Applied Materials Projects First-Quarter Revenue Above Expectations as AI Chip Expansion Progresses!

Fourth-quarter revenue of $10.41 billion marked an increase of approximately 53% year on year for Applied Materials, exceeding market expectations of around $10.3 billion. The company published its fourth-quarter and full-year fiscal 2026 results following Thursday’s market close. Adjusted earnings per share, at $4.16, were approximately 92% higher than a year earlier and ahead of the $4.06 forecast. As AI chip production capacity expanded, the core Semiconductor Systems business recorded fourth-quarter revenue of $8 billion, a year-on-year rise of 64%.

Strong demand for advanced AI chips underpinned the company’s above-Wall Street revenue forecast for the first quarter of fiscal 2027, with that demand expected to sustain spending on semiconductor manufacturing equipment. Describing the fiscal 2026 results as record-breaking, the CEO said AI was continuing to generate additional semiconductor demand. Against that backdrop, the Semiconductor Systems business remained on track to expand by more than 40% during calendar 2026.

A 21% rise took full-year revenue to a record $34.45 billion. Both earnings measures reached record levels: GAAP earnings per share were $12.62, and non-GAAP earnings per share advanced 37% to $12.89. The business generated $8.87 billion in operating cash flow and distributed $4.75 billion to shareholders through share repurchases of $3.18 billion and dividends of $1.57 billion.

Analysts’ average revenue estimate of around $10.89 billion was below Applied Materials’ forecast for the first quarter of fiscal 2027: approximately $11.1 billion, plus or minus $500 million. The adjusted earnings per share outlook also topped expectations, at approximately $4.35, plus or minus $0.20. Underlying these projections is the company’s expectation that strong demand for advanced AI chips will sustain investment in semiconductor manufacturing equipment. The shares advanced approximately 3% in trading after the market close.

Doubling revenue over the next few years without increasing headcount proportionately was the aim of plans the CEO presented in late October. These rely chiefly on AI tools to improve efficiency in research and development and quality control. Alongside this, Applied Materials is bringing its $5 billion EPIC research and development centre in Silicon Valley into operation to accelerate the development of next-generation chips. China nevertheless remains the company’s greatest source of policy uncertainty: broader US export restrictions on China had previously led it to anticipate a revenue loss of approximately $600 million in fiscal 2026.

Capacity for leading-edge logic chips and DRAM is still tight, management said in its demand assessment. It also reported persistently very strong demand for advanced packaging, notably in high-bandwidth memory and hybrid bonding.

Applied Materials Remains Optimistic About Packaging Demand:

New packaging architectures remain an area of optimism for Applied Materials, whose equipment covers approximately 80% of the process steps involved in hybrid bonding. Nine consecutive years of dividend increases, with the dividend yield currently at 0.54%, also reflect management’s confidence that the company can continue to generate cash.