Applied Materials, Inc.

What they do

Designs, develops, manufactures and services wafer fabrication equipment, services and software used to produce semiconductors. Its Semiconductor Systems segment is the largest revenue contributor and sells equipment for patterning, transistor/interconnect fabrication, process control and advanced packaging. Applied Global Services provides services, spares and factory automation software to customer fabs worldwide. Through fiscal 2025, AGS also sold 200mm equipment; that business moved to Semiconductor Systems effective Q1 FY2026.

Revenue drivers

• Semiconductor Systems — Sells a comprehensive portfolio of chip-making equipment to customers in foundry/logic, DRAM and NAND markets; the largest contributor to net revenue.
• Applied Global Services — Generates recurring revenue from services, spares and factory automation software supporting the large global installed base of semiconductor equipment.
• Advanced packaging and process control — Within Semiconductor Systems, these products address heterogeneous integration and chip yield, tied to AI and leading-edge logic demand.

Recent performance

For Q2 FY2026 (ended April 26, 2026), revenue rose 11% year over year to a record $7.91B. GAAP gross margin was 49.9%, operating margin 31.9%, net income $2.81B and diluted EPS $3.51 (up 33% YoY). Non-GAAP EPS was $2.86, up 20% YoY. Cash from operations was $845M, with $765M returned to shareholders through $400M in buybacks and $365M in dividends. Full-year FY2025 revenue was $28.37B, net income $7.00B and diluted EPS $8.66.

Strategy

Management is focused on AI-driven demand across leading-edge logic, DRAM and advanced packaging and is expanding EPIC Center collaborations, including new partnerships with TSMC, Advantest, and universities (ASU, RPI, Stanford) to accelerate commercialization of next-generation semiconductor technologies. The CFO stated the company is increasing build plans, inventory positions and logistics capacity to support customer growth. The 200mm equipment business was moved from AGS to Semiconductor Systems effective Q1 FY2026.

Risks

• Cyclical industry — Semiconductor capital equipment demand is historically cyclical and volatile, and customer spending shifts can materially affect results.
• AI demand forecast uncertainty — AI-related investments are a significant demand driver, but the expected timing and amount of AI spending are difficult to predict.
• Global economy exposure — Uncertain global economic and political conditions can impact customers' investment timing and capital spending.
• Operating leverage risk — Rapid demand changes can lead to unplanned costs in supply chain, inventory and capacity, pressuring margins and cash flows.

Outlook

Management expects the semiconductor equipment business to grow more than 30% in calendar 2026, citing the rapid global build-out of AI computing infrastructure and strong positions in leading-edge logic, DRAM and advanced packaging. The company says it is prioritizing operational and supply chain readiness. No full-company revenue or EPS guidance was provided in the available materials.