Applied Materials’ Orders Extend to 2030, but Shares Fall Despite Strong Results
Applied Materials, a U.S. chip-equipment supplier, issued guidance for its fiscal fourth quarter after the U.S. market closed Thursday. Revenue in its fiscal third quarter exceeded market expectations, while its fourth-quarter revenue outlook also topped Wall Street forecasts. The company said strong demand for high-end AI chips and large capital-spending programs by major companies would continue to support its semiconductor-manufacturing equipment business. Even so, the results failed to meet investors’ elevated expectations, and the company’s shares fell more than 5% after hours. The stock has more than doubled this year. Applied Materials supplies equipment used in key wafer-fabrication processes, including deposition, chemical-mechanical polishing and inspection. As major chipmakers increase spending and aggressively expand AI infrastructure, Applied Materials has become one of the biggest beneficiaries. According to its earnings report, revenue for the fiscal third quarter ended July 26 rose 25% from a year earlier to $9.12 billion, above the $8.99 billion analyst estimate compiled by LESG. On a non-GAAP basis, the company reported a gross margin of 50.4%, while earnings per share reached a record $3.50. Cash flow from operations also reached a record $3.04 billion. The company returned $860 million to shareholders through $440 million in share repurchases and $420 million in dividends. Applied Materials President and Chief Executive Gary Dickerson said the company had delivered another record quarter, including the highest sequential revenue growth in its history. “As artificial intelligence is rapidly adopted worldwide, demand for our materials-engineering solutions is stronger than ever,” Dickerson said. “We have further raised our 2026 revenue outlook for the semiconductor systems business and are confident that our growth this year will exceed the market average. Based on the growing demand expectations we are receiving from customers, we expect Applied Materials to maintain strong growth momentum in 2027.” The company expects fiscal fourth-quarter revenue of about $10.25 billion, plus or minus $500 million, also above the analysts’ average estimate of $9.54 billion. Chief Financial Officer Bryce Hill said, “We expect revenue in the second half of calendar 2026 to continue its strong growth, with particularly strong performance in DRAM, leading-edge foundry logic and advanced packaging.” Applied Materials expects full-year calendar 2026 revenue from its packaging business to increase by more than 70%, up from its previous forecast of more than 50%. During the earnings call, Hill said, “The business visibility our customers are giving us is at an all-time high, with discussions around some orders extending to 2030.” Stifel analyst Brian Chin said strong quarterly results and revenue-growth outlooks previously delivered by Applied Materials’ peers Lam Research and KLA had also raised market expectations for the chip-equipment company. CFRA analyst Brooks Idlet said the results and guidance did not surprise the market, but the overall performance remained solid and business momentum was clearly continuing to improve. “We believe that if the current upcycle continues, there is still room for consensus estimates for calendar 2027 to move higher,” Idlet said.
Even so, the results failed to meet investors’ elevated expectations, and the company’s shares fell more than 5% after hours. The stock has more than doubled this year.
Applied Materials supplies equipment used in key wafer-fabrication processes, including deposition, chemical-mechanical polishing and inspection. As major chipmakers increase spending and aggressively expand AI infrastructure, Applied Materials has become one of the biggest beneficiaries.
According to its earnings report, revenue for the fiscal third quarter ended July 26 rose 25% from a year earlier to $9.12 billion, above the $8.99 billion analyst estimate compiled by LESG. On a non-GAAP basis, the company reported a gross margin of 50.4%, while earnings per share reached a record $3.50.
Cash flow from operations also reached a record $3.04 billion. The company returned $860 million to shareholders through $440 million in share repurchases and $420 million in dividends.
Applied Materials President and Chief Executive Gary Dickerson said the company had delivered another record quarter, including the highest sequential revenue growth in its history.
“As artificial intelligence is rapidly adopted worldwide, demand for our materials-engineering solutions is stronger than ever,” Dickerson said. “We have further raised our 2026 revenue outlook for the semiconductor systems business and are confident that our growth this year will exceed the market average. Based on the growing demand expectations we are receiving from customers, we expect Applied Materials to maintain strong growth momentum in 2027.”
The company expects fiscal fourth-quarter revenue of about $10.25 billion, plus or minus $500 million, also above the analysts’ average estimate of $9.54 billion.
Chief Financial Officer Bryce Hill said, “We expect revenue in the second half of calendar 2026 to continue its strong growth, with particularly strong performance in DRAM, leading-edge foundry logic and advanced packaging.”
Applied Materials expects full-year calendar 2026 revenue from its packaging business to increase by more than 70%, up from its previous forecast of more than 50%.
During the earnings call, Hill said, “The business visibility our customers are giving us is at an all-time high, with discussions around some orders extending to 2030.”
Stifel analyst Brian Chin said strong quarterly results and revenue-growth outlooks previously delivered by Applied Materials’ peers Lam Research and KLA had also raised market expectations for the chip-equipment company.
CFRA analyst Brooks Idlet said the results and guidance did not surprise the market, but the overall performance remained solid and business momentum was clearly continuing to improve. “We believe that if the current upcycle continues, there is still room for consensus estimates for calendar 2027 to move higher,” Idlet said.