Morningstar

Applied Materials Earnings: Momentum Continues as AI Equipment Demand Keeps Accelerating

Positive guidance from peers and Applied indicates that industry demand remains healthy.

Signage with logo at the Silicon Valley headquarters Applied Materials.
Smith Collection/Gado via Getty
Securities in This Article
Applied Materials Inc
(AMAT)

Key Morningstar Metrics for Applied Materials

  • Fair Value Estimate
    : $520.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Wide
  • Morningstar Uncertainty Rating
    : High

What We Thought of Applied Materials’ Earnings

Applied Materials AMAT posted solid fiscal third-quarter results, driven by surging AI infrastructure demand. Revenue grew 25% year on year to $9.1 billion, beating FactSet consensus estimates. Fourth-quarter guidance is for $10.25 billion in sales and $4.02 in EPS at the midpoint, ahead of our estimates.

Why it matters: The artificial intelligence-driven growth cycle for chip equipment continues to strengthen. We are impressed by the demand for leading-edge logic, DRAM, and advanced packaging, which is outpacing chip supply. We expect this to drive the majority of growth in wafer fabrication equipment in 2026-27.

  • DRAM looks especially strong, with sales growing 52% year on year and management expecting an even higher step-up for the second half of the year. Applied benefits from industry efforts to increase existing capacity and new fab builds.
  • Applied raised its 2026 systems growth outlook above its earlier target of 30%, expecting another solid year in 2027. As this demand visibility improves, Applied is expected to bring roughly double its quarterly system output online by 2028.

The bottom line: Results and guidance reaffirmed the upside we baked into our model ahead of earnings. We maintain our $520 fair value estimate for wide-moat Applied Materials. After the shares slipped against high expectations ahead of the earnings release, we now view them as fairly valued.

  • Positive guidance from peers and Applied indicates that industry demand remains healthy. We model close to 20% annual revenue growth through 2030, with faster growth in the next three years, driven by robust equipment demand, clean room expansions, and tight chip supply.
  • We like that profitability is improving alongside growth. Non-GAAP gross margin reached 50.4%, marking its 13th consecutive quarter of year-over-year expansion. We estimate margins to rise steadily as a richer mix, value-based pricing, and operating leverage kick in.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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