlook:** Applied Materials expects robust growth in 2026, led by leading-edge logic and DRAM, offsetting digestion phases in China and ICAPS markets. The company reiterated confidence in outperforming WFE market growth, supported by technology leadership and customer collaborations spanning multiple nodes.
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