Let $A[C/x]$ denote substitution of $C$ for $x$ in $A$.
Suppose we arrived at the expression $AB[C/x][D/y]$ and we want to manipulate it as follows:
$$ \begin{aligned} AB[C/x][D/y] &= \Big(\big((AB)[C/x]\big)[D/y]\Big)\\ &= \Big(\big((A[C/x])(B[C/x])\big)[D/y]\Big)\\ &= \Big(\big((A[C/x])[D/y]\big)\big((B[C/x])[D/y]\big)\Big)\\ &= \big(A[C/x][D/y]\big)\big(B[C/x][D/y]\big)\\ \end{aligned} $$
- Can we perform the above manipulations always?
- Or only if certain conditions hold?
- such as $x \neq y \text{ and } \big(y \not \in \textsf{FV}(C) \text{ or } x \not \in \textsf{FV}(AB)\big)$ (see below)
Here's one way to arrive at $AB[C/x][D/y]$:
$\beta$-reduction is, of course, defined in terms of substitution as:
$$(\lambda x.A)\ C \rightarrow_{\beta} A[C/x]$$
Under certain conditions, we have
$$(\lambda xy.AB)\ C\ D \twoheadrightarrow_{\beta} AB[C/x][D/y]$$
Proof:
$$ \begin{aligned} (\lambda xy.AB)\ C\ D &\rightarrow_{\beta} ((\lambda y.AB)[C/x])\ D\\ &\equiv (\lambda y.(AB[C/x]))\ D &&\text{conditions: } x \neq y \text{ and } \big(y \not \in \textsf{FV}(C) \text{ or } x \not \in \textsf{FV}(AB)\big)\\ &\rightarrow_{\beta} (AB[C/x])[D/y]\\ &\equiv AB[C/x][D/y] \end{aligned} $$
What you described above sounds nothing but successive substitutions in lambda calculus and we certainly need some rules for it to be manipulated like you specified as referenced here:
So in your first example if both $A,B$ are terms without abstraction, then you can always have $AB[C/x][D/y]=(A[C/x][D/y])(B[C/x][D/y])$ and further possible result may be based on the specific content of $A,B$. For example, if $A$ doesn't contain variable $x$ and $x \neq y$ then your substitution $[C/x]$ will have no effect on $A$. On the other hand, if your expressions have lambda abstraction(s), then you need to match the conditions of any of the rules 4/5/6 above to proceed accordingly.
Finally successive substitution is different from simultaneous substitution as shown from following example using your notation. If $M ≡ x_1x_2$, then the successive substitution results in $(M[x_1 /x_2])[u/x_1] ≡ [u/x_1 ](x_1x_1) ≡ uu$, while the simultaneous substitution results in $M[x_1 /x_2, u/x_1] ≡ ux_1$.