Applied Materials, Inc. (AMAT): PESTLE Analysis [Nov-2025 Updated]

You're holding the keys to Applied Materials, Inc. (AMAT) at a critical moment: the company is poised for an estimated 2025 fiscal year revenue of around $28.5 billion, but that growth sits squarely on a geopolitical fault line. The core challenge isn't just selling equipment; it's navigating the US export controls while simultaneously capitalizing on the massive, multi-year CapEx boom fueled by Artificial Intelligence (AI) and the shift to sub-3nm chip architectures. I've seen this movie before, and what's defintely clear is that you must map all six macro-forces-Political, Economic, Sociological, Technological, Legal, and Environmental-to truly understand the risks and opportunities ahead.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Political factors

US export controls severely restrict sales to key Chinese customers.

You need to see the China market not as a single opportunity, but as a politically fractured one. The U.S. government's stringent export controls are the single biggest political headwind Applied Materials, Inc. (AMAT) faces right now. These rules, enforced by the Commerce Department's Bureau of Industry and Security (BIS), severely limit the export of advanced chipmaking equipment and services to specific Chinese customers.

For fiscal year 2025, this impact was significant. China's contribution to AMAT's total systems and service revenues dropped to 28%, a substantial decline from a peak of 45% in the first quarter of fiscal 2024. This erosion of the accessible market was equivalent to 'more than double' the impact felt in fiscal 2024. Looking ahead, the company has already factored in a potential $600 million reduction in sales for fiscal 2026 due to the tightened restrictions. That's a huge, defintely unavoidable headwind.

The core issue is that foreign competitors, who are not bound by U.S. jurisdiction, are now filling the market gap for restricted Chinese customers, which raises a long-term question about market share erosion for AMAT in this critical region. The political decision to prioritize national security over open trade has a direct, measurable cost on the income statement.

The CHIPS and Science Act provides US subsidies, boosting domestic CapEx.

The good news is that what the U.S. government takes away in China, it is actively trying to give back at home. The CHIPS and Science Act is a massive government-driven capital expenditure (CapEx) cycle designed to re-shore semiconductor manufacturing. The Act allocates approximately $52.7 billion in core funding to bolster domestic manufacturing and R&D. This is a multi-year tailwind.

Applied Materials is a direct beneficiary of this policy shift. In 2025, the company secured a $100 million grant under the CHIPS National Advanced Packaging Manufacturing Program (NAPMP) to accelerate the development of silicon-core substrate technology, a key component for next-generation AI chips. This is a clear signal of AMAT's alignment with U.S. strategic goals. The overall market is responding, with global CapEx on advanced chip manufacturing equipment expected to exceed $100 billion in 2025 alone, driven by AI demand and these government incentives. Here's the quick math: the U.S. share of global chipmaking capacity is forecast to increase by 203% by 2032 because of this Act. That means a lot more domestic factory-building, which is AMAT's bread and butter.

Geopolitical tensions drive regionalization (or 'friend-shoring') of supply chains.

Geopolitical tensions have forced a fundamental shift from a cost-efficient, centralized global supply chain model to a 'friend-shoring' model, prioritizing strategic resilience and national security. This means building new fabs in politically stable, allied nations, and AMAT is perfectly positioned to capture this spending.

The evidence of this regionalization is visible in AMAT's 2025 revenue mix:

• China's revenue share is down to 28% for FY2025.
• Taiwan accounted for 28% of Q2 2025 revenue.
• Korea accounted for 22% of Q2 2025 revenue.

Applied Materials reported record revenue in both Taiwan and Korea in fiscal 2025, directly offsetting the decline in the restricted Chinese market. This trend is a strategic opportunity, as it creates new, high-value equipment orders in politically secure regions like the U.S., South Korea, and Taiwan, which are all building advanced-node manufacturing capacity.

EU's European Chips Act aims to double global market share by 2030.

The European Union is also playing the same game as the U.S., which creates another market opportunity. The European Chips Act is an ambitious policy aiming to double the EU's global market share in semiconductors to 20% by 2030. This political goal is backed by serious money.

The Act has leveraged a total of €69 billion in public and private investments as of October 2025. The identified public funding alone is at least €43 billion. This investment is driving the construction of new fabrication plants (fabs) and research centers across the continent, particularly focusing on advanced manufacturing and packaging technologies. For AMAT, Europe is currently a smaller piece of the pie, contributing only 3.8% (or approximately $1.09 billion based on the forecasted total FY2025 revenue of $28.94 billion) to its total revenue for fiscal 2025. The EU's push represents a clear, long-term growth vector for AMAT's European sales, especially in process control and advanced packaging equipment.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Economic factors

You're looking at Applied Materials, Inc. (AMAT) and trying to map the economic landscape for 2025, and the takeaway is clear: the underlying demand for wafer fab equipment (WFE) is robust, driven by AI and memory, but the cost of capital and geopolitical trade friction are the immediate headwinds. We've moved past the trough, but financing big-ticket projects is still a grind.

Global semiconductor CapEx is projected to rebound strongly in 2025.

The global spending on semiconductor capital equipment is definitely turning a corner, which is great for a pure-play equipment provider like Applied Materials. World Semiconductor Trade Statistics (WSTS) projects that companies will allocate around $185 billion to capital expenditures (CapEx) in 2025 to expand manufacturing capacity. That's a strong signal.

This rebound is highly concentrated, though. The massive investments in Artificial Intelligence (AI) and High-Bandwidth Memory (HBM) are the primary fuel. For example, TSMC is guiding for a CapEx range between $38 billion and $42 billion for 2025, and Micron Technology is projecting CapEx of $14 billion for its fiscal year ending in August 2025, which is a significant increase. Here's the quick math: TSMC and Micron alone are driving a huge portion of the market's growth, even as other players like Intel and Samsung are projected to cut their CapEx by 20% and 11%, respectively, according to Semiconductor Intelligence.

• WFE spending grew 19% year-over-year in Q1 2025.
• Memory-related CapEx surged 57% year-over-year in Q1 2025.
• Global capacity is expected to expand by 7% in 2025.

AMAT's estimated 2025 fiscal year revenue is forecast to be around $28.5 billion.

Applied Materials actually reported record annual revenue of $28.37 billion for its fiscal year 2025 (which ended October 26, 2025), marking a 4% increase year-over-year. This performance was driven by the company's strategic positioning in high-value technology inflections like leading-edge logic, DRAM, and advanced packaging.

The Semiconductor Systems segment, which is the core equipment business, accounted for a significant portion of this, with net revenue of $4.76 billion in Q4 FY2025 alone. The company's non-GAAP gross margin also improved, rising by 120 basis points to 48.8% for the full fiscal year. That's a testament to pricing power and operational efficiency, still, the Q4 revenue of $6.80 billion was a 3% decline year-over-year, showing some near-term cyclicality and digestion of capacity.

High interest rates still pressure customer financing for new fabs.

The semiconductor industry is brutally capital-intensive, and the current high interest rate environment is a persistent drag on new fab financing. Building a new fabrication plant (fab) requires billions of dollars, and higher rates directly increase the cost of capital, which can delay or scale back projects. This is a primary concern for equipment suppliers.

The capital and long-term operating costs for advanced logic fabs are already inherently higher in regions like the United States compared to Asia. Even with government subsidies like the CHIPS Act, a standard mature logic fab built in the US can have up to 35% higher operating costs than a similar facility in Taiwan. So, when the cost of borrowing goes up, it puts acute pressure on the financial models of these multi-billion-dollar, multi-year construction projects, making customers more cautious about placing large equipment orders.

Strong US dollar impacts overseas revenue conversion and component costs.

As a US-based multinational, a strong US dollar acts as a headwind for Applied Materials in two ways: it makes overseas revenue worth less when converted back to dollars, and it can increase the cost of components sourced internationally. While the company cited general 'currency fluctuations' as a macroeconomic pressure, the more immediate and quantifiable economic risk is geopolitical.

The US government's expanded export restrictions targeting China, a major market for Applied Materials, is a direct economic hit. China contributed 29% of total net sales in Q4 FY2025, but that revenue declined 8.1% year-over-year in the same quarter due to market restrictions and digestion. Applied Materials has already forecast a revenue hit of around $600 million for fiscal year 2026 due to these tighter US controls. This is a political factor with a very real, measurable economic impact on their top line.

Next Step: Monitor the Federal Reserve's interest rate policy for any shifts that could ease the cost of capital for major fab projects by Q2 2026.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Social factors

You're looking at Applied Materials, Inc. (AMAT) through the social lens, and what you see is a business adapting to a profound shift: the workforce is now a critical infrastructure problem, and corporate values are a financial metric. It's no longer enough to build the best equipment; you also have to win the war for talent and meet rigorous Environmental, Social, and Governance (ESG) standards.

The core of AMAT's social environment in 2025 revolves around talent pipeline investment, transparent diversity goals, and managing the ethical fallout from a complex global supply chain. This is where long-term value is either built or eroded.

Intense global competition for skilled semiconductor process engineers.

The global semiconductor talent shortage is acute, and it's a direct threat to AMAT's innovation pipeline. The industry needs thousands of new engineers, and competition from giants like Lam Research Corporation and KLA Corporation is fierce. AMAT is addressing this head-on by investing heavily in workforce development programs, a clear signal that they view this as a strategic bottleneck, not just an HR problem.

Their proactive approach earned them the 2025 SEMI Excellence in Talent Development Award in November 2025. This recognition highlights their commitment to building the talent pool, which is a necessary, defensive move in this market. They are putting real money and effort into the early stages of the pipeline.

• Momentum Fund: In partnership with the Last Mile Education Fund, this program targets 6,700 new semiconductor graduates by 2030.
• Student Support: The fund has already provided financial support to more than 200 engineering students nationwide.
• Veteran Engagement: Active participation in the SEMI VetWorks employer network helps transition military service members into high-demand semiconductor roles.

Growing investor focus on Environmental, Social, and Governance (ESG) metrics.

Investor scrutiny on ESG has moved from a niche interest to a core driver of capital allocation. For AMAT, this means setting and reporting against clear, measurable social targets, primarily in diversity and supply chain ethics. Honestly, your institutional investors-think BlackRock and Vanguard-are using these metrics to screen for long-term operational risk.

AMAT has established ambitious social goals with a 2030 deadline, demonstrating a commitment to transparency that is vital for maintaining a strong ESG rating and attracting capital. The company was recognized on the Fortune World's Most Admired Companies 2025 list, partly reflecting these efforts.

Shifting work models require investment in hybrid and remote R&D infrastructure.

The nature of R&D is changing. While hands-on work with multi-million dollar equipment remains central, the analysis, simulation, and collaboration that drive innovation are increasingly remote or hybrid. AMAT's response is a massive, centralized investment that supports a decentralized, collaborative model.

Their R&D spending is a key indicator: it grew 13.8% year over year in the second quarter of fiscal 2025. This is a double-digit rise in R&D expenses, which is a significant capital allocation decision. The centerpiece is the new Equipment and Process Innovation and Commercialization (EPIC) Center, a $4 billion gross, incremental capital investment over seven years. This center is designed as a co-innovation hub, where internal teams and customer engineers can work side-by-side, effectively creating a hybrid R&D ecosystem that shortens learning cycles and speeds up time-to-market. The physical infrastructure is a platform for the new, flexible work model.

Increased public scrutiny on chip supply chain labor practices.

Public scrutiny has intensified, not just on labor conditions, but on the ethical end-use of AMAT's advanced equipment. This is a significant social risk that has immediate legal and financial consequences. The issue is centered on the geopolitical tensions and the sale of semiconductor manufacturing equipment (SME) to China-based customers who may have military or human rights ties.

The numbers here are stark. In 2024, AMAT's revenue from China was approximately 36%. This high exposure makes the company a prime target for scrutiny. This is a matter of national security, not just corporate reputation. For instance, AMAT has received multiple subpoenas from U.S. government agencies, including the U.S. Attorney's Office and the SEC, concerning shipments to certain Chinese customers. This investigation, which includes allegations of circumventing export licenses, is a clear example of ethical supply chain scrutiny escalating into a major legal and social liability. You defintely need to track this risk closely.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Technological factors

The technological landscape for Applied Materials, Inc. is defined by a handful of massive, non-negotiable industry shifts. The core takeaway is that the move to three-dimensional structures-Gate-All-Around logic, 3D NAND, and 3D DRAM-requires materials engineering solutions, not just lithography, and that's exactly where Applied Materials makes its money.

You need to focus your capital allocation strategy on the deposition, etch, and metrology equipment that enables these new architectures, because that's where the growth is. Honestly, the old way of just shrinking transistors is dead; the future is vertical stacking and advanced integration.

Transition to Gate-All-Around (GAA) transistor architecture requires new deposition tools.

The shift from FinFET to Gate-All-Around (GAA) transistors at the 3nm/2nm logic nodes is the biggest architectural change since 2010. GAA is a truly three-dimensional structure that wraps the gate around the nanosheet channel on all four sides, which is essential for managing power leakage and continuing to scale performance.

This transition is a major opportunity because it demands new process steps that rely heavily on deposition, etch, and metrology-Applied Materials' core strengths. For instance, creating the nanosheets and the surrounding high-k metal gate requires complex, highly precise Atomic Layer Deposition (ALD) and Selective Removal tools. The global market for GAA transistors is still nascent but is estimated at $677.10 million in 2025, and Applied Materials is projecting significant revenue growth from this GAA process equipment over the next one to two years.

Explosive AI demand fuels investment in advanced packaging technologies.

The skyrocketing demand for Artificial Intelligence (AI) and High-Performance Computing (HPC) chips is driving a massive investment wave in advanced packaging (heterogeneous integration). Since you can't just make a single chip big enough to handle AI workloads, chipmakers are stacking and connecting multiple chiplets-logic, memory, and accelerators-in a single package.

This is a huge tailwind for the company's back-end tools. The global advanced packaging market is projected to reach $40.34 billion in 2025, with advanced packaging wafers forecast to grow by 23% in 2025 alone. Applied Materials is capitalizing on this with new products like the Kinex die-to-wafer bonder, which is a critical tool for the 3D stacking needed for high-bandwidth memory (HBM) and other advanced packages.

High-NA Extreme Ultraviolet (EUV) lithography adoption drives demand for complementary equipment.

While ASML dominates the market for the core High-NA EUV scanner-which can cost about $384 million-Applied Materials is perfectly positioned to sell the complementary equipment. EUV is a patterning tool, but it requires a huge number of subsequent process steps for deposition, etch, and cleaning to complete the chip's structure. For the 2nm and sub-2nm nodes, the process complexity explodes.

The total EUV lithography market is projected to be around $12.3 billion in 2025, but the demand for the non-lithography tools that surround it is what matters here. Applied Materials' advanced metrology and inspection tools, like the PROVision 10 for eBeam metrology, become essential for controlling the incredibly tight tolerances of these new nodes.

Focus on material engineering solutions for 3D NAND and DRAM scaling.

The memory market is seeing a split in investment: DRAM is focused on high-performance HBM for AI, while NAND is recovering from a cyclical downturn. For fiscal year 2025, spending on NAND is on track to approximately double, which is a significant recovery. The total logic and memory segment drives about $9.0 billion of the dry etch systems market in 2025.

Applied Materials' strategy is to solve the physics problems of vertical scaling with materials engineering, not just lithography. For 3D DRAM, which is moving toward vertical stacking similar to 3D NAND, new materials are needed for high-mobility channels. For example, their integrated solutions, like the combination of the DRACO hard mask and Sym3 hard mask etch tool, allow customers to achieve a 30% reduction in hard mask thickness for the capacitor etch, which is a huge density win. They are also exploring single-crystalline epitaxial silicon as a channel material to push the boundaries of 3D NAND density.

• NAND spending is forecast to double in 2025, signaling a market recovery.
• AMAT achieved record DRAM sales outside of China in fiscal year 2025.
• New 3D DRAM architectures require advanced deposition and etch for hundreds of stacked layers.

What this estimate hides is the sheer capital intensity required for these shifts. The complexity of manufacturing GAA and 3D memory means chipmakers must invest heavily in new equipment generations, which defintely benefits Applied Materials.

Next Step: Review your current CapEx budget to ensure at least 40% is allocated to equipment enabling GAA and advanced packaging technologies, given the strong 2025 market signals. Owner: Strategy Team: Present a 3-year CapEx plan focused on these inflections by month-end.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Legal factors

You are navigating a legal landscape that is less about traditional contract law and more about geopolitical risk and intellectual property (IP) warfare. The compliance burden for a company like Applied Materials, Inc. is now a direct, quantifiable headwind to revenue, plus the constant threat of IP litigation in China adds a layer of unpredictable financial risk. This is a high-stakes environment where legal compliance directly impacts your top line.

Strict compliance burden from evolving US export control regulations.

The most immediate and material legal risk you face is the constantly shifting framework of US export controls, primarily targeting China's advanced semiconductor manufacturing capabilities. The Bureau of Industry and Security (BIS) Affiliates Rule, which took effect in late September 2025, immediately complicated your sales process by expanding the list of restricted entities to include their subsidiaries.

This isn't a theoretical problem; it's a direct revenue hit. Applied Materials, Inc. disclosed an anticipated $110 million reduction in net revenue for the fourth quarter of fiscal 2025 alone due to this rule change. Looking ahead, the company forecasts a total revenue reduction of approximately $600 million for the entire fiscal year 2026 as a direct result of these tightened restrictions. China remains a critical market, accounting for over one-third of Applied Materials, Inc.'s net revenue in Q3 2025, so every new restriction has an outsized impact.

Ongoing risk of Intellectual Property (IP) litigation in a highly competitive sector.

In a technology-driven sector like wafer fabrication equipment, IP is everything, and the legal battles over trade secrets are a constant operational cost. The risk is global, but the most aggressive new front is in China.

A clear example of this is the August 2025 lawsuit filed against Applied Materials, Inc. by its rival, Beijing E-Town Semiconductor Technology. The suit, filed in the Beijing Intellectual Property Court, alleges trade secret theft related to core technologies for plasma source application in wafer surface treatment. The plaintiff is seeking substantial financial recompense, specifically demanding about 100 million yuan (around $13.9 million) in damages. This shows that IP disputes are no longer just defensive maneuvers; they are now offensive, high-value tools in the broader geopolitical tech competition.

Increased antitrust scrutiny on large equipment mergers and acquisitions.

The regulatory environment for large-scale M&A in the semiconductor equipment industry is highly restrictive, driven by global concerns over market concentration and national security. While Applied Materials, Inc. is not currently involved in a major, blocked M&A deal, the entire sector operates under a cloud of intense scrutiny from the U.S. Department of Justice (DOJ), the Federal Trade Commission (FTC), and international bodies like the European Commission (EC).

The 2025 regulatory focus is on both horizontal (competitor-to-competitor) and vertical (supplier-to-customer) deals. A relevant example from the broader chip ecosystem is the Synopsys/Ansys acquisition, a $35 billion deal that required the divestiture of a $100 million optical unit to alleviate horizontal competition concerns and gain regulatory clearance in key jurisdictions like the EC in early 2025. This illustrates the high bar for approval: regulators will demand significant remedies-like divesting entire product lines-to ensure competition is maintained, making M&A a slow, expensive, and high-risk path for growth.

New global data privacy and cybersecurity mandates affect operational security.

As a global enterprise, Applied Materials, Inc. must navigate a patchwork of new, stringent data privacy and cybersecurity laws, which translates directly into increased and mandatory compliance spending. The risk here is less about a single massive fine in 2025 and more about the ongoing, non-optional cost of a global compliance program.

The focus is global, and you defintely need to keep up with the pace of change.

• India's Digital Personal Data Protection Act (DPDP): Expected to take effect in 2025, this law introduces a major new compliance requirement for all companies processing Indian residents' personal data, including employees and customers.
• US State-Level Enforcement: State regulators in key markets like California, New York, and Texas are aggressively stepping up enforcement of their own privacy and cybersecurity laws, which can lead to multiple, simultaneous investigations.

The core compliance cost is tied to maintaining a robust, globally consistent framework that addresses rights like data access and deletion, which the company's June 2024 Privacy Policy update acknowledges as necessary to meet legal requirements, including those similar to the EU's General Data Protection Regulation (GDPR). The legal team's constant work here is a non-revenue-generating operational expense that cannot be cut.

Applied Materials, Inc. (AMAT) - PESTLE Analysis: Environmental factors

The environmental factor is no longer a peripheral compliance issue; it's a core driver of Applied Materials, Inc.'s (AMAT) product roadmap and a major operational risk. Your customers-the largest chipmakers in the world-are demanding equipment that fundamentally uses less energy and water, and they are using AMAT's sustainability metrics as a vendor qualification filter. This is a capital expenditure (CapEx) cycle driven by green mandates.

Here's the quick math: If the AI-driven CapEx cycle holds, AMAT's Process Equipment segment, which drives the bulk of that $28.5 billion revenue estimate, is set for a multi-year tailwind. But what this estimate hides is the potential for sudden, new export rules to cut off a billion-dollar revenue stream overnight. It's a tightrope walk.

AMAT targets significant reductions in Scope 1 and 2 greenhouse gas emissions by 2030.

Applied Materials has set aggressive, science-based targets validated by the Science Based Targets initiative (SBTi), aligning its operations with the 1.5°C global warming scenario. The most direct impact is on Scope 1 (direct emissions) and Scope 2 (purchased energy) emissions, which the company aims to cut by an absolute 50% by fiscal year 2030, using a 2019 baseline. This is a clear, non-negotiable goal. To hit this, they are aggressively transitioning to renewable energy.

In fiscal 2024, the company sourced 100% of its electricity from renewable sources in the U.S. and 73% globally, a major step toward its goal of 100% renewable electricity globally by 2030. This shift not only reduces their carbon footprint but also stabilizes long-term energy costs, a smart financial move. Still, the challenge remains: Scope 3 emissions-from the use of sold products and the supply chain-make up more than 99% of AMAT's total carbon footprint, so the real heavy lifting is outside their own walls.

Customer demand for equipment with lower energy and water consumption per wafer.

The relentless march to smaller node technologies (like 3nm and 5nm) is dramatically increasing resource consumption at the customer's fab (fabrication plant). For advanced 3-7nm technologies, energy consumption can spike to 800-1,500 kWh per wafer, and water usage can hit 15-38 cubic meters per wafer. Your customers are under intense pressure to reduce this, and they are looking to AMAT's equipment as the solution.

AMAT's response is the '3x30' product efficiency program, which targets a 30% reduction in equivalent energy use, chemical impact, and cleanroom floorspace requirements for their new semiconductor products by 2030. This isn't just marketing; it's a competitive advantage. In 2024, product efficiency improvements already resulted in an average 13% decrease in energy consumption per wafer pass across their semiconductor products, a tangible value-add for chipmakers facing rising utility costs.

This is where R&D directly translates to customer savings.

Regulatory pressure to manage and reduce hazardous chemical waste from manufacturing.

The regulatory landscape for hazardous waste is tightening, especially in the US and internationally, which directly impacts AMAT's manufacturing and logistics. The semiconductor industry uses complex chemicals, and regulators are focused on substances like Per- and Polyfluoroalkyl Substances (PFAS). New EPA regulations under the Toxic Substances Control Act (TSCA) are set to take effect in July 2025, requiring extensive reporting on PFAS uses, production volumes, and disposal. This will create a massive compliance and data-gathering burden.

Also, the new Basel Convention amendments on electrical and electronic waste (e-waste) took effect on January 1, 2025, changing international hazardous materials transportation rules. AMAT's own operations generated hazardous waste that accounted for only 2% of their annual waste output in 2020, but the regulatory complexity is rising exponentially. They manage this risk by contracting with licensed third parties and using the CHWMEG Facility Review Program for vendor oversight.

Supply chain mandates require suppliers to meet specific sustainability standards.

AMAT's SuCCESS2030 (Supply Chain Certification for Environmental and Social Sustainability) initiative is a 10-year roadmap that extends environmental accountability deep into the vendor base. This program is crucial because the majority of their Scope 3 emissions are embedded in the supply chain.

The mandates are concrete and have deadlines that are already past or imminent:

• Reduce supply chain carbon emissions by moving to intermodal shipping, targeting a 15% reduction by 2024.
• Transition to recycled content packaging, targeting 80% by the end of 2023.
• Achieve 100% elimination of phosphate-based pre-treatment of metal surfaces by 2024.

These requirements force suppliers to invest in their own sustainability, making AMAT a powerful driver of industry change. Failure to comply means a supplier loses business, so this mandate is defintely a powerful lever for change.

So, your next step should be a deep dive into the latest Commerce Department guidance. Finance: Draft a 13-week cash view by Friday, stress-testing a 20% immediate drop in China-related revenue.