Applied Materials, Inc. (AMAT)

On Monday 26 October Applied Materials agreed to buy more shares of BE Semiconductor Industries, the Dutch maker of chip assembly machines known as Besi, lifting its holding to about 20 percent 12. It has held about 9 percent since April 2025, Reuters reported, and the new shares arrive only after a US antitrust waiting period ends 31. Applied calls the stake long term and says it has no intention to go beyond about 20 percent or to seek a Besi board seat 2.

The bet is on hybrid bonding, which joins stacked chips with direct copper-to-copper bonds so connections sit closer and wiring runs shorter 7. The two companies have worked on it since 2020, and Besi reported that its hybrid bonding orders so far in 2026 are more than double those of all 2025 29.

The stake comes after the strongest quarter Applied has filed: in the quarter to 26 July 2026 revenue rose 25 percent to a record $9.12 billion, and net income rose 43 percent to $2.54 billion 5. Chief executive Gary Dickerson credited the rapid global adoption of AI, and finance chief Brice Hill said DRAM revenue, which includes packaging for high-bandwidth memory, grew 52 percent 56.

Applied reports its fourth quarter on 12 November, against its own outlook of $10.25 billion of revenue, plus or minus $500 million 235. A one-year US suspension of the export rule covering affiliates of listed companies ends on 9 November unless extended, a rule Applied had said would cut its fiscal 2026 revenue by about $600 million 1918.

Applied Materials was incorporated in 1967 and makes the machines chip factories use to build, wire and inspect the layers of a chip 10. In November 2011 it bought Varian Semiconductor Equipment Associates, then the leading maker of ion implantation equipment and its largest acquisition to date 16. Varian's chief executive, Gary Dickerson, became Applied's president in June 2012 and its chief executive in September 2013 10.

A combination with Tokyo Electron, agreed in September 2013, was called off by both companies on 26 April 2015, with no termination fee 15. The purchase of Japan's Kokusai Electric, agreed in June 2019, ended on 19 March 2021, and Applied paid a $154 million termination fee 12.

Revenue fell to $14.61 billion in fiscal 2019 from $16.71 billion, and net income to $2.71 billion from $3.04 billion 11. The annual report blamed memory chipmakers, who delayed new capacity and ran their factories slower because the industry held too much supply and inventory 11. Gross margin, revenue minus production costs as a share of revenue, slipped to 43.7 from 45.0 percent 11.

Revenue then rose to $17.20 billion in fiscal 2020 and $23.06 billion in fiscal 2021, as COVID-19 sped up the digital economy and lifted demand for chips, the filing says 12. Net income reached $5.89 billion in 2021, and sales to customers in Korea rose 65 percent that year 12.

Revenue reached $25.79 billion in fiscal 2022 and $26.52 billion in fiscal 2023 13. In 2023 foundry and logic makers spent more on mature chip nodes, while memory makers deferred capacity on weak demand for consumer electronics 13. US export rules issued in 2022 also cut service sales in China, the filing says 13.

In fiscal 2024 revenue rose 2 percent to $27.18 billion, as DRAM makers invested in new technology while spending on leading-edge logic fell 14. China became the largest market by far, with $10.12 billion, or 37 percent of revenue, up from 27 percent a year earlier 14.

In fiscal 2025 revenue rose 4 percent to $28.37 billion, and gross margin widened to 48.7 percent on higher prices, a better mix and lower costs 10. Net income still fell to $7.00 billion, because a Singapore tax deal and a write-down of tax credits lifted the tax rate to 24.5 from 12.0 percent 10. China fell to 30.1 percent of revenue while Taiwan rose 71 percent 10.

In February 2026 Applied agreed to pay $252.5 million to settle Commerce Department claims about China shipments between November 2020 and July 2022, and the Justice Department and the SEC closed their inquiries 20. Revenue for the nine months to July rose 11 percent to $24.04 billion 4.

Chipmaking machines: Semiconductor Systems

Semiconductor Systems sells the equipment that turns patterns into chip structures, builds transistors and the wiring between them, and inspects the results 10. It brought in $20.80 billion in fiscal 2025, 73 percent of revenue, at an operating margin of 35.5 percent 10. In the July quarter its revenue rose 27 percent to $7.04 billion, with foundry and logic 67 percent of it, DRAM 26 percent and flash memory 7 percent 45.

Recent examples include the Centris Spectral ALD, which uses microwave plasma to coat 3D structures evenly in silicon nitride, and the Producer Selectra Mo Etch, which removes molybdenum to separate layers in 3D NAND flash 5. The machines are built to each customer's specifications, and two customers took about 19 and 15 percent of fiscal 2025 revenue 10.

Process control and eBeam

Process control machines use light and electron beams (eBeam) to inspect and measure chips mid-production, so more of each wafer's chips work 10. Applied expects its eBeam tools to bring in about $2 billion in calendar 2026 24. New examples are VeritySEM 7AP, which measures features on warped packaging substrates, and SEMVision G7AP, which reviews defects on silicon, organic and glass 5.

Advanced packaging and hybrid bonding

Advanced packaging connects several chips into one package, so a system gains performance and saves energy beyond what one chip can do 10. Dickerson said in August that Applied expects its packaging revenue to grow more than 70 percent in calendar 2026 6. Kinex, built with Besi, is the industry's first integrated die-to-wafer hybrid bonding system, the companies say 8.

In May Applied agreed to buy the NEXX business of ASMPT, based in Billerica, Massachusetts, which makes equipment that plates metal onto large panels for packaging 26. Dickerson said Applied has built tools for panel packaging, including digital lithography, deposition, etch and eBeam review 6.

Services and spares: Applied Global Services

Applied Global Services sells service contracts, spare parts and factory automation software that keep installed machines running well 10. It brought in $6.39 billion in fiscal 2025, 23 percent of revenue, and $1.78 billion in the July quarter, up 22 percent 105. Dickerson said more than 37,000 chambers in the field connect to its AIX software for monitoring and diagnostics 6.

Display and smart glasses

The other businesses, mostly display equipment, brought in $294 million in the July quarter and lost $118 million at the operating line 5. In that quarter Applied unveiled SENZ, an optics and display system for AI smart glasses, and a joint development agreement with EssilorLuxottica on smart eyewear 5.

Where it sells

Revenue is booked where the customer's factory sits 4. In the July quarter China took 28 percent of revenue against 35 percent a year earlier, Taiwan 22 percent, Korea 17 percent and the United States 15 percent 4. US revenue doubled to $1.37 billion from $683 million 4.

Plants and places

At the end of fiscal 2025 Applied owned about 9.1 million square feet of space and leased 5.3 million, and its products are made mainly in the United States, Singapore, Taiwan and Israel 10. In the July quarter it opened a $500 million campus at Tampines, Singapore, which more than doubles its cleanroom space there 5.

On 12 October it unveiled the EPIC Center in Sunnyvale, California, a 600,000-square-foot research building with nearly four acres of cleanroom 25. The company expects capital spending there to scale to about $5 billion as customer projects begin 25. TSMC, Intel, Samsung Electronics, Micron and SK hynix are founding partners, and Besi is one of five innovation partners 25.

People

Gary Dickerson, 68, has run Applied since September 2013, and Brice Hill, finance chief since March 2022, came from Xilinx and 25 years at Intel 10. Prabu Raja leads the Semiconductor Products Group and Timothy Deane leads Applied Global Services 10. Qualcomm's finance and operating chief, Akash Palkhiwala, joined the board on 27 August, under chairman Tom Iannotti 21.

The company employed about 36,500 people in 25 countries at the end of fiscal 2025, and approved a cut of about 4 percent of the workforce to finish in fiscal 2026 10. Hill said Applied added more than 1,500 people in manufacturing and customer support in the July quarter 6.

Rivals

TechInsights ranks ASML first among chip equipment makers in 2025, with $27.5 billion of revenue, followed in the top five by Applied, Lam Research, Tokyo Electron and KLA 29. Lam's annual report names Applied its primary competitor in dielectric and metals deposition and in etch 30. Lam reported $8.22 billion of revenue for its quarter to 27 September 2026 31.

Chinese equipment makers gained as foreign suppliers pulled back, TechInsights says 29. Applied's own annual report warns of more competition from domestic Chinese makers helped by local subsidies and by US export controls 10.

Problems

The annual report says US export rules on chip technology sold in China have limited the market for some products and hurt revenue 10. The February settlement carries a suspended denial order, an export ban, waived after three years if Applied completes required audits 4. China's 2025 export controls on rare earth minerals touch some Applied products 10.

The umbrella, in words

Applied sells under product names such as Centura, Producer, Centris, VeritySEM, SEMVision and Kinex 58. Its subsidiaries exhibit for fiscal 2025 names entities including Varian Semiconductor Equipment Associates, Applied Materials Israel, Semitool, Picosun USA and companies in China, Singapore and Taiwan 17. Applied Ventures, its venture capital arm, is led by chief technology officer Omkaram Nalamasu 1017.

Applied owns about 9 percent of Besi, bought in April 2025, and has agreed to buy enough shares to own about 20 percent once delivered 712. It has agreed to buy ASMPT's NEXX business, and agreed research work with Intel at the EPIC Center and Intel's Hillsboro, Oregon campus 2628. It also owns about 279 acres of buildable land, mainly in the United States 10.

Each common share carries one vote, and the proxy names no holder above 10 percent 22. Its largest holders on the proxy are BlackRock with 9.69 percent and Vanguard with 9.35 percent, from Schedules 13G filed in 2024 22.

Applied reports its fourth fiscal quarter on Thursday 12 November 23. Its outlook calls for revenue of $10.25 billion, plus or minus $500 million 5. Hill said the company expects Semiconductor Systems revenue of around $7.9 billion and other revenue of around $510 million, mostly display 6.

Dickerson said customers' demand visibility leads the company to expect another strong growth year in 2027 5. Hill said Applied is hiring and training teams so it can double its quarterly system output from current levels by 2028 6. He also said the first quarter of fiscal 2027 will run 14 weeks 6.

At an investor breakfast on 13 October Applied set targets for 2030 24. It expects equipment spending to grow faster through 2030 than over the past decade, and aims to gain more than 2 points of market share from 2025 24. It targets a non-GAAP gross margin of about 54 percent and an operating margin of about 40 percent 24.

It also expects services revenue to exceed $12 billion by calendar 2030, and plans to more than double its research lab and manufacturing capacity by then 24. It says it is committed to returning 80 to 100 percent of free cash flow to shareholders over time 24. About $12.8 billion of its buyback authorization remained at 26 July, and in March the board raised the quarterly dividend to $0.53 a share 427.

With Besi at the EPIC Center, the two companies plan new die-to-wafer hybrid bonding platforms, the scaling of thermo-compression bonding and new die-on-wafer, die-on-die and die-on-panel designs 82. Applied names 15 EPIC partnerships to date, among chipmakers, suppliers and universities 24.

The added Besi shares arrive only once the Hart-Scott-Rodino waiting period expires or ends early, and no date is given 1. The NEXX purchase was expected to close within several months of May, subject to customary conditions 26. The suspension of the US affiliates rule ends on 9 November unless extended 19.

How it operates

Applied Materials makes the machines that chip factories use to build semiconductors. The annual report calls the company the leader in the materials engineering solutions used to produce virtually every semiconductor in the world, and describes its people as experts in the design, development, production and servicing of the critical wafer fabrication tools its customers need. It was incorporated in 1967 and is a Delaware corporation; its financial year ends on the last Sunday in October, so fiscal 2025 closed on October 26, 2025. It reports two segments, Semiconductor Systems and Applied Global Services, with Semiconductor Systems the largest contributor to revenue. Everything else sits in a catch-all called Corporate and Other, which since the end of fiscal 2025 includes the display equipment business, no longer treated as a significant operating segment on its own. 13141516

Semiconductor Systems designs, develops, manufactures and sells the equipment used to fabricate chips. Its products cover steps across materials engineering, process control and advanced packaging: turning patterns into device structures, building transistors and interconnects, metrology, inspection and review, and the packaging that joins finished chips to one another. Sales go to customers serving three markets: foundry, logic and other; dynamic random access memory, the working memory a computer forgets when the power goes off; and flash memory, the kind that remembers. Leading edge means customers producing on the most advanced nodes, which the filing defines as 7 nanometers and smaller. Nodes that are not leading edge serve the internet of things, communications, automotive, power and sensors. 1718

Applied Global Services sells services, spare parts and factory automation software to customers' fabrication plants, bought to keep the large global installed base of equipment running well, and delivered through a global distribution system and trained field engineers stationed near customer sites. Through October 26, 2025 the segment also made and sold 200 millimeter and other equipment for markets that are not leading edge; from the first quarter of fiscal 2026 that 200 millimeter business moves into Semiconductor Systems. 1920

The customer list is short and concentrated. Two customers alone took about 19% and 15% of net revenue in fiscal 2025, and about 89% of revenue went to customers in regions outside the United States. By the location of the customer facilities that products were shipped to, China was the largest at 8.5 billion dollars, 30.1% of revenue; then Taiwan at 6.9 billion, 24.2%; South Korea at 5.6 billion, 19.8%; the United States at 3.1 billion, 10.8%; Japan at 2.3 billion, 8.0%; Southeast Asia at 1.1 billion, 3.8%; and Europe at 962.0 million, 3.4%. The filing says the customer base is geographically concentrated, particularly in China, Taiwan and Korea, that the actions of even a single customer have exposed the results to greater swings, and that products are configured to customer specifications, so changing or cancelling an order can leave costs that cannot be recovered. 2122232425

Applied builds its systems itself, in a spread-out way: manufacturing and supply chain work runs in the United States, Singapore, Japan, China, Korea, Taiwan, Israel and other countries in Asia and Europe, with qualified vendors, including contract manufacturers, supplying parts, services and product support; the products themselves are made mainly in the United States, Singapore, Taiwan and Israel. Some key parts come from a single qualified supplier or a small group of them. The machines are marketed and sold worldwide almost entirely through a direct sales force. At the end of fiscal 2025 the order book stood at 15,002 million dollars: 7,105 million, 47%, in Semiconductor Systems; 7,141 million, 48%, in Applied Global Services; and 756 million, 5%, in Corporate and Other. About 31% of it is not reasonably expected to be filled within the next 12 months. 262728293031

The specifics

The technology is protected by the weight of many patents rather than by any one of them: more than 23,500 active patents in the United States and other countries, with more applications pending, and the filing says the business is not materially dependent upon any one patent. Royalties paid to and received from others have not been material. Behind the patents sits research spending of 3.6 billion dollars in fiscal 2025, up 10.4% on the year and higher in every year since 2020, which the company puts down to extra headcount for product development and higher depreciation. The stated reason for spending so early is that new products and technologies have to arrive before strong demand does, so customers can pick them during early stage technology selection. 3233343536

The annual report names not one competitor. It describes them by shape instead: rivals range from small companies that compete in a single region, which may benefit from policies and regulations that favor domestic companies, to global, diversified companies operating in more complex economic and regulatory settings. In services the competition includes a diverse group of third party service providers as well as customers who choose to do their own servicing. The filing does flag one direction of travel, saying the company could see more competition from domestic equipment makers in China helped by local government incentives and funding, and also by the export controls the United States government has placed on sales of certain technologies to customers in China. 3738

Export rules are the single biggest outside force on this business. The filing says that over the past several years the United States government announced additional export regulations for American semiconductor technology sold in China, covering wafer fabrication equipment and related parts and services, which have limited the market for certain products and services, adversely affected revenues and increased exposure to foreign and Chinese domestic competition. The pressure runs the other way too: in 2025 the Chinese government put export controls on rare earth minerals used in certain Applied products. Since 2022 the company has received multiple subpoenas from the Department of Justice, the Commerce Department's Bureau of Industry and Security and the Securities and Exchange Commission about certain China customer shipments and export controls compliance, and further Justice Department subpoenas about federal award applications; it says it is cooperating fully and cannot predict the outcome. 394041

Tax law and public money move the numbers here. The CHIPS and Science Act, enacted on August 9, 2022, created a 25% investment tax credit for certain investments in domestic semiconductor manufacturing, which the One Big Beautiful Bill Act, enacted on July 4, 2025, raised to 35% while also allowing full expensing of domestic research costs; by the end of fiscal 2025 that credit had cut current income taxes payable by 233 million dollars and future income taxes payable by 548 million. The same year's law pushed the other way on the accounts: the effective tax rate rose to 24.5% from 12.0%, on a 659 million dollar remeasurement of deferred tax assets after new tax incentive agreements in Singapore and a 407 million dollar allowance against deferred tax assets tied to corporate alternative minimum tax credits, which the company says it no longer expects to realize. 4243444546

What drives growth, line by line

Revenue rose to 28,368 million dollars in fiscal 2025 from 27,176 million, an increase of 1,192 million, or 4%, the fifth yearly rise in a row and up from 17.2 billion in 2020. Gross margin widened to 48.7% from 47.5%, which the filing puts down to the higher revenue, a better mix of customers and products, higher average selling prices and lower material and manufacturing costs. Operating income rose 422 million to 8,289 million. Net income went the other way, down 179 million to 6,998 million, the one year in the six the record shows in which it fell, while the charge for income taxes rose 1,298 million to 2,273 million. 4748494436

Semiconductor Systems. The big one: 20,798 million dollars, 73% of revenue, up 4% on the year, earning 7,379 million of operating income, up 6%, at a margin of 35.5%. The filing says customers kept making strategic investments in new capacity and new technology transitions; foundry and logic spending rose on higher customer investment in leading-edge manufacturing technologies, and memory spending rose on investment in NAND fabrication equipment upgrades. Within the segment, foundry, logic and other was 67% of sales against 68% the year before, dynamic random access memory 26% against 28%, and flash memory 7% against 4%, so the mix tipped toward flash. 485051525354

Applied Global Services. 6,385 million dollars, 23% of revenue, up 3%, and the steadier line. The growth came from higher customer spending on long-term service agreements and spares, partly offset by lower spending on 200 millimeter equipment. Operating income slipped 20 million to 1,792 million and the margin narrowed to 28.1% from 29.1%, which the filing attributes to the smaller 200 millimeter equipment revenue, more cost from added headcount, and higher charges for excess and obsolete inventory, partly offset by more revenue from services and spares. 4851535556

Corporate and Other. 1,185 million dollars, 4% of revenue and the fastest-moving line, up 14%. It is the catch-all: revenue and product costs that sit in neither segment, including the display equipment business, plus corporate functions that are not charged to the segments. It lost 882 million at the operating line against 926 million the year before, and it carries the 181 million restructuring charge as well as a 41 million goodwill impairment taken in the fourth quarter. 485157161258

Where the money came from moved sharply in a single year. China, still the largest at 8.5 billion dollars and 30.1% of revenue, fell 15.7%. Taiwan jumped 71.0% to 6.9 billion, 24.2% of revenue, and South Korea rose 24.8% to 5.6 billion. The United States fell 19.8% to 3.1 billion and Europe fell 33.3% to 962.0 million, while Japan edged up 5.5% to 2.3 billion and Southeast Asia slipped 5.7% to 1.1 billion. Revenue is booked to the place of the customer facility the products were shipped to, so this is a map of where chips are made, not of where the buyers are headquartered. The filing says the changes in all regions primarily reflected changes in investments in semiconductor equipment. 215960

What comes next, in the company's own words: it says investments by semiconductor equipment customers are expected to remain strong, with growth in the adoption of high bandwidth memory and other forms of advanced packaging, continued demand for artificial intelligence and data center computing, and demand for nodes that are not leading edge. It expects demand for services to grow as its installed base of systems and chambers gets larger and customers renew long-term service agreements. Over the longer term it points to data center and edge artificial intelligence, the internet of things, robotics and electric and autonomous vehicles, and to device refresh cycles for personal computers and smartphones. It also warns that the order book on any particular date is not necessarily indicative of actual sales for any future period, and is subject to change, including from changes in export rules. 61566263

The read's section on the people who run it is on the People tab.

What the desk infers Inferred

1. Inferred

   The two customers behind roughly a third of revenue are almost certainly a leading-edge foundry whose plants are in Taiwan, most likely Taiwan Semiconductor Manufacturing Company, and a Korean memory maker. Applied never names them, but the map of where its revenue lands moves with them.

   Because

   • Two customers took about 19% and 15% of net revenue in fiscal 2025, and the filing nowhere says who they are. 22
   • Revenue is booked to the location of the customer facilities the products were shipped to, and Taiwan took 24.2% of revenue and South Korea 19.8%, the two shares closest to those customer shares. 2159
   • Taiwan rose 71.0% in one year, the largest move of any region. 21
   • Foundry and logic spending rose on higher customer investment in leading-edge manufacturing technologies, which the filing defines as nodes of 7 nanometers and smaller, a club with very few members. 5217
   • The filing says the customer base is geographically concentrated, particularly in China, Taiwan and Korea. 24
   Confidence 55 of 100Wrong if A disclosure by Applied or by a customer naming either of the two as a buyer whose fabrication plants are outside Taiwan and Korea, for instance a mainland Chinese or a United States based manufacturer.
2. Inferred

   What Applied has already sold is becoming service rather than machinery: the service arm books under a quarter of revenue but carries about half the order book, so a growing part of the revenue contracted ahead is maintenance on machines already installed.

   Because

   • Applied Global Services brought in 6,385 million dollars, 23% of revenue, while Semiconductor Systems brought in 20,798 million, 73%. 48
   • In the order book at the end of fiscal 2025 the two are level: 7,141 million dollars, 48%, in services against 7,105 million, 47%, in systems. 30
   • The order book counts contractual service revenue and maintenance fees alongside accepted equipment orders. 64
   • About 31% of the order book is not reasonably expected to be filled within the next 12 months. 31
   • The segment's growth came from higher customer spending on long-term service agreements and spares. 56
   Confidence 75 of 100Wrong if A year in which the Applied Global Services share of the order book falls back below its share of revenue, or a disclosure that the service backlog is mostly equipment orders rather than contracted service and maintenance fees.
3. Inferred

   The one-year swing from China to Taiwan is the export rules working through the order book: what shrank was equipment for mature production lines in China, and what replaced it was leading-edge foundry building elsewhere, which leaves Applied leaning on the handful of customers who can afford the most advanced nodes.

   Because

   • China revenue fell 15.7% to 8.5 billion dollars while Taiwan rose 71.0% to 6.9 billion, in the same year. 21
   • The filing says export regulations for American semiconductor technology sold in China have limited the market for certain products and services, adversely affected revenues and increased exposure to foreign and Chinese domestic competition. 39
   • Foundry and logic spending rose on higher customer investment in leading-edge manufacturing technologies, while memory spending rose on NAND upgrades. 52
   • Nodes that are not leading edge, the kind Chinese buyers have been adding, serve the internet of things, communications, automotive, power and sensors. 17
   • The filing warns of more competition from domestic equipment makers in China, helped by local government incentives and by the United States export controls themselves. 37
   Confidence 65 of 100Wrong if A later filing showing China revenue returning to its earlier share while leading-edge foundry spending falls, or a disclosure that the China decline came from customers' own demand rather than from export licensing.
4. Inferred

   Applied is putting money into buildings and demonstration tools while taking people out: three quarters of a capital budget that nearly doubled sat outside both operating segments, which points at shared research and demonstration facilities rather than extra factory capacity.

   Because

   • Capital spending was 2.3 billion dollars in fiscal 2025 against 1.2 billion the year before, and went primarily into real property and improvements, demonstration and testing equipment, manufacturing and network equipment. 65
   • The segment table splits that 2,260 million dollars as 507 million in Semiconductor Systems, 57 million in Applied Global Services and 1,696 million in Corporate and Other, following the column order the same table uses for revenue. 6667
   • Corporate and Other holds the functions performed at the corporate level rather than either segment's own operations. 57
   • Research spending rose to 3.6 billion dollars on additional headcount for product development and higher depreciation. 3536
   • In the same quarter the company approved a workforce reduction plan expected to touch about 4% of the global workforce. 12
   Confidence 60 of 100Wrong if A disclosure that the Corporate and Other capital spending went into manufacturing capacity for the Semiconductor Systems segment, or a later year in which segment capital spending rises while the corporate share falls back.