Applied Materials Earnings Lifted by AI Demand
Applied Materials earnings had record results and stronger guidance tied to AI infrastructure, prompting traders to weigh export risk.
KEY TAKEAWAYS
- Applied Materials reported record Q2 revenue of $7.9 billion and record EPS, driven by strong operating leverage.
- Management raised calendar 2026 semiconductor equipment growth to more than 30.0% citing AI infrastructure build-out.
- They guided fiscal Q3 revenue at $9.0 billion ± $0.5 billion, above Wall Street estimates.
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Applied Materials reported record fiscal second-quarter results on May 14 and raised its next-quarter outlook, citing a rapid global build-out of AI computing infrastructure that will accelerate equipment demand and support revenue and profit growth.
Record Quarter Results
Applied Materials reported total net sales of $7.91 billion for the quarter ended April 26, an 11% increase year over year that exceeded both its prior guidance and Wall Street estimates. The company delivered record GAAP diluted earnings per share of $3.51 and non-GAAP diluted EPS of $2.86, rising 33.0% and 20.0% year over year, respectively, reflecting strong operating leverage.
The Semiconductor Systems segment generated $5.97 billion in revenue with a 35.1% operating margin, while Applied Global Services produced $1.67 billion with a 29.2% operating margin. Despite these gains, non-GAAP free cash flow declined roughly 80% year over year, drawing investor attention to cash generation amid expanding capital returns.
Outlook and Strategic Moves
For fiscal third quarter 2026, Applied Materials issued guidance for revenue of $8.95 billion plus or minus $0.5 billion and non-GAAP diluted EPS of $3.36 plus or minus $0.20. Management said this outlook exceeds Wall Street estimates and reflects sustained spending on data centers and AI infrastructure.
The company raised its calendar 2026 semiconductor equipment growth forecast to more than 30%, up from an earlier view of over 20%, attributing the upgrade to accelerating AI semiconductor equipment demand and the rapid global build-out of AI computing infrastructure.
Applied also announced an agreement to acquire ASMPT’s NEXX advanced-packaging business and plans to expand EPIC Center partnerships with customers and ecosystem players to support advanced process technology.
The board increased the quarterly cash dividend by 15% to $0.53 per share, marking nine consecutive years of increases and more than doubling the payout over four years. The stock has risen about 70% year to date, with investors weighing the AI-driven growth against export-control risks and softer demand in China.
