Applied Materials (AMAT) delivered a fiscal Q2 that aligned with expectations, but the semiconductor equipment supplier is not showing the same level of upside as some of its competitors, Morgan Stanley said in a report Friday.

Applied Materials reported April quarter revenue of $7.1 billion -- slightly below expectations -- as strong NAND growth was offset by dynamic random-access memory, or DRAM and Semiconductor Systems declines, though earnings per share rose to $2.39 and gross margin improved to 49.2%, both beating forecasts, the report said.

the company's performance was more in line with forecasts compared to competitors like KLA's (KLAC) and Lam Research (LRCX), which demonstrated more notable upside, Morgan Stanley said, adding that a slight decline in business from China also contributed to this difference.

The company forecast July revenue of $7.2 billion and adjusted full-year estimates, raising NAND and logic forecasts but lowering DRAM, the report said.

Geopolitical factors continue to create uncertainty, with potential shifts from current U.S. export controls to more unpredictable policies under a new administration, while foundry tariffs could encourage increased U.S. investment by multinational companies, Morgan Stanley said.

Morgan Stanley lowered the price target of Applied Materials to $162 from $164 due to a slight valuation adjustment amid sector-wide trends, with an underweight rating signaling expectations of below-average performance, the report said.

Shares of Applied Materials were down more than 6% in recent Friday trading.

Price: 163.45, Change: -11.30, Percent Change: -6.47