Overview
Since the Report − 25.9%
Revenue grew 25.0% year over year, EPS beat the estimate by 2.9%; the stock fell 5.0% in its first reaction.
- RevenueQ3
- $9.12B
- Record · 25% YoY
- EPSAdjusted
- $3.50
- Est. Was $3.40
Verdict
BUYApplied Materials posted record third-quarter revenue of $9.12 billion, adjusted EPS of $3.50 beat expectations, and fourth-quarter revenue was guided to $10.25 billion, well above market estimates. Despite "unprecedented" AI-driven demand for chip equipment, the stock fell about 5% after hours in a "beat wasn't enough" reaction following a steep year-long rally. From here the focus shifts to whether the record outlook carries into 2027 and how the revenue mix shifting away from China affects margins.
Close on Report DayAug 13
$534.54▼ 5.0%Report-Day Move
- Market Cap(Today)
- ≈ $314 B
- 1Y Return(At Report)
- + 190%
- P/E(At Today's Price · $10.91 · Trailing 12M)
- 36.3
- Net Margin(Trailing 12M)
- 30.1%
Earnings Summary
In 30 Seconds- Revenue rose 25% year over year to a record $9.12 billion; adjusted EPS of $3.50 beat the estimate by 2.9%.
- Fourth-quarter revenue guidance of $10.25 billion sits 7.4% above the market expectation.
- After a roughly 190% run over the past year, the stock fell 5% in after-hours trading.
The Numbers
Gross Margin
50.4%
Adjusted · Solid
Semiconductor Systems
$7.04B
Op. Margin 38%
Q4 Revenue Guidance
$10.25B
Est. $9.54B
Stock Reaction
▼ 5.0%
After Hours
Quarterly Revenue ($ Billion)
7.30
Q3 25 · $7.30 B
6.80
Q4 25 · $6.80 B · QoQ − 6.8%
7.01
Q1 26 · $7.01 B · QoQ + 3.1%
7.91
Q2 26 · $7.91 B · QoQ + 12.8%
9.12
Q3 26 · $9.12 B · QoQ + 15.2% · YoY + 24.9%
9.75–10.75
Q4 26E · 9.75–10.75 · QoQ + 12.5% · YoY + 50.7%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 FY26 Company Guidance
- Revenue9.75 – 10.75 billion9.75 billion10.75 billion
Midpoint $10.25B · Market Expectation $9.54BMidpoint 7.4% Above Estimate ▲
- Adjusted EPS3.82 – 4.22 $3.82 $4.22 $
Midpoint $4.02 · Market Expectation $3.69Midpoint 8.9% Above Estimate ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±9.4% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Semiconductor Systems$7.04 BShare 77.2%
Year ago $5.56 billion; operating margin 37.7%
- Applied Global Services$1.78 BShare 19.5%
Year ago $1.46 billion; operating margin 30.1%
- Other (Incl. Display)$294 MShare 3.2%
Year ago $275 million
Key Metrics
Free Cash Flow
$2.33 B
▲ 14.0% YoYPress Release
Operating Cash Flow
$3.04 B
Press Release
Share Repurchases
$440 M
Press Release
Dividends Paid
$420 M
Press Release
China Revenue Share
28.0%
Press Release
Employees
38.9 K people
Press Release
Shares are computed over the segment total: $9.12 B. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company's history.”
- Record-breaking Quarter
- AI-driven Demand
- 2026 Outlook Raised
Summary and Review
Summary
Applied Materials set records in its fiscal third quarter. Revenue rose 25% year over year to $9.12 billion, the highest in company history, topping the $8.99 billion market expectation. Adjusted earnings per share climbed 41% to $3.50, ahead of the $3.40 expectation. GAAP earnings per share rose 43% to $3.17. Adjusted gross margin held at 50.4% and adjusted operating margin at 34.0%. Semiconductor Systems, the largest business, delivered $7.04 billion in revenue; its operating margin expanded to 38.0% from 33.2%.
Despite the strong scorecard, the stock fell about 5% after hours from its $534.54 close, toward $508. The reason is simple: the shares had climbed roughly 190% in a year and about 100% year to date. The pricing demanded perfection. The price-to-earnings ratio is near 50; at that multiple, merely beating expectations is not enough. The stock had already fallen 2.48% in the regular session that day. So the drop reflects stretched expectations unwinding, not weakness in the quarter.
The quarter itself was strong on every axis; the score measures results, not the stock reaction. Record revenue, an earnings beat, a Q4 outlook well above expectations and structural AI demand came together. The company returned $860 million via buybacks and dividends. China's revenue share fell from 35% to 28%, reducing geopolitical risk. Caveats: elevated valuation, a cyclical industry, and the path of China export controls. The results support a "buy" read; this evaluates the quarter, not the stock.
Full Review
Record revenue and margins beat on every front.
Third-quarter revenue of $9.12 billion marks a 25% jump year over year and the highest quarterly revenue in company history. It topped the $8.99 billion market expectation. Adjusted earnings per share of $3.50 rose 41% year over year and GAAP earnings per share of $3.17 rose 43%; both beat expectations. On profitability, adjusted gross margin held at 50.4% and adjusted operating margin at 34.0%, strong figures for an equipment company at this scale. Operating cash flow reached $3.04 billion and free cash flow $2.33 billion. The company returned $860 million to shareholders through buybacks and dividends during the quarter. In short, revenue, earnings and margin all beat in the same quarter; there is no weak line on the scorecard.
AI and advanced packaging power the growth.
Semiconductor Systems, the backbone of revenue, generated $7.04 billion and made up roughly 77% of total revenue. More striking, that segment's operating margin expanded to 38.0% from 33.2% a year earlier. The company emphasized that growth is fueled by "unprecedented" demand for AI infrastructure. Investment in advanced packaging, high-bandwidth memory and leading-edge logic nodes is lifting equipment demand. Management again raised its Semiconductor Systems revenue expectation for calendar 2026 and guided to growing faster than the market. It also signaled a strong growth year for 2027. This is not a one-quarter flash but a sign of a demand wave spread across multiple quarters. This structural demand is the main reason the quarter's score is high. The one caveat is that volatility in memory capital spending could make equipment demand swing.
A record outlook, but the stock said "not enough".
The company guided fourth-quarter revenue to a midpoint of $10.25 billion, roughly 7% above the $9.54 billion market expectation. The adjusted earnings-per-share guide is $3.82–$4.22, a midpoint of $4.02, versus a $3.69 expectation. So both revenue and earnings guidance beat clearly. Even so, the stock fell about 5% after hours; it had already slipped 2.48% in the regular session. The reason is not the quarter but the pricing. The shares had risen about 190% over the past year and about 100% year to date, and the price-to-earnings ratio was near 50. At that multiple the market wanted not a "beat" but a blowout. Much of the good news was already in the price. The 39 analysts covering the stock have an average target of $633, roughly 18% above the close.
China share falls, U.S. weight rises.
A notable structural theme was the shift in geographic mix. China's share of total revenue fell to 28% from 35% in the prior period, while the U.S. contribution nearly doubled. Over the long run, this is an important de-risking development against the backdrop of export controls and geopolitical tension. Lower dependence on China softens the impact of any new restrictions on revenue. On the other hand, because the shift changes demand composition in the near term, it is a variable to watch for margins and product mix. By spreading its revenue base across a more balanced geography, the company reduces its exposure to any single market's policy risk. The main caveats still stand: elevated valuation, industry cyclicality and the path of China export controls. Two lines to check in November's Q4 report: whether revenue holds the $10.25 billion midpoint and whether China's share stays below 28%.
Looking Ahead
Strengths and Risks
6 Strengths · 5 RisksStrengths
6- Record revenue$9.12 billion, up 25% year over year and above expectations
- Adjusted earnings per share of $3.50 beat expectations, up 41% year over year
- Fourth-quarter guidance of $10.25 billion, well above market expectations
- Semiconductor Systems operating margin expanded to 38.0% from 33.2%
- China revenue share fell from 35% to 28%, easing geopolitical risk
- Returned $860 million to shareholders via buybacks and dividends this quarter
Risks
5- Price-to-earnings ratio near 50The valuation is pricing perfection
- The stock has risen about 190% over the past yearGood news is priced in
- The chip-equipment industry is cyclical by natureDemand can swing
- The trajectory of export controls toward China remains uncertain
- Volatility in memory capital spending could affect equipment demand
What to Watch
4- Fourth-quarter fiscal 2026 results due ~November 2026
- Calendar 2026 Semiconductor Systems revenue expectation was raised
- Management signaled a strong growth year for 2027
- Potential new export-control decisions toward China to watch
Upcoming Earnings
To Understand This