AMAT · Q1 2026 Earnings

Bullish

Applied Materials

Reported February 12, 2026

30-second summary

Applied printed Q1 revenue of $7.01B (-2% YoY) and non-GAAP EPS of $2.38, beating the prior $6.85B revenue midpoint by $162M and landing at the top of the $1.98–$2.38 EPS range, with Semi Systems at $5.14B above the ~$5.025B point guide. The signal that matters: management committed for the first time to >20% calendar-2026 semiconductor equipment growth and identified cleanroom capacity — not demand — as the pacing constraint, with multiple factories scheduled for 2027. The Q2 guide of $7.65B ±$500M is high-single-digit YoY at midpoint with a wide range, consistent with the prior framing that H1 stays flattish before an H2 inflection.

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

Applied Materials beat Q1 FY2026 guidance across revenue, EPS, and gross margin; raised Q2 guidance midpoint while signaling strong calendar 2026 outlook with >20% equipment business growth.

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	$6.35B–$7.35B (midpoint $6.85B)	$7.012B	+$0.162B above midpoint; +$0.662B above low end	Beat
Non-GAAP Diluted EPS	Q1 FY2026	$1.98–$2.38 (midpoint $2.18)	$2.38	+$0.20 above midpoint; at top of range	Beat
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%	49.0%	+60bps above guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$7.15B–$8.15B (midpoint $7.65B)	+0.7–14.8% YoY
Non-GAAP Diluted EPS	Q2 FY2026	$2.44–$2.84 (midpoint $2.64)	—
Semiconductor equipment business growth	FY 2026	over 20% calendar year 2026	—

Segment performance

Q1 FY2026

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

Profitability

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP Operating Margin	30.0%
Semiconductor Systems Non-GAAP Gross Margin	54.5%
Applied Global Services Non-GAAP Gross Margin	34.4%
Semiconductor Systems Non-GAAP Operating Margin	32.9%
Applied Global Services Non-GAAP 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%

Management tone

Narrative arc: Q2 FY25 widened ranges → Q3 FY25 led with the pullback → Q4 FY25 committed to "growth year, no number" → Q1 FY26 quantifies it at >20% with cleanroom as the constraint.

The >20% commitment is the single biggest tone shift in four quarters. Three quarters ago management could not commit to FY26 at all when Vivek Arya pressed them on whether DRAM and leading-edge could offset China; two quarters ago the language was "growth year, H2-weighted" with no number; this quarter Dickerson opened with "we expect to grow our semiconductor equipment business over 20 percent this calendar year." That is a structural change in management posture — they are now willing to publicly underwrite a specific growth rate, which Applied historically only does when bookings visibility is high. The conviction has graduated from qualitative to quantitative.

The constraint narrative has flipped from demand-side to supply-side. In Q3 FY25 management said "customers are taking longer to commit to orders, leading to a shorter visibility window" — a classic demand-soft signal. This quarter, in answer to Stacy Rasgon's question on what's limiting growth, the answer was unambiguous: "cleanroom capacity is the primary constraint in leading-edge logic and DRAM this year. Multiple factories scheduled to come online in 2027." When the bottleneck moves from "customers won't commit" to "we can't build cleanrooms fast enough," the entire risk profile of the story changes — the question becomes execution-readiness, not demand sustainability.

AI demand framing widened from data center to a five-pillar inflection. Last quarter Dickerson identified five concurrent technology inflections but the public messaging still leaned on "AI data center investments" as the driver. This quarter the language broadened: "The need for higher performance and more energy-efficient chips is driving high growth rates for leading-edge logic, high-bandwidth memory and advanced packaging." The shift is subtle but consequential — Applied is no longer dependent on AI capex headlines for the narrative; it's telling investors the demand is structural across multiple chip categories simultaneously, with HBM alone requiring 3-4x more wafer starts per bit than standard DRAM.

The wide Q2 range is the one piece of residual caution. Despite the >20% full-year commitment, Q2 came in at $7.65B ±$500M — a 13% range width that implies anywhere from +0.7% to +14.8% YoY growth. Management did not narrow the range despite improving visibility into the back half. The honest read: full-year confidence is built on H2 customer commitments, but the precise Q2-to-Q3 cadence is still being negotiated. This is consistent with the prior framing that "semi-business will be flattish in first half until Q4/Q1 calendar inflection" and is the cleanest tell that the H2-weighting story is intact.

Recurring themes management leaned on this quarter:

AI demand normalizationCustomer inventory correctionUncertainty in forward visibilityMargin pressure from competitive environmentGeopolitical headwinds

Risks management surfaced:

AI demand cyclicality and moderationGeopolitical tensions and export restrictionsCustomer capital expenditure timing uncertaintyCompetitive pricing pressureInventory correction cycles among customers

Q&A highlights

CJ Muse · Cantor Fitzgerald

How does Applied's view on 2026 WFE growth compare to peer guidance (low teens to 22%)? What is driving share gains given the >20% equipment growth guidance?

Applied expects >20% semi-equipment growth in 2026, second-half weighted, with cleanroom capacity pacing growth. Leadership positions in leading-edge logic, DRAM (including HBM), and advanced packaging expected to drive share gains. Positioned to capture >50% of served market in gate-all-around and wiring. HBM requires 3-4x more wafer starts per bit versus standard DRAM.

>20% semi-equipment growth calendar year 2026Second-half weighted demand profileCleanroom capacity is pacing factorExpect >50% of served market in gate-all-around and wiring

Stacy Raskin · Bernstein Research

Given Q2 guide of $5.8B equipment revenue and >20% full-year growth, what is the implied trajectory for H2 2026? Is cleanroom capacity the only limiter on growth, and does this suggest 2027 will be even stronger?

Management confirms second half will be significantly higher than first half to achieve >20% growth. Cleanroom capacity is the primary constraint in leading-edge logic and DRAM this year. Multiple new factories scheduled for 2027, which should support continued strong growth. Management expects 2027 to be strong but notes it's early to define exact shape.

Second half of 2026 will be notably higher than first halfCleanroom capacity is primary growth limiter in 2026Multiple factories scheduled to come online in 2027Customer CEOs describing AI data center demand as multi-year wave

Mark Lipakis · Evercore ISI

With semiconductor industry reaching $1T sooner, is the historical 15% WFE intensity still valid? How should the portfolio composition model change?

WFE intensity has grown to ~15% but is less relevant given divergence in segment growth rates. Previous framework assumed thirds across leading-edge logic, ICAPS, and memory with similar growth rates. New framework needed as leading-edge logic and DRAM (especially HBM) grow much faster than ICAPS. Applied well-positioned in fastest-growing segments.

WFE intensity approximately 15%Previous model: thirds across logic, ICAPS, memoryNew framework needed due to segment growth divergenceLeading-edge logic and DRAM growing significantly faster than ICAPS

Vivek Arya · Bank of America Securities

What is driving second-half 2026 acceleration if not memory cleanroom constraints? Is it foundry logic or other factors?

Cleanroom availability for both DRAM and leading-edge foundry logic is driving second-half acceleration. Customers were able to increase capacity expectations this year. Multiple new factory projects announced, with schedule of factories coming online in 2027. Demand metering is driven by facility availability, not market demand.

Second-half acceleration driven by DRAM and leading-edge foundry logic cleanroom availabilityMultiple new factory projects announced during quarterNumber of global factory projects increasing each quarterFactories in DRAM and leading-edge logic scheduled for 2027 launch

Harlan Cerf · JPMorgan Chase

Given strong systems growth and high customer utilization, can AGS grow faster than the historical 11% CAGR? Is the current 13-15% YoY growth sustainable?

Q1 AGS grew 15% YoY; confidence in low double-digit growth going forward. Historical 11% CAGR was depressed by trade restrictions and lost accounts. Current dynamics (growing installed base, new product value, service innovation pipeline) support continued acceleration. 30,000 chambers connected to AIX enables higher-value service delivery.

Q1 AGS growth: 15% YoYQ2 AGS guide: ~12-13% YoY55,000-tool installed base growing 5%+ annually30,000 chambers connected to AIX servers

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 the point guide. This is the cleanest confirmation that the H2-2026 inflection narrative is anchored in real bookings rather than aspirational customer talk.

Resolved positively

Whether management can quantify the 2026 WFE growth rate on the Q1 call — Yes, and explicitly: >20% semiconductor equipment business growth in calendar 2026, second-half weighted. This is the specific number that was missing last quarter; the upgrade from "growth year" to ">20%" is the defining signal of the print.

Resolved positively

The $490M China affiliate shipment cadence through FY26 — Management did not break out specific cadence on the China affiliate shipments in disclosed commentary. China revenue of $2.10B (-7% YoY) was consistent with the prior 15-20% below 2024 framing, suggesting the shipments are tracking but not surprising to the upside.

Continue monitoring

Whether Q2 FY26 Semi Systems guidance lands flat or starts inflecting — Q2 total revenue guide of $7.65B midpoint is roughly flat-to-up modestly versus Q1's $7.01B — consistent with Bryce's prior "flattish through Q3" framing. The full-year >20% commitment confirms the inflection is loaded into H2 rather than pulled forward into Q2. Status: Resolved positively (the prior framing held)

Gate-all-around volume ramp visibility — Management reaffirmed >50% served-market share in gate-all-around and wiring but did not provide a refreshed FY26 GAA dollar figure. The qualitative claim is intact; the dollar quantification is not yet refreshed.

Continue monitoring

AGS organic growth ex-reclassification — AGS came in at +15% YoY in Q1, materially above the historical 11% CAGR, with management guiding Q2 to ~12-13% YoY and framing the recurring-revenue base as the durability story. The reclassification did not derail the growth narrative.

Resolved positively

What to watch into next quarter

Whether Q2 Semi Systems prints above or below the explicit ~$5.8B point guide — the cleanest read on whether the H2 inflection is pulling forward into Q2 or strictly back-loaded

Whether management raises or reaffirms the >20% calendar-2026 equipment growth target on the Q2 call — a raise would signal the H2 bookings are firming; a reaffirmation at "over 20%" without a new floor would suggest the cleanroom constraint is binding harder than expected

Cleanroom-readiness disclosure cadence — management cited "multiple factories scheduled for 2027"; watch whether they begin sizing the 2027 opportunity quantitatively, which would extend the multi-year visibility window

Whether AGS holds ~12-13% YoY at the Q2 print — sustained low-double-digit AGS growth validates the recurring-revenue narrative and the AIX-connected installed base leverage thesis

HBM stack-count progression and wafer-intensity disclosures — management flagged 12→16→20+ dies and 3-4x wafer-start intensity per bit; quantification of HBM's contribution to DRAM revenue mix would clarify how much of the 34% DRAM mix is structurally durable vs. cyclical

Any narrowing of the Q3 FY26 revenue range — Applied has used ±$500M for four straight quarters; a tightening would signal visibility is restored

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 — webcast and transcript available at https://ir.appliedmaterials.com

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