Applied Materials Falls Despite Q4 Beat as China Restrictions Pressure Outlook

Applied Materials (AMAT) delivered better-than-expected Q4 revenue and EPS, along with Q1 guidance that slightly topped expectations. However, ongoing export restrictions tied to the U.S.–China semiconductor rules weighed on sentiment and pushed shares lower in premarket trading.

Q4 Results: Modest Beats Across the Board

Revenue: $6.8B
• vs. $6.67B consensus
• Within guidance range of $6.2B–$7.2B
Adjusted EPS: $2.17
• vs. $2.11 estimate
• Guidance range: $1.91–$2.21

Despite the beats, shares traded down nearly 5% in early premarket activity.

Q1 FY26 Outlook: Slightly Ahead of Estimates

Revenue: ~$6.85B ± $500M
• vs. $6.81B consensus
Adjusted EPS: ~$2.18 ± $0.05
• vs. $2.15 consensus

Management said they expect a meaningful pickup in demand beginning in the second half of calendar 2026.

China Restrictions: The Main Pressure Point

Export restrictions remain a major challenge for Applied Materials, creating both revenue headwinds and timing distortions.

Key points:

Management previously flagged a $600M FY26 revenue hit tied to China limitations.
AMAT was unable to sell into well over 20% of China’s wafer-fab equipment market in late 2024 and early 2025.
• This was up from 10% in early 2024.
Some ex-China revenue was pulled into Q4 due to regulatory timing, inflating Q4 while making Q1 appear softer.

CEO Gary Dickerson noted that the company does not expect significant changes to export restrictions in 2026.

Analyst Commentary: Explaining the Stock Drop

Needham analyst Charles Shi pointed out:

Buy-side expectations for Q1 revenue were as high as $7.1B, well above AMAT’s guidance.
Some investors believed paused BIS rules would restore China-related revenue, but management clarified:
• Q4 benefited from pulled-forward ex-China sales
• Q1 would therefore look weaker
As a result, the company beat Q4 but did not guide higher for Q1, leading to selling pressure.

Sector Context

Applied Materials is up more than 35% year to date but is still lagging peers KLA (KLAC) and Lam Research (LRCX). Much of the underperformance stems from cautious guidance and the continued drag from China restrictions, which remain a key overhang for the entire semi equipment sector.