Applied Materials’ First-Quarter Revenue Outlook Tops Expectations as AI Chip Expansion Continues!

Applied Materials beat market expectations for both revenue and adjusted earnings in its fourth-quarter fiscal 2026 results, released alongside its full-year figures after the market closed on Thursday. Revenue for the quarter climbed approximately 53% year over year to $10.41 billion, against expectations of around $10.3 billion. At $4.16, adjusted earnings per share were approximately 92% higher and surpassed the $4.06 forecast. Expansion in AI chip production capacity helped lift quarterly revenue at the core Semiconductor Systems business by 64% year over year to $8 billion.

Expecting sustained demand for advanced AI chips to support spending on semiconductor manufacturing equipment, the company issued a first-quarter fiscal 2027 revenue forecast above Wall Street expectations. The CEO described fiscal 2026 as a record year and said the Semiconductor Systems business remained on course for growth of more than 40% over calendar 2026, as AI continues to create additional demand for semiconductors.

Annual revenue reached a record $34.45 billion following a 21% increase. Earnings per share also set records on both measures: GAAP earnings per share stood at $12.62, while non-GAAP earnings per share rose 37% to $12.89. Cash flow from operations came to $8.87 billion. Shareholder returns amounted to $4.75 billion, consisting of $3.18 billion in share buybacks and $1.57 billion in dividends.

Applied Materials put its revenue outlook for the first quarter of fiscal 2027 at approximately $11.1 billion, plus or minus $500 million, compared with analysts’ average estimate of around $10.89 billion. Its adjusted earnings per share forecast of approximately $4.35, plus or minus $0.20, was also above expectations. Continued strength in advanced AI chip demand is expected by the company to underpin investment in semiconductor manufacturing equipment. In after-hours trading, its shares gained approximately 3%.

Plans set out by the CEO in late October envisaged doubling revenue over the next few years without a proportionate rise in headcount. The main approach is to deploy AI tools to make research and development and quality control more efficient. To speed up next-generation chip development, the company is also bringing its $5 billion EPIC research and development centre in Silicon Valley into operation. Expanded US export restrictions on China, however, had earlier prompted the company to forecast a revenue loss of approximately $600 million for fiscal 2026. China continues to be its largest source of policy uncertainty.

Management’s assessment of demand pointed to continued capacity constraints in leading-edge logic chips and DRAM. Advanced packaging demand remains very strong as well, especially for high-bandwidth memory and hybrid bonding.

What Does This Mean for the Market?

With its equipment covering approximately 80% of the process steps used in hybrid bonding, Applied Materials continues to view demand for new packaging architectures optimistically. Its dividend has risen for nine consecutive years and currently yields 0.54%, signalling management’s confidence in the company’s capacity to keep generating cash.