Key Takeaways:
Applied Materials' record earnings and raised outlook confirm the AI infrastructure buildout is spreading beyond GPUs into the broader semiconductor manufacturing chain.
Applied Materials Inc. posted record quarterly revenue of $7.91 billion in its fiscal second quarter, up 11% from a year earlier, as surging demand for advanced chip-making equipment tied to artificial intelligence infrastructure drove the stock to a 52-week high of $739.67.
"The semiconductor equipment business will increase more than 30% in calendar 2026," Chief Executive Officer Gary Dickerson said, citing fast-growing demand from AI infrastructure investments across hyperscalers, memory manufacturers and foundries.
The Santa Clara, California-based company reported non-GAAP earnings per share of $2.86, up 20% year over year, with gross margins reaching 50%. Analysts now expect fiscal 2026 adjusted EPS of $12.11, a 28% increase from $9.42 in fiscal 2025, according to Zacks estimates. Revenue is projected to climb 17% to $33.29 billion this year and another 25% to $41.74 billion in fiscal 2027.
The results reinforce a shift in the AI spending cycle: while graphics processing units captured the first wave of investment, the buildout is now flowing into wafer fabrication equipment for advanced logic, DRAM and high-bandwidth memory production. Applied Materials, with a market capitalization of about $551.5 billion, is the largest supplier of deposition, etch and inspection tools — positioning it to capture a disproportionate share of that spending.
The company's stock has gained more than 370% from its low point last year and roughly 200% year to date, outpacing the broader semiconductor sector and the S&P 500 Index. KeyBanc Capital Markets raised its price target to $750, while Sesquania set a $900 target — the highest on Wall Street — with both firms citing Applied Materials' leadership in growth segments tied to AI manufacturing.
Valuation in Context
At about 52 times forward earnings, Applied Materials trades above its modeled fair multiple of roughly 59 times, according to Simply Wall St data. But analysts have begun valuing semiconductor equipment companies on normalized earnings several years ahead rather than near-term results, arguing that the current multiple will compress as earnings catch up. KeyBanc's $750 target is based on estimated fiscal 2028 EPS of $24.17.
The company returned $765 million to shareholders last quarter through $400 million in share repurchases and $365 million in dividends. Management has also increased production plans and inventory levels to meet rising customer demand, while expanding logistics capabilities.
Competitive Landscape
Applied Materials competes with ASML Holding NV, Lam Research Corp. and KLA Corp. in the semiconductor equipment market. While ASML holds a monopoly on extreme ultraviolet lithography systems, Applied Materials dominates the deposition and etch segments — critical for advanced packaging technologies like CoWoS (chip-on-wafer-on-substrate) that enable high-bandwidth memory integration in AI accelerators.
The company's EPIC Center, a collaborative platform for commercializing future manufacturing technologies, has announced new partner engagements as customers accelerate their own roadmaps to keep pace with AI-driven demand.
So What for Investors
Applied Materials shares trade at roughly 52 times forward earnings, near the semiconductor equipment industry average of about 54 times. With fiscal 2027 EPS estimates rising 14% over the past 60 days and revenue expected to surpass $41 billion, the bull case rests on whether AI-related wafer fabrication equipment spending remains elevated through the decade. The risk: a pullback in hyperscaler capital expenditure or geopolitical exposure to China, which accounted for a significant portion of equipment sales in prior cycles.
This article is for informational purposes only and does not constitute investment advice.
