Why did quarterly revenue decline while the company reported record annual revenue?

Fourth-quarter revenue of $6.80 billion fell 3% year over year, while full-year revenue of $28.37 billion rose 4%. Growth in the first three quarters, particularly from Taiwan and Korea, offset the softer fourth quarter. China revenue also declined sharply in the fourth quarter, to $1.96 billion from $2.14 billion, and Global Services revenue was roughly flat.

Why does GAAP EPS rise while non-GAAP EPS falls in the fourth quarter?

GAAP EPS of $2.38 includes a $467 million unrealized gain on strategic investments, which is excluded from non-GAAP results. Non-GAAP EPS of $2.17 excludes that gain as well as the $181 million restructuring charge and a $41 million impairment, and it fell 6% year over year. Investors focused on operating performance should weight the non-GAAP figure more heavily.

What does the company expect for the coming quarters, and what drives the outlook?

For Q1 FY2026, Applied guided to $6.85 billion of revenue (+/- $0.5 billion) and non-GAAP EPS of $2.18 (+/- $0.20). Management said it is preparing operations and service organizations for higher demand starting in the second half of calendar 2026, tied to AI-driven investment in advanced semiconductors and wafer fab equipment. The guidance excludes unforeseen acquisition charges and other unusual items.

Why did free cash flow decline so sharply, and is it a concern?

Non-GAAP free cash flow fell 24% to $5.70 billion, mainly because capital expenditures rose to $2.26 billion from $1.19 billion, while operating cash flow declined to $7.96 billion from $8.68 billion. Net working capital was a use of cash for the full year. The higher capex appears to support the capacity expansion that management is preparing for expected demand, but investors should watch whether that spending converts into revenue growth.

What is the company's exposure to China and other geographies, and why does it matter?

China represented 30% of full-year revenue ($8.53 billion), down from 37% ($10.12 billion) a year earlier. Taiwan rose to 24% ($6.86 billion) and Korea to 20% ($5.61 billion), reflecting customer investment in advanced nodes and memory. The filing's risk factors cite export regulations and license requirements, so continued China concentration reduction could affect revenue sensitivity to export policy changes.

AMAT 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed November 13, 2025. Cited figures are marked; the original filing is the authoritative source.

Applied Materials reported fiscal fourth-quarter and full-year 2025 results (quarter ended October 26, 2025).

Full-year net revenue rose 4% to a record $28.37 billion^a, and the company cited its sixth consecutive year of growth, driven by AI-related investment in advanced logic, DRAM, and advanced packaging. Fourth-quarter revenue fell 3% year over year to $6.80 billion. Quarterly non-GAAP diluted EPS declined 6% to $2.17, while GAAP diluted EPS rose 14% to $2.38, largely because of a $467 million unrealized gain on strategic investments that is excluded from non-GAAP results.

Full-year non-GAAP EPS grew 9% to a record $9.42^b. Margins were mixed. Full-year non-GAAP operating margin expanded 1.0 point to 30.2%, but fourth-quarter non-GAAP operating margin contracted 0.7 points to 28.6%.

Non-GAAP free cash flow fell 24% for the year to $5.70 billion as capital expenditures nearly doubled to $2.26 billion^c. The company also recorded $181 million of restructuring charges tied to a workforce reduction plan announced in the fourth quarter. Management guided first-quarter fiscal 2026 revenue to $6.85 billion (plus or minus $0.5 billion) and non-GAAP EPS to $2.18 (plus or minus $0.20).

It said it is preparing operations to support higher demand beginning in the second half of calendar 2026. China fell to 30%^d of full-year revenue from 37% a year earlier, which reflects export-control pressure.

02—Key points

Key Highlights

Full-year FY2025 net revenue of $28.37 billion, a record and up 4% year over year; fourth-quarter revenue of $6.80 billion was down 3%.
Full-year non-GAAP EPS of $9.42 (up 9%) and GAAP EPS of $8.66 (up 1%); fourth-quarter non-GAAP EPS of $2.17 was down 6%, while GAAP EPS of $2.38 rose 14%, aided by a $467 million unrealized gain on strategic investments.
Q1 FY2026 guidance: revenue of $6.85 billion (+/- $0.5 billion) and non-GAAP EPS of $2.18 (+/- $0.20), which includes a $0.04 per share tax benefit from intra-entity intangible asset transfers.
Non-GAAP free cash flow fell 24% to $5.70 billion for the year, as capital expenditures rose to $2.26 billion from $1.19 billion.
Semiconductor Systems was the main growth engine, with full-year revenue of $20.80 billion (up 4%) and a 35.5% operating margin; DRAM rose to 26% of segment mix and foundry/logic was 67%.
Restructuring charges of $181 million were recorded in the fourth quarter under a workforce reduction plan, which contributed to a GAAP operating margin of 25.2% in the quarter.
Capital returns remained substantial, with $4.90 billion of share repurchases and $1.38 billion of dividends paid in fiscal 2025, while cash and short-term investments of about $8.6 billion and long-term investments of $4.3 billion were held at year end.

03—Questions

Frequently Asked Questions

Why did quarterly revenue decline while the company reported record annual revenue?
Fourth-quarter revenue of $6.80 billion fell 3% year over year, while full-year revenue of $28.37 billion rose 4%. Growth in the first three quarters, particularly from Taiwan and Korea, offset the softer fourth quarter. China revenue also declined sharply in the fourth quarter, to $1.96 billion from $2.14 billion, and Global Services revenue was roughly flat.
Why does GAAP EPS rise while non-GAAP EPS falls in the fourth quarter?
GAAP EPS of $2.38 includes a $467 million unrealized gain on strategic investments, which is excluded from non-GAAP results. Non-GAAP EPS of $2.17 excludes that gain as well as the $181 million restructuring charge and a $41 million impairment, and it fell 6% year over year. Investors focused on operating performance should weight the non-GAAP figure more heavily.
What does the company expect for the coming quarters, and what drives the outlook?
For Q1 FY2026, Applied guided to $6.85 billion of revenue (+/- $0.5 billion) and non-GAAP EPS of $2.18 (+/- $0.20). Management said it is preparing operations and service organizations for higher demand starting in the second half of calendar 2026, tied to AI-driven investment in advanced semiconductors and wafer fab equipment. The guidance excludes unforeseen acquisition charges and other unusual items.
Why did free cash flow decline so sharply, and is it a concern?
Non-GAAP free cash flow fell 24% to $5.70 billion, mainly because capital expenditures rose to $2.26 billion from $1.19 billion, while operating cash flow declined to $7.96 billion from $8.68 billion. Net working capital was a use of cash for the full year. The higher capex appears to support the capacity expansion that management is preparing for expected demand, but investors should watch whether that spending converts into revenue growth.
What is the company's exposure to China and other geographies, and why does it matter?
China represented 30% of full-year revenue ($8.53 billion), down from 37% ($10.12 billion) a year earlier. Taiwan rose to 24% ($6.86 billion) and Korea to 20% ($5.61 billion), reflecting customer investment in advanced nodes and memory. The filing's risk factors cite export regulations and license requirements, so continued China concentration reduction could affect revenue sensitivity to export policy changes.

04—Continue

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