Earnings Report Preview | Macroeconomic market uncertainties remain, Wall Street expects Applied Materials to seek steady progress

According to Zhitong Finance APP, Applied Materials (AMAT.US) is scheduled to release its earnings report for the third quarter of fiscal year 2025 after the U.S. stock market closes on Thursday, with an expected earnings per share of $2.34, a year-on-year increase of 10.4%; revenue is expected to be $7.2 billion, a year-on-year increase of 6.2%. The company has exceeded general expectations for earnings per share in each of the past four quarters. During this period, the company has exceeded general revenue expectations three times.

Morgan Stanley maintained its "hold" rating on Applied Materials last week and set a target price of $169. The firm expects the revenue guidance for the fourth quarter from Applied Materials to show slight growth (approximately low single-digit percentage), around $7.4 billion to $7.5 billion. This forecast exceeds Morgan Stanley's prediction of zero growth and Wall Street's general expectation of a 1.5% growth rate. The company has performed robustly, with a 6% revenue growth over the past 12 months, maintaining a healthy price-to-earnings ratio of 22 times.

Morgan Stanley noted that the revenue growth momentum for Applied Materials is expected to come from TSMC and DRAM chips, indicating that the earnings quality of this semiconductor equipment manufacturer is relatively good. Despite the recent optimistic outlook, Morgan Stanley stated that due to market uncertainties, Applied Materials is unlikely to make an optimistic forecast for its 2026 outlook.

The firm pointed out that market forecasts have indicated that the year-on-year growth rate for fiscal year 2026 will reach 6%, while Morgan Stanley's expectation is for flat performance. Furthermore, the firm believes that the upcoming earnings report will not lead to significant adjustments to the consensus forecast for fiscal year 2026.

However, Redburn-Atlantic downgraded the stock rating from "buy" to "neutral," citing that its Physical Vapor Deposition division has lost market share to competitors, resulting in a loss of market share.

Meanwhile, following ASML's warning about potential growth uncertainties in 2026 due to U.S. tariff issues, the entire semiconductor equipment industry, including Applied Materials, is also under pressure. These recent developments reflect the comprehensive situation of Applied Materials in terms of strategic positioning and market challenges.

Nonetheless, Goldman Sachs initiated coverage on Applied Materials with a "buy" rating and set a target price of $225, emphasizing the potential gains the company may achieve due to the semiconductor industry's transition to 3D architecture.

UBS raised its target price for Applied Materials from $175 to $185 while maintaining its "neutral" rating. The firm's analysts believe that there will not be many surprises in the company's performance for the third quarter of fiscal year 2025 and that the quarterly performance may slightly exceed expectations. Applied Materials has a strong global supply chain and diversified manufacturing layout, enabling it to respond well to changing circumstances.

UBS's target price increase reflects the analyst's agreement with the view that Applied Materials can maintain strong performance despite the challenges posed by geopolitical tensions and supply chain changes. The company's advanced tools for manufacturing next-generation artificial intelligence chips and high-bandwidth memory (HBM) are expected to drive profit growth