Semiconductor machinery manufacturer Applied Materials (NASDAQ:AMAT) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 2.1% year on year to $7.01 billion. On top of that, next quarter’s revenue guidance ($7.65 billion at the midpoint) was surprisingly good and 8.1% above what analysts were expecting. Its non-GAAP profit of $2.38 per share was 7.8% above analysts’ consensus estimates.
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Applied Materials (AMAT) Q4 CY2025 Highlights:
- Revenue: $7.01 billion vs analyst estimates of $6.89 billion (2.1% year-on-year decline, 1.8% beat)
- Adjusted EPS: $2.38 vs analyst estimates of $2.21 (7.8% beat)
- Adjusted Operating Income: $2.11 billion vs analyst estimates of $2.00 billion (30% margin, 5.5% beat)
- Revenue Guidance for Q1 CY2026 is $7.65 billion at the midpoint, above analyst estimates of $7.08 billion
- Adjusted EPS guidance for Q1 CY2026 is $2.64 at the midpoint, above analyst estimates of $2.28
- Operating Margin: 26.1%, down from 30.4% in the same quarter last year
- Free Cash Flow Margin: 14.8%, up from 7.6% in the same quarter last year
- Inventory Days Outstanding: 153, in line with the previous quarter
- Market Capitalization: $269.8 billion
“Applied Materials delivered strong results in our fiscal first quarter, fueled by the acceleration of industry investments in AI computing,” said Gary Dickerson, President and CEO.
Company Overview
Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ:AMAT) is the largest provider of semiconductor wafer fabrication equipment.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Applied Materials’s sales grew at a decent 9.2% compounded annual growth rate over the last five years. Its growth was slightly above the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Applied Materials’s recent performance shows its demand has slowed as its annualized revenue growth of 3.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Applied Materials’s revenue fell by 2.1% year on year to $7.01 billion but beat Wall Street’s estimates by 1.8%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 7.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9.5% over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Applied Materials’s DIO came in at 153, which is 12 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.
Key Takeaways from Applied Materials’s Q4 Results
We were impressed by Applied Materials’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 5.5% to $347 immediately following the results.
Applied Materials may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).