Applied Materials (NASDAQ:AMAT) slid more than 4% in U.S. premarket trading on Friday after cautioning that chip-equipment spending in China is set to decline next year, as the country faces tighter U.S. export restrictions.
The company disclosed that roughly $110 million worth of products remained unshipped in its fiscal fourth quarter due to export limits—measures that were later relaxed following last month’s meeting between U.S. President Donald Trump and Chinese President Xi Jinping.
This update follows its earlier warning that expanded U.S. export rules targeting advanced semiconductor tools could shave about $600 million off fiscal 2026 revenue.
Even so, Applied Materials highlighted that rising corporate investment in AI should help boost demand for its chipmaking equipment in the back half of next year.
Analysts at Stifel noted, “While China is still expected to be a headwind in FY26, Applied was the first [semiconductor capital equipment provider] to call for and see a slowdown in China. Especially given the about face on the prior China restrictions, we are optimistic that quarterly China sales could stabilize sooner rather than later.”
Despite the latest pullback, the stock remains up around 36% for the year.
In its fiscal fourth quarter, the company posted adjusted earnings of $2.17 per share on revenue of $6.8 billion, surpassing consensus forecasts of $2.11 and $6.68 billion.
For the current quarter, Applied Materials projected adjusted earnings of $2.18 per share and revenue of $6.85 billion at the midpoint—again ahead of expectations of $2.15 per share and $6.80 billion in revenue.