Key Stats for Applied Materials Stock
- Current Price: $436.62
- Target Price (Mid): ~$626
- Street Target: ~$455
- Potential Total Return: ~43%
- Annualized IRR: ~8% / year
- Earnings Reaction: (0.89%) (May 14, 2026)
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What Happened?
Applied Materials, Inc. (AMAT) just delivered records across revenue, earnings, and gross margin in a single quarter, and the stock closed lower. That is the tension investors are working through right now.
On May 14, Applied reported fiscal Q2 2026 results that broke company records on three fronts simultaneously. Revenue reached $7.91 billion, up 11% year over year, beating the average Street estimate of $7.69 billion by 2.81%. Non-GAAP gross margin crossed 50% for the first time in more than 25 years. Non-GAAP EPS of $2.86 came in 6.46% ahead of the consensus estimate of $2.69 and grew 20% year over year. Management then guided Q3 revenue to $8.95 billion, nearly 23% year-over-year growth, and raised the full-year semiconductor equipment industry growth outlook from more than 20% (the February guide) to more than 30%.
The stock rose in after-hours trading on May 14, then closed down 0.89% the following session in a broader market selloff. Deutsche Bank raised its price target to $550 and Cantor Fitzgerald to $575 after the print.
The question investors are asking: did the macro-driven dip create an entry point, or does a $436 stock already reflect the best of what management just described?
What the Quarter Revealed
Semiconductor Systems, the segment selling deposition, etch, and packaging equipment to chipmakers, posted record revenue of $5.97 billion, up 10% year over year, with segment gross margin reaching 54.8%. Within that, DRAM (dynamic random-access memory) revenue hit $1.7 billion, growing 18% year over year as customers added capacity for AI workloads.
Applied Global Services (AGS), which provides spares, upgrades, and diagnostics to Applied’s global installed base of tools, hit record revenue of $1.67 billion, up 17% year over year. Management raised AGS’s long-term annual growth target from low-double-digits to mid-teens, supported by the expansion of its AIx software connected to more than 35,000 chambers across the installed base.
The guidance upgrade was the number that moved analyst models. CEO Gary Dickerson stated: “Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026.” The driver was not a change in demand; customers found cleanroom floor space faster than expected, converting backlogged orders into near-term deliveries. Applied is now tracking more than 100 active fab construction projects globally, adding more than 10 new ones in Q2 alone.
Applied returned $765 million to shareholders in Q2: $365 million in dividends and $400 million in buybacks. The quarterly dividend was raised 15% in March, the ninth consecutive annual increase.
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What the Headlines Miss
The most important detail from the Q2 call is structural, not financial.
Applied’s largest customers are now providing 8-quarter rolling demand forecasts, roughly two years of equipment orders communicated in advance. This allows Applied to signal demand directly to its more than 2,000 direct suppliers with enough lead time for those suppliers to plan their own capacity additions, reducing the supply disruptions that plagued the prior upcycle.
Dickerson offered a telling data point in Q&A: “I was just with a customer two days ago, they were worried about the supply all the way into 2030.” That is not language that surfaces near a cyclical peak. CFO Brice Hill reinforced the multi-year view: “based on our latest discussions with them, we expect 2027 will be another strong record year for the industry.” When asked about 2028, Hill said directly: “We don’t think it’s too early.”
Dickerson also flagged a demand variable that the market has not fully priced. Agentic AI systems, those that plan and execute tasks autonomously rather than simply responding to queries, require more CPU-intensive architectures and drive incremental DRAM and NAND demand, adding a new consumption layer on top of the generative AI workloads already running through the cycle.
How Applied Materials Compares to Peers
Per TIKR’s Competitors page, Applied trades at 25.16x NTM EV/EBITDA (forward enterprise value relative to earnings before interest, taxes, depreciation, and amortization). Lam Research (LRCX) trades at 32.43x on the same metric. KLA Corporation (KLAC) trades at 31.47x.
Applied’s discount to both peers is notable given that its portfolio is the broadest in the industry, spanning deposition, etch, thermal processing, metrology, packaging, and services. With Semiconductor Systems gross margin at 54.8% in Q2 and packaging revenue growing more than 50% this calendar year, the case for multiple convergence is more defensible today than at any point in the current cycle.
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TIKR Advanced Model Analysis
- Current Price: $436.62
- Target Price (Mid): ~$626
- Potential Total Return: ~43%
- Annualized IRR: ~8% / year
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The mid-case model uses a revenue CAGR of around 13% and a net income margin expanding to around 29%, driven by two factors: continued AI equipment demand in leading-edge logic, DRAM, and advanced packaging; and AGS growing at mid-teens annually as the installed base compounds and AIx software drives higher-value service contracts.
The margin driver is the same one CFO Brice Hill described on the call, value-based pricing, as each new product generation solves problems competitors cannot replicate. As Hill noted, Applied’s non-GAAP gross margin has expanded 800 basis points since 2013 through exactly this mechanism.
The primary risk is a demand air pocket if cleanroom capacity arrives faster than expected in 2027 or 2028, compressing a multi-year pipeline into a shorter window. China, at 24% of Semiconductor Systems and AGS revenue in Q2, is a structural risk if export controls tighten further.
The mid-case IRR of around 8% annualized is modest in isolation. But the assumptions are conservative relative to what management described: 8-quarter customer visibility, 100+ active fab projects, a record-year guide for 2027, and customer conversations extending to 2030.
Conclusion
The thesis resolves on one number: Q3 revenue, reported August 13, 2026. Management guided $8.95 billion. At or above the midpoint confirms the 30%+ WFE growth upgrade is tracking through Applied’s own order book. Below $8.45 billion reopens the supply chain debate.
Hill gave analysts the explicit roadmap on the call: assume linear sequential growth from Q3 through fiscal Q1. If that holds, the next two quarters would be the strongest in the company’s history. The May 14 dip reflected macro pressure, not anything in Applied’s results. August 13 is when the data answers the question that the stock cannot settle on its own.
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Should You Invest in Applied Materials?
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Pull up Applied Materials, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
