TenQ

The Applied Materials story

Applied Materials makes the machines that build semiconductor layers, with the central question whether demand for advanced memory and chip packaging can sustain growth as it expands manufacturing capacity.

Written from Applied Materials's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $486.76share price, last close
  • $386.3Bmarket value
  • 21/36TenQ Score checks passed
  • 26.5%growth a year the price assumes

The story in brief

  • Growth accelerates. In the quarter to July 2026, revenue reached $9.12 billion, up 25 percent year over year, while non-GAAP EPS rose 41 percent to $3.50.
  • Cash supports expansion. Applied generated $5.6 billion of free cash flow over the last twelve months and held $9.2 billion in cash and short-term investments against $6.4 billion of debt.
  • Expectations exceed history. The reverse DCF implies 26.5% annual growth in free cash flow after stock pay for ten years, above the 23.0% annual pace delivered over the last 10 years.

What drives the business

  • Applied Materials designs, manufactures and services wafer fabrication tools, with a broad materials engineering portfolio that helps chipmakers manage increasingly complex semiconductor production.
  • Its largest segment, Semiconductor Systems, generated $7,040 million in revenue in the quarter to July 2026, while Applied Global Services, which supports installed equipment, generated $1,781 million.
  • Applied introduced six systems for DRAM and advanced packaging, addressing transistor efficiency, wafer uniformity and defect analysis as customers develop more complex AI chips.
  • EPIC Center research partnerships expanded to 11 in the quarter to July 2026, including Broadcom for advanced packaging, UC Berkeley for materials and process research, and SCREEN Semiconductor Solutions for integrated wafer cleaning processes.
  • A long-term joint development agreement with EssilorLuxottica extends Applied’s technology work into intelligent optical systems for augmented reality and AI-powered smart eyewear.

What the price assumes

At $486.76 per share, the reverse DCF implies free cash flow after stock pay grows 26.5% a year for ten years, using a 10.2% discount rate.

Applied delivered 23.0% annual growth on that measure over the last 10 years, while the TenQ check sets a 13.5% bar by slowing that record halfway toward 4%.

The implied pace exceeds both comparisons, and Applied passes 0 of 6 TenQ Value checks, with a free cash flow yield of 1.5% versus its historical 6.8%.

Value AMAT on your own assumptions

What could change the story

  • China accounted for $2,506 million of revenue, or 28%, in the quarter to July 2026, leaving a substantial business exposed to export restrictions and licensing requirements.
  • Applied agreed to a $252.5 million Commerce Department settlement over allegations involving past China shipments, although the Justice Department and SEC closed their related investigations without action.
  • Middle East conflict, trade restrictions and critical material shortages could disrupt supplies, raise costs or cause manufacturing delays and customer order cancellations.
  • Despite the acceleration in the quarter to July 2026, revenue growth of 7.8% over the last twelve months and 3.2% annually over the last three years remained below TenQ’s sector comparison bars of 22.1% and 11.4%, respectively.
  • Costly AI implementation with uncertain benefits and potential changes in intellectual property law could affect operating costs and the protection of Applied’s technology.

What to watch next

  • For the fourth quarter of fiscal 2026, Applied expects revenue of $10,250 million plus or minus $500 million and non-GAAP diluted EPS of $4.02 plus or minus $0.20.
  • DRAM, leading-edge foundry and logic, and advanced packaging revenue will show whether the growth management expects in the second half of calendar 2026 is materializing.
  • Cash generation relative to capital spending will show how expansion is affecting cash flow, following the opening of the $500 million Tampines Campus in Singapore.
  • The comparison starts with $3.04 billion of operating cash flow and $707 million of capital expenditures in the quarter to July 2026.

Sources

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