Applied Materials (AMAT.O) has signaled a slowdown in chipmaking equipment spending in China for 2026, as U.S. export controls restrict its market access. Despite these challenges, the company expects overall revenue to strengthen in the second half of 2026, driven by robust memory chip production and growing AI-related investments.

Impact of U.S. Export Curbs

Tighter U.S. regulations have limited Applied Materials’ ability to supply China’s memory chip and older-generation semiconductor markets. CEO Gary Dickerson noted that foreign competitors without such restrictions continue to serve Chinese clients, reducing Applied’s share of revenue from China from nearly 40% in recent years to the mid-20% range.

The company had previously estimated a $600 million hit to its fiscal 2026 revenue due to expanded export restrictions, which complicated shipments of specific products and services to China. About $110 million worth of products were delayed in the fourth quarter due to an affiliate rule, which was later temporarily suspended following discussions between U.S. President Donald Trump and Chinese President Xi Jinping. These shipments are now expected in the three months to January and are included in Applied’s revenue forecast.

Forecast and Financial Outlook

Applied Materials projects current-quarter revenue of $6.85 billion, plus or minus $500 million, slightly above analyst expectations of $6.76 billion. Excluding one-off items, the company forecasts profit per share of $2.18, plus or minus 20 cents, exceeding consensus estimates of $2.13.

Chief Financial Officer Brice Hill highlighted that despite the near-term impact of U.S. restrictions, wafer fab equipment spending is expected to accelerate in the second half of 2026, supported by ongoing AI investments and strong memory chip output.

Competitive Landscape

Applied Materials’ competitors without U.S. restrictions are able to continue serving Chinese clients, giving them a market advantage. Dickerson emphasized:
“Non-U.S. equipment companies don’t have the same restrictions, and so restricted customers can buy from those companies, even if they would prefer to buy from Applied.”

While Applied does not foresee further major limitations on shipments to China, the ongoing regulatory environment poses strategic challenges for its business in the region.

Market Reaction

Following the announcement, Applied Materials’ shares fell more than 4% in after-hours trading, reflecting investor concerns about near-term revenue impacts from restricted China sales.

Despite these challenges, the company remains optimistic about long-term growth, citing continued demand for advanced semiconductor equipment, particularly for memory chips and AI-driven applications.