Applied Materials Warns: China Slowdown and Tariff Concerns Impact Q4 Outlook

Global Market Shake-Up

In a pivotal announcement, U.S. chipmaking giant Applied Materials warned of a potential revenue slump for the fourth quarter of the fiscal year. The alarming forecast results from reduced demand in the Chinese market and apprehensions linked to ongoing tariff disputes. Within the semiconductor realm, this announcement didn’t go unnoticed, coming hot on the heels of similar cautionary tales from industry peers like ASML and Tokyo Electron, according to TrendForce.

China: A Doubling Sword

Despite the challenges, China remains a critical player in Applied’s business model, with its contribution to the company’s sales jumping to 35% in Q3 from 25% previously. Such an increase underscores dual-edged reliance on the Chinese market, especially as local chipmakers pause new orders to manage surplus from older production lines. This, coupled with erratic demand from top-tier clients, further clouds the revenue forecast.

Revenue and Earnings Forecast

Looking ahead, Applied Materials projects its Q4 revenue to hover around \(6.70 billion, signaling a notable downturn from the \)7.30 billion recorded in Q3. Similarly, the company’s adjusted earnings per share (EPS) target is set at \(2.11, indicating a dip from the previous quarter's \)2.48. This careful financial outlook also hinges on the non-approval of existing U.S. export license applications, alongside a significant government backlog.

Broader Industry Impact

Applied Materials is not navigating these tumultuous waters alone. ASML reported challenges related to delayed U.S. projects, projecting potential setbacks in its 2026 growth trajectory. Tokyo Electron similarly revised its profit forecast for FY2026, citing cooled investments by premier logic chipmakers as a downer, as stated by TrendForce.

Industry Benchmark and Challenges

Meanwhile, KLA, another significant entity in the U.S. chipmaking arena, echoed these sentiments by underscoring expected declines in Chinese demand. In Q2, China accounted for nearly a third of KLA’s revenue; however, trade tensions and export restrictions remain ever-present threats to market access.

The Road Ahead

Navigating the currents of international trade and semiconductor demand is no small feat. As the industry continues to adapt to the ebb and flow of global dynamics, companies like Applied Materials must remain agile and responsive to both opportunities and challenges in their path.