AMAT · Q1 2026 Earnings

Bullish

Applied Materials

Reported February 12, 2026

30-second summary

Applied delivered Q1 revenue of $7.01B (-2% YoY) above the $6.85B prior midpoint, with non-GAAP EPS of $2.38 at the top of guidance and non-GAAP gross margin of 49.1% beating the 48.4% guide. The Q2 guide of $7.65B ±$500M is the first meaningfully positive YoY guide in three quarters — and management for the first time put a number on the 2026 thesis: >20% growth in the semiconductor equipment business, with cleanroom capacity (not demand) now the gating factor. The H2-calendar-2026 inflection management forecast last quarter is now visible in the Q2 print, with 2027 set up for further acceleration as new fabs come online.

Headline numbers

EPS

Q1 FY2026

$2.38

Revenue

Q1 FY2026

$7.01B

-2.0% YoY

Gross margin

Q1 FY2026

49.0%

Free cash flow

Q1 FY2026

$1.04B

Operating margin

Q1 FY2026

26.1%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$7.01B	-2.0%	$6.80B	+3.1%
EPS	$2.38	—	$2.17	+9.7%
Gross margin	49.0%	—	48.0%	+100bps
Operating margin	26.1%	—	25.2%	+90bps
Free cash flow	$1.04B	—	$2.04B	-49.1%

Guidance

Q1 FY2026 beat revenue and margin guidance; Q2 guided higher to $7.65B (+7.8% YoY) and $2.64 EPS, with full-year semiconductor equipment business expected to grow over 20%.

Guidance is issued one quarter forward. The Prior-guide column references the guide issued last quarter for the period just reported; the New-guide column is for next quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$6.85B +/- $0.50B (range: $6.35B–$7.35B)	$7.012B	+0.162B above midpoint; within guided range	Beat
Non-GAAP diluted EPS	Q1 FY2026	$2.18 +/- $0.20 (range: $1.98–$2.38)	$2.38	+0.20 above midpoint; at upper bound of range	Missed
Semiconductor Systems revenue	Q1 FY2026	approximately $5.025B	$5.141B	+$0.116B above guide	Beat
Applied Global Services revenue	Q1 FY2026	approximately $1.52B	$1.559B	+$0.039B above guide	Beat
Non-GAAP gross margin	Q1 FY2026	approximately 48.4%	49.1%	+0.7 percentage points above guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$7.65B +/- $0.50B (range: $7.15B–$8.15B)	+0.8% to +14.8% YoY
Non-GAAP diluted EPS	Q2 FY2026	$2.64 +/- $0.20 (range: $2.44–$2.84)	—
Semiconductor equipment business growth	FY 2026	Expected to grow over 20% this calendar year	—

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Semiconductor Systems	$5.141B	-8.1%
Applied Global Services	$1.559B	+15.2%

Capacity & utilization

Q1 FY2026

Segment	Q1 FY2026
DRAM revenue as % of Semiconductor Systems	34%

Profitability

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP gross margin	49.1%
Non-GAAP operating margin	30.0%
Semiconductor Systems non-GAAP gross margin	54.5%
Semiconductor Systems non-GAAP operating margin	32.9%
Applied Global Services gross margin	34.4%
Applied Global Services operating margin	28.1%
Non-GAAP free cash flow margin	14.8%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Taiwan	$1.722B	+45.6%
China	$2.095B	-6.6%
Korea	$1.458B	-12.5%

Management tone

Narrative arc: Q4 FY25 committed to a 2026 growth year and prepped capacity → Q1 FY26 puts a number on it (>20%) and identifies capacity as the upside ceiling.

The most consequential tone shift is that the gating factor has flipped from demand to supply. One quarter ago management was "preparing operations to support higher demand"; this quarter the press release reads "with demand increasing for our innovative products and services, we are focused on ensuring we have the capacity to support our customers." That is a company telling investors the order book is full and the question now is whether they can ship it.

Quantitative commitment replaced qualitative direction. Last quarter Brice Hill gave "2026 will be a growth year" with no number; this quarter the press-release headline framing — "we expect to grow our semiconductor equipment business over 20 percent this calendar year" — converts the directional call into a specific commitment. Companies that just printed a -2% YoY revenue quarter do not casually put a 20%+ growth target on the next four quarters unless backlog supports it. The shift from "growth year" to ">20%" in one quarter is the single most important tone signal in this print.

The WFE intensity framework itself is being repositioned. In Q&A, Gary Dickerson acknowledged the historical one-third/one-third/one-third WFE model (logic/memory/ICAPS) no longer applies, with leading-edge logic, DRAM, and advanced packaging growing 30-40% while ICAPS grows mid-to-high single digits. Applied is asking investors to model the company at a higher growth rate than industry-wide WFE because the company is concentrated in the fastest-growing segments — a meaningful narrative upgrade from the prior "we participate across the cycle" framing.

Multi-year visibility extended from 1-2 years to mid-decade. Brice told Bernstein that multiple new factories are scheduled to come online in 2027, creating pent-up demand currently capped by cleanroom availability, with data center wafer starts already surpassing PCs this year and projected to surpass smartphones by 2029. That timeline pushes the AI infrastructure thesis well past the typical semi-cycle window investors model.

Recurring themes management leaned on this quarter:

AI adoption pace and customer capex timing uncertaintyFoundry and logic market bifurcation (strength in some nodes, weakness in others)Inventory normalization extending across customer baseSelective geographic/customer strength masking broader cautionEquipment deployment readiness vs. demand readiness mismatch

Risks management surfaced:

Customer capex timing delays and budget deferralsInventory correction extending beyond initial guidanceUneven foundry recovery across competing processes and nodesGeopolitical constraints on China market accessDemand visibility limited in near-term quarters

Q&A highlights

CJ Muse · Cantor Fitzgerald

How does Applied's view of 2026 WFE growth compare to peers' guidance ranging from low teens to 22%? What drives the company's >20% semiconductor equipment growth and share gains?

Applied expects >20% semiconductor equipment growth in 2026, second-half weighted, with cleanroom capacity pacing growth. Company is number one in leading-edge logic, DRAM (including HBM), and advanced packaging—the fastest-growing WFE segments. Plans to capture >50% of served market in gate-all-around and gain share across all three segments.

>20% semiconductor equipment growth expected for calendar 2026Second-half weighted demand profileNumber one position in leading-edge logic, DRAM, and advanced packagingTarget to capture >50% of served market in gate-all-around and wiring

Stacy Raskin · Bernstein Research

If Q2 guidance of $5.8B equipment revenue is extrapolated, does the implied 20% growth math require a ~$6.5B run rate for remaining quarters? What is the growth trajectory through the year, and is cleanroom capacity the limiting factor?

Bryce confirmed analyst's math is directionally correct but declined to fill in quarters three and four. Cleanroom capacity is indeed metered for leading-edge and DRAM this year. Multiple new factories are scheduled to come online in 2027, creating pent-up demand. Expects continued strong growth into 2027 based on customer conversations about multi-year AI data center buildout.

Cleanroom capacity constraints limiting 2026 growth in leading-edge and DRAMMultiple factories scheduled to come online in 2027Customers discussing extremely high compound annual growth ratesData center wafer starts expected to surpass PCs this year, smartphones by 2029

Mark Lipakis · Evercore ISI

With semiconductor industry reaching $1 trillion sooner than expected, is the historical 15% WFE intensity assumption still valid? Should investors use a new framework to model future WFE?

Gary acknowledged 15% intensity is no longer appropriate given divergent growth rates across segments. Old model assumed equal thirds (logic, memory, ICAPS). New reality shows AI-driven markets (leading-edge logic, DRAM, advanced packaging) growing 30-40% while ICAPS grows mid-to-high single digits. Proposed a new segmented growth framework rather than single intensity metric.

Historical one-third/one-third/one-third model no longer applicableLeading-edge logic and DRAM now significantly larger than ICAPS in growth trajectoryData center AI component growth 30-40% vs. traditional data center 10-20%Applied positioned in fastest-growing segments with strong leadership

Timothy O'Curry · UBS

What is the size of the 200mm equipment business being moved from AGS to SSG, and what is the true AGS growth rate on a pro forma basis? How much manufacturing capacity upside exists given the doubled capacity built over recent years?

Bryce confirmed Q1 AGS grew 15% year-over-year and Q2 guide shows ~12-13% growth. Pro forma recast numbers provided in earnings materials show true underlying growth. Systems manufacturing capacity has roughly doubled over several years, with significant upside available. Company has pre-positioned additional space and plans to work with 2,000 suppliers on supply chain visibility to support higher output.

Q1 AGS growth 15% year-over-year (post-reorganization)Q2 AGS guidance ~12-13% year-over-yearSystems manufacturing capacity approximately doubled over recent yearsAdditional pre-positioned capacity available

Vivek Arya · Bank of America Securities

What is driving the second-half 2026 acceleration given conventional thinking that memory cleanroom is the constraint? What proportion of WFE is driven by data center AI and how has that shifted from last year?

Bryce confirmed cleanroom availability for DRAM and leading-edge logic is the second-half driver, with customers announcing new factory projects each quarter. Data center AI now represents >20% of leading-edge wafer starts (up from prior guidance), with AI components growing 30-40% annually while traditional data center grows 10-20%, yielding >20% overall AI data center growth.

Cleanroom capacity for DRAM and leading-edge logic meters second-half 2026 growthNew factory projects being announced each quarterData center now surpassing PCs in leading-edge wafer consumptionAI component growth 30-40% vs. traditional data center 10-20%

Answers to last quarter's watch list

Whether Q1 Semi Systems prints at or above the ~$5.025B point guide — Semi Systems printed $5.141B, $116M above guide (+2.3%). The H2-2026 inflection narrative is now anchored in real bookings: the Q2 Semi Systems guide of ~$5.8B is materially above $5.141B, confirming the lift is pulling forward.

Resolved positively

Whether management can quantify the 2026 WFE growth rate — Yes, decisively. Management committed to >20% growth in the semiconductor equipment business for calendar 2026 — a specific number replacing last quarter's "growth year" framing.

Resolved positively

The $490M China affiliate shipment cadence through FY26 — Not disclosed in the press release. China revenue of $2.10B was -7% YoY in Q1 (~30% of revenue), but specific shipment cadence against the $490M opportunity wasn't broken out.

Continue monitoring

Whether Q2 Semi Systems guidance lands flat or starts inflecting — Inflecting. The Q2 Semi Systems guide of ~$5.8B is materially above Q1's $5.141B — meaning the prior "flattish through Q3" framing is being overtaken by stronger near-term demand. The H2-2026 inflection is pulling into Q2.

Resolved positively

Gate-all-around volume ramp visibility and FY26 GAA sizing — Management reaffirmed the >50% served-market share target in GAA and wiring in Q&A, but did not size FY26 GAA in dollar terms. The framework around AI-driven markets growing 30-40% is the new lens, but a specific GAA revenue anchor wasn't given.

Continue monitoring

AGS organic growth ex-reclassification — AGS grew 15% YoY on the pro forma post-reorganization basis, with Q2 guided to ~12-13%. The underlying low-double-digit recurring-growth narrative is intact and arguably stronger than implied last quarter.

Resolved positively

What to watch into next quarter

Whether Q2 Semi Systems prints above the ~$5.8B guide — the cleanest test of whether the >20% calendar-2026 commitment is back-end-loaded (risky) or already running ahead (the bull case)

Cleanroom capacity commentary specifics — Brice called this the gating factor; any quantification of how much revenue is being deferred from FY26 into FY27 would size the 2027 setup

Whether management lifts or maintains the >20% calendar-2026 equipment growth target on the Q2 call — a maintain is fine, a lift would be the strongest possible confirmation of the inflection thesis

DRAM mix evolution — DRAM stepped to 34% of Semi Systems in Q1 FY26 from 27% in Q1 FY25; watch whether this approaches or exceeds 40% as the HBM ramp deepens

China revenue trajectory through FY26 — whether the ~$2.1B Q1 run rate holds, drifts down toward the "structurally smaller envelope" management framed, or surprises upward on license activity

Gross margin trajectory — Q1 came in at 49.1% with Q2 guided to ~49.3%; watch whether the FY26 mix shift to higher-value leading-edge tools push the structural margin level meaningfully above 49%

Sources

Applied Materials Q1 FY2026 earnings press release — https://www.sec.gov/Archives/edgar/data/6951/000162828026007661/exhibit991q12026earningsre.htm
Applied Materials Q1 FY2026 earnings conference call commentary and Q&A

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