Applied Materials Earnings Rise on AI Demand

Applied Materials Inc. (AMAT) reported earnings on Feb. 12, 2026, that beat estimates as demand for AI processors and record services revenue boosted profitability. The company issued second-quarter guidance above consensus despite a one-time regulatory charge.

Quarter Results and Profitability

For the quarter ended Jan. 25, 2026, Applied Materials reported revenue of $7.01 billion, down 2% year over year from $7.17 billion but above the consensus of $6.89 billion. GAAP net income rose 75% to $2.03 billion, with GAAP diluted earnings per share (EPS) of $2.54, up from $1.45 a year earlier. Non-GAAP diluted EPS was $2.38, flat year over year and above the $2.19 consensus.

GAAP gross margin was 49.0% and operating margin 26.1%. On a non-GAAP basis, gross margin was 49.1% with a 30.0% operating margin. Margin expansion contributed to the profit increase.

Semiconductor Systems revenue declined to $5.14 billion from $5.60 billion a year earlier, with a non-GAAP operating margin of 32.9%. In contrast, Applied Global Services posted record services and spares revenue of $1.56 billion, with a non-GAAP operating margin of 28.1%. The services business provided a steadier revenue stream amid softer equipment sales.

Cash from operations totaled $1.69 billion, and free cash flow rose 91% to $1.04 billion. The company returned $702 million to shareholders, including $337 million in share repurchases and $365 million in dividends.

Results included a $253 million charge to resolve an export-controls compliance matter with the U.S. Commerce Department Bureau of Industry and Security. The company excluded this charge from its non-GAAP metrics.

Guidance, AI Demand, and Regulatory Charge

Applied Materials guided second-quarter revenue to roughly $7.65 billion, plus or minus $0.50 billion, and non-GAAP diluted EPS of about $2.64, plus or minus $0.20. This outlook excludes known acquisition charges and incorporates a specified tax benefit, standing above market estimates.

The company expects the semiconductor-equipment market to grow more than 20% in calendar 2026, driven by demand for AI processors, leading-edge logic, high-bandwidth memory, and advanced packaging.

The quarter’s improved profitability, the excluded one-time charge, and the upbeat outlook reflect management’s view that AI-processor demand will be the main driver of equipment spending, while record services revenue supports near-term profitability.