Applied Materials Forecasts $600M Revenue Hit from Expanded China Export Curbs

Applied Materials (AMAT), which is the largest U.S. maker of machinery used to manufacture semiconductors, is bracing for a significant financial impact following the expansion of U.S. export restrictions targeting China. The company has flagged a substantial $600 million hit to its fiscal 2026 revenue as a direct consequence of these widened export curbs.

In addition to the long-term forecast, Applied Materials also expects an impact of about $110 million on its fourth-quarter revenue. The company stated in a filing that the new rule would make it more difficult to export some products and supply specific parts and services to select China-based customers without first obtaining a license.

This regulatory shift stems from a new rule published by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). The Commerce Department widened the export blacklist earlier this week to include majority-owned subsidiaries of listed companies. This long-awaited rule, published on September 29th, expands the range of companies subject to export restrictions and is aimed at cracking down on firms in China and other countries that use units and affiliates to circumvent existing U.S. export controls.

Under the measure, subsidiaries that are at least 50% owned by blacklisted companies will now face the same restrictions as their sanctioned parents. Previously, the BIS's export restrictions did not apply to entities that were not specifically named on the list, even if they had extensive corporate and financial ties with the listed entities. The new rule also stipulates that significant minority ownership by an entity list company will trigger additional due diligence requirements for exports.

The implementation of this new rule is likely to disrupt supply chains even more and will greatly increase the number of companies that need licenses to receive American goods and services. These increasingly strict rules are part of a broader push by Washington to limit the Asian nation’s ability to develop its domestic chip supply. Successive administrations have cited national security concerns for these moves and have attempted to encourage other governments to place similar curbs on AMAT’s overseas competitors.

The announcement had an immediate effect on the market: Shares of Applied Materials fell about 3% in extended trading on Thursday, with premarket trading showing shares down 3.5% at $215.90. At one point, shares of the Santa Clara, California-based company fell as much as 5.6%. Other U.S. semicaps are likely to be affected, including rivals such as Lam Research (LRCX), which was down 2.3%, and ASML Holding (ASML).

Despite the clear financial impact, analyst views suggest perspective. Brokerage Bernstein called the estimated revenue hit "annoying but mostly incremental," characterizing it as a "regulatory clean-up rather than a major shift".

It is worth noting that these challenges arrive after a period of recent strong performance for Applied Materials. The company reported that its third-quarter revenue rose 8% from a year ago to $7.30 billion, surpassing estimates of $7.22 billion. Furthermore, the company's revenue for fiscal 2024 increased by 2.5% to $27.18 billion. However, the company and its rivals were already under pressure from weakness in China and existing U.S. tariffs, leading to dour sales and profit forecasts provided by Applied Materials in August. The newly expanded export restrictions introduce significant additional complexities for AMAT’s operations in the region.