Applied Materials Inc. suffered the worst single-day stock decline in five years after giving a disappointing sales and profit forecast, renewing concerns that the US trade dispute with China is weighing on demand.
Revenue will be approximately $6.7 billion in the fiscal fourth quarter, the company said in a statement Thursday. Analysts had estimated $7.32 billion on average. Profit will be about $2.11 a share, excluding some items, compared with a projection of $2.38.
Applied Materials, the largest American producer of chipmaking gear, is seeing less demand from customers in China, Chief Executive Officer Gary Dickerson said in an interview. It also faces delays in approval for exporting technology to that country, he said. Moreover, large customers are putting off some purchases in the face of prolonged negotiations around tariffs and other economic issues.
“It just creates a level of uncertainty,” Dickerson said.
The outlook sent shares of Applied Materials down 14% on Friday, the most since the early days of the pandemic in March 2020. They had been up 16% this year heading into the report.
In the third quarter, which ended July 27, revenue rose 7.7% to $7.3 billion. Analysts had anticipated $7.21 billion on average, according to data compiled by Bloomberg. Profit was $2.48 a share, compared with an estimate of $2.36.
Applied Materials’ customer ranks include some of the biggest names in the chip industry, such as Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Intel Corp. Those manufacturers order gear well ahead of starting production, making Applied Materials’ forecasts a barometer for future demand.
The company said last week that it would participate in an Apple Inc. plan to boost manufacturing in the US by spending more than $200 million on a facility in Arizona. Applied Materials will also sell equipment to Texas Instruments Inc.’s US factories to support Apple products.
“Applied Materials’ decision to be a core member of Apple’s ‘American Manufacturing Program,’ a drive to increase factory production within the US, could strengthen its position as a key supplier of chipmaking tools for advanced semiconductors used in iPhones,” Bloomberg Intelligence analyst Masahiro Wakasugi said in a note.
“The new administration is very focused on increasing semiconductor supply in the United States,” Dickerson said on Thursday. “We’re very positive.”
In July, rival Lam Research Corp. said revenue for the quarter ending in December would ease from the current-quarter levels, with Chinese customers potentially scaling back after a spending spree.
In a further sign of US-China tensions, Applied Materials was recently sued by Beijing E-Town Semiconductor Technology Co. over what that company characterized as trade secret theft.
Still, Dickerson said the long-term demand outlook for computing power remains strong. Customers in China had significantly ramped up buying in recent years, and are now just digesting those purchases, he said.
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