Applied Materials, Inc.

During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. I would now like to turn the call over to Mike Sullivan, Corporate Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining today's call. With me are Gary Dickerson, our President and CEO, and Bryce Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call includes forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning these risks and uncertainties is discussed in our most recent Form 10-Q and other filings with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures can be found in today's earnings press release and in our quarterly earnings materials, which are available on our investor relations website at ir.appliedmaterials.com. And with that introduction, I'd now like to turn the call over to Gary Dickerson.

Welcome back, Mike. Applied Materials delivered fiscal fourth quarter results above the midpoint of our guidance to complete another record year. 2025 was our sixth consecutive year of growth, and over this period, we have grown revenue and earnings at annualized rates of approximately 12 and 20%. These results are made possible by our passionate and dedicated employees around the world. Over the past 12 months, we have built new capabilities, strengthened our product portfolio, and streamlined our organization to prepare for the opportunities ahead. Applied is in a tremendous position to benefit as AI computing fuels secular growth in semiconductors and wafer fab equipment. As this is our year end call, I'll begin with a brief review of our performance in 2025. Then I'll provide our latest market outlook. And finally, I'll describe how our inflection focused innovation strategy enables us to extend our leadership in the most valuable and fastest growing areas of the market as next generation technologies ramp in volume production in 2026 and beyond. Looking back at fiscal 2025, while it was a growth year for Applied, our growth rate was tempered due to increased trade restrictions and an unfavorable market mix. Over the past 12 months, multiple trade rule changes have reduced the size of our accessible market in China. Overall, China declined to 28% of our total systems and service revenues in fiscal 2025 and to 25% for our fourth quarter. In 2026, we expect wafer fab equipment spending in China to be lower, and we are not anticipating significant changes to market restrictions. In the areas of the market where we can operate, we are competing well and maintaining market share. Outside of China, the fastest growing areas of the market in 2025 were segments where applied had low or no share. In leading edge foundry logic, investment was more oriented toward advanced lithography. We believe this is a positive leading indicator for process equipment demand in 2026. NAND, where historically applied has lower market share, is on track to approximately double in 2025, even though it remains a relatively small portion of the wafer fab equipment market. In DRAM, where Applied has strong process technology leadership, overall spending is tracking to be approximately flat for calendar 2025. Nevertheless, we strengthened our leadership position in DRAM growing revenues from leading edge customers by more than 50% over the past four fiscal quarters. As we look ahead to 2026, we expect the spending mix to play more to applied strengths with leading edge foundry logic, DRAM, and advanced packaging being the fastest growing areas of the market. I recently returned from an extended trip to Asia. My discussions with customers and partners reinforce my view that opportunities for the semiconductor industry and applied materials have never been greater. Our customers are engaging with us to ensure we are ready to support significant production ramps in the coming years. AI has reached a tipping point that is accelerating investment in next-generation computing infrastructure and advanced silicon. Today, we are seeing a virtuous cycle of innovation and demand, advances in performance, energy consumption, and cost of AI computing open up new AI applications that in turn significantly increase demand for AI compute capacity. Recent third-party forecasts predict that the semiconductor industry will grow at a compound annual rate between 10 to 15 percent over the next five years, driving a healthy increase in wafer fab equipment spending. We expect 2026 to be another growth year for Applied, with our revenue being weighted toward the second half of the calendar year. AI computing is not only fueling growth, but also reshaping the semiconductor roadmap and changing the way chips are designed and manufactured. Foundational semiconductor technology plays a critical role in increasing performance and bringing down the cost of AI in the data center and at the edge. Today, major technology inflections are underway in five key areas. Leading edge logic, high performance DRAM, high bandwidth memory or DRAM stacking, advanced packaging for heterogeneous integration, and power electronics. At Applied, our core strategy is inflection focused innovation. We partner with our customers to see technology inflections early. We focus our research and development on the most critical and valuable challenges on their roadmaps using deep co-innovation engagement models. And we create highly differentiated solutions by connecting our broad portfolio of capabilities and technologies. The three products we recently launched at Semicon West are great examples of how this strategy works. Our new XTERRA epitaxy system enables higher performance gate-all-around transistors for 2 nanometer and beyond. XTERRA creates void-free source drain structures that provide higher transistor speeds that are especially critical for AI computing. The XTERRA system integrates epi, cleaning, and etch, resulting in a 40% improvement in uniformity and 50% lower gas usage compared to traditional EPI. Connex is the industry's first integrated die-to-wafer bonder. Hybrid bonding enables significant improvement in performance, power consumption, and costs for both complex multi-chip packages and die stacking. Connex is a six-step integrated system with onboard metrology that provides higher accuracy bonding, smaller interconnect pitches, and higher yields for new logic and memory packaging architectures. ProVision 10 is designed to improve yield in 3D devices and further extends our leadership in eBee metrology. eBee metrology is critical for 3D devices as it can see through multiple layers of 3D chips and provide multi-layer images to identify defects in buried structures. This system is the first to use cold field emission technology for metrology, which increases image resolution by 50% and imaging speed 10 times compared to conventional thermal field emission technology. Overall, Applied is very well positioned at the most valuable technology inflections and in areas of the market that will grow fastest as AI is deployed on a large scale. The process tool of record positions that we have established over the past several years give us confidence that we will extend our strong leadership position in logic, DRAM, and packaging as advanced technology nodes ramp in volume production. Another key theme we consistently hear from our customers and our customers' customers is that co-optimization of the technology stack is more critical than ever. We are expanding our deep multi-year co-innovation engagements that focus on system technology co-optimization. Our high-velocity co-innovation model provides chip makers and chip designers much earlier access to next-generation process technology to accelerate their new chip and system architectures. This is a core value proposition of Applied Materials Equipment and Process Innovation and Commercialization Platform, or EPIC. Construction of the platform's flagship facility, the EPIC Center in Silicon Valley, is on track and we are excited to begin operations next year. Our co-optimization strategies extend well beyond R&D. As our customers race to bring these complex new device architecture inflections to market, we are providing advanced service solutions that help them rapidly transfer new technology into their pilot lines and then rapidly optimize device performance, yield, and cost in volume production. In 2025, our core service business delivered another year of double-digit growth with more than two-thirds of our service revenue generated from subscriptions. In AGS and across Applied, we are rapidly adopting AI and digital tools. This enables us to drive higher velocity and productivity, innovate the way we work, and streamline our organization to meet the opportunities ahead. Before I hand over to Bryce, I'll quickly summarize. Fiscal 2025 was our sixth consecutive year of growth, even as trade restrictions and an unfavorable market mix trimmed our growth rate for the year. As we look ahead, large-scale AI adoption will drive substantial investment in AI computing infrastructure, including advanced semiconductors and wafer fab equipment. applies inflection-focused innovation strategy positions us for another record year in 2026 as we gain share at the highest value technology inflections in the fastest growing areas of the market. As next generation technologies ramp in volume production over the coming years, we will extend our leadership in logic, DRAM, and packaging. Bryce, over to you.