Key points
- Applied Materials (AMAT) posted record revenue of $9.12 billion for the quarter ended July 26, up 25% from a year earlier.
- Adjusted EPS of $3.50 beat the $3.39 analysts expected, and fourth-quarter guidance of $10.25 billion sits about $1.1 billion above the record just reported.
- DRAM was 26% of Semiconductor Systems revenue, up from 22%, while China's share of company sales fell to 28% from 35%.
- The stock closed down 2.3% Thursday and traded near $507 after the release, about 5% below the close.
Applied Materials (AMAT) had earnings after the close and posted the highest quarterly revenue in its history. It guided the fall quarter above that record. The stock dropped after hours. Shares closed down 2.3% at $535.54 ahead of the release. They were near $507 at 6 p.m. in New York, about 5% below the close.
Revenue for the three months ended July 26 came to $9.12 billion, up 25% from a year earlier. Adjusted earnings were $3.50 a share, up 41%. Analysts had penciled in $3.39 on about $9 billion of sales. GAAP earnings came to $3.17 a share. Applied doesn't design processors. It sells equipment that foundries and memory makers use to produce them, so it gets paid when a customer adds capacity or moves to a harder production method.
"Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company's history," said Gary Dickerson, president and chief executive, in the earnings release filed with the SEC. "As the rapid global adoption of AI drives unprecedented demand for our materials engineering solutions, we are further raising our Semiconductor Systems revenue expectations for calendar 2026 and are confident we will grow faster than the market this year."
| Measure | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | $9.12 billion | $7.30 billion | +25% |
| GAAP net income | $2.54 billion | $1.78 billion | +43% |
| GAAP EPS | $3.17 | $2.22 | +43% |
| Adjusted EPS | $3.50 | $2.48 | +41% |
| Adjusted gross margin | 50.4% | 48.9% | +1.5 points |
| Free cash flow | $2.33 billion | $2.05 billion | +14% |
Operating cash flow set a company record at $3.04 billion. Applied returned $860 million to shareholders, $440 million of it in buybacks and the rest in dividends.
DRAM is doing more of the work
Semiconductor Systems, the equipment business, brought in $7.04 billion against $5.56 billion a year earlier. DRAM supplied 26% of that, up from 22%. Foundry, logic and other still led the mix at 67%. Flash memory slipped to 7% from 9%. The shift tracks how current AI systems get built. High-bandwidth memory sits beside the accelerator and feeds it data fast enough to keep the processing cores busy. Making it takes more layers and tighter tolerances than standard DRAM. SK Hynix (SKHY) and Samsung Electronics are both pushing HBM4 into production, and we wrote about Samsung's yields catching up this month. Micron (MU) is expanding too, with DRAM contract prices climbing since the spring. Applied sells tools into all of them.
Six new systems for DRAM and advanced packaging went out during the quarter, covering everything from copper plating to defect review. One of them, the Producer Avila 2, lays stress-balanced films around the through-silicon vias in ultra-thin DRAM dies so a 12-high or 16-high HBM stack holds together.
"Applied Materials achieved its 13th consecutive quarter of year-over-year gross margin expansion, demonstrating the increasing value we create by enabling better chips, systems and fab returns," said Brice Hill, senior vice president and chief financial officer. "We expect continued strong revenue growth in the second half of the calendar year, particularly in DRAM as well as leading-edge foundry-logic and advanced packaging." Hill said Applied is putting money into extra manufacturing capacity for demand it expects through the end of the decade.
Guidance for the fiscal fourth quarter is $10.25 billion in revenue, plus or minus $500 million. Applied is calling for adjusted earnings of $4.02 a share, plus or minus 20 cents. The midpoint of that revenue range runs about $1.1 billion above the record Applied announced Thursday. "Based on the increased demand visibility we are receiving from our customers, we expect another strong growth year for Applied Materials in 2027," Dickerson said.
China keeps shrinking as a share of sales
China stayed Applied's largest market at $2.51 billion, slightly below the $2.55 billion it did there a year ago. Its share of total revenue dropped to 28% from 35%. Sales into the United States doubled to $1.37 billion, or 15% of the total against 9% last year. Europe more than tripled to $483 million. Korea rose 31% to $1.52 billion and Taiwan added 10% to $2.03 billion. The export restrictions on China haven't gone away. The growth in this quarter came from everywhere else.
The rest of the equipment group didn't follow Applied down on Thursday. Lam Research (LRCX) closed up 3.4% and ASML (ASML) gained 2.1%. KLA (KLAC) added 0.6%. ASML has its own AI-driven order book, which we covered in Source Foundry's $500 million lithography commitment. Applied shares were near $190 a year ago. They still sit about 28% below the intraday high near $740 they reached in June.
Sources
- Applied Materials, third quarter fiscal 2026 earnings release (Exhibit 99.1 to Form 8-K, filed August 13, 2026): revenue, EPS, margins, cash flow, segment and geographic detail, fourth-quarter guidance and the Dickerson and Hill quotes.
Share prices are Nasdaq closes and extended-hours quotes from Thursday, August 13, 2026. This is general market commentary, not investment advice.
