Applied Materials Drops 7% as Soft Q2 Outlook Overshadows Strong Q1 Results

Applied Materials (NASDAQ:AMAT) delivered better-than-expected first-quarter earnings, but shares fell around 7% intra-day today as the company’s second-quarter guidance fell short of analyst expectations.

For Q1, the semiconductor equipment giant reported adjusted earnings per share of $2.38, exceeding the $2.28 consensus estimate. Revenue reached $7.17 billion, slightly above projections of $7.15 billion and reflecting a 7% year-over-year increase.

However, investors reacted negatively to the company's softer Q2 outlook. Applied Materials forecast revenue of $7.1 billion, plus or minus $400 million, below analysts' $7.198 billion projection. Adjusted EPS guidance of $2.30, plus or minus $0.18, came in largely in line with expectations of $2.29 but signaled potential headwinds in the coming quarter.

Q1 profitability showed improvement, with non-GAAP gross margin expanding to 48.9%, up 1 percentage point from the prior year. The company’s Semiconductor Systems segment, which contributes 75% of total revenue, grew 9% year-over-year to $5.36 billion, reflecting continued demand for semiconductor manufacturing tools.

While the company noted strong customer investments in leading-edge technology and AI-driven demand, management also acknowledged challenges from export controls that could impact future growth. Despite record revenue and expanding margins, uncertainty in the near-term outlook has left investors cautious.