Analyst(s): Ray Wang
Publication Date: August 26, 2025
Applied Materials delivered record quarterly performance supported by broad-based demand in semiconductor systems, services, and display. The company cautioned that macroeconomic uncertainty and policy pressures, particularly in China, will weigh on near-term visibility even as long-term growth drivers remain intact.
What is Covered in this Article:
- Applied Materials’ Q3 FY 2025 financial results
- Leading-edge logic demand timing and non-linear order patterns
- DRAM/HBM momentum and advanced packaging trajectory
- AGS and Display performance
- China’s digestion and export license uncertainty impacting near-term visibility
The News: Applied Materials (NASDAQ: AMAT) reported its Q3 FY 2025 financial results with record revenue of $7.30 billion, up 8% year-on-year (YoY) and above the consensus estimate of $7.21 billion. Semiconductor Systems revenue was $5.43 billion, up 10% YoY and in line with expectations of $5.39 billion. Applied Global Services revenue was $1.60 billion, up 1% YoY and slightly above the $1.55 billion consensus. Display and Adjacent Markets delivered $263 million in revenue, up 5% YoY and ahead of the $250 million consensus. Non-GAAP gross margin was 48.9%, expanding 150 basis points YoY. Non-GAAP operating margin came at 30.7%, up 190 basis points YoY from last year.
“Applied Materials delivered record performance in our third fiscal quarter, and we are on track to deliver our sixth consecutive year of revenue growth in fiscal 2025,” said Gary Dickerson, President and CEO of Applied Materials. “We are currently operating in a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the near term, including for our China business. Despite this, we remain very confident in the longer-term growth opportunities for the semiconductor industry and Applied Materials.”
Applied Materials Q3 FY 2025 Results Show Solid Quarterly Performance Overshadowed by China and Outlook Concerns
Analyst Take: Applied Materials delivered record Q3 FY 2025 revenue and record non-GAAP EPS with strong profitability, while issuing a Q4 FY 2025 outlook below consensus tied to China digestion, pending export license uncertainty, and non-linear leading-edge demand. Management highlighted longer-term confidence in AI-driven device architecture inflections and highlighted continued momentum in DRAM, HBM, and advanced packaging alongside resilient services and improving Display.
Applied Materials echoed Tokyo Electron’s commentary, as both face a meaningful near-term headwind in China. While the precise drivers of the pause are hard to disaggregate, we see a combination of post-pull-in digestion, elevated license uncertainty, and customers re-sequencing spend; management nevertheless reiterated multi-year confidence tied to AI-centric device-architecture shifts (DRAM/HBM, advanced packaging) and resilient services.
Leading-Edge Logic: Non-Linear Timing Against Strong Underlying Demand
Applied noted that underlying demand indicators at the leading edge remain strong, including 100% utilization, design wins, and rising cloud service provider CapEx. However, order timing is uneven due to market concentration and customers taking longer to commit, reducing visibility. The company now expects FY 2025 gate-all-around related purchases to total just over $4.5 billion (previously modeled nearly $5 billion), reflecting the non-linear pattern rather than a change in long-term expectations. Gate-all-around and backside power delivery expand Applied’s revenue opportunity by ~30% for equivalent fab capacity. Management estimates close to 100,000 wafer starts per month of GAA capacity will be in the field exiting the year, with a long runway toward ~300,000 at scale. Hence, despite uneven timing, leading-edge demand remains strong with a long runway for growth.
Management’s comments imply growing uncertainty around its leading-edge logic customers, with the notable exception of foundry-leader TSMC. In particular, both Intel and Samsung Foundry are exhibiting much more conservative capital spending as they continue to struggle to win new customers. While Samsung recently secured a deal with Tesla, the broader customer momentum for both companies remains limited compared to TSMC’s dominant positioning. Such development should raise an alarm for Applied Materials as we move into Q4 and 1H26.
DRAM, HBM, and Advanced Packaging: Areas of Strength
Management highlighted DRAM strength in Q3 FY 2025, with revenue from leading-edge DRAM customers expected to be up around 50% in FY 2025. The company secured new production positions for next-generation gapfill Chemical Vapor Deposition (CVD) and its Pioneer Dielectric Patterning System at leading DRAM manufacturers and cited opportunities to win incremental DRAM share as customers adopt vertical transistor (4F²) architectures later in the decade. In advanced packaging, Applied maintains a high market share and expects to more than double packaging revenue to >$3 billion over the next few years. The Edge business surpassed $1 billion in quarterly revenue for the first time, underpinned by DRAM strength. As 4F²/vertical transistor architectures begin ramping in 2027–2028, management sees potential to gain more than five points of incremental DRAM share. Strong DRAM momentum and a robust market position in advanced packaging reinforce Applied’s position to capture future share gains and extend long-term growth.
Advanced packaging, in particular, is likely to see increased resource allocation as Applied Materials positions itself for this rapidly expanding business. We should also see continued growth in the firm’s advanced packaging business. With Moore’s Law slowing and demand rising for more complex integration, the need for advanced packaging equipment is set to accelerate over time.
Applied Global Services and Display: Recurring Mix and OLED Investments
Applied Global Services continues to post record core services performance, anchored by a subscription mix exceeding two-thirds of services revenue. Momentum is supported by ~10% YoY growth in core services, healthy utilization at leading-edge foundry logic and HBM, and broader adoption of comprehensive service agreements. The segment has now delivered 24 consecutive quarters of YoY growth, reinforcing the durability of the recurring model and its role in dampening cyclicality and sustaining profitability when equipment demand softens.
Display delivered a second consecutive quarter of growth with a 23.6% non-GAAP operating margin, reflecting continued OLED adoption in consumer devices. The portfolio is aligned to this shift, and the MAX OLED system – announced last year as a different mass-production approach – strengthens positioning as customers advance next-gen OLED manufacturing. Together, the services flywheel and OLED exposure provide a resilient counterbalance to near-term variability in equipment spending.
China Digestion and Export License Uncertainty Lower Near-Term Visibility
For Q4 FY2025, Applied guides revenue to ~$6.7 billion (+/– $500 million; below consensus estimate: $7.3 billion), non-GAAP gross margin of ~48.1%, non-GAAP operating expenses of ~$1.31 billion.
Management cited three primary factors muting the near-term outlook: digestion of capacity in China, a large backlog of pending export license applications (assumed none approved in Q4), and non-linear demand from leading-edge customers tied to market concentration and fab timing. Management broke down the sequential guide as roughly a $500 million decline from China and roughly a $500 million decline from leading edge, partially offset by rest-of-world ICAPS. China’s revenue is expected to run roughly 15%–20% below 2024 levels over the next few quarters. The company emphasized that it is leveraging its robust supply chain, global manufacturing footprint, and deep customer relationships to navigate these uncertainties.
Looking ahead, we see three key areas to watch:
- The trajectory of Applied Materials’ China business, not only through the remainder of 2025 but also into 1H26, amid ongoing industry dynamics and regulatory uncertainties.
- The outlook for logic foundry capacity in 2H25 and 1H26, particularly as Intel and Samsung continue to struggle to secure meaningful customer traction.
- The extent to which robust HBM momentum can further accelerate Applied Materials’ sales growth from the memory segment.
See the complete press release on Applied Materials’ Q3 FY 2025 financial results on the company’s investor website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
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Author Information
Ray Wang is the Research Director for Semiconductors, Supply Chain, and Emerging Technology at Futurum. His coverage focuses on the global semiconductor industry and frontier technologies. He also advises clients on global compute distribution, deployment, and supply chain. In addition to his main coverage and expertise, Wang also specializes in global technology policy, supply chain dynamics, and U.S.-China relations.
He has been quoted or interviewed regularly by leading media outlets across the globe, including CNBC, CNN, MarketWatch, Nikkei Asia, South China Morning Post, Business Insider, Science, Al Jazeera, Fast Company, and TaiwanPlus.
Prior to joining Futurum, Wang worked as an independent semiconductor and technology analyst, advising technology firms and institutional investors on industry development, regulations, and geopolitics. He also held positions at leading consulting firms and think tanks in Washington, D.C., including DGA–Albright Stonebridge Group, the Center for Strategic and International Studies (CSIS), and the Carnegie Endowment for International Peace.
