Key Takeaways
- Applied Materials CFO Brice Hill expects cloud capex to rise more than 50% in 2027 to well over $1 trillion.
- Customers want more tools than Applied can ship.
- Microsoft, Amazon and Alphabet still spend far more than a year ago.
- After the selloff, Applied trades near its average forward P/E.
Applied Materials (AMAT) topped its own forecast on Nov. 12, with fourth-quarter revenue up 53% to a record $10.41 billion. It landed in a selloff in chip-equipment stocks, on the same day Nvidia announced Jensen Huang had resigned.
The bigger news was CFO Brice Hill’s call on customer spending:
“Cloud CapEx is expected to increase more than 50% in 2027 to well over $1 trillion.”
That’s the bill for Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG) and the rest of the cloud. CEO Gary Dickerson says silicon is about 60% of an AI data center’s capital cost, and it’s made on tools like Applied’s.
Applied Materials’ Customers Want Their Tools Sooner
Investors worried chipmakers would take tools more slowly. Asked whether any customer wanted a tool a month or two later, Dickerson said no: “Nobody is saying that they’re not wanting the tools as fast as we can get them.”
Hill said demand exceeds supply, especially in DRAM and leading-edge logic, and the limit is physical: “clean room capacity remains a gating factor for how much equipment the industry can consume.” Applied is tracking more than 20 fab ramps and line expansions in 2027, and Dickerson expects wafer fab equipment demand to grow more than 30%.
Consensus has revenue up about 36% in fiscal 2027, to $46.9 billion, and Applied guided its 14-week first quarter to $11.1 billion. Nothing on the call gives analysts a reason to cut.
The Customers’ Own Numbers Back It Up
An equipment maker will always talk up its customers’ budgets, so check what they spend. Microsoft’s quarterly cash capex has roughly quadrupled since late 2023:
Microsoft’s cash spending on property and equipment was $39.4 billion in the September quarter, about double a year earlier. Including finance leases, its capex was $45.2 billion, and on Oct. 28 it trimmed its calendar 2026 forecast on that basis to $170 billion from $175 billion, citing delayed third-party capacity.
Amazon spent $77.3 billion on property and equipment in its third quarter, up from $35.1 billion, and still expects about $220 billion of 2026 cash capex. Alphabet, which raised its 2026 range to $195 billion to $205 billion in July, held it on Oct. 28 and said 2027 spending will rise significantly.
TIKR Tracks 40 Analysts on Applied Materials. How Many Say “Buy”?
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The Cuts Are Small So Far
On Bloomberg Tech on Nov. 12, Mandeep Singh, who leads technology research at Bloomberg Intelligence, said: “we are looking to lower our 2027 capex numbers slightly. Right now we are thinking, you know, 5 to 7%.” He pointed to the midterms’ “blue wave” and Nvidia, and said much of it could simply be pushed out.
That’s a long way from the collapse that empties an equipment maker’s order book. With cleanrooms capping how many tools the industry can take, a modest cut should shorten the waiting list before it touches Applied’s shipments.
What Applied Materials Stock Is Pricing In
At 22x on Nov. 12, Applied’s forward P/E sits about at its five-year average of 21x, under half its June 30 peak of 49x.
Equipment booms end: revenue fell 13% in fiscal 2019. Two customers supplied 34% of revenue in the first nine months of fiscal 2026. Still, if cloud spending gets anywhere near Hill’s trillion dollars, I think Applied at its average multiple is a good deal. The hyperscalers’ first 2027 budgets, due with fourth-quarter results, will test his 50%.
So What Is Applied Materials Stock Actually Worth?
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