Applied Materials AMAT (Minutes): Stable in the first half of next year, growth concentrated in the second half.

Below is the summary of the AMAT 2025 fiscal year Q4 earnings call minutes organized by Dolphin Research. For the earnings report interpretation, please refer to the article Storage is 'boiling hot', can Applied Materials (AMAT) benefit?

I. $Applied Materials(AMAT.US) Key Financial Data Review

Revenue: Fiscal year 2025 revenue grew by 4% to $28.4 billion; Q4 revenue exceeded the midpoint of expectations.

Segment Revenue: Semiconductor Systems revenue grew by 4%.

Applied Global Services (AGS) revenue grew by 3% to $6.4 billion, a record high; recurring revenue from parts, services, and software achieved double-digit growth.

Display revenue grew by 20%; Q4 display revenue grew by 68% year-over-year.

Profitability: Non-GAAP gross margin increased by 120 basis points to 48.8%, the highest in 25 years; Q4 non-GAAP gross margin increased by 60 basis points year-over-year.

Non-GAAP EPS grew by 9%; Q4 non-GAAP EPS exceeded the midpoint of expectations.

Cash Flow and Capital Allocation:

Operating cash flow was nearly $8 billion; free cash flow was $5.7 billion (including $2.3 billion in capital expenditures, with more than half used for the construction of the EPIC center).

Approximately $6.3 billion was returned to shareholders (cash dividends of $1.4 billion, annual quarterly dividend per share increased by 15% to $0.46; share repurchases of $4.9 billion, reducing the number of outstanding shares by over 3%).

Operating Expenses: Non-GAAP operating expenses increased by 5%, mainly due to a 10% increase in R&D investment; Q4 non-GAAP operating expenses were slightly higher than expected, up 3% year-over-year.

Regional Markets: Q4 revenue from the China market accounted for 29%, down from the peak of 45% in Q1 of fiscal year 2024.

II. Detailed Information from the AMAT Earnings Call

2.1 Key Information from Executives' Statements

Performance Review and Market Environment:

Fiscal year 2025 marked the sixth consecutive year of growth, with revenue and profit CAGR of approximately 12% and 20%, respectively; growth slowed due to trade restrictions and adverse market structure.

Trade restrictions compressed the addressable market size in China: the proportion of total system and service revenue from China fell to 28% in fiscal year 2025 and to 25% in Q4; Chinese wafer fab equipment spending is expected to remain sluggish in 2026, with no major changes in restriction policies.

Maintaining competitiveness in the addressable market: the fastest-growing areas outside China are segments where Applied Materials has a lower or no presence (e.g., NAND market share is expected to double; DRAM revenue from leading-edge customers grew by over 50% in the past four quarters).

Technology Trends and Market Outlook:

AI computing is driving long-term growth in the semiconductor industry, reaching a critical point, accelerating investment in next-generation computing infrastructure and advanced silicon chips; third-party forecasts predict a 10%-15% CAGR for the semiconductor industry over the next five years.

In 2026, market spending is expected to align more with the company's areas of strength (leading-edge foundry logic chips, DRAM, and advanced packaging will be the fastest-growing segments); 2026 is expected to be another growth year for the company, with revenue concentrated in the second half.

Five key technology inflection points: leading-edge logic chips, high-performance DRAM, high-bandwidth memory (or DRAM stacking), heterogeneous integration advanced packaging, and power electronics technology.

New Product Examples (Released at SEMICON West):

Xtera Epitaxy System: Supports 2nm and more advanced processes, improves transistor speed, enhances uniformity by 40%, and reduces gas consumption by 50%.

Kinex Bonding Equipment: The industry's first integrated die-to-wafer bonding equipment, improving packaging performance and cost efficiency.

Connect Six-Step Integrated System: Equipped with onboard metrology functions.

PROVision 10 Electron Beam Metrology System: Improves image resolution by 50%, increases imaging speed by 10 times, focusing on improving yield for 3D devices.

Operational and Service Progress:

EPIC (Equipment and Process Innovation and Commercialization Platform) center construction is progressing smoothly, expected to be operational next year, accelerating collaboration between chip manufacturers and designers for optimization.

Service business: Core service business achieved double-digit growth in 2025, with over two-thirds of service revenue coming from subscription models; accelerating the adoption of AI and digital tools to improve efficiency.

Reporting structure adjustments (starting fiscal year 2026): Display business will be included in