AMAT Q3 Earnings Call Focuses on AI Demand & FY27 Growth

Applied Materials, Inc. AMAT used its third-quarter fiscal 2026 earnings call to raise the tone on AI-related demand, pointing to stronger 2026 system growth and unusually long customer visibility extending into 2027 and beyond.

Revenues of $9.12 billion and non-GAAP earnings per share of $3.50 topped the Zacks Consensus Estimate of $9 billion and $3.38, respectively. However, management's fiscal fourth-quarter outlook called for another step-up.

Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote

AMAT Raises 2026 Systems View

Chief financial officer Brice Hill said that Semiconductor Systems growth for calendar 2026 is expected to exceed the prior call for more than 30%, as customer demand strengthened again.

President and CEO Gary Dickerson said that customers are finding new ways to work around clean-room space constraints and are providing rolling eight-quarter forecasts. He also said that Applied Materials expects to outgrow the overall market.

During Q&A, a Cantor Fitzgerald analyst pressed for a firmer growth framework. Hill declined to provide guidance for first-quarter fiscal 2027 but said that the company expects sequential growth in that quarter.

Applied Materials Sees Multi-Year AI Demand

Dickerson said that leading-edge foundry-logic, DRAM and advanced packaging should account for about 80% of wafer fab equipment growth in 2026 and 2027, aligning with areas where Applied Materials holds strong positions.

Hill said that most leading-edge logic and DRAM fabs are running at full capacity, while utilization is also improving in ICAPS. Customer conversations now extend as far as 2030 in some cases.

Dickerson added that DRAM growth is weighted toward the second half of calendar 2026. He also expects advanced packaging revenues to grow more than 70% this year.

AMAT Expects Strong Q4 Growth

Hill guided fiscal fourth-quarter revenues to $10.25 billion, plus or minus $500 million, and non-GAAP earnings per share to $4.02, plus or minus $0.20.

He expects Semiconductor Systems revenues of $7.9 billion and Applied Global Services revenues of $1.84 billion. The non-GAAP gross margin is projected at 50.4%.

Hill also reminded investors that first-quarter fiscal 2027 will contain 14 weeks, lifting operating expenses more than usual. In Q&A, he said that services benefit more from the extra week than equipment shipments.

Applied Materials Defends Margin Path

Hill said that the company has lifted the gross margin by roughly 300 basis points over the past three years, helped by value-based pricing and a portfolio focused on higher-value products.

A Bernstein analyst questioned why the fiscal fourth-quarter gross margin is guided roughly flat despite the projected revenue increase. Hill pointed to display mix and ramp costs tied to hiring customer support and manufacturing resources.

Hill said that those ramp headwinds should recede as revenue grows, while margin improvement should continue at a slow pace over a longer horizon. Dickerson also cited new products and services as margin tailwinds.

AMAT Expands Packaging & Service Opportunities

Dickerson said that advanced packaging remains a major AI compute opportunity, with panel-based packaging expected to post significant revenue growth next year. He also described hybrid bonding as a meaningful longer-term growth driver.

Dickerson stated that more than 37,000 chambers are connected to Applied Materials' AIx software capabilities. He expects Applied Global Services revenues to grow more than 20% in calendar 2026.

Dickerson added that process diagnostics and control revenues should grow more than 50% this year, while the EPIC Center has expanded to 11 announced engagements and is preparing to begin operations.

Applied Materials Keeps Focus on Capacity

Hill said that AMAT has nearly doubled the manufacturing space over the past several years and is adding teams so quarterly systems output capacity can double from current levels by 2028. Responding to a UBS analyst, he stressed that this is a capacity plan, not a 2028 revenue forecast.

Dickerson and Hill framed customer visibility, technology road maps and capacity readiness as the basis for confidence in another strong growth year in 2027, while clean-room availability remains a key constraint on industry expansion.

AMAT's Zacks Rank & Style Scores

Applied Materials currently sports a Zacks Rank #1 (Strong Buy), which points to a favorable near-term earnings estimate revision profile. Its Value Score of F, Growth Score of F, Momentum Score of C and VGM Score of F are less supportive under the Style Scores framework. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Style Scores work best as a complement to the Rank, with A or B readings preferred alongside a Zacks Rank #1 or #2 (Buy). AMAT's current mix combines a top Rank with weak Value, Growth and VGM grades and a middling Momentum grade. The Zacks Rank can change as analyst estimates are revised after the just-reported results.

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