Applied Materials posts record revenue as AI-driven chip spending accelerates

Applied Materials, the largest U.S. maker of semiconductor-manufacturing equipment, reported record quarterly and full-year revenue for its fiscal 2026, driven by a surge in spending on chipmaking tools tied to artificial intelligence. The Santa Clara, California-based company's results, released after markets closed on November 12, showed fiscal fourth-quarter revenue of $10.41 billion, up 53 percent from a year earlier, according to the earnings release filed with the Securities and Exchange Commission.

Non-GAAP diluted earnings per share came in at a record $4.16, up 92 percent year over year and above the roughly $4.06 average analyst estimate tracked by TipRanks. GAAP diluted earnings per share were $3.40, up 43 percent. For the full fiscal year, which ended October 25, revenue reached a record $34.45 billion, up 21 percent, and non-GAAP EPS hit a record $12.89, up 37 percent, the company said in the filing, which it submitted to the SEC as an 8-K current report.

Margins keep expanding

The quarter marked Applied's 14th consecutive period of year-over-year gross-margin expansion, Chief Financial Officer Brice Hill said on the earnings call, a run the company attributes to pricing discipline and a richer mix of advanced chipmaking tools as customers shift toward leading-edge logic and high-bandwidth memory. Non-GAAP gross margin for the quarter was 50.6 percent, up from 48.1 percent a year earlier, and non-GAAP operating margin rose to 35.3 percent from 28.6 percent, according to the earnings-call transcript published by Investing.com.

Applied's largest unit, Semiconductor Systems, generated $7.996 billion in quarterly revenue, up from $4.879 billion a year earlier, with foundry and logic customers accounting for 58 percent of that business and DRAM another 33 percent. Applied Global Services, which sells spare parts and support contracts tied to the installed base of equipment already in factories, brought in $1.896 billion, up from $1.506 billion. The company generated record quarterly free cash flow of $2.6 billion and returned more than $2.4 billion to shareholders through buybacks and dividends during the quarter — the largest quarterly buyback in more than eight years, Hill said — bringing full-year shareholder returns to $4.75 billion.

Those results also included a one-time drag: full-year GAAP figures carried a $253 million charge tied to a settlement Applied reached with the Commerce Department's Bureau of Industry and Security in February over allegations that it had improperly shipped chipmaking equipment to a Chinese customer on the U.S. Entity List, a matter the company first disclosed in a separate SEC filing at the time.

Betting on an AI buildout with "unprecedented visibility"

Executives framed the quarter as evidence that demand from AI data-center construction is still outrunning the industry's ability to supply equipment. "AI is driving a multi-year expansion in semiconductor demand," Chief Executive Gary Dickerson said on the call, adding that the company is "on track to grow our Semiconductor Systems business more than 40 percent in our calendar 2026" and that, if anything, customers are pushing Applied to deliver tools faster rather than signaling caution. Hill offered a specific figure for the industry backdrop driving that demand:

Cloud CapEx is expected to increase more than 50% in 2027 to well over $1 trillion.

On the call, analysts from Cantor Fitzgerald, UBS, Bank of America, Bernstein, Citi, TD Cowen, JPMorgan, Goldman Sachs, Wolfe Research, Wells Fargo and Deutsche Bank pressed management on how durable that demand is — whether customers were delaying tool deliveries, whether a slowdown in broader data-center spending could crimp the wafer-fab-equipment market, and whether Applied's own factories could keep pace through 2028. Management said capacity, not demand, is now the binding constraint, pointing to plans to roughly double quarterly systems output by 2028 and to a new collaboration hub, the EPIC Center in Silicon Valley, where it said four additional research partnerships bring its total announced engagements to 15.

A muted stock reaction

Despite the beat, Applied's shares fell 3.58 percent in the regular session on November 12, to $380.95, before edging up about 0.5 percent to $382.85 in after-hours trading once the results came out, according to data reported by TipRanks. The muted reaction reflected elevated expectations built up after a run of AI-fueled gains in semiconductor-equipment stocks this year, and investors' focus on whether growth could keep accelerating rather than simply beat already-high guidance. Wall Street's existing position on the stock is heavily bullish regardless: TipRanks reported a consensus of 24 "buy" ratings, one "hold" and zero "sell" recommendations among analysts over the prior three months, with an average price target implying substantial further upside from current levels.

What's next

For the fiscal first quarter of 2027, Applied guided to revenue of $11.1 billion, plus or minus $500 million, and non-GAAP EPS of $4.35, plus or minus 20 cents — both above Wall Street's prior consensus estimates. Management said it expects China, long a source of regulatory friction, to make up under 25 percent of revenue in 2027 as growth increasingly comes from AI-linked markets elsewhere. The company declined to give a specific target for calendar 2027 beyond saying it expects "another record year," leaving investors to judge, over the coming quarters, whether the AI infrastructure spending cited by Hill and echoed across the chip-equipment sector continues at the pace executives are promising.