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    AMAT
    Earnings call· Jan 2026(Q1 FY26)

    APPLIED MATERIALS INC /DE Q1 FY26 earnings call AMAT

    Feb 12, 2026 Source

    Executive summary

    Applied Materials Q1 FY26 — AI-Driven Growth and Strong Outlook

    Applied Materials delivered strong Q1 FY26 results, exceeding guidance, driven by accelerating AI investments and robust demand in leading-edge logic, HBM DRAM, and advanced packaging. The company anticipates over 20% growth in its semiconductor equipment business for calendar year 2026, with momentum expected to continue into 2027, despite cleanroom capacity constraints. Strategic investments in R&D and manufacturing capacity position Applied to capitalize on the long-term AI-driven semiconductor growth cycle.

    Highlights

    5

    • Q1 FY26 revenue of $7 billion was in the upper end of guidance.

    • Non-GAAP EPS of $2.38 was at the top of guidance range, flat YoY.

    • Semiconductor Systems revenue exceeded expectations, with record DRAM revenue.

    • Applied Global Services delivered record revenue of $1.56 billion, up 15% YoY.

    • Company expects to grow its semiconductor equipment business more than 20% in CY26.

    Concerns

    3

    • Revenue in China declined 7% YoY, representing 30% of overall sales.

    • Accrual of $252.5 million related to an export controls compliance matter.

    • Cleanroom capacity is a key factor pacing the rate of investment in CY26.

    Guidance & targets

    9
    CategoryTargetConfidence
    Company Revenue
    $7.65 billion, plus or minus $500 million
    high materiality
    High
    Non-GAAP EPS
    $2.64 and plus or minus $0.20
    high materiality
    High
    Semiconductor Systems Revenue
    around $5.8 billion
    medium materiality
    High
    AGS Revenue
    about $1.6 billion
    medium materiality
    High
    Other Revenue
    around $250 million
    low materiality
    High
    Non-GAAP Gross Margin
    approximately 49.3%
    medium materiality
    High
    Non-GAAP Operating Expenses
    around $1.415 billion
    medium materiality
    High
    Semiconductor Equipment Business Growth
    more than 20%
    high materiality
    High
    Non-GAAP Tax Rate
    around 11%
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Semiconductor Systems
    Revenue exceeded expectations in Q1 FY26.
    Record DRAM revenue
    		$5.14 billiondeclined 8%—Non-GAAP gross margin increased 100 basis points to more than 54%; Non-GAAP operating margin declined 80 basis points to 32.9%
    Applied Global Services
    Revenue exceeded expectations in Q1 FY26.
    Record revenue
    		$1.56 billiongrew 15%—Non-GAAP gross margin increased 210 basis points; Non-GAAP operating margin grew 320 basis points

    Operational metrics

    15
    Shareholder distributions
    $702 million
    Q1 FY26

    Distributed to shareholders.

    Non-GAAP Operating Expenses
    $1.34 billiongrew 2% year-over-year
    Q1 FY26

    In line with expectations, with R&D increase offset by G&A reductions.

    R&D investments growth
    8%
    Q1 FY26

    Increase in R&D investments, largely offset by G&A spending reductions.

    Inventory increase
    nearly $500 million
    year-over-year

    Proactively increased to meet increasing build plans.

    Days inventory
    approximately 153
    Q1 FY26

    Expected to stay fairly tight to this zone as revenue increases.

    AIx connected chambers
    more than 30,000
    Q1 FY26

    Using AI-powered monitoring, diagnostics and analytics.

    AIx response times improvement
    30%
    Q1 FY26

    Faster response times enabling increased wafer output.

    Automated distribution centers
    all our major distribution centers
    Q1 FY26

    Significantly improving parts delivery speed and accuracy as well as inventory optimization.

    AGS installed base
    55,000
    Q1 FY26

    Installed base of tools for Applied Global Services.

    AGS contracts under contract
    2/3
    Q1 FY26

    Proportion of AGS business under contract.

    AGS average contract duration
    2.9 years
    Q1 FY26

    Average length of AGS contracts.

    AGS renewal rate
    90%
    Q1 FY26

    Renewal rate for AGS contracts.

    Leading-edge wafer starts for data center
    >20%
    recent past

    Proportion of leading-edge wafer starts directed towards data centers.

    Traditional data center growth
    between 10% and 20%
    current

    Growth rate for traditional data center components.

    AI-related data center growth
    between 30% and 40%
    current

    Growth rate for AI-related data center components.

    Industry KPIs

    9
    MetricValueDetails
    Ai data center revenueAI is driving significant demand
    Market share commentary—
    Services installed base55,000tools
    Fab capacity utilization—
    Advanced packaging revenue—
    Wfe industry spend outlookglobal semiconductor industry revenues can potentially reach $1 trillionUSD
    Node platform ramp schedule—
    Wafer shipments foundry ASP—
    End market segment revenue mixNAND less than 10% of wafer fab equipment spending; ICAPS approximately flat year-on-year%

    Product announcements

    3
    ProductTypeDetails
    Viva radical treatment systemlaunch
    Sym3 Z Magnumlaunch
    Spectral ALD systemlaunch

    Deals & partnerships

    1
    Samsung Electronicsco-development

    First EPIC co-development agreement, designed to support high velocity co-innovation and provide earlier access to Applied's R&D portfolio for faster learning cycles and accelerated technology transfer.

    Capital programs

    1
    EPIC R&D centerunderway
    Period spend: elevated capital investments
    Spent to date: continued progress

    Benefit: support high velocity co-innovation with customers and R&D partners

    Free cash flow of $1 billion included elevated capital investments as we made continued progress building the EPIC R&D center in Silicon Valley.

    Risks & headwinds

    4
    Export controls compliance matterQ1 FY26

    $252.5 million accrual

    Mitigation: Department of Justice and SEC closed inquiries with no enforcement actions; settlement reached with U.S. Department of Commerce Bureau of Industry and Security.

    Cleanroom capacity constraintCY26

    pacing the rate of investment

    Mitigation: Customers are increasing new factory projects and fab expansions for 2027; Applied has doubled manufacturing capacity and increased inventory.

    Supply chain lead timesongoing

    takes some time

    Mitigation: Providing direct suppliers longer visibility into requirements and specific bill of materials to secure materials and labor.

    ICAPS and NAND market growthCY26

    ICAPS flattish; NAND growing slower and remaining less than 10% of total WFE

    Mitigation: Focusing on faster-growing AI-driven segments (leading-edge foundry/logic, DRAM, advanced packaging) where Applied has strong leadership.

    Q&A highlights

    8

    Asked about Applied's view on 2026 WFE growth compared to peers' estimates (low teens to 22%) and drivers for share growth, given Applied's expectation of >20% growth in its semi equipment business.

    Gary Dickerson reiterated the >20% growth for Applied's semi equipment business in CY26, driven by AI's impact on leading-edge foundry/logic, DRAM (including HBM), and advanced packaging. He emphasized Applied's #1 position and share gain potential in these fastest-growing segments, while NAND and ICAPS are expected to be flatter or slower growing.

    “We expect to grow our semi equipment business more than 20% this calendar year and our #1 position in these fast growing markets creates a great setup for Applied in '27 and for the next several years.”

    asked by Christopher Muse · answered by Gary Dickerson

    2 min read7 chapters

    Detailed Narrative

    01

    AI's Transformative Impact on Semiconductors

    AI is driving unprecedented🌐 spending on semiconductors, manufacturing capacity, and R&D, accelerating the global semiconductor industry to potentially reach $1 trillion in 2026, years ahead of prior predictions. This shift is reshaping investments towards leading-edge logic, HBM DRAM, and advanced packaging, where Applied Materials holds strong leadership positions. The company's strategy focuses on inflection-driven innovation to enable energy-efficient AI computing.

    02

    Market Leadership and Share Gains

    Applied Materials is positioned as the #1 process equipment provider in leading-edge logic, memory (especially DRAM), and advanced packaging, which are the fastest-growing WFE segments. The company expects to gain market share, particularly in gate-all-around nodes and wiring (targeting over 50% of its served market), and in HBM DRAM where 3-4x more wafer starts are needed per delivered bit. NAND and ICAPS are expected to be flatter or slower growing in 2026.

    03

    New Product Innovations for Next-Gen Architectures

    Applied plans to launch over a dozen new products in 2026, including three for advanced logic and DRAM announced recently. These include the Viva radical treatment system for angstrom-level precision engineering of nanosheet surfaces, Sym3 Z Magnum for critical etch steps in gate-all-around transistors and advanced DRAM, and the spectral ALD system for monocrystal moly deposition to reduce contact resistance in advanced logic devices by up to 15%.

    04

    EPIC Co-development Platform

    The new EPIC (Equipment & Process Innovation & Commercialization) platform, with its first co-development agreement with Samsung Electronics, aims to accelerate innovation. It provides customers with earlier access to Applied's R&D portfolio, enabling faster learning cycles and technology transfer. For Applied, EPIC offers better multi-node visibility to guide R&D investments, improving productivity, value sharing, and product design-in.

    05

    Advanced Services and AI-Powered Operations

    Applied Global Services (AGS) is experiencing double-digit growth, supported by a 55,000-tool installed base and innovations like the AIx (Actionable Insight Accelerator) software. Over 30,000 chambers are connected to AIx, leading to 30% faster response times and increased wafer output for customers. The company has also automated its major distribution centers with AI-enabled robotic systems, significantly improving parts delivery speed, accuracy, and inventory optimization.

    06

    Capacity Expansion and Supply Chain Management

    Applied has nearly doubled its system manufacturing capacity over the past several years and proactively increased inventory by nearly $500 million year-over-year to meet rising demand. The company is working closely with its 2,000+ suppliers, providing longer visibility into requirements and specific bill of materials. This ensures the supply chain can secure materials and labor needed to support customer ramps in 2026 and 2027.

    07

    Export Controls Compliance Resolution

    The company disclosed an accrual of $252.5 million related to an export controls compliance matter. The Department of Justice and SEC have closed their inquiries into this matter with no enforcement actions. A settlement was reached with the U.S. Department of Commerce Bureau of Industry and Security to resolve its inquiry, with all comments related to the matter available in public filings.

    AI-generated summary of the company’s earnings call. Not investment advice.