Applied Materials Earnings Rise on AI Demand
Applied Materials earnings beat as AI-processor demand and services revenue lifted profit and pushed Q2 guidance above estimates lifting afterhours shares.
KEY TAKEAWAYS
- Applied Materials beat Q1 revenue and non-GAAP EPS, citing AI-processor demand.
- Q2 guidance set near $7.65B revenue and $2.64 non-GAAP EPS, above consensus.
- Shares had risen about 9% after-hours.
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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.
