Key Stats
- Current price: ~$441 (May 14, 2026)
- Q2 FY2026 revenue: $7.91B, up 11% YoY
- Q2 FY2026 non-GAAP EPS: $2.86, up 20% YoY
- Q3 FY2026 revenue guidance: $8.95B (+/- $500M), up ~23% YoY
- Q3 FY2026 non-GAAP EPS guidance: $3.36 (+/- $0.20), up ~36% YoY
- TIKR model price target: ~$630 (mid case)
- Implied upside: ~43%
Applied Materials Stock Just Delivered Record Revenue and Its Highest Gross Margin in Over 25 Years
Applied Materials stock (AMAT) posted record Q2 FY2026 revenue of $7.91B, up 11% year over year and 13% sequentially, alongside record non-GAAP EPS of $2.86, which grew 20% year over year, according to CFO Brice Hill on the Q2 FY2026 earnings call.
Semiconductor Systems drove the quarter, delivering record revenue of $5.97B, up 10% year over year and 16% sequentially, according to Brice Hill on the Q2 FY2026 earnings call.
DRAM contributed $1.7B within Semiconductor Systems, growing 18% year over year, as customers aggressively added capacity at 6F squared nodes, according to Brice Hill on the Q2 FY2026 earnings call.
Applied Global Services hit record revenue of $1.67B, up 17% year over year, reflecting higher fab utilization across the installed base, according to Brice Hill on the Q2 FY2026 earnings call.
Non-GAAP gross margin reached 50% in Q2, up 80 basis points year over year, crossing the threshold for the first time in the company’s history at the company level, according to Brice Hill on the Q2 FY2026 earnings call.
Non-GAAP operating margin expanded to 32.1%, up 140 basis points year over year, according to Brice Hill on the Q2 FY2026 earnings call.
For Q3, management guided revenue of $8.95B (up ~23% YoY) and non-GAAP EPS of $3.36 (up ~36% YoY), with non-GAAP gross margin expected to increase modestly to approximately 50.1%, according to Brice Hill on the Q2 FY2026 earnings call.
CEO Gary Dickerson raised the full-year semiconductor equipment growth outlook to more than 30% in calendar 2026, citing customer demand increments as new clean room space comes online, according to Gary Dickerson on the Q2 FY2026 earnings call.
Applied also raised its long-term AGS growth outlook from low-double-digits to mid-teens, with calendar 2026 expected to exceed that rate due to utilization improvements across the industry, according to Brice Hill on the Q2 FY2026 earnings call.
Advanced packaging revenue is expected to grow more than 50% in calendar 2026, according to Gary Dickerson on the Q2 FY2026 earnings call.
Applied announced an intent to acquire NEX, a panel-level packaging technology supplier, to strengthen its large-area packaging portfolio for AI accelerator applications, according to Gary Dickerson on the Q2 FY2026 earnings call.
TSMC joined Applied’s EPIC co-innovation platform as a founding partner alongside Micron, Samsung, and SK Hynix, with the EPIC Center in Silicon Valley on track to begin operations in the fall of 2026, according to Gary Dickerson on the Q2 FY2026 earnings call.
Applied distributed $765M to shareholders in Q2, including $365M in dividends and $400M in share repurchases, having raised the quarterly cash dividend 15% in March, according to Brice Hill on the Q2 FY2026 earnings call.
China represented 24% of Semiconductor Systems plus AGS revenue in Q2, with management expecting that business and the ICAP segment worldwide to be flat to slightly higher for the calendar year, according to Brice Hill on the Q2 FY2026 earnings call.
Applied Materials Stock: What the Income Statement Shows
Applied Materials stock is in a sustained margin expansion cycle, with gross margin recovering from a 47% range in early FY2024 to cross 49% in the most recent quarters.
Gross margin was 47.4% in Q1 FY2024 (4/28/24), held near that level through FY2024, then expanded to 49.1% in Q1 FY2025 (4/27/25), reached 48.8% in Q2 FY2025 (7/27/25), compressed to 48.0% in Q3 FY2025 (10/26/25), and recovered to 49.0% in Q4 FY2025 (1/25/26).
Operating income followed the same arc, rising from $1.91B in Q1 FY2024 to a peak of $2.23B in Q2 FY2025 (7/27/25), before pulling back to $1.93B in Q3 FY2025, then recovering to $2.10B in Q4 FY2025.
Operating margin reached a multi-quarter peak of 30.6% in Q2 FY2025 (7/27/25), compressed to 28.4% in Q3 FY2025, and recovered to 29.9% in Q4 FY2025.
Q2 FY2026 reported non-GAAP operating margin of 32.1%, according to Brice Hill on the Q2 FY2026 earnings call, representing a meaningful step above the income statement’s recent peak.
Semiconductor Systems’ non-GAAP gross margin reached 54.8% in Q2 FY2026, according to Brice Hill on the Q2 FY2026 earnings call, which management attributed to value-based pricing on differentiated products and ongoing manufacturing cost improvements.
What Does the Valuation Model Say?
TIKR’s mid-case valuation model prices Applied Materials stock at $630, implying ~43% upside from the current price of ~$441, with a total return of 73.5% projected over the next 4.5 years (realized at 10/31/30).
The mid-case assumes a revenue CAGR of 10.8% through 2035, a net income margin of 27.5%, and EPS growth of 10.9% annually, with a P/E multiple compression of 2.8% per year embedded in the model.
The Q2 report strengthens the case for the mid-case assumptions: record revenue, 50% non-GAAP gross margin for the first time at the company level, a Q3 guide of $8.95B implying ~23% YoY growth, and management raising the calendar 2026 semiconductor equipment growth outlook to more than 30%.
Applied Materials stock enters the second half of FY2026 with the earnings tailwinds aligned: expanding gross margins, accelerating services growth, and a multi-year demand pipeline backed by 8-quarter customer visibility into 2027 and beyond.
The investment argument for Applied Materials stock hinges on whether the AI-driven equipment cycle sustains into 2027 at the growth rates management is projecting, or whether supply chain constraints and China exposure slow the ramp.
What Has to Go Right
- Semiconductor equipment growth must sustain above 30% in calendar 2026 and extend into a “similar profile” in 2027, as guided by Gary Dickerson on the Q2 FY2026 earnings call, requiring continued clean room capacity additions across more than 100 tracked factory projects globally.
- Advanced packaging revenues must grow more than 50% in calendar 2026, as guided on the call, with momentum continuing into 2027 from NEX acquisition integration and EPIC Center co-development with TSMC, Samsung, SK Hynix, and Micron.
- Non-GAAP gross margin must continue its upward trajectory past 50%, supported by the gradual portfolio enrichment Brice Hill described as the primary pricing lever.
What Could Still Go Wrong
- China concentration at 24% of Semiconductor Systems plus AGS revenue creates regulatory exposure; management acknowledged this has been factored into guidance but did not provide detail on restrictions risk related to entities such as Huawei.
- Free cash flow of $210M in Q2 is well below the $845M in operating cash flow, with capital expenditures of $635M representing a heavy reinvestment period that may continue to constrain near-term cash returns.
- Supply chain remains the binding constraint on growth: management described the ability to “significantly expand output” beyond current levels but noted that supplier lead times require 8-quarter forecasting windows to execute.
- The TIKR mid-case assumes P/E multiple compression of 2.8% annually through 2035, meaning the full 73.5% total return requires the earnings growth to more than offset a sustained de-rating in the market’s willingness to pay for the stock.
Should You Invest in Applied Materials, Inc.?
The only way to really know is to look at the numbers yourself. TIKR gives you free access to the same institutional-quality financial data that professional analysts use to answer exactly that question.
Pull up Applied Materials stock 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.
You can build a free watchlist to track Applied Materials stock alongside every other stock on your radar. No credit card required. Just the data you need to decide for yourself.
Access Professional Tools to Analyze AMAT stock on TIKR for Free →
