Applied Materials reports record quarterly revenue

(Sharecast News) - Applied Materials reported record quarterly revenue and issued a stronger-than-expected outlook overnight on Friday, as demand for artificial intelligence infrastructure and advanced memory chips continued to drive spending on semiconductor manufacturing equipment.

The US chip equipment maker said revenue rose 11% year on year to $7.91bn in the second quarter ended 26 April, ahead of analyst expectations of about $7.67bn to $7.69bn cited by Bloomberg.

Adjusted earnings were $2.86 per share, above forecasts of $2.68, while net income rose 31% to $2.8bn.

For the third quarter, Applied Materials forecast revenue of about $8.95bn, plus or minus $500m, well above analyst expectations of roughly $8.1bn.

It projected adjusted earnings of $3.36 per share, plus or minus 20 cents, compared with estimates of about $2.88 cited by Bloomberg.

"Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026," said president and chief executive Gary Dickerson.

"The rapid global build-out of AI computing infrastructure combined with Applied's strong leadership positions in leading-edge logic, DRAM and advanced packaging provide an exceptionally strong foundation for sustained, multi-year revenue and profit growth."

Demand for Applied Materials' tools has been supported by heavy investment in data centres and AI infrastructure, as well as tight supply in memory chips.

Customers including Samsung Electronics and Micron Technology are expanding production capacity, while the move to more advanced AI chips requires more complex manufacturing processes.

Dickerson told Bloomberg that AI demand was also helping improve gross margins, which are at their widest level in more than 25 years.

"This AI compute demand is going to be a multiyear driver," he said.

"Our customers are giving us eight-quarter forecasts, so we have more longer-term visibility than any time I've been in this industry."

Applied Materials said GAAP gross margin was 49.9% in the quarter, while non-GAAP gross margin reached 50.0%.

GAAP operating income was $2.52bn, and non-GAAP operating income was $2.54bn.

The company generated $845m in operating cash flow and returned $765m to shareholders through dividends and share repurchases.

The firm had been expanding capacity to meet demand, with Dickerson saying it had "basically doubled" its manufacturing capacity.

It also continued to deepen its AI-related partnerships through its EPIC Center, including collaborations with TSMC, SK Hynix and Micron on next-generation semiconductor and memory technologies.

During the quarter, Applied Materials introduced new chipmaking systems for advanced AI chips and agreed to acquire ASMPT's NEXX business to strengthen its advanced packaging portfolio, an area increasingly important for AI processors.

Shares initially rose after the results late on Thursday, though they reversed were in the red in premarket trading on Friday.

The stock remained up more than 70% this year.

At 0638 EDT (1138 BST), shares in Applied Materials were down 3.36% in premarket trading in New York at $425.75.

Reporting by Josh White for Sharecast.com.