AMAT · Q2 2026 Earnings

Bullish

Applied Materials

Reported May 14, 2026

30-second summary

Applied printed Q2 revenue of $7.91B (+11% YoY) and non-GAAP EPS of $2.86, beating the prior-quarter guide by $260M on revenue (above midpoint, within upper half of range) and $0.02 above the EPS high end, with Semi Systems at $5.97B coming in $165M above the explicit ~$5.8B point guide. The signal that matters: management raised calendar-2026 semi-equipment growth from ">20%" to ">30%" — a minimum 10-point uplift in a number they only first committed to last quarter — and disclosed rolling eight-quarter customer forecasts that now extend visibility into 2027 and 2028. The Q3 guide of $8.95B ±$500M implies 16–29% YoY growth and confirms the H2 inflection is no longer a thesis; it's in the print.

Headline numbers

EPS

Q2 FY2026

$2.86

Revenue

Q2 FY2026

$7.91B

+11.0% YoY

Gross margin

Q2 FY2026

49.9%

Free cash flow

Q2 FY2026

$0.21B

Operating margin

Q2 FY2026

31.9%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$7.91B	$7.10B	+11.4%	$7.01B	+12.8%
EPS	$2.86	$2.39	+19.7%	$2.38	+20.2%
Gross margin	49.9%	49.1%	+80bps	49.0%	+90bps
Operating margin	31.9%	30.5%	+140bps	26.1%	+580bps
Free cash flow	$0.21B	$1.06B	-80.2%	$1.04B	-79.8%

Guidance

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	Q2 FY2026	$7,650 +/- $500M (range $7.15B–$8.15B)	$7.91B	+$260M above midpoint; +$0.76B above low end	Beat
Non-GAAP Diluted EPS	Q2 FY2026	$2.64 +/- $0.20 (range $2.44–$2.84)	$2.86	+$0.22 above high end	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q3 FY2026	$8,950 +/- $500M (range $8.45B–$9.45B)	+16–29% YoY
Non-GAAP Diluted EPS	Q3 FY2026	$3.36 +/- $0.20 (range $3.16–$3.56)	—
Semiconductor Systems revenue	Q3 FY2026	~$6.9B	—
Applied Global Services revenue	Q3 FY2026	~$1.75B	—
Other revenue	Q3 FY2026	~$300M	—
Non-GAAP Gross Margin	Q3 FY2026	~50.1%	—
Non-GAAP Operating Expenses	Q3 FY2026	~$1.485B	—
Non-GAAP Tax Rate	Q3 FY2026	~11%	—
Advanced packaging revenue growth	FY 2026	more than 50% calendar year 2026	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Semiconductor equipment business growth	FY 2026	over 20% calendar year 2026	more than 30% calendar year 2026	+10 percentage points minimum	Raised

Segment performance

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Semiconductor Systems	$5.965B	$5.255B	+13.5%
Applied Global Services	$1.665B	$1.566B	+6.3%

Capacity & utilization

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Capital Expenditures	$635M	—	—

Profitability

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Semiconductor Systems Gross Margin	54.7%	—	—
Semiconductor Systems Operating Margin	35.1%	—	—
Applied Global Services Gross Margin	34.7%	—	—
Applied Global Services Operating Margin	29.2%	28.5%	—
Non-GAAP Operating Margin	32.1%	—	—
Non-GAAP Free Cash Flow	$210M	—	—
Operating Cash Flow	$845M	—	—

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Taiwan	$2.155B	$1.997B	+7.9%
China	$2.087B	—	+17.6%
Korea	$1.572B	$1.562B	+0.6%

Management tone

Narrative arc: Q3 FY25 China reset and visibility compression → Q4 FY25 "growth year, no number" → Q1 FY26 ">20% with cleanroom constraint" → Q2 FY26 ">30% with rolling eight-quarter customer forecasts into 2028"

Visibility has graduated from "improved" to "unprecedented" in two quarters. Last quarter Dickerson described 1–2 year customer visibility as a 180-degree reversal from Q3 FY25's "shorter window" language. This quarter the framing escalated again: "Our largest customers are providing rolling eight-quarter forecasts so we can prepare the required manufacturing capacity and service resources for their ramps." Eight-quarter customer forecasting is not a forward-looking statement Applied has historically used — it's a procurement-grade disclosure that customers themselves are operating with two-year capacity commitments. The shift signals the demand environment has moved from cyclical recovery to multi-year planning regime.

The constraint narrative tightened from cleanroom to supply chain. Last quarter cleanroom availability was the primary 2026 pacing factor and customers were "finding ways to reallocate or create space." This quarter, in answer to Stacy Rasgon (Bernstein), management was explicit: supply chain — across 2,000 direct suppliers — is now the binding constraint on further growth acceleration, not demand and not cleanroom. From the call: "capacity can roughly double current output levels with supply chain enablement." When the bottleneck moves from real estate to internal manufacturing scale, the upside option is in Applied's hands rather than its customers' — that's a structurally better risk profile.

AI demand reframed from monolithic to diversifying. Through the prior three quarters AI was framed as a generative-AI-training-and-inference driver. This quarter Dickerson identified a discrete shift: "AI demand is not only growing rapidly, it's also diversifying. Since the beginning of the year, there's been a meaningful increase in agentic applications, which layer on top of continued growth in generative AI training and inference workloads." The significance is that agentic workloads have different chip mix implications (more inference, more memory, different power profiles) than training — broadening the addressable wafer-start demand beyond the GPU/HBM combination that has anchored the bull case to date.

AGS reframed from incremental to core growth pillar. Three quarters ago AGS was a stabilizing recurring-revenue layer with ~11% historical CAGR. Last quarter the narrative shifted to "low double-digit growth throughout 2026." This quarter Dickerson said outright: "we expect Applied Global Services to deliver a sustainable annual growth rate in the mid-teens and potentially higher this year." The mechanism — 35,000 AIX-connected chambers monetized via AI-driven yield and throughput services while customers wait for cleanroom space — is genuinely new and explains why services growth is decoupling from the historical installed-base-expansion math.

Hedging is concentrated on Huawei and on the unwillingness to convert the >30% number into a hard floor. Management explicitly deflected the Huawei question ("I don't really want to comment on that") — the only material evasion of the call. And while the calendar-2026 number was raised to ">30%", management did not provide a hard floor or range, leaving room for additional raises through the year. The wide ±$500M Q3 range despite eight-quarter customer forecasts is the residual caution: visibility is high but the precise quarter-to-quarter cadence is still being negotiated.

Recurring themes management leaned on this quarter:

AI infrastructure build-out driving semiconductor equipment demand diversification beyond generative AI into agentic AI applicationsLeadership in leading-edge foundry logic, DRAM, and advanced packaging positioning Applied to capture 80%+ of wafer fab equipment growth in 2026-2027Epic platform transformation of customer collaboration model reducing commercialization cycles and enabling multi-node visibilityGross margin expansion trajectory with 800 bps improvement since 2013, now at 50% company-wide and 55% in semiconductor systemsOperating leverage through AI-enabled internal productivity and services revenue growth with higher-margin profileSupply chain and manufacturing capacity expansion to support unprecedented customer demand visibility

Risks management surfaced:

Actual results could differ from forward-looking statements due to risks and uncertainties (standard disclaimer)China business exposure at 24% of semiconductor systems plus AGS revenue with expectation of flat to slightly higher performanceDependency on customer capacity decisions and cleanroom space allocation strategiesIntegration risk from Next acquisition for panel-level packaging technologiesExecution risk in ramping new manufacturing centers in Singapore, U.S., and Europe simultaneously

Q&A highlights

CJ Muse · Kendra Fitzgerald

How is eight-quarter rolling visibility with customers changing order patterns, upfront payments, and pricing environment, and how does this affect customer relationships given tight equipment supply?

Eight-quarter visibility primarily helps with supply chain planning across 2,000 direct suppliers. Deposits are required selectively, not across the board. Pricing operates on 2-3 year contracts per project and moves slowly. Gross margin improvement driven by portfolio enrichment with higher-value solutions, not aggressive pricing actions. Management confident margin improvements will continue.

2,000 direct suppliers requiring lead time2-3 year pricing contracts per projectSemi-systems gross margin: 54.8% in Q2Company-level gross margin guide: 50.1% for Q3

J.C. Raskin · Verde Research

Clarification on 30% equipment growth guidance implying ~$14.5-15B in H2; how to think about WFE and wafer start growth in 2026 versus 2027 as cleanroom constraints ease?

30% YoY equipment growth confirmed. Strong demand signals with customers increasing orders in last 90 days as new cleanrooms come online. Tracking 100+ factory projects globally, added 10+ last quarter. Expect WFE and wafer start growth overall, headlined by AI. 2027 expected to be strong growth year with customers planning into 2028. Supply chain is primary constraint on further acceleration, not demand.

30% or more systems growth guidance for full year100+ factory projects tracked globallyAdded 10+ new projects last quarterDoubled manufacturing floor space

Vivek Arya · Bank of America Securities

Will semiconductor industry growth come more from units or pricing over next 1-3 years? Will AGS growth accelerate with strong system sales growth?

Computing demand increasing across multiple layers (GenTech AI, physical AI). Not speculating on units vs. pricing, but market environment for Applied never better. Raising AGS growth expectations from low double-digits to mid-teens in normal environment; higher this year due to utilization improvements. 35,000+ chambers connected to AIX servers enabling AI-driven yield innovations.

Over 35,000 chambers connected to AIX serversAGS growth raised from low double-digits to mid-teens medium-termHigher than mid-teens expected for current yearGenTech AI driving incremental CPU, DRAM, NAND demand on top of prior forecasts

Harlan Sir · J.P. Morgan

Are customers squeezing more wafers from existing fabs through throughput/yield improvements? Is this driving incremental tool fills and upgrades, and advanced services adoption?

Output and yield innovation is key customer focus while waiting for new cleanroom floor space. Major driver of service growth rate acceleration above prior expectations. Implementing AI across connected chambers with remote expert monitoring. This is a significant incremental driver of AGS growth beyond just installed base expansion.

Output and yield innovation major customer focusService growth rate increasing faster than anticipatedInstantaneous remote expert connectivity to chambersAGS margins improved 30 bps sequentially, 120 bps YoY

Shane Brent · Morgan Stanley

Conductor etch gained 300 bps market share in 2025 despite portfolio weaknesses elsewhere. Where did gains come from and what is path to market leadership? Process control market share declining—what is strategic importance?

Conductor etch one of fastest growing businesses this year; #1 in leading-edge foundry etch and DRAM etch. SIM3 fastest ramping product in Applied history with 250+ chambers, multi-hundreds millions in growth. Process control declining share is addressed by management as best opportunity within Applied; PDC one of fastest growing this year, positioned for strong 2027 growth. eBeam leadership with cold field emission provides highest resolution and imaging speed.

Etch one of fastest growing businesses calendar year 2025#1 in Conductor Etch for leading-edge foundry logic gate-all-around nodes#1 in Conductor Etch for DRAMSIM3 fastest ramping product in Applied history

Answers to last quarter's watch list

Whether Q2 Semi Systems prints above or below the explicit ~$5.8B point guide — Semi Systems printed $5.97B, $165M above the point guide (+10.4% YoY). The H2 inflection is pulling forward into Q2, not strictly back-loaded; the Q3 ~$6.9B guide compounds the trajectory another $900M sequentially.

Resolved positively

Whether management raises or reaffirms the >20% calendar-2026 equipment growth target — Raised to ">30%" — a minimum 10-point uplift in 90 days. This is the strongest sequential conviction upgrade in Applied's recent history and confirms H2 bookings are firming materially faster than the cleanroom-constrained framing of last quarter implied.

Resolved positively

Cleanroom-readiness disclosure cadence and 2027 sizing — Management characterized 2027 as "another strong record year for the industry" and disclosed that customers are now providing rolling eight-quarter forecasts extending into 2028. The qualitative 2027 visibility was confirmed; specific 2027 dollar sizing was not provided. Status: Resolved positively (qualitative); Continue monitoring (quantitative)

Whether AGS holds ~12-13% YoY at the Q2 print — AGS came in at +17.3% YoY, materially above the ~12-13% guide, and management raised the sustainable AGS growth rate from low double-digits to mid-teens-and-potentially-higher. The recurring-revenue thesis is not just intact — it's accelerating beyond prior framing.

Resolved positively

HBM stack-count progression and wafer-intensity disclosures — Management did not refresh the 12→16→20+ die progression or break out HBM's specific contribution within the 29% DRAM mix, but disclosed DRAM revenue grew +18% YoY — faster than total Semi Systems — confirming HBM-driven DRAM is contributing materially to the YoY uplift. Status: Partially resolved (YoY growth disclosed); Continue monitoring (stack-count specifics)

Any narrowing of the Q3 FY26 revenue range — No. Applied carried ±$500M for a fifth straight quarter on the Q3 FY26 guide. The eight-quarter customer visibility did not translate into a narrower forward range, suggesting precise quarter-to-quarter cadence is still being negotiated even as full-year confidence rises. Status: Resolved negatively (the visibility upgrade did not flow through to range tightening)

What to watch into next quarter

Whether Q3 Semi Systems prints above or below the ~$6.9B point guide — the trajectory from $5.14B (Q1) → $5.97B (Q2) → $6.9B (Q3 guide) is a $1.76B sequential build in two quarters; any acceleration above $6.9B confirms the supply-chain-not-demand constraint is loosening faster than guided

Whether the calendar-2026 ">30%" semi-equipment growth number gets raised again on the Q3 call or converted to a tighter range — sequential raises from ">20%" to ">30%" suggest another uplift is possible if H2 bookings continue firming

Free cash flow recovery — Q2 FCF of $210M (2.7% margin) was a sharp compression from Q1's $1.04B at 14.8%; watch whether $635M capex is the new run-rate (supporting capacity build) and whether working capital normalizes as the ramp matures

China revenue trajectory at +17.6% YoY in Q2 — whether this is the pre-built affiliate shipment tail working through (one-time) or a genuine re-rating; management did not flag China as a tailwind in commentary, suggesting the former

AGS sustainability above mid-teens — whether the AIX-connected chamber monetization story translates into sustained 17%+ YoY growth or whether Q2's print was a peak driven by output/yield optimization demand that compresses once cleanroom space comes online

Huawei and broader export-restriction disclosure — management's explicit refusal to comment was the only material evasion of the call; any expansion of restrictions to commingled fab complexes would be a material downside surprise not currently in guidance

Advanced packaging revenue tracking against the new ">50% growth in calendar 2026" target — Applied has not historically broken out packaging revenue cleanly; watch for new segment-level disclosure that lets investors triangulate progress against the floor

Sources

Applied Materials Q2 FY2026 earnings press release — https://www.sec.gov/Archives/edgar/data/6951/000162828026035071/exhibit991q22026earningsre.htm
Applied Materials Q2 FY2026 earnings conference call commentary and Q&A

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