Applied Materials beats estimates as AI chip investment drives strong outlook

Market Performance

South African Market Summary

The JSE ended marginally weaker yesterday, with the All Share index slipping 0.02% to 117,362.40 points, while the Top 40 index eased 0.09% to 109,680.89 points. Investor sentiment remained cautious as domestic mining data pointed to a slower pace of output growth. Statistics South Africa reported that mining production increased 2.5% year-on-year in March, down from 9.7% in February and below the 4.1% forecast by analysts polled by Reuters. The softer print highlighted continued unevenness in the local production environment. Separately, President Cyril Ramaphosa removed Sisisi Tolashe as minister of social development and appointed Sindisiwe Chikunga as acting minister, pending a permanent appointment.

European Market Summary

European equities closed higher on Thursday, with the pan-European STOXX 600 rising 0.8% to 616.05 points, its strongest level in a week, supported by broad-based gains and strength in technology shares. Investors nevertheless remained cautious as markets monitored developments in US-China talks. In the UK, political uncertainty increased after Labour’s Wes Streeting resigned as health minister, raising fresh questions over Prime Minister Keir Starmer’s leadership. Policy risks also remained in focus after ECB chief economist Philip Lane warned that interest rate hikes may be needed to contain inflation, with money markets pricing in more than two increases this year. UK GDP rose 0.3% month-on-month in March, versus expectations for contraction, helping first-quarter growth reach 0.6%.

US Market Summary

US equities advanced on Thursday, supported by renewed strength in technology shares as investors assessed solid economic data and monitored high-level US-China talks in Beijing. All three major indices closed higher, with the S&P 500 and Nasdaq reaching fresh record closing highs. Market focus centred on President Trump’s meeting with Chinese President Xi Jinping, attended by senior business leaders including Tesla CEO Elon Musk and Nvidia CEO Jensen Huang. On the data front, retail sales met expectations, although higher petrol prices linked to the Iran war provided support. Import prices posted their sharpest increase since October 2022, reinforcing concerns that energy-driven inflation could spread more broadly and delay Federal Reserve rate cuts. Kansas City Fed President Jeffrey Schmid described inflation as the economy’s key risk.

Asian Market Summary

Asia-Pacific markets traded lower this morning, with South Korea’s Kospi retreating after moving above 8,000 to a fresh record high. In Japan, wholesale inflation accelerated in April at its fastest pace in three years, as higher oil and chemical goods prices linked to the Iran war intensified cost pressures. The data strengthened expectations that the Bank of Japan could raise interest rates as early as June, after a policymaker called for tighter policy at the earliest possible stage. Japanese Finance Minister Satsuki Katayama said G7 finance chiefs are likely to discuss global bond market volatility, following sharp yield moves in Japan, the US and Britain. In Australia, planned strike action at Woodside Energy’s Karratha and Pluto LNG facilities added supply-side risk.

Commodity Market Summary

Gold fell to its lowest level in more than a week on Friday and was on track for a weekly decline, as higher energy prices reinforced inflation concerns and supported expectations that interest rates could remain elevated for longer. Investor attention also remained fixed on the meeting between US President Donald Trump and Chinese President Xi Jinping. Oil prices rose more than 1% after Trump said China wanted to buy oil from the US, while supply risks persisted despite Iran saying around 30 vessels had passed through the Strait of Hormuz. Geopolitical tensions remained elevated after a ship was reportedly seized by Iranian personnel near the United Arab Emirates, with Washington and Beijing agreeing on the need to keep the strategic shipping route open.

Currency Market Summary

The South African rand weakened against a firmer US dollar on Thursday as investors awaited the outcome of high-level talks between US President Donald Trump and Chinese President Xi Jinping in Beijing. The dollar strengthened further on Friday and was on track for its largest weekly gain in more than two months, with the dollar index set to rise more than 1% for the week. Rising energy prices and shipping disruptions continued to fuel inflation concerns, increasing expectations that the Federal Reserve could raise interest rates this year. Sterling also came under pressure as the UK’s political crisis deepened following health minister Wes Streeting’s resignation, while UK government bonds retained recent price gains.

Domestic Company News

Karooooo Limited (KRO) -9.76%

Karooooo reported solid FY2026 results, supported by continued subscriber growth and higher recurring revenue, although near-term margins reflected accelerated investment in expansion. Cartrack subscribers increased 16% to 2.66 million, with record net additions of 359,986, while group subscription revenue rose 19% to R4.84 billion. Cartrack’s subscription revenue increased 19% to R4.83 billion, and Karooooo Logistics delivered 29% DaaS revenue growth to R540 million. Group operating profit rose 8% to R1.42 billion, with EPS up 8% to R32.17, while adjusted EPS increased 3% to R32.55. Cartrack’s operating margin moderated to 28% from 31%, reflecting higher sales capacity and acquisition-related costs aimed at supporting long-term recurring revenue growth and shareholder value.

KAL Group Limited (KAL) +1.13%

KAL Group delivered a stronger first-half performance for the six months ended 31 March 2026, supported by revenue growth, improved profitability and a healthier balance sheet. Revenue increased 5.0% to R11.36 billion, while gross profit rose 8.8% to R1.81 billion, indicating margin improvement. EBITDA advanced 7.7% to R599.7 million, while EPS increased 30.3% to 513.87 cents. HEPS rose 12.5% to 441.36 cents, with recurring HEPS up 15.1% to 453.25 cents, reflecting underlying earnings momentum. Net cash from operating activities improved 3.9% to R575.2 million, while net interest-bearing debt to equity strengthened to 32.9% from 48.4%. The board declared a 25.0% higher interim dividend of 70.00 cents per share.

Tharisa plc (THA) +4.80%

Tharisa expects a material improvement in interim earnings for the six months ended 31 March 2026, supported by stronger year-on-year commodity prices. The company guided for basic EPS of between US15.3 cents and US15.8 cents, representing an increase of 512.0% to 532.0% from US2.5 cents in the prior corresponding period. HEPS is expected to rise to between US16.1 cents and US16.6 cents, up 455.2% to 472.4% from US2.9 cents previously. The trading statement follows Tharisa’s production update released on 14 April 2026, which highlighted firmer commodity pricing. Reviewed interim consolidated financial statements are expected to be released on or about 21 May 2026. The guidance has not yet been reviewed by the company’s auditors.

Global Company News

Applied Materials Inc. (AMAT) +0.90%

Applied Materials delivered stronger-than-expected second-quarter results and issued third-quarter guidance ahead of Wall Street estimates, supported by sustained AI-related semiconductor investment. The chip-equipment supplier expects third-quarter revenue of about US$8.95 billion, above consensus of US$8.09 billion, while adjusted EPS guidance of US$3.36 also exceeded expectations of US$2.88. For the second quarter ended 26 April, revenue rose to US$7.91 billion, ahead of estimates of US$7.65 billion, with adjusted EPS of US$2.86 also beating forecasts. Demand is being supported by increased data centre and AI infrastructure spending, which is driving capacity expansion by chipmakers including TSMC and Samsung. Applied expects more than 30% growth in semiconductor equipment and over 50% growth in packaging revenue for 2026.

Honda Motor Company Limited (7267) +3.77%

Honda Motor reported its first annual loss since listing in 1957, as heavy electric-vehicle restructuring costs weighed on earnings and forced a reset of its long-term EV strategy. The group posted an operating loss of ¥414.3 billion for the year ended March, versus a ¥1.2 trillion profit a year earlier, after booking ¥1.45 trillion in EV-related losses. Honda scrapped its target for EVs to represent 20% of new vehicle sales by 2030 and suspended its planned US$11 billion Canada EV project. However, shares rose after the company pledged at least ¥800 billion in shareholder returns over three years. Management expects a return to profitability this year, supported by cost reductions and its strong motorcycle business.

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