Applied Materials
AMAT · NASDAQSemiconductors · Wafer Fab Equipment
Since the Report − 14.9%
Close on Report DayAug 13
$534.54▼ 5.0%Report-Day Move
- Market Cap(Today)
- ≈ $361 B
- 1Y Return(At Report)
- + 190%
- P/E($10.91 · Trailing 12M)
- 41.7
- Net Margin(Trailing 12M)
- 30.1%
Applied Materials posted record third-quarter revenue of $9.12 billion, with adjusted earnings per share rising to $3.50 to beat expectations, and guided fourth-quarter revenue to $10.25 billion, well above what the market had penciled in. Despite "unprecedented" AI-driven demand for chip equipment, the stock fell about 5% after hours in a "beat wasn't enough" reaction following a steep year-long rally. From here the focus shifts to whether the record outlook carries into 2027 and how the revenue mix shifting away from China affects margins.
Revenue (Q3)
$9.12B
Record · 25% YoY
Adjusted EPS
$3.50
Est. Was $3.40
Gross Margin
50.4%
Adjusted · Solid
Semiconductor Systems
$7.04B
Op. Margin 38%
Q4 Revenue Guidance
$10.25B
Est. $9.54B
Stock Reaction
▼ 5.0%
After Hours
Quarterly Revenue ($ Billion)
7.30
6.80
7.01
7.91
9.12
9.75–10.75
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
- Annual Revenue Growth
- ▲ 25%
- Semiconductor Systems
- $7.04B77% of Revenue
- China Revenue Share
- ▼ 28%Down From 35%
Q4 FY26 Company Guidance
- Revenue9.75 – 10.75 billion
Midpoint $10.25B · Market Expectation $9.54BWell Above Expectation ▲
- Adjusted EPS3.82 – 4.22 $
Midpoint $4.02 · Market Expectation $3.69Above Expectation ▲
The blue band is the company's low–high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. Axis is ±9.4% around the midpoint.
- Operating Margin
- 34.0%Adjusted · Q3
- Free Cash Flow
- $2.33BQ3
- Shareholder Returns
- $860MBuyback + Dividend
“Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company's history.”
- Record-breaking quarter
- AI-driven demand
- 2026 outlook raised
Summary
Applied Materials, the chip-equipment giant, set records in its fiscal third quarter. Revenue rose 25% year over year to $9.12 billion, the highest in company history, topping the $8.99 billion market expectation. Adjusted earnings per share climbed 41% year over year to $3.50, ahead of the $3.40 expectation, while GAAP earnings per share rose 43% to $3.17. Adjusted gross margin held at a strong 50.4% and adjusted operating margin at 34.0%. Semiconductor Systems, the largest business, delivered $7.04 billion in revenue, and its operating margin expanded to 38.0% from 33.2% a year earlier. Operating cash flow reached $3.04 billion.
Even with such a strong scorecard, the stock fell about 5% after hours from its $534.54 close, sliding toward $508. The reason is simple: the shares had climbed roughly 190% over the past year and around 100% year to date, and the pricing left no room for anything short of perfection. The price-to-earnings ratio is near 50; at that multiple, merely beating expectations is not enough and the market wanted a far bigger surprise. The stock had already fallen 2.48% during the regular session on report day. So the drop reflects the unwinding of stretched expectations rather than any weakness in the quarter.
Our overall view is that the quarter itself was strong on every axis; the score measures the results, not the stock reaction. Record revenue, an earnings beat, a fourth-quarter outlook well above market expectations, and structural AI-driven demand all came together. The company returned $860 million to shareholders through buybacks and dividends during the quarter, and its China revenue share fell from 35% to 28%, reducing geopolitical risk. The main caveats are the elevated valuation, the cyclical nature of the chip-equipment industry, and the trajectory of export controls toward China. The results support a "buy" read on the quarter; this is an evaluation of the quarter, not a stock recommendation.
Full Review
ClaudeRecord revenue and margins beat on every front.
Third-quarter revenue of $9.12 billion marks a 25% jump year over year and the highest quarterly revenue in company history. It topped the $8.99 billion market expectation. Adjusted earnings per share of $3.50 rose 41% year over year and GAAP earnings per share of $3.17 rose 43%; both beat expectations. On profitability, adjusted gross margin held at 50.4% and adjusted operating margin at 34.0%, strong figures for an equipment company at this scale. Operating cash flow reached $3.04 billion and free cash flow $2.33 billion. In short, revenue, earnings and margin all beat in the same quarter; there is no weak line on the scorecard.
AI and advanced packaging power the growth.
Semiconductor Systems, the backbone of revenue, generated $7.04 billion and made up roughly 77% of total revenue. More striking, that segment's operating margin expanded to 38.0% from 33.2% a year earlier. The company emphasized that growth is fueled by "unprecedented" demand for AI infrastructure. Investment in advanced packaging, high-bandwidth memory and leading-edge logic nodes is lifting equipment demand. Management again raised its Semiconductor Systems revenue expectation for calendar 2026 and guided to growing faster than the market. This is not a one-quarter flash but a sign of a demand wave spread across multiple quarters.
A record outlook, but the stock said "not enough."
The company guided fourth-quarter revenue to a midpoint of $10.25 billion, roughly 7% above the $9.54 billion market expectation. The adjusted earnings-per-share guide is $3.82–$4.22, a midpoint of $4.02, versus a $3.69 expectation. So both revenue and earnings guidance beat clearly. Even so, the stock fell about 5% after hours. The reason is not the quarter but the pricing: the shares had risen about 190% over the past year and the price-to-earnings ratio was near 50. At that multiple the market wanted not a "beat" but a blowout. Much of the good news was already in the price.
China share falls, U.S. weight rises.
One of the quarter's notable structural themes was the shift in geographic mix. China's share of total revenue fell to 28% from 35% in the prior period, while the U.S. contribution nearly doubled. Over the long run, this is an important de-risking development against the backdrop of export controls and geopolitical tension. Lower dependence on China softens the impact of any new restrictions on revenue. On the other hand, because the shift changes demand composition in the near term, it is a variable to watch for margins and product mix. By spreading its revenue base across a more balanced geography, the company reduces its exposure to any single market's policy risk.
Strengths
6- Record revenue: $9.12 billion, up 25% year over year and above expectations
- Adjusted earnings per share of $3.50 beat expectations, up 41% year over year
- Fourth-quarter guidance of $10.25 billion, well above market expectations
- Semiconductor Systems operating margin expanded to 38.0% from 33.2%
- China revenue share fell from 35% to 28%, easing geopolitical risk
- Returned $860 million to shareholders via buybacks and dividends this quarter
Risks
5- Price-to-earnings ratio near 50; the valuation is pricing perfection
- The stock has risen about 190% over the past year; good news is priced in
- The chip-equipment industry is cyclical by nature; demand can swing
- The trajectory of export controls toward China remains uncertain
- Volatility in memory capital spending could affect equipment demand
What to Watch
4- Fourth-quarter fiscal 2026 results due ~November 2026
- Calendar 2026 Semiconductor Systems revenue expectation was raised
- Management signaled a strong growth year for 2027
- Potential new export-control decisions toward China to watch
Upcoming Earnings
To Understand This