Applied Materials' 7.5% Slide Spreads to Chipmaking Equipment Stocks
Key Facts
Applied Materials shares fell 7.5% to $461.50 during the trading session, according to Investing.com, in a selloff that spread to other chipmaking equipment companies. KLA shares dropped 4.1% in afternoon trading, according to a separate report by the website on the stock's performance during the session. The losses included Lam Research, whose shares fell about 4%, while ASML declined 3%. The moves coincided with Applied Materials declining to provide an industry spending forecast at its investor meeting, according to Investing.com. Applied Materials' loss exceeded the declines the website reported for other companies in the equipment sector. The selling came as the company presented forecasts for spending growth on advanced manufacturing technologies over the coming years.
Investing.com cited Citi as warning that component shortages could limit the pace of acceleration in equipment spending in the near term. The warning was conditional, with Citi saying component shortages "could constrain the acceleration in equipment spending in the near term," according to the website. Applied Materials, meanwhile, identified in its statement the areas it expects to account for the bulk of spending growth from 2025 to 2030. These include advanced logic manufacturing, dynamic random-access memory and advanced packaging. The company estimated their combined contribution at about 75% of growth in chipmaking equipment spending over that period. That estimate extends to 2030, while Citi's warning focused on the pace of spending increases in the near term.
Applied Materials had reported record revenue of $9.12 billion in its fiscal third-quarter results preceding the news. The company said in its earnings announcement that revenue rose 25% from the same quarter a year earlier, recording annual growth alongside record sales. In the same announcement, management maintained its outlook for continued growth into the following year, saying: "We expect another year of strong growth for Applied Materials in 2027." Across its product portfolio, the company forecast revenue of $2 billion from electron-beam equipment in calendar 2026. The estimate for this portfolio appeared in the company's statement on its business outlook and demand for its equipment. That forecast covers the full calendar year, while the reported record revenue relates to its fiscal third quarter.
Applied Materials included profitability targets in its long-term objectives alongside forecasts for revenue and equipment spending. It said in its statement that its adjusted gross margin target was approximately 54%. It also set an adjusted operating margin target of about 40%, according to the adjusted metrics in the statement. Both percentages form part of the company's long-term targets, while the electron-beam equipment revenue forecast covers calendar 2026. On investment, Applied Materials expects capital spending on the EPIC Center to ramp up to about $5 billion. The company linked reaching that level of spending to the start of customer projects, explaining in its announcement of the center that spending would expand over time as those projects get underway.
The EPIC Center includes chipmakers as founding partners, according to Applied Materials' announcement about the center. The list includes Taiwan Semiconductor Manufacturing Co., Intel and SK Hynix, alongside Micron and Samsung Electronics. Applied Materials said in the announcement: "Capital spending is expected to ramp over time to about $5 billion as customer projects begin." The amount represents anticipated capital investment by the company in the center, linked to progress on the customer projects cited in the announcement. The spending growth estimate the company presented for 2025 to 2030 concerns chipmaking equipment. The company expected advanced logic manufacturing, memory and advanced packaging to drive the bulk of the increase over those years.
At KLA, prior guidance pointed to revenue of $4.0 billion for the September quarter, plus or minus $200 million, according to Investing.com. That compares with revenue of $3.66 billion in the preceding June quarter, putting the midpoint of guidance above that quarter's sales. The company's chief financial officer had said on the previous earnings call that revenue rose 7% from the prior quarter. He added that it grew 15% year on year, according to the call transcript published by Investing.com. On the earnings calendar following the trading session covered by the news, ASML's third-quarter 2026 results were scheduled for Wednesday, October 14, 2026, according to the company's investor website. KLA's next quarterly results were scheduled for October 28, according to Investing.com's report published on the day of the news.