Applied Materials makes the machines that make computer chips. Without its equipment, the factories that produce the semiconductors inside your phone, laptop, car, and AI server simply could not operate. The company sells these machines to chip manufacturers around the world, then keeps earning money from those same customers through its Applied Global Services business, which provides repairs, spare parts, software, and long-term service agreements. In fiscal 2025, equipment sales through the Semiconductor Systems segment accounted for 73% of total revenue, while Applied Global Services added another 23%. The diagram below traces where the money goes.
Five years of financial data tell a consistent story: Applied Materials has grown steadily and become more profitable along the way. Revenue climbed from $23.1 billion in 2021 to $28.4 billion in 2025. Gross margin, the share of each dollar left after making the product, held remarkably steady across that stretch, sitting at 47.3% in 2021 and rising to 48.7% in 2025. That stability matters because it shows the company has pricing power even as costs change around it.
Cash generation tells an even more encouraging story. Operating cash flow jumped sharply from $5.4 billion in 2021 to $8.7 billion in 2023 and 2024, before settling at $8.0 billion in 2025. The company also moved from carrying a small net debt position to holding more cash than debt. Net debt went from positive $0.5 billion in 2021, meaning the company owed slightly more than it held, to negative $0.7 billion in 2025, meaning it now holds more cash than it owes. Applied Materials used much of that cash to return money to shareholders, repurchasing $4.9 billion of its own stock and paying $1.4 billion in dividends in fiscal 2025 alone.
That backlog is a useful forward signal. It represents orders already placed but not yet fulfilled, giving the company visibility into near-term revenue. Roughly 31% of it is not expected to ship within the next 12 months, which means a portion of future revenue is already committed on paper today.
The single biggest risk sitting inside this business right now is geography. China accounted for 37% of Applied Materials revenue in fiscal 2024. In fiscal 2025, that fell to 30% as US government export restrictions tightened. Taiwan jumped from 15% to 24% of revenue over the same period, and Korea rose from 17% to 20%, partly absorbing the shift. But the direction of US policy on chip technology exports to China remains unsettled, and the company has received multiple government subpoenas since 2022 about its China customer shipments.
Beyond the China exposure, the company faces a set of interlocking threats. Customer concentration is real: two customers alone accounted for 19% and 15% of fiscal 2025 revenue, meaning just two companies represented more than a third of total sales. Supply chain fragility is a second concern, because Applied Materials assembles its machines from parts sourced across the US, Singapore, Japan, China, Korea, Taiwan, Israel, and other countries. China implemented rare earth mineral export restrictions in 2025, which directly threatens some of those supply lines. Finally, the chip equipment industry is simply volatile by nature. Chip makers ramp up equipment orders aggressively during boom periods and cancel or delay them just as fast when conditions soften.
Applied Global Services generated $6.4 billion in revenue in fiscal 2025, with an operating margin of 28.1%. That is a meaningful cushion when the equipment cycle turns down. The company has said its strategy is to shift more of the services business toward long-term subscription agreements, which would make that revenue stream even more predictable. The installed base of Applied Materials equipment keeps growing as more machines ship each year, which naturally expands the pool of customers who need ongoing service.
That research spending reflects the core competitive challenge. Chip makers are constantly moving to smaller, more complex designs, including three-dimensional transistors, advanced packaging that stacks multiple chips together, and high-bandwidth memory for AI servers. Applied Materials has to develop new equipment ahead of when customers actually need it, so that its tools are ready when chip makers begin selecting equipment for their next factory generation. If a competitor's tool gets chosen instead, Applied Materials can miss an entire technology cycle at a given customer.