Key Stats for Applied Materials Stock
- Current Price: $539.14
- Target Price (Mid): ~$690
- Potential Total Return: ~29%
- Annualized IRR: ~6% / year
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What Happened?
Applied Materials (AMAT) reports fiscal third-quarter earnings after the close on Thursday, August 13, and the setup is unusual for a company this dominant. Shares closed at $539.14 on August 7, up 2.21% on the day, clawing back most of a steep July slide that followed the June 30 record close of $739.67 and carried a peak-to-trough drawdown of 39.63% by late July. Management guided fiscal Q3 revenue to around $8.95 billion, up roughly 23% year over year, with the Street modeling around $3.39 in adjusted EPS.
Applied has topped consensus on EBITDA, EBIT, and adjusted EPS for five straight quarters, and on revenue in four of those five. The problem sits one line lower, on the cash flow statement, where free cash flow keeps missing by wide margins.
The Beat Streak Is Real, and So Is the Cash Flow Miss
In fiscal Q2, reported May 14, Applied delivered record revenue of $7.91 billion, record adjusted EPS of $2.86, and a gross margin of 50%, its highest in more than 25 years. That beat the Street’s revenue estimate by 2.83% and its adjusted EPS estimate by 6.5%. Revenue has topped consensus in four of the last five quarters, and adjusted EPS in all five.
In that same record quarter, free cash flow came in at $210 million against a Street estimate of roughly $1.6 billion, a miss of 86.86%. Operating cash flow fell 46% year over year to $845 million, landing 61% below what the Street had penciled in, while capital expenditure climbed to $635 million. Applied also missed FCF consensus by 26% in the January quarter, and has come up short on the Street’s cash flow estimate in four of the last five prints. Record accounting profit is converting into far less cash than analysts expect, as rising inventories and capital spending fund the capacity Applied keeps describing.
That tension matters for a stock trading at roughly 50 times last-twelve-months earnings per TIKR, up from the low-20s a year ago. A premium like that leans on the earnings being high quality and the cash being real. Four cash flow misses in five quarters is the one crack in that story, and August 13 is the next place it shows up.
The stock fell partly on a sector-wide unwind, but also on Applied-specific caution: Morgan Stanley downgraded the shares to a Hold-equivalent rating with a $502 target, and SEC filings showed more than $65 million in insider stock sales, including CEO Gary Dickerson selling 78,321 shares for about $55 million near the highs in late June. Executives selling into a record while the cash line softens is exactly the combination a cautious reader weighs before a print.
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Why the Demand Behind the Guide Is Durable
The reason to give Applied the benefit of the doubt on cash is where the spending is going. At a June technical briefing, management laid out why DRAM and advanced packaging are inflecting with AI, saying it now expects the DRAM wafer fab equipment market to run at more than twice the size of the NAND market for the foreseeable future. Applied said high-bandwidth memory is growing rapidly and expanding its advanced packaging business by over 50%, with that revenue tracking toward more than $2 billion in calendar 2026. These are the exact steps Applied leads, from through-silicon-via formation to hybrid bonding. On the May earnings call, management projected that leading-edge logic, DRAM, and packaging together would drive more than 80% of wafer fab equipment spending growth this year.
Management said its largest customers now provide rolling eight-quarter production forecasts, which is what lets Applied plan its own manufacturing ramp, and CEO Gary Dickerson tied the raised full-year equipment outlook of more than 30% growth to customers physically finding cleanroom space faster than the company had modeled. That forward signal is why the capacity spending, and the cash it consumes, has a rationale beyond hope.
Against peers, the valuation still asks a lot. Applied trades at around 30.5 times NTM EV/EBITDA per TIKR, above Lam Research at 27.62 times and well above NVIDIA at 17.85 times, a name growing faster. Justifying that premium to a faster grower rests on Applied’s share position in exactly the DRAM and packaging inflections above.
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TIKR Advanced Model Analysis
- Current Price: $539.14
- Target Price (Mid): ~$690
- Potential Total Return: ~29%
- Annualized IRR: ~6% / year
See analysts’ growth forecasts and price targets for Applied Materials stock (It’s free!) >>>
The two revenue engines are the leading-edge logic ramp and the DRAM and advanced packaging inflections management detailed. The primary risk is timing: if cleanroom capacity comes online faster than expected and pulls the cycle peak forward, the revenue ramp compresses into a shorter window, and the multiple has less time to work.
The upside is AI demand extending the cycle into 2027 and beyond, as the eight-quarter customer forecasts suggest. The downside is a sector reset like the roughly 40% peak-to-trough drawdown the stock suffered in July, where sentiment sets the price. At around $690 mid-case against a Street mean target of around $630, the model sees more upside than consensus modestly, and neither screams bargain at 50 times earnings.
Conclusion
The headline numbers on August 13 will almost certainly clear the bar, given the streak and the around $8.95 billion revenue guide. The real tell is whether free cash flow and operating cash flow start converging back toward accounting profit, or whether the gap widens again as capital spending and inventory keep climbing. A quarter where FCF finally tracks earnings confirms the capacity build is turning into cash on schedule. Another double-digit miss, and the quality of these record profits becomes the debate the stock cannot avoid. Applied reports after the close on Thursday, August 13, with the calendar 2026 equipment growth outlook as the other number that matters: reaffirm the more than 30% guide and the recovery has legs, trim it, and the July selloff looks less like an overreaction.
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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!
