Applied Materials Falls Despite Beating Expectations as Wall Street Demands More from AI Trade
The second quarter earnings season is winding down on a historic note, with nearly 90% of S&P 500 (^GSPC) companies having already reported results. According to FactSet data, Q2 earnings for the broad index are on pace to rise 50% year over year, the highest growth rate since 2021. Bank of America strategists have identified artificial intelligence as the growth engine driving this broad-based earnings expansion.
Yet even standout results can disappoint when expectations are sky-high. Applied Materials (AMAT) saw its stock fall over 3% in after-hours trading despite posting record revenue of $9.12 billion, which topped analyst expectations. EPS rose 43% year over year to $3.17 in the fiscal third quarter, with management noting that “rapid global adoption of AI drives unprecedented demand for our materials engineering solutions.” The company guided Q4 revenue to $10.25 billion (plus or minus $500 million) and adjusted diluted EPS of $4.02 (plus or minus $0.20).
AI Infrastructure Winners and Laggards This Week
Several AI-exposed names reported this week, painting a mixed picture for the infrastructure trade:
- Supermicro (SMCI) jumped over 13% after Q4 EPS of $1.70 beat the $1.59 estimate on $11.2 billion in revenue. Q1 guidance of $14.5B-$15.5B crushed the $11.9B consensus, with gross margins expanding to 17.5% from 9.5%.
- CoreWeave (CRWV) surged 18% as Q2 revenue hit $2.58 billion (vs. $2.5B expected) and the loss per share narrowed to $1.14 (vs. $1.41 expected). CEO Michael Intrator called it an “inflection point” with expanding operating leverage.
- Nebius (NBIS) soared 18% with AI cloud revenue surging 514% year over year to $575 million. CEO Arkady Volozh disclosed four $1 billion deals with Reflection, Cohere, a US neolabs, and a large US quant trading firm.
- Cerebras (CBRS) raised its annual revenue and gross margin forecasts on strong inference demand, but the stock fell nearly 18% in extended trading despite Q2 sales rising 74.3% to $180.11 million.
- Cisco (CSCO) topped Q4 estimates with $17.3 billion in revenue (vs. $16.8B expected) and EPS of $0.97 (vs. $0.86), but shares slipped 2% as profit-taking hit after a 60%+ YTD rally.
AI-Linked EPS Growth Running at 28%
Per BofA research, EPS growth at AI-related companies averaged 28% year-on-year in Q2. With roughly 80% of S&P 500 reporters posting year-on-year EPS growth, the quarter ranks in the 94th percentile for that metric. Combined with consensus forecasts for Q3 and Q4, the index is tracking for four consecutive quarters of EPS growth above 20%, a feat that has happened only 10 times since 1936.
Non-AI Highlights
Outside the AI complex, Cava (CAVA) jumped 10% on comparable sales growth of 9% and traffic up 5.3%, reaffirming full-year sales growth guidance of 4.5% to 6.5%. On Holding (ONON) plunged 18% pre-market after Q2 revenue of CHF 850.3 million missed the CHF 881.4 million estimate, despite gross margin expansion to 65.4%. Plug Power (PLUG) rose 8% after revenue of $178 million beat the $169 million consensus and the company raised full-year revenue growth guidance to 15%-16%.
The takeaway for investors: in a quarter where 50% earnings growth has become the new baseline, the bar for AI infrastructure names is being set extraordinarily high. Quality is rewarded, but so is growth at any reasonable price, and the market is increasingly unforgiving of guidance that merely meets rather than exceeds expectations.
Frequently Asked Questions
Q: Why did Applied Materials stock drop after a record revenue beat?
A: Despite beating revenue and EPS estimates, AMAT’s after-hours decline reflects Wall Street’s elevated expectations. When a stock trades at AI-infrastructure multiples, even strong results can trigger profit-taking if guidance isn’t dramatically above consensus.
Q: How much have S&P 500 earnings grown in Q2 2025?
A: Per FactSet, S&P 500 Q2 earnings are on pace to rise 50% year over year, the highest growth rate since 2021. AI-related companies specifically have averaged 28% EPS growth per Bank of America research.
Q: What other AI companies reported earnings this week?
A: Key AI-related reporters included Supermicro (SMCI), CoreWeave (CRWV), Nebius (NBIS), Cerebras (CBRS), Cisco (CSCO), and Applied Materials (AMAT), with results broadly strong but stock reactions mixed based on forward guidance and prior run-ups.
