Applied Materials Sees Revenue Lift, China Sales to Slip in 2026

Applied Materials said on Thursday it expects spending on chipmaking equipment in China to fall in 2026 as tighter U.S. export controls narrow its market access, while overall revenue should strengthen in the second half of the year as demand tied to artificial intelligence lifts memory production.

The semiconductor equipment maker, one of the largest suppliers to global chip manufacturers, warned that new U.S. rules would make it more difficult to export certain products and to provide specific parts and services to China based customers without a license. Company executives said that constraint will weigh on sales to Chinese customers next year, though it will not fully offset stronger demand driven by AI related memory investment.

"Our customers are indicating to us that wafer fab equipment spending is likely to accelerate beginning in the second half of calendar 2026," Chief Financial Officer Hill said. That timing implies a pause or slowdown in capital expenditure for much of next year, followed by a renewed wave of ordering as memory fabs scale up to serve AI compute and data center needs.

Applied Materials also updated its profit outlook, forecasting non GAAP earnings per share of $2.18, plus or minus 20 cents, above consensus estimates of $2.13. The company said the figure excludes one time items, signaling underlying margins that remain resilient even as geographic mix shifts.

Analysts say the company sits at the intersection of two powerful trends. On one hand, U.S. export policy aimed at curbing China access to advanced chipmaking tools is hastening a reorientation of global technology trade and supply chains. On the other hand, surging investment in large scale AI models and data centers is propelling a boom in memory capacity, which requires substantial equipment spending on DRAM and NAND production.

The net effect for Applied Materials is a mixed near term outlook but a potentially stronger back half of 2026. For investors and customers, the company message highlights the cyclical and regional nature of semiconductor capital expenditure. Firms with heavy exposure to China may face a tougher revenue path, while those positioned in memory equipment and services stand to benefit from the AI led ramp.

Policy implications ripple beyond a single supplier. Tighter export controls increase licensing complexity for U.S. companies, reduce addressable markets, and accelerate technology diversification by affected customers. Over the long term, the measures could encourage greater domestic and regional investment in alternative suppliers in Asia, complicating global supply chain efficiencies.

Applied Materials' guidance underscores how AI is altering capital spending priorities within the semiconductor industry. While China remains a substantial market for wafer fab equipment, the combination of export restrictions and a pivot toward memory capacity to serve AI workloads means revenue growth will depend on the timing and scale of the memory investment cycle as well as the evolving regulatory landscape.