Applied Materials Inc (NASDAQ:AMAT, ETR:AP2) topped Wall Street expectations for quarterly profit as strong demand for advanced semiconductors helped offset weakness in memory chips and trade-related headwinds in China.
Adjusted earnings per share rose 14% to $2.39 in the fiscal second quarter ended April 28, surpassing analysts’ average estimate of $2.31, according to LSEG data.
Revenue rose 7% year over year to $7.10 billion, just shy of the $7.12 billion consensus.
Gross margin improved to 49.2% from 47.5% a year earlier, driven by a favorable product mix and disciplined cost controls.
“High-performance, energy-efficient AI computing remains the dominant driver of semiconductor innovation,” CEO Gary Dickerson said. “Applied is working closely with our customers and partners to accelerate the industry’s roadmap.”
Revenue in the company’s largest unit, Semiconductor Systems, rose to $5.26 billion from $4.9 billion a year earlier, while Applied Global Services (AGS) brought in $1.57 billion, slightly ahead of the year-ago period. Display revenues rose sharply to $259 million from $179 million.
For the fiscal third quarter, Applied forecast revenue between $6.7 billion and $7.7 billion, with a midpoint of $7.2 billion — roughly in line with analysts' expectations. It guided adjusted earnings per share in the range of $2.15 to $2.55, compared with the $2.31 consensus.
Jefferies analysts said the outlook was "right up the fairway," noting that expected growth in advanced chipmaking — known as leading edge — would be slightly offset by weaker DRAM demand.
“China is expected to step back up in Q2 and remain stable,” the analysts wrote, adding that the company’s gross margin guidance of 48.3% reflects a return to baseline levels after a stronger first quarter.
China revenue fell 21% quarter-over-quarter to $1.77 billion, representing 25% of total revenue, down from 43% in the first quarter. Still, Jefferies sees China as a potential tailwind going forward, particularly as investments shift toward 28-nanometer nodes.
Looking ahead, the firm expects continued strength in Leading Edge and NAND segments to support growth in July, while DRAM and services face pressure from trade restrictions.
Shares of Applied Materials dropped on Friday morning around 6.7% to reach $163.