Applied Materials forecasts quarterly revenue above estimates on AI-driven demand

(Reuters) -Applied Materials forecast fourth-quarter revenue slightly above Wall Street estimates on Thursday, anticipating a surge in AI-fueled demand for its chip-making equipment.

Booming demand for AI-powered chips has increased the need for sophisticated and expensive wafer fabrication equipment (WFE) essential for chip manufacturing, benefiting companies such as Applied Materials (NASDAQ:).

A rise in demand for high-performance computing and data centers has also boosted the need for memory semiconductors such as dynamic random access memory and flash memory, in turn benefiting suppliers of chip-making tools.

Shares of Applied Materials fell 2.4% in extended trading. They had closed about 5% higher on Thursday.

“I think some of the aftermarket pullback is based on how much the stock went up today… the mixed sales report from China and the wide variance in their fourth-quarter forecast,” Michael Ashley Schulman, chief investment officer at Running Point Capital, said.

“Some analysts may have been looking for a more robust next-quarter forecast.”

The largest U.S. semiconductor equipment maker expects fourth-quarter revenue of about $6.93 billion, plus or minus $400 million, compared with analysts’ average estimate of $6.92 billion, according to LSEG data.

It forecast adjusted profit per share between $2.00 and $2.36, compared with an estimate of $2.14 per share.

The company reported third-quarter revenue of $6.78 billion, beating an average estimate of $6.67 billion. It reported 32% of its total revenue from China, compared with 27% a year earlier.

Its adjusted profit per share was $2.12 per share, compared with a market estimate of $2.02.

Applied Materials disclosed in May that it had received another subpoena from the U.S. Department of Commerce, as regulators sought more information about shipments to China.