AMAT · Q2 2026 Earnings

Bullish

Applied Materials

Reported May 14, 2026

30-second summary

Applied printed Q2 revenue of $7.91B (+11% YoY), beating consensus of $7.69B by 2.9% and the prior $7.65B guide midpoint by $260M, with non-GAAP EPS of $2.86 above the top of the $2.44–$2.84 guide range. Non-GAAP gross margin crossed 50.0% — management framed it as Applied's "highest gross margin in more than 25 years" — with the Q3 guide of ~50.1% extending the move. The headline is what management did with the full-year framing: the calendar-2026 semiconductor equipment growth target was raised from ">20%" (set last quarter) to ">30%" — a 10+ percentage point lift in 90 days — and Q3 revenue is guided to $8.95B ±$500M, implying +23-27% YoY against the $7.30B Q3 FY25 base. The H2-2026 inflection management forecast two quarters ago is now arriving harder and earlier than the prior framing suggested, with management citing customer reallocation of cleanroom space as the mechanism unlocking incremental 2026 deliveries.

Headline numbers

EPS

Q2 FY2026

$2.86

+6.7% vs est.

Revenue

Q2 FY2026

$7.91B

+11.0% YoY

+2.9% vs est.

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

Applied Materials significantly raised calendar 2026 semiconductor equipment growth guidance from over 20% to more than 30% following strong Q2 results

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	$7,650M +/- $500M	$7,910M	+$260M above high end of guide	Beat
Non-GAAP Diluted EPS	Q2 FY2026	$2.64 +/- $0.20	$2.86	+$0.22 above high end of guide	Beat

New guidance

Metric	Period	Guide	YoY
Advanced packaging revenue growth	FY 2026	more than 50% in calendar 2026	—
Applied Global Services sustainable growth rate	FY 2026	mid-teens and potentially higher this year	—
Revenue	Q3 FY2026	$8,950M +/- $500M	+22.6% to +27.4% YoY
Non-GAAP Diluted EPS	Q3 FY2026	$3.36 +/- $0.20	—
Semiconductor Systems revenue	Q3 FY2026	around $6.9 billion	—
Applied Global Services revenue	Q3 FY2026	about $1.75 billion	—
Other revenue	Q3 FY2026	around $300 million	—
Non-GAAP gross margin	Q3 FY2026	approximately 50.1%	—
Non-GAAP operating expenses	Q3 FY2026	around $1.485 billion	—
Non-GAAP tax rate	Q3 FY2026	around 11%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Semiconductor equipment business growth	FY 2026	over 20% this calendar year	more than 30% this calendar year	+10+ percentage points	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
Semiconductor Systems Foundry/Logic Mix	67%	—	—
Semiconductor Systems DRAM Mix	29%	—	—

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%	—
Operating Cash Flow	$845M	—	—
Capital Expenditures	$635M	—	—

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%
Japan	$0.623B	$0.572B	+8.9%

Management tone

Narrative arc: Q3 FY25 defensive China reset → Q4 FY25 commits to 2026 as a growth year → Q1 FY26 puts >20% on the calendar-2026 equipment number → Q2 FY26 lifts to >30% with eight-quarter forecasts as the new visibility frame.

The visibility horizon extended again — from "1-2 year line of sight" (Q4 FY25) to "rolling eight-quarter forecasts" (this quarter), with explicit 2027 commitment. Two quarters ago Dickerson described 1-2 year customer visibility as a tone reversal from Q3 FY25's "shorter window." This quarter management goes further: "Our largest customers are providing rolling eight-quarter forecasts so we can prepare the required manufacturing capacity and service resources for their ramps. With this improved visibility, we see continued growth across this extended planning horizon into 2027 and beyond." The visibility window has now extended each consecutive quarter — and management explicitly forecast 2027 as "another strong record year for the industry." Three quarters ago they couldn't guide Q1 FY26.

The cleanroom constraint flipped from a ceiling to a release valve in 90 days. Last quarter Brice Hill named cleanroom availability as the gating factor metering 2026 growth. This quarter: "Last quarter, we said the availability of clean room space was a key factor pacing the rate of industry investment. As customers find new ways to reallocate or create space, we are seeing incremental requests for equipment deliveries in 2026, and we now expect our semiconductor equipment business will grow more than 30% this calendar year." This is the mechanism that explains the 10+ percentage point lift in the calendar-2026 target. Management is telling investors that the prior "deferred from FY26 into FY27" framing is being overtaken by customer reallocation pulling demand forward — which simultaneously raises 2026 and preserves the 2027 setup.

The AI demand frame shifted from training/inference to agentic, with quantification. A quarter ago management positioned AI as "the operating model" with five concurrent technology inflections. This quarter the framing layers agentic AI on top as a fresh tailwind: "Global token generation has increased more than threefold in just the past three months... As agentic AI applications grow, they provide an additional tailwind for wafer fab equipment." The 3x token-generation data point anchors the demand thesis in external, objective measurement rather than customer guidance alone — the kind of evidence management uses when they want to pre-empt skepticism about whether the AI capex cycle is structural.

Supply chain language shifted from "preparing operations" to "consolidated signal to suppliers." Q4 FY25 management said they were "preparing operations and service organizations" — passive readiness. This quarter: "We are systematically translating our eight-quarter customer demand forecast into a consolidated signal to our suppliers, ensuring they have the visibility they need to make their own capacity and resource additions." That is an explicit statement that Applied is now scaling its supplier base on a multi-year horizon — what a company does when it has signed off on demand durability past the next cycle. The same posture that took two years to develop on the demand side is now propagating upstream.

AGS quietly got upgraded. Two quarters ago AGS was framed as "low double-digit" recurring growth. This quarter Brice raised the sustainable growth rate to "mid-teens and potentially higher this year." With Q2 actual at +17.2% YoY and Q3 guided to ~$1.75B (+9.4% YoY against a tougher base), the upgrade is anchored in print, not aspiration. The 35K+ connected chambers and AI-enabled predictive service model are now being positioned as a structural margin-accretive offset to whenever equipment cyclicality reasserts itself.

Recurring themes management leaned on this quarter:

AI adoption accelerating and diversifying beyond generative AI into agentic applicationsLeading-edge foundry logic, DRAM, and advanced packaging as primary growth drivers (80%+ of WFE growth)Extended customer visibility (8-quarter forecasts) enabling confident capacity investmentsEPIC platform as transformational collaboration model reducing commercialization timelinesMargin expansion through value-based pricing and manufacturing cost innovations (800 bps improvement since 2013)Services as high-growth lever with 35K+ connected chambers and mid-teens sustainable growth

Risks management surfaced:

Forward-looking statements subject to risks and uncertainties that could cause actual results to differChina business and ICAPS expected flat to slightly higher (geopolitical headwinds implicit)Execution risk on manufacturing capacity expansions in U.S., Europe, and SingaporeDependency on largest customers' continued capital investment and forecast accuracy

Q&A highlights

CJ Muse · Kendra Fitzgerald

How is eight-quarter rolling visibility with customers affecting order patterns, upfront payments, and pricing dynamics given equipment scarcity?

Eight-quarter visibility primarily helps supply chain planning. Deposits required selectively, not across board. Pricing follows long-term contracts (2-3 years per project), moving slowly. Gross margin expansion driven by portfolio enrichment and higher-value solutions rather than pricing power.

Eight-quarter rolling visibility with large customersApproximately 2,000 direct suppliers per toolSemi-systems gross margin at 54.8% in Q2Company-level gross margin guidance of 50.1%

J.C. Raskin · Verde Research

Verification of 30% YoY equipment growth translating to ~$14.5-15B H2 revenue; thoughts on WFE growth vs. Applied growth in 2026 and trajectory into 2027 as cleanrooms come online.

30% YoY equipment growth confirmed. Strong demand signal with customer orders increased in last 90 days. Over 100 factory projects tracked globally; 10+ added last quarter. Expect continued WFE and wafer start growth headlined by AI. 2027 expected strong growth year; customers planning into 2027-2028.

30% YoY equipment growth implied ~$14.5-15B H2 revenueOver 100 factory projects globally being trackedMore than 10 new projects added in last quarterGenTech AI driving incremental CPU, DRAM, and NAND demand

Vivek Arya · Bank of America Securities

Is semiconductor industry growth over next 1-3 years driven more by units or pricing? How should we think about AGS growth correlation with systems growth acceleration?

Computing demand increasing substantially across layers; customers planning capacity into 2030. Not speculating on units vs. pricing, but market environment and Applied's position never better. AGS services growth raised from low double-digit to mid-teen expectations for normal environment; will be higher this year due to utilization and new factory ramps.

AGS services growth expectations raised to mid-teens from low double-digitAGS will be higher than mid-teens in current yearOver 35,000 chambers connected to AIX serversOutput yield innovation most valuable today

Timothy Curry · UBS

Why only 'at least 30%' systems growth when booked for a year would suggest higher growth (40%+)? Is this conservatism or sequential constraint? Also, risk assessment on Huawei restrictions spreading to broader fab complexes.

30% YoY systems growth confirmed; linear assumption Q3-Q4 to fiscal Q1 is reasonable for guidance. Supply chain is primary constraint despite operational scalability. Restrictions factored into guidance; no specific comment on Huawei expansion risk. AI compute innovations (leading-edge logic, DRAM, HBM, advanced packaging) will drive growth 26-27+.

Systems growth at 30% or more YoYSupply chain identified as primary growth constraintOperations can scale significantly; supply chain response is limiting factorRestrictions already factored into guidance

Harlan Sir · J.P. Morgan

Are customers optimizing existing capacity (throughput/yield improvements) an incremental growth driver via tool fills, upgrades, and advanced services adoption? How is this showing up in service growth acceleration?

Output and yield innovation is key customer focus while waiting for new floor space. Driving service growth at higher pace than anticipated. AI implementation at Applied (35,000+ connected chambers, remote experts, predictive models) elevating service growth expectations. Services now core competitive advantage.

35,000+ chambers remotely connected enabling instant expert accessAI-enabled predictive models improving wafer fab output, yield, costService growth accelerating beyond prior expectationsRestructuring reduced AGS OPEX 8% sequentially

Answers to last quarter's watch list

Whether Q2 Semi Systems prints above the ~$5.8B guide — Yes. Semi Systems printed $5.965B, $165M above guide (+2.8%). With Q3 guided to ~$6.9B, the >20% (now >30%) calendar-2026 commitment is running ahead of the prior trajectory, not back-end-loaded. The bull case from last quarter's watch list is the case management is now committing to.

Resolved positively

Cleanroom capacity commentary specifics — The cleanroom constraint was reframed: management did not quantify revenue deferred from FY26 to FY27, but disclosed that customers are reallocating/creating space and incrementally requesting 2026 deliveries — which is the mechanism that lifted the calendar-2026 equipment target from >20% to >30%. The 2027 setup is preserved by management's explicit "2027 will be another strong record year" commentary, but no FY26→FY27 deferral dollar figure was given. Status: Resolved positively (the directional question is answered, even without a number)

Whether management lifts or maintains the >20% calendar-2026 equipment growth target — Lifted to >30%, a 10+ percentage point raise in 90 days. The strongest possible confirmation of the inflection thesis. New disclosures layered on top: advanced packaging revenue guided to >50% growth in calendar 2026, AGS sustainable growth rate raised to mid-teens-plus.

Resolved positively

DRAM mix evolution — DRAM 29% of Semi Systems in Q2 FY26 vs 27% in Q2 FY25 — a +200bps YoY shift that's consistent with the HBM/AI-DRAM thesis. Foundry/Logic/Other 67% vs 66% YoY; Flash compressed to 4% from 7%. The mix is rotating exactly where management said it would.

Continue monitoring

China revenue trajectory through FY26 — Surprised sharply upward in the quarter — $2.087B (+17.6% YoY) — but management explicitly capped the full-year framing at "flat to slightly higher" for China and ICAPS combined. So the Q2 strength is real but the structural narrative hasn't been retired; rather, the floor under China has firmed. Status: Resolved positively for the quarter, with management framing the full year more cautiously

Gross margin trajectory — Q2 non-GAAP came in at 50.0% — Applied's highest in 25+ years, the first 50%+ print on actuals this cycle — and Q3 is guided to ~50.1%. The 50% threshold is now broken on the print, not just on the guide line.

Resolved positively

What to watch into next quarter

Whether Q3 Semi Systems prints above the ~$6.9B guide — the cleanest test of whether the >30% calendar-2026 commitment is conservative (further lift possible at Q3) or fully reflected in the guide

Whether management revises the calendar-2026 equipment growth target higher again at Q3 — back-to-back lifts (>20% → >30% → ?) would be unprecedented and would force a re-rating of FY27 expectations. Arcuri's "why not >40%" exchange suggests the buy-side is already there

Q3 gross margin actual vs the ~50.1% guide — whether 50%+ holds as the new structural floor. Hill framed the expansion as portfolio-mix-driven rather than cyclical, so reversion in Q4 would be a meaningful tell

Whether China sustains the ~$2.1B+ quarterly run rate — Hill's "flat to slightly higher" full-year framing implies Q3/Q4 China revenue should moderate from Q2's spike; if it doesn't, the structural framing needs another revision

Advanced packaging revenue contribution — management committed to >50% growth in calendar 2026 with no dollar anchor disclosed; watch for a Q3 segment-level breakout or sizing commentary

AGS sustainable growth rate confirmation — Q2 printed +17.2% YoY, Q3 guides to +9.4% YoY against a tougher base; whether full-year AGS lands in the mid-teens validates the raised structural guidance

2027 and 2028 framing specificity — Dickerson explicitly said customers are now in 2027 and 2028 planning conversations; watch whether Q3 brings any quantification of 2027 vs 2026, or any update to the "linear from Q3 to Q4 to Q1 FY27" anchor Hill provided

Sources

Applied Materials Q2 FY2026 earnings press release — https://www.sec.gov/Archives/edgar/data/6951/000162828026035071/exhibit991q22026earningsre.htm

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