Applied Materials Earnings: It Just Keeps Accelerating

Key Morningstar Metrics for Applied Materials

• Fair Value Estimate
  : USD 470
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

What We Thought of Applied Materials’ Earnings

Applied Materials AMAT' April-quarter results were strong, and guidance was even better. Sales rose 11% year-on-year to USD 7.9 billion, and guidance calls for growth to accelerate to 23%. Applied now expects to grow its equipment sales by more than 30% in calendar 2026.

Why it matters: The artificial intelligence-driven growth cycle for chip equipment is strengthening, and we now expect even stronger growth through 2028. We see Applied as very well-positioned for leading-edge logic, DRAM, and advanced packaging supply buildouts.

• Applied offers the widest breadth in chip equipment and the deepest capabilities for both DRAM and logic deposition. We see it gaining market share across this growth cycle. We expect share gains for other wide-moat incumbents as well, but it appears Applied is growing the fastest.
• Management raised its long-term services growth target to midteens, up from low-teens. We find this credible—rapid buildouts of chip capacity require commensurately more services, and we believe demand for higher yields in a supply-constrained environment augments demand for services.

The bottom line: We raise our fair value estimate for wide-moat Applied to USD 470 from USD 380, driven by a higher growth forecast through 2028. Shares were flat after-hours, signaling investors expected the strong guidance raise. Applied stock looks fairly valued.

• We’re above management’s 30% equipment growth target for 2026 (35%), as we expect momentum in the current upcycle to continue accelerating through the year. In 2027, we model mid-20% total revenue growth, and 18% in 2028 to round out the three-year cycle we expect.
• Applied is up over 150% in the last 12 months and over 70% year-to-date as investors have priced in the AI growth cycle. This appreciation looks justified to us, as we forecast 24% annualized growth over a three-year period, up from historical growth in the midsingle digits.