TLDR
- Applied Materials expects a $600 million revenue hit in fiscal 2026 from expanded U.S. export controls
- The company also anticipates a $110 million impact on fourth-quarter revenue
- U.S. Department of Commerce expanded restrictions to include majority-owned subsidiaries of blacklisted companies
- Shares fell about 3% in after-hours trading following the announcement
- Bernstein analysts maintain Outperform rating, calling the impact “fairly incremental”
Applied Materials filed a disclosure Thursday revealing that new U.S. export restrictions will slice $600 million from its fiscal 2026 revenue. The Santa Clara-based chip equipment maker became the first in its sector to put a dollar figure on the latest round of trade controls.
The company also expects to lose $110 million in fourth-quarter revenue. Shares dropped roughly 3% in extended trading after the filing hit.
The U.S. Department of Commerce expanded its export blacklist Monday to include majority-owned subsidiaries of listed companies. The move targets firms in China and elsewhere that use corporate structures to dodge existing export curbs.
Applied Materials said the new rule will make it harder to export certain products without a license. The restrictions also affect the company’s ability to supply specific parts and services to select China-based customers.
Bernstein Weighs In
Bernstein analysts called the fourth-quarter hit modest. The $110 million represents less than 2% of the current $6.7 billion revenue guidance. It accounts for roughly 6% of expected China revenues.
The fiscal 2026 impact equals about 2% of current consensus revenue of $29.1 billion. Bernstein estimates it represents mid to high single-digit percentage of China sales, assuming a 25-30% mix.
The analysts described the measure as “annoying, but fairly incremental.” They suggested it functions more as a cleanup effort than a major policy shift. Bernstein expects other U.S. semiconductor equipment makers will likely face similar impacts.
Despite the setback, the firm kept its Outperform rating on the stock with a $195 price target.
Revenue Performance
Applied Materials reported third-quarter revenue of $7.30 billion, up 8% year-over-year. The figure beat analyst estimates of $7.22 billion.
Full fiscal 2024 revenue reached $27.18 billion, a 2.5% increase. The company and competitors like ASML Holding already faced pressure from China market weakness and existing U.S. tariffs.
The Bureau of Industry and Security’s new affiliate rule extends end-user controls to cover affiliates of companies on the entity list. It also applies to entities more than 50% owned by military end users and other sanctioned parties.
Commerce Secretary Howard Lutnick told NewsNation that Washington is pitching Taiwan on a 50-50 manufacturing split. The goal is to boost domestic chip production and reduce reliance on Taiwan.
Bernstein noted that prospects for wafer fabrication equipment recovery, particularly in memory and DRAM, represent bigger potential drivers than the incremental reduction in China exposure. The new rule will likely disrupt supply chains further and increase the number of companies requiring licenses to receive American goods and services.
Applied Materials provided weak sales and profit forecasts for the fourth quarter back in August. The latest export restrictions add another layer of complexity to an already challenging environment for chip equipment manufacturers operating in China.
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