Applied Materials Q3 2025 Earnings Preview: AI & Memory Tailwinds Meet Geopolitical Headwinds

Applied Materials’ upcoming earnings will reveal whether demand for AI-related chips is still growing.

• Applied Materials (AMAT) reports fiscal Q3 results after the market close on Thursday, August 14, with Wall Street expecting earnings per share (EPS) of $2.34 on $7.21 billion in revenue.

• The company enters the quarter with record margins, strong AI and high-bandwidth memory (HBM) tailwinds, and a leading share in critical wafer fabrication equipment (WFE) markets.

• Trading at a forward price-to-earnings (P/E) ratio of 21—below the sector median—AMAT’s valuation looks attractive on a long-term basis, but near-term stock direction will hinge on guidance and investor reaction to the results.

Applied Materials (AMAT) is a cornerstone of the global semiconductor industry, providing the wafer fabrication equipment (WFE) and materials engineering solutions essential to advanced chipmaking. Its technology powers the production of cutting-edge DRAM, NAND, and logic chips—making AMAT a vital partner for foundries, memory producers, and integrated device manufacturers worldwide.

The company’s dominance in deposition and etch processes—bolstered by advanced inspection tools such as its eBeam technology and Sym3 Magnum Etch system—has secured its position as the largest player in the WFE market, with market share in key segments more than double that of its closest competitor. Shares trade near $185, up about 12% year-to-date but roughly 5% lower over the past year, reflecting both recent momentum and the volatility typical of this corner of the tech sector.

Applied Materials will report fiscal Q3 2025 results after the market closes on Thursday, August 14. Wall Street expects earnings of $2.34 per share on revenue of $7.21 billion, closely matching the company’s guidance of $2.15–$2.55 EPS and about $7.2 billion in sales. The release follows a strong May quarter, when AMAT beat EPS estimates, delivering 7% year-over-year revenue growth, and improved margins—helping the stock rebound from 52-week lows.

Why It Matters: AI momentum meets a critical test

Applied Materials heads into Q3 earnings riding strong momentum. In May, the company reported earnings per share (EPS) of $2.39, up 14% from a year earlier, on $7.1 billion in revenue. Profitability also moved higher, with gross margins climbing 170 basis points to their strongest level in decades. The drivers were clear: surging demand in advanced chip manufacturing, high-bandwidth memory (HBM) used in artificial intelligence (AI) accelerators and the build-out of AI-focused data centers. 

The industry backdrop makes this quarter especially significant. Chipmakers are ramping investment in next-generation manufacturing technologies such as gate-all-around (GAA) transistors, backside power delivery and advanced packaging. These upgrades boost chip speed, improve energy efficiency and enable the handling of increasingly complex AI workloads. Applied Materials’ tools—like the Sym3 Magnum etch platform, which carves chip features at the atomic level, and its eBeam inspection systems, which detect microscopic defects—are critical to making these advances possible.

A rebound in memory chip demand is adding to the momentum. Sales of high-bandwidth memory (HBM) are growing at roughly 40% annually, and Applied Materials has been steadily increasing its share of the broader DRAM market for more than a decade. Last quarter, management noted that DRAM demand is “not at a cyclical low,” suggesting the ongoing recovery still has room to run.

The company still faces a significant real-world stress test. About a quarter of its revenue comes from China, a market now constrained by U.S. export restrictions that have already cut an estimated $400 million in annual sales. These rules limit the sale of certain advanced tools to Chinese chipmakers, forcing Applied Materials to adapt. The company has responded quickly, reducing China’s share of revenue from 43% in the first quarter to 25% last quarter, while shifting more manufacturing to Taiwan and other markets. These steps help mitigate risk, but the geopolitical backdrop remains unsettled.

Thursday’s earnings will resonate well beyond Applied Materials. As a bellwether for semiconductor capital spending—and a proxy for the AI boom’s strength—the company’s results often move the entire chip sector. A strong beat with upbeat guidance would signal that demand for advanced manufacturing and next-gen memory is holding firm despite economic headwinds, while a miss or cautious tone could fuel doubts about how long the AI investment surge can last.

Valuation: Attractive multiples, but earnings will dictate the next move

Despite a strong 2025 rally and its central role in the AI buildout, Applied Materials still trades at what appears to be an appealing discount to peers. Shares hover near $185—about 10% below the average analyst target of $205—and its forward price-to-earnings (P/E) ratio of 21 sits well under the semiconductor sector median of roughly 30. On an earnings basis, the setup appears favorable heading into Thursday’s release, especially for a company with industry-leading margins and entrenched relationships across the global foundry and memory markets.

Still, the valuation picture isn’t uniformly cheap. Applied’s forward price-to-book (P/B) ratio stands at 7.6, meaning investors are paying a premium versus the sector median of 4.4. That reflects the market’s recognition of its technology leadership in wafer fabrication equipment (WFE), dominant share in deposition and etch processes and strong free cash flow profile—plus confidence in its ability to keep winning business in high-growth segments like high-bandwidth memory (HBM) and advanced logic manufacturing. In short, while the stock trades below peers on P/E, it’s priced higher when measured against its assets.

Near-term upside likely depends on Applied Materials continuing to deliver strong results. Analysts are broadly positive—24 of 35 rate the stock a “buy” or “overweight”—but the market’s reaction will hinge on whether the company can pair its long-term AI and memory tailwinds with solid execution and reassuring guidance. A strong report could lift shares toward $200, closing the gap with consensus targets, while a miss or cautious tone might trigger a pullback—creating a potential entry point for long-term investors who see current valuations as attractive relative to its growth trajectory.

Investment takeaways

Applied Materials will step into the earnings spotlight after the market closes on Thursday, August 14, with expectations running high. The company enters the quarter with momentum—record margins, leadership in critical chipmaking technologies and exposure to two of the industry’s fastest growth engines: the buildout of artificial intelligence (AI) infrastructure and the rapid adoption of high-bandwidth memory (HBM). Analysts are leaning bullish, but the market will be looking for more than another solid quarter. The real test will be whether management can pair a strong earnings print with forward guidance that keeps the bullish narrative intact.

Valuation sets up an interesting backdrop for this earnings report. With a forward price-to-earnings (P/E) ratio of 21—well below the semiconductor sector median—Applied Materials screens as inexpensive on earnings, even as its higher price-to-book (P/B) ratio reflects the premium investors place on its technology leadership and market share dominance. A beat-and-raise outcome could help close the gap with the $205 analyst price target, while a softer tone might trigger short-term selling pressure.

For long-term investors, the message is clear: this earnings report could shape the near-term chart, but it’s unlikely to alter the long-term trajectory. Applied Materials is positioned at the heart of some of the most powerful forces in tech—next-generation chipmaking, advanced packaging and memory innovation. If the stock pops on results, it will confirm the market’s faith in those tailwinds. If it pulls back, it could be the kind of opportunity seasoned investors wait for—a chance to buy into a proven industry leader at a discount. 

Andrew Prochnow has traded the global financial markets for more than 15 years, including 10 years as a professional options trader.

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.