Applied Materials(AMAT -13.86%) reported third-quarter fiscal 2025 results on August 14, 2025, delivering record quarterly revenue of $7.3 billion (up 8% year over year), record non-GAAP earnings per share (EPS) of $2.48 (up 17% year over year (non-GAAP)), and a non-GAAP gross margin of 48.9%. Management guided for sequential declines in revenue and non-GAAP EPS in the fourth quarter, driven by reduced demand in China and non-linear orders from leading-edge customers, yet reaffirmed mid-single-digit full-year growth guidance and highlighted multiple strategic milestones in advanced semiconductor and packaging technologies.

Record profitability highlights business mix strength at AMAT

Non-GAAP gross margin improved 150 basis points year over year, reaching a non-GAAP gross margin of 48.9%, with a record non-GAAP EPS of $2.48 on robust top-line growth. The company achieved its second-highest quarterly cash from operations at approximately $2.6 billion, or 36% of revenue.

"In fiscal Q3, we delivered a record quarter with growth across all three segments, and with a robust gross margin of nearly 49%, we also achieved record non-GAAP earnings per share. In Semiconductor Systems, the overall demand environment for equipment was largely in line with our expectations, with broad-based customer investments across foundry logic, DRAM, and NAND. In Applied Global Services, we achieved record core services revenue with positive trends across our key performance indicators. And in display, we recorded our second consecutive quarter of revenue growth as the industry invests in equipment to support the further adoption of OLED technology in consumer devices. Let me now turn to the financial details for Q3. Total net revenue was approximately $7.3 billion, up 8% year over year, about $100 million above the midpoint of our guidance range. Non-GAAP gross margin was 48.9%, up 150 basis points year over year."
-- Brice Hill, CFO

The strong margin in the third quarter was driven by a combination of product and segment mix, as well as pricing, as the company worked to offset tariff-related headwinds.

AMAT gains market share in leading-edge and advanced memory

The company secured the first win for molybdenum (molly) deposition in critical performance applications and reported record etch business revenue exceeding $1 billion, with leading-edge DRAM revenue estimated to surge 50% year over year. Customer adoption of next-generation chemical vapor deposition (CVD) and dielectric patterning systems at volume further cements competitive positioning at major technology transitions.

"In leading-edge foundry logic, the transition from FinFET to gate-all-around transistors with backside power delivery grows our revenue opportunity by 30% for the equivalent fab capacity. And we are on track to gain multiple points of market share when these nodes ramp in 2026 and 2027. In this past quarter, our strength in leading-edge foundry supported revenue of almost $1.2 billion for our metal deposition business. And we also secured our first win in molly deposition for the most critical device performance applications. In DRAM, we also have strong market share, and we expect our revenue from leading-edge DRAM customers to be up around 50% in fiscal 2025. In the quarter, our strength in DRAM supported record results for our etch business, which surpassed $1 billion of quarterly revenue for the first time. In addition, we see customers adopting our new solutions"
-- Gary Dickerson, President and CEO

Direct exposure to secular investment shifts in artificial intelligence (AI), advanced memory, and 3D packaging is supporting outsized growth in Applied Materials’ addressable market and validating its differentiated technology roadmap.

China and leading-edge demand create near-term headwinds

Management anticipates a roughly $500 million sequential revenue decline from China in the fourth quarter, driven by capacity digestion and deferred export licenses, and expects a further $500 million decline tied to non-linear leading-edge demand as large customers delay capital purchases. Visibility in China is expected to remain low for several quarters due to policy uncertainties and prior frontloaded investments, while leading-edge order timing is affected by market concentration and customer ramp schedules.

"We had very large shipments into China in 2023 and 2024. And we expected, you know, lower business in 2025. And we actually expect this to continue for several more quarters as we look forward. It's hard to give a specific guide as you know those numbers have changed over time. But with such a large build in China in those 2023 and 2024, we call it digestion. It's not unexpected that we would have, you know, lower business, especially given the restrictions in our Q4 guide. And then turning to LeadingLogic, here, this was different than our expectations. We have underlying demand that we think is very strong. There is 100% utilization on the leading edge. You've got reportedly more design wins."
-- Brice Hill, CFO

The Q4 outlook highlights sensitivity to export controls as well as the risks associated with high customer concentration in leading-edge logic, limiting short-term predictability but not detracting from the company’s long-term secular growth trajectory.

Looking Ahead

Management guides for fourth quarter revenue of $6.7 billion plus or minus $500 million (down 4.9% year over year at midpoint) and non-GAAP EPS of $2.11 plus or minus $0.20 (down 9% year over year at midpoint), with semiconductor systems revenue of approximately $4.7 billion (down 9% year over year) and Applied Global Services revenue of approximately $1.6 billion (down 2% year over year). China revenue is expected to stabilize at 15% to 20% below fiscal year 2024 levels for several quarters, while a display segment rebound is anticipated due to increased OLED adoption. Management reiterates mid-single-digit revenue growth for the full year, marking the sixth consecutive year of revenue growth for Applied Materials, and ongoing investments in U.S. manufacturing and advanced R&D, including an Arizona facility and the EPIC center in Silicon Valley, with operations starting in spring 2026.