Applied Materials ended fiscal 2025 with a contrast that matters more strategically than it does optically. While the fourth quarter itself reflected a natural pause in wafer-fab spending after an exceptionally strong comparison base, the full year told a very different story. Annual revenue reached an all-time high of $28.4 billion and earnings per share set a new record, underscoring how decisively the company has shifted away from pure memory cyclicality toward AI-driven logic, advanced nodes, and cutting-edge packaging technologies.
What stands out for investors is not the softer quarter, but the quality of the business underneath it. Margins remain elevated, free cash flow is resilient, and capital is being deployed precisely where the next semiconductor bottlenecks are forming. Management’s message is clear: demand acceleration is expected to return in the second half of calendar 2026. Applied Materials is positioning itself less as a cyclical equipment vendor and more as a critical infrastructure provider for the AI era.
How was the last quarter?
The fourth quarter of fiscal year 2025 brought in $6.8 billion in revenue, down 3% year-over-year. However, in the context of a record strong Q4 2024, this is more of a normalization than a dramatic deterioration in demand. Gross margin was 48.0%, a slight improvement on last year's 47.3%, and confirms the company's ability to maintain pricing discipline in a less favorable quarter. Operating margin was 25.2%, compared to nearly 29% in the prior year, reflecting higher research investment, restructuring costs and weaker operating leverage on lower sales.
Net income was $1.9 billion and GAAP EPS of $2.38 represented 14% year-over-year growth. On a non-GAAP basis, the picture was more mixed, with EPS of $2.17 down 6% year-over-year, primarily due to cost structure and lower order volumes in some segments. Free cash flow was roughly $2.0 billion, a solid level but down 24% year-over-year. So the quarter was not about expansion, but about maintaining stability in a transitional phase of the cycle.
From a segment perspective, Semiconductor Systems remains a key pillar. This segment generated sales of $4.76 billion in the quarter, down 8% year-over-year. However, the order mix is improving, with Foundry, Logic and Other Advanced Technologies accounting for 65% of the total, while DRAM accounted for 29% and NAND Flash only 6%. This confirms Applied Materials' gradual shift towards advanced logic, AI accelerators and advanced manufacturing nodes. The segment's operating margin remained high at 32.1%.
Applied Global Services $AMAT, the service and support business, reported sales of $1.63 billion, virtually unchanged from last year. Operating margin was 27.9%, down slightly but still a very healthy level. This segment acts as a stabilizer to results and provides recurring revenue even in periods of weaker capex for chipmakers. Corporate and Other remains loss-making, mainly due to restructuring costs and investment in the Display business, which however improved its performance year-on-year.
CEO commentary
Gary Dickerson identified fiscal 2025 as the sixth year of continuous growth and emphasized that Applied Materials is strategically positioned at the most important technology inflection points in the semiconductor industry today. He said AI is dramatically increasing both the complexity and value of each step in the manufacturing process, which increases the importance of devices and technologies in which Applied has long had a strong position - particularly in the areas of lead-edge logic, DRAM and advanced packaging.
CFO Brice Hill then added that the company is actively preparing for higher demand starting in the second half of 2026. R&D investments are being targeted at more energy-efficient transistors, advanced materials and new chip architectures. Management comments indicate that they view the current period as a preparation phase, not a downturn.
Outlook
The outlook for the first quarter of fiscal 2026 suggests stabilization. Applied Materials expects sales of around $6.85 billion with a margin of error of ±500 million, roughly on par with Q4. Non-GAAP EPS is expected to be around $2.18 ± $0.20. The outlook does not yet anticipate a significant recovery, but at the same time does not suggest further deterioration.
More important than the near-term outlook, however, is management's medium-term commentary. The company openly talks about demand acceleration in the second half of calendar year 2026, when investments in AI infrastructure, advanced logic and modern memory technologies should be fully reflected. Applied Materials is looking to be ready not only in terms of capacity but also technology, which should translate into a return to faster margin and revenue growth.
Long-term results
The long-term numbers show Applied Materials as a stable, highly profitable player with gradually increasing revenues. In 2025, the company achieved record revenues of $28.4 billion, up 4.4% year-over-year. Gross profit rose more than 7% to $13.8 billion, while operating profit reached $8.3 billion. Net profit fell slightly to $7.0 billion, but this was primarily related to a higher tax burden rather than an operational weakening of the business.
Earnings per share remained record, with GAAP diluted EPS of $8.66, slightly higher year-over-year than in 2024. An important factor is the continued reduction in the number of shares outstanding. The average number of shares outstanding has declined by roughly 7% since 2022, supporting EPS growth and return on capital for shareholders over the long term. EBITDA has held steady above $8 billion, giving the company considerable financial flexibility.
News
The key news is the continued shift in demand towards advanced logic, next generation DRAM and advanced chip packaging. Applied Materials is investing heavily in technologies that enable the production of more energy-efficient transistors and complex chip structures needed for AI accelerators. At the same time, the company is strengthening its service business, which provides stable revenue across the cycle.
Preparations for the next wave of investments are also visible. Applied is expanding capacity, strengthening service organizations and increasing R&D spending to be able to respond quickly to the capex renewal by foundries and memory manufacturers in 2026.
Shareholder Structure
Applied Materials has a highly institutional ownership structure. Over 85% of the shares are held by institutions and a similar proportion is free float. The largest shareholders are Vanguard Group with 9.6%, BlackRock with 9.3%, State Street with 4.8%, and Geode Capital with 2.6%. Insiders hold only a negligible stake, which is common for a firm of this size and stage.
Analyst expectations
Analysts view the Q4 2025 results as a transition period within the broader cycle. Stagnation or only modest growth is expected in the short term, but the medium-term outlook remains positive. A key catalyst is renewed investment in AI infrastructure, advanced logic and next-generation memory, where Applied Materials has a strong technology and market position.
If the scenario of accelerating demand in the second half of 2026 proves true, Applied Materials could return to faster revenue and margin growth. For investors, this is more of a long-term infrastructure story tied to AI and semiconductor complexity than a short-term bet on a cyclical turnaround.