Key Stats for Applied Materials Stock
- Today’s Performance: -5%
- 52-Week Range: $154 to $740
- Valuation Model Target Price: Around $640
- Valuation Model Implied Upside: 19%
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What Happened?
Applied Materials stock fell about 5% today to around $508 per share, extending its volatile post-earnings stretch as investors questioned whether the company can turn booming AI semiconductor demand into growth that keeps pace with equipment rivals Lam Research, KLA, and ASML. Applied sells equipment used to manufacture advanced processors and memory chips, including systems that deposit materials, shape wafers, and inspect increasingly complex chip structures. Broader market weakness added to the pressure, with the Philadelphia Semiconductor Index falling 3.7% as higher Treasury yields and concerns around elevated AI valuations weighed on technology stocks.
Applied Materials stock is down because its record quarter and stronger-than-expected outlook still did not show enough relative outperformance to satisfy investors after strong results across the semiconductor-equipment industry raised the competitive bar. Fiscal Q3 revenue increased 25% year over year to $9.12 billion, above Wall Street’s roughly $9 billion estimate, while non-GAAP EPS reached a record $3.50. Applied guided fiscal Q4 revenue to $10.25 billion, above consensus of around $9.5 billion, but its 50.4% non-GAAP gross-margin outlook was essentially flat sequentially. Investors wanted clearer evidence that Applied could outgrow Lam Research, KLA, and ASML, while AMAT traded around 32x forward earnings after the report compared with roughly 35x for Lam Research, 37x for KLA, and 33x for ASML.
This week, Applied Materials reported record fiscal Q3 revenue of $9.1 billion, up 25% year over year, and record non-GAAP EPS of $3.50, up 41%, while Semiconductor Systems revenue reached $7.0 billion and DRAM revenue, including high-bandwidth-memory packaging, jumped 52% to a record. DRAM provides the high-speed memory used alongside AI processors, while advanced packaging connects logic and memory chips into higher-performance AI systems. CEO Gary Dickerson said, “we now expect our overall packaging revenues to grow more than 70% in calendar 2026,” while Applied’s largest customers are providing rolling eight-quarter forecasts, giving management unusually strong visibility into future equipment demand.
Wall Street remains constructive despite the selloff, but recent target changes show how high the bar has become. JPMorgan raised its price target to $660 from $515 and maintained an Overweight rating, while B. Riley lowered its target to $700 from $790 but maintained Buy. The analyst reaction supports the same conclusion as the stock move: AI, DRAM, and advanced-packaging demand remains strong, but another sustained move higher increasingly depends on Applied translating that demand into market-share gains, faster relative growth, and continued margin expansion.
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Is Applied Materials Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): Around 25%
- Operating Margins: Around 34%
- Exit P/E Multiple: Around 22x
The model’s roughly 25% revenue-growth assumption is the most demanding input, but Applied has identifiable business drivers that could support unusually strong growth over the model period. Management expects leading-edge foundry-logic, DRAM, and advanced packaging to account for around 80% of wafer-fab-equipment growth in 2026 and 2027. These areas matter because faster AI processors require more sophisticated transistors, more high-bandwidth memory, and more complex packaging, increasing the number and value of manufacturing steps Applied can address.
Advanced packaging provides one of the clearest near-term growth drivers. Applied now expects packaging revenue to grow more than 70% in calendar 2026, up from its previous forecast of more than 50%, as chipmakers combine processors and memory more tightly to improve AI performance and power efficiency. Applied Global Services adds another growth lever because fabs running near full capacity require more maintenance, replacement parts, and AI-assisted yield optimization, with management expecting AGS revenue to grow more than 20% in 2026.
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The model’s roughly 34% operating-margin assumption looks more defensible than the revenue-growth input because Applied already delivered a record 34% non-GAAP operating margin in Q3. Your TIKR EBIT chart shows consensus EBIT margin rising from roughly 30% in fiscal 2025 to around 33% in 2026 and 36% by 2028, while EBIT is estimated to increase from about $8.6 billion to $11.3 billion and then roughly $20.1 billion over the same periods. That trajectory illustrates the key investment question: whether AI-driven revenue growth can translate into substantially higher operating profit rather than simply higher equipment sales.
The model’s roughly 22x exit P/E adds some valuation discipline because it sits well below AMAT’s recent forward multiple of around 32x. That means the valuation case does not require today’s elevated AI-era multiple to persist, but it does require strong earnings growth to offset meaningful multiple compression.
Using around 25% revenue growth, 34% operating margins, and a 22x exit P/E, TIKR’s valuation model estimates a target price of around $640, implying about 19% total upside over 2.2 years from the model’s roughly $535 reference price. Applied therefore appears modestly undervalued rather than deeply discounted, with the strongest path to upside coming from sustained DRAM investment, rapid advanced-packaging growth, market-share gains, and operating-margin expansion as higher-value AI equipment becomes a larger part of the business.
How Much Upside Does AMAT Stock Have From Here?
Investors can estimate Applied Materials’ potential share price, or what any stock could be worth, in under a minute using TIKR’s New Valuation Model tool.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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