Applied Materials (NASDAQ:AMAT) reported record fiscal fourth-quarter revenue and forecast further growth, as demand for equipment used to make advanced chips and memory continues to outstrip supply.
The semiconductor equipment maker expects wafer fab equipment demand to rise more than 30% in 2027 and believes it can grow faster than the market, President and CEO Gary Dickerson said on the company’s earnings call. The outlook is driven by investment in leading-edge logic, DRAM and advanced packaging for artificial intelligence applications.
“Nobody is saying that they’re not wanting the tools as fast as we can get them,” Dickerson said in response to an analyst’s question about potential customer delays. He said customers have instead been asking Applied Materials to accelerate deliveries.
Quarterly revenue rose 53%
Fourth-quarter revenue increased 53% from a year earlier to $10.4 billion and was up 14% sequentially. Non-GAAP earnings per share rose 92% year over year to $4.16. Non-GAAP gross margin expanded by 250 basis points to 50.6%, while non-GAAP operating margin reached 35.3%.
For fiscal 2026, revenue rose more than 21% to $34.4 billion, and non-GAAP earnings per share increased 37% to $12.89. The company generated $8.9 billion in operating cash flow and $6.2 billion in free cash flow after capital expenditures.
Semiconductor Systems revenue reached $8 billion in the fourth quarter, up 64% year over year. CFO Brice Hill said the segment posted record sales in DRAM and advanced packaging. Applied Global Services revenue rose 26% to a record $1.9 billion, supported by services and spare parts.
Forecast points to continued growth
For the fiscal first quarter, Applied Materials forecast revenue of $11.1 billion, plus or minus $500 million, and non-GAAP earnings per share of $4.35, plus or minus 20 cents. At the midpoints, those figures would represent year-over-year increases of 58% and 83%, respectively.
The outlook includes approximately $8.7 billion in Semiconductor Systems revenue and $2 billion in Applied Global Services revenue. Hill noted that the first quarter has 14 weeks, benefiting services revenue, and said he expects services revenue to remain close to that level in the second quarter.
Based on the midpoint of the first-quarter outlook, Dickerson said Semiconductor Systems revenue is expected to grow more than 40% in calendar 2026. The company expects advanced packaging revenue to rise around 90% and inspection and metrology revenue to increase more than 50% over the same period. For the call, management defined calendar 2026 as fiscal second-quarter 2026 through fiscal first-quarter 2027.
Capacity constraints and investment plans
Hill said leading-edge logic and DRAM fabrication plants are running at full utilization. He also pointed to limits on clean room availability and equipment components as the industry expands. Applied Materials is tracking more than 20 fab ramps and line expansions in 2027, he said.
Supply constraints would make the company’s first-quarter forecast slightly higher if every component were available, Hill said, although he described the impact as not major. Applied Materials expects to increase output each quarter through 2027 as it works with suppliers.
The company is investing to double systems output from fourth-quarter 2026 levels by 2028 and more than double manufacturing and lab capacity by 2030. Hill said those investments are intended to prepare for a range of demand scenarios, rather than represent a shipment forecast.
On a question about the effect of a possible data center slowdown, Hill said demand exceeds supply in DRAM and leading-edge logic and that other markets, including PCs and smartphones, are constrained. Both Hill and Dickerson said they were not seeing a slowdown in customer demand.
Services, China and longer-term targets
Hill said Applied Materials expects services growth of approximately 15% over the planning horizon, supported by expansion of the installed equipment base and higher revenue per tool. Services grew faster in fiscal 2026 partly because of rising factory utilization, a benefit he said would not repeat in the same way in future years.
The company also expects investment in mature logic technologies to increase in 2027, with faster growth outside China than inside the country, Dickerson said. Hill expects China shipments to account for less than 25% of Applied Materials’ business in 2027, even as sales there grow.
Management reiterated targets for 2025 through 2030 that include gaining more than two percentage points of wafer fab equipment share, increasing service revenue per installed tool by at least 20%, and expanding gross and operating margins by five and 10 percentage points, respectively. Dickerson said the company expects to make meaningful progress toward those goals in 2027.
About Applied Materials (NASDAQ:AMAT)
Applied Materials, Inc. develops and supplies equipment, software and services used to manufacture semiconductors and advanced displays. Its technologies help customers build and process materials at the microscopic scale required for chips and other electronic products. The company’s offerings include systems for depositing, removing and modifying materials, as well as inspection, measurement and process-control tools. It also provides equipment and services for advanced semiconductor packaging and supports customers with maintenance, upgrades and manufacturing software.
