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    AMAT
    Earnings call· Jul 2026(Q3 FY26)

    APPLIED MATERIALS INC /DE Q3 FY26 earnings call AMAT

    Aug 13, 2026 Source

    Executive summary

    Applied Materials Q3 FY26 — Record Results Driven by AI Infrastructure Build-Out

    Applied Materials delivered record Q3 FY26 results, driven by the rapid global build-out of AI infrastructure and strong demand for advanced chips. The company is confident in outgrowing the overall market in 2026 and expects another strong year in 2027, supported by increased customer visibility and multi-year commitments. Strategic investments in AI-enabling technologies, advanced packaging, and service solutions are expanding gross margins and positioning Applied Materials for sustained growth.

    Highlights

    5

    • Record-breaking Q3 FY26 revenue of $9.1 billion, up 15% sequentially and 25% year-over-year.

    • Non-GAAP EPS of $3.50, up 22% sequentially and 41% year-over-year.

    • Non-GAAP gross margin increased to 50.4%, up 40 basis points sequentially and 150 basis points year-over-year, marking 13th consecutive quarter of YoY expansion.

    • Semiconductor Systems revenue reached a record $7 billion, up 18% sequentially and 27% year-over-year, with DRAM revenue up 52% year-over-year.

    • Applied Global Services (AGS) delivered record revenue of $1.8 billion, up 22% year-over-year, with operating margin of 30.1%, up 280 basis points year-over-year.

    Concerns

    3

    • Q4 FY26 non-GAAP gross margin guided flat sequentially at 50.4% due to ramp costs for customer service engineers and resources.

    • Q1 FY27 operating expenses expected to have a higher than average step-up due to it being a 14-week quarter.

    • Non-GAAP tax rate expected to increase to around 13% in 2027 due to the effect of the global minimum tax.

    Guidance & targets

    16
    CategoryTargetConfidence
    Company Revenue
    $10.25 billion, plus or minus $500 million
    high materiality
    High
    Non-GAAP EPS
    $4.02, plus or minus $0.20
    high materiality
    High
    Semiconductor Systems Revenue
    around $7.9 billion
    medium materiality
    High
    Applied Global Services (AGS) Revenue
    about $1.84 billion
    medium materiality
    High
    Other Revenue
    around $510 million
    low materiality
    High
    Other Revenue (average)
    approximately $400 million per quarter
    low materiality
    Medium
    Non-GAAP Gross Margin
    approximately 50.4%
    high materiality
    High
    Non-GAAP Operating Expenses
    around $1.58 billion
    medium materiality
    High
    Non-GAAP Tax Rate
    around 11%
    low materiality
    High
    Non-GAAP Tax Rate
    around 13%
    low materiality
    Medium
    Applied Global Services (AGS) Annual Growth Rate
    mid-teens
    medium materiality
    Medium
    Semiconductor Systems Growth
    stronger than 30%
    high materiality
    High
    Company Revenue
    another strong record year
    high materiality
    High
    Advanced Packaging Revenues
    more than 70%
    medium materiality
    High
    Process Diagnostics and Control Business Growth
    more than 50%
    medium materiality
    High
    Applied Global Services (AGS) Growth
    more than 20%
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Semiconductor Systems
    Delivered record revenue and operating profit. Revenue mix was similar to last quarter, with capacity additions in gate-all-around and FinFET driving record foundry/logic revenue. DRAM revenue, including HBM packaging, grew significantly. Non-GAAP gross margin increased 190 basis points year-over-year.
    Non-GAAP Gross Margin: 55.4%
    		$7 billion27%18%Operating profit: $2.7 billion
    Applied Global Services (AGS)
    Delivered record revenue, reflecting growth in subscription services and high transactional parts demand. The team added over 1,000 customer support engineers. Gross margin increased 180 basis points year-over-year, and operating margin increased 280 basis points year-over-year.
    Non-GAAP Gross Margin: 35.6%
    		$1.8 billion22%—Operating margin: 30.1%
    Other
    Revenue was in line with expectations, primarily composed of display revenue.
    		$294 million———
    China (regional)
    China represented 26% of Semiconductor Systems plus AGS revenue. Expected to increase this calendar year, led by investments in 28-nanometer foundry logic.
    Revenue as % of Semiconductor Systems + AGS: 26%
    		————

    Operational metrics

    14
    Non-GAAP Gross Margin
    50.4%up 40 bps sequentially, up 150 bps YoY
    Q3 FY26

    Marks 13th consecutive quarter of year-over-year gross margin expansion.

    Non-GAAP Operating Margin
    34%up 190 bps sequentially, up 330 bps YoY
    Q3 FY26

    Expanded to a record level.

    Non-GAAP EPS
    $3.50up 22% sequentially, up 41% YoY
    Q3 FY26

    Record non-GAAP earnings per share.

    Capital Expenditures
    $707 million
    Q3 FY26

    Capital expenditures for the quarter.

    Shareholder Distribution
    $860 million
    Q3 FY26

    Total capital distributed to shareholders.

    Share Buyback Authorization Remaining
    $12.8 billion
    Q3 FY26

    Remaining authorization for share repurchases.

    G&A as % of Operating Expenses
    lowest levelin company history
    Q3 FY26

    AI is helping ramp faster, drive meaningful improvements in productivity and scale revenue faster than headcount.

    R&D Investment
    increased every year
    since 2012

    Investments have broadened from equipment innovations to materials engineering solutions and advanced packaging.

    Headcount Added
    more than 1,500
    Q3 FY26

    Hiring and training new teams to support capacity expansion.

    Manufacturing Space
    nearly doubled
    past several years

    Expansion includes a new manufacturing center in Singapore.

    Quarterly System Output Capacity
    doublefrom current levels
    by 2028

    Capacity expansion to support longer-term demand signals from customers.

    Connected Chambers
    more than 37,000
    Q3 FY26

    Enables AI-powered monitoring, diagnostics, and predictive analytics for advanced service solutions.

    New Fab Projects Announced
    more than 10
    Q3 FY26

    Indicates strong demand and increasing customer investments.

    NAND Revenue Growth
    doubled
    Q3 FY26

    Off a small base, but strong growth for the year.

    Industry KPIs

    10
    MetricValueDetails
    Lead timeslonger lead time POs
    Backlog order booklonger-term commitments and rolling 8-quarter forecasts
    Ai data center revenueimplied by growth in leading-edge foundry logic, DRAM, and advanced packaging
    Services installed basemore than 37,000 chamberschambers
    Fab capacity utilizationfull capacity / rising across the board%
    Bookings net order intakelonger-term commitments and rolling 8-quarter forecasts
    Wfe industry spend outlookgrow faster than the overall market
    Design wins socket pipelineco-innovation programs
    Node platform ramp scheduleinnovations in 6 F squared, 4 S squared, and 3D DRAM
    End market segment revenue mixDRAM revenue up 52% YoY; Foundry/Logic revenue record; China 26% of Semi Systems + AGS revenue; ICAP expected to grow this year and next%

    Orderbook & backlog

    2
    Customer Forecastsrolling 8-quarter forecastsQ3 FY26

    Customers are giving longer-term commitments and rolling 8-quarter forecasts, providing increased demand visibility and high confidence for strong growth in 2027.

    Customer Visibilitylonger visibilityQ3 FY26

    increased

    Customers are providing longer visibility than ever before, with some conversations extending to 2030, which is valuable for company and supply chain planning.

    Product announcements

    5
    ProductTypeDetails
    Centura Prime Epitaxy systemlaunch
    Producer Avilalaunch
    Nokota VMAXlaunch
    Opta Quad CMPlaunch
    Two new e-beam systemslaunch

    Deals & partnerships

    3
    BroadcomInnovation partner to accelerate the development of advanced chip packaging technologies for next-generation AI systems.

    Joined EPIC as an innovation partner, contributing to the EPIC strategy of co-innovation.

    ScreenEPIC partnership agreement.

    Signed an EPIC partnership agreement, contributing to the total of 11 announced EPIC engagements.

    UC BerkeleyEPIC partnership agreement.

    Signed an EPIC partnership agreement, contributing to the total of 11 announced EPIC engagements, spanning top research universities.

    Capital programs

    2
    Newest Manufacturing Centeropened

    Benefit: nearly doubled manufacturing space

    Officially opened newest manufacturing center in Singapore, part of a global expansion that has nearly doubled manufacturing space over the past several years.

    Manufacturing Capacity Expansionplanning

    Benefit: option to support further increases in demand

    Planning the next manufacturing capacity expansion to ensure the option to support further increases in demand by 2030, based on longer-term demand signals.

    Risks & headwinds

    5
    Ramp costs impacting gross marginQ4 FY26

    Q4 FY26 non-GAAP gross margin guided flat sequentially at 50.4%

    Mitigation: The company is adding resources (customer service engineers, semi business resources) to support growth, which are factored into the forecast. Expects headwinds to recede as revenues continue to grow.

    Higher operating expenses due to 14-week quarterQ1 FY27

    higher than average step-up in Q1 operating expenses

    Mitigation: Anticipated impact of the 14-week fiscal quarter on operating expenses, with most spending expected to occur in the quarter.

    Increased tax rate from global minimum tax2027

    tax rate of around 13%

    Mitigation: The company is absorbing the effect of the global minimum tax, leading to a higher non-GAAP tax rate in 2027.

    Clean room space constraints2026

    customers have found new ways to address clean room space constraints

    Mitigation: Customers are being creative in expanding space and taking tools earlier, and Applied Materials' supply chain and operations teams are reacting quickly to support increased demand.

    Supply chain scaling to meet demandmulti-year

    scaling our operations for continued growth

    Mitigation: The company is making substantial investments, hiring new manufacturing and customer support teams, and expanding manufacturing space to support customer growth forecasts and higher output levels by 2028 and beyond.

    What to watch in Q4 FY26

    5

    Semiconductor Systems Growth (CY26)

    next quarter (Q4 FY26 earnings call)
    Currentgreater than 30%, now even higher
    Targetfinal reported growth rate for CY26

    Why it matters

    This metric indicates the company's ability to outperform the overall market and capitalize on AI-driven demand, impacting market share and revenue trajectory.

    the mid -- the greater than 30% that we highlighted last quarter, we're saying now that it's greater than that at this point.

    Q&A highlights

    6

    What is the updated growth outlook for semi-systems for calendar year 2026, given the positive commentary, and what is the framework for thinking about growth into calendar year 2027?

    Demand has strengthened further, exceeding the previously highlighted 'greater than 30%' growth for CY26. The company expects to gain market share. For CY27, strong demand led by AI is expected to continue, making it another strong year.

    “the mid -- the greater than 30% that we highlighted last quarter, we're saying now that it's greater than that at this point. ... when we look into 2027, we expect this whole demand function led by AI to continue. So we're saying '27 at this point, we expect another strong year.”

    asked by Christopher Muse · answered by Brice Hill

    3 min read7 chapters

    Detailed Narrative

    01

    AI's Impact and Strategic Focus

    AI is reshaping the semiconductor industry, driving unprecedented🌐 demand for advanced chips and creating a significant gap between demand and supply. Applied Materials views AI as the biggest technology inflection of our lifetimes, fueling both a technology leadership race and a capacity race. The company's investments in AI are accelerating revenue growth and operating profit margins, with AI being used in R&D, services, operations, supply chain, and corporate functions to create differentiated products, speed up development, and improve productivity.

    02

    Leadership in Key Growth Segments

    Leading-edge foundry logic, DRAM, and advanced packaging are expected to represent around 80% of wafer fab equipment (WFE) growth in 2026 and 2027. Applied Materials holds strong leadership positions in these areas, having identified key AI inflections early and shifted investments to build an innovative pipeline of next-generation solutions. This strategic alignment positions the company for strong multi-year revenue and profit growth.

    03

    Advanced Packaging and Innovation

    Advanced packaging is a critical area for AI compute innovation, with Applied Materials expecting its packaging revenues to grow more than 70% in calendar 2026. The company is the overall leader in this market, with strong positions in high-bandwidth memory and 3D chiplet stacking. Applied is also developing a broad portfolio of next-generation technologies for panel formats, including digital lithography, deposition, etch, and e-beam review, and sees hybrid bonding as a significant growth driver.

    04

    Optimizing Fab Yields and Output

    Customers are intensely focused on increasing output and yields in existing factories while rapidly building new ones. Applied Materials is addressing this with innovations in services, process diagnostics and control, and new products that increase wafer output per area of fab space. The company's process diagnostics and control business is expected to grow over 50% in calendar 2026, driven by advanced e-beam and optical inspection products.

    05

    EPIC Strategy and Partnerships

    The EPIC strategy aims to increase innovation and commercialization velocity through earlier and deeper engagements with customers and partners. The new EPIC Center in Silicon Valley is on track to start operations, with the first R&D tool moving in next week. Broadcom, Screen, and UC Berkeley have joined as innovation partners, bringing the total number of announced EPIC engagements to 11, spanning system companies, chip makers, universities, and innovation partners.

    06

    Manufacturing Capacity Expansion and Supply Chain

    Based on longer-term demand signals, Applied Materials is expanding its manufacturing capacity, having nearly doubled its space over the past several years and officially opened a new manufacturing center in Singapore. The company is hiring and training new manufacturing and customer support teams to double quarterly system output from current levels by 2028, with plans for further expansion by 2030 to support increased demand.

    07

    Value-Based Pricing and Margin Expansion

    Applied Materials has systematically implemented value-based pricing over the last three years, contributing to a 300 basis point increase in company-level gross margins. This approach, combined with a strengthened portfolio targeting valuable inflection solutions, has driven gross margins to over 50% for the company and over 55% in semiconductor systems. The company expects to continue expanding gross margins by delivering value in chips, systems, and fab returns.

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