Applied Materials faces worsening challenges in China operations as export controls bite harder

Applied Materials just delivered a quarter that looks great on paper and worrying underneath. The company posted $9.12 billion in fiscal Q3 2026 revenue, a 25% jump year-over-year, but investors fixated on the part of the business that’s shrinking: China. The stock dropped more than 4% in after-hours trading following the earnings release. The problem is what CEO Gary Dickerson said about the road ahead. The $600 million problem Applied Materials now expects US export controls to carve roughly $600 million out of its fiscal 2026 revenue. China contributed $2.51 billion in Q3, representing 28% of total sales. A year ago, that figure was 35%. Dickerson was blunt about the dynamics at play. The restrictions prevent Applied Materials from supplying China’s memory chip segments. The company’s share of the Chinese wafer fab equipment market has contracted to the mid-20% range, a sharp decline from its earlier dominance. Non-US competitors, particularly from Japan and the Netherlands, are increasingly stepping into the gaps that American restrictions have created. Every quarter that passes without AMAT selling into those segments is a quarter where competitors build relationships, install...