- Revenue was $7.91 billion. The estimated revenue was $7,647.01 million.
- GAAP diluted EPS was $3.51.
- Non-GAAP diluted EPS was $2.86. The estimated EPS was $2.67.
- GAAP gross margin was 49.9%, up 0.8 points year over year.
- Non-GAAP free cash flow was $210 million, down 80% year over year.
- Shareholder returns were $765 million through buybacks and dividends.
On May 14, 2026, Applied Materials Inc AMAT released its 8-K filing reporting record second-quarter results for the period ended April 26, 2026. The company posted all-time highs for quarterly revenue and both GAAP and non-GAAP EPS, alongside year-over-year margin expansion and significant growth in net income.
Applied Materials Inc AMAT is the largest semiconductor wafer fabrication equipment manufacturer in the world. It has a broad portfolio spanning nearly every corner of the WFE ecosystem. Applied Materials holds leading market share in deposition, which entails the layering of new materials on semiconductor wafers. It is more exposed to general-purpose logic chips made at integrated device manufacturers and foundries. It counts the largest chipmakers in the world as customers, including TSMC, Intel, and Samsung.
Quarterly performance and estimate comparison
Revenue was $7.91 billion, an increase of 11% year over year. The estimated revenue was $7,647.01 million. GAAP diluted EPS was $3.51, a record for the company. The non-GAAP diluted EPS was $2.86, which is higher than the estimated EPS of $2.67.
GAAP gross margin expanded to 49.9% from 49.1% a year ago. GAAP operating margin improved to 31.9% from 30.5%. Net income rose to $2.81 billion from $2.14 billion, up 31% year over year. Non-GAAP metrics also improved, with gross margin at 50.0% and operating margin at 32.1%. Non-GAAP net income was $2.29 billion, up 18%.
“Interest and other income (expense), net” increased to $771 million from $221 million, contributing to the year-over-year rise in net income. The diluted weighted average share count declined to 799 million from 812 million, which supported EPS growth. These dynamics matter in semiconductor capital equipment because incremental revenue often carries high operating leverage, making margin expansion and share count changes significant drivers of earnings power.
| Q2 FY2026 | Q2 FY2025 | Change | |
|---|---|---|---|
| Revenue | $7.91B | $7.10B | +11% |
| GAAP gross margin | 49.9% | 49.1% | +0.8 pts |
| GAAP operating margin | 31.9% | 30.5% | +1.4 pts |
| Net income (GAAP) | $2.806B | $2.137B | +31% |
| Diluted EPS (GAAP) | $3.51 | $2.63 | +33% |
| Non-GAAP gross margin | 50.0% | 49.2% | +0.8 pts |
| Non-GAAP operating margin | 32.1% | 30.7% | +1.4 pts |
| Non-GAAP net income | $2.286B | $1.940B | +18% |
| Non-GAAP diluted EPS | $2.86 | $2.39 | +20% |
Cash generation, capital returns and key financial metrics
Applied Materials Inc AMAT generated $845 million in cash from operations. Non-GAAP free cash flow was $210 million, down 80% year over year. The decline in non-GAAP free cash flow is notable in a capital equipment business because cash conversion informs reinvestment capacity and balance-sheet flexibility during industry upcycles.
The company returned $765 million to shareholders, including $400 million in share repurchases and $365 million in dividends. The quarterly dividend was increased by 15% to $0.53 per share, marking nine consecutive years of dividend increases. In semiconductors, sustained cash returns and rising dividends can signal confidence in recurring service revenue and installed base durability.
Segment performance and end-market mix
Semiconductor Systems revenue grew to $5.97 billion from $5.40 billion. End-market mix within the segment shifted toward Foundry/Logic at 67% and DRAM at 29%, while Flash was 4%. GAAP gross margin in the segment improved to 54.7% from 53.5%, and operating margin rose to 35.1% from 32.8%.
Applied Global Services revenue increased to $1.67 billion from $1.42 billion, with operating margin expanding to 29.2% from 26.6%. The Other category posted revenue of $280 million, steady year over year, but moved to an operating loss of $56 million from operating income of $21 million. Segment mix and profitability are critical for Applied Materials Inc AMAT because services provide countercyclical stability, while leading-edge Systems sales drive margin and earnings expansion.
| Segment | Q2 FY2026 | Q2 FY2025 | Notes |
|---|---|---|---|
| Semiconductor Systems revenue | $5,965M | $5,401M | Foundry/Logic 67%; DRAM 29%; Flash 4% |
| Semiconductor Systems operating margin | 35.1% | 32.8% | GAAP |
| Applied Global Services revenue | $1,665M | $1,420M | GAAP operating margin 29.2% vs 26.6% |
| Other revenue | $280M | $279M | Operating loss $(56)M vs income $21M |
Strategic and operational updates
Applied Materials Inc AMAT announced several EPIC Center engagements with chipmakers and partners to reduce time-to-commercialization for next-generation technologies, including a new innovation partnership with TSMC, and collaborations with Samsung Electronics, SK hynix, Micron, Advantest, and academic institutions ASU, RPI and Stanford. The company also entered into an agreement with ASMPT Limited to acquire its NEXX business, broadening panel-level advanced packaging capabilities. Recent product introductions targeted atomic-scale features for 3D Gate-All-Around transistors, including Precision Selective Nitride PECVD and Trillium ALD for complex metal gate stacks.
The growth in AI that Applied has been investing for is now in full force,"
As the largest process equipment company in the fastest growing markets, our top priority is ensuring we have the operational and supply chain readiness to support our customers’ growth. We have increased our build plan, inventory positions and logistics capacity, and we are driving higher operating profit and productivity across the company."
Analysis
Applied Materials Inc AMAT delivered year-over-year revenue growth with broad-based margin expansion, reflecting operating leverage on higher volumes and favorable mix in Foundry/Logic and DRAM. Service growth and higher segment margins support the earnings quality profile typical of a mature WFE leader with a large installed base. The jump in “interest and other income” also aided net income, while a lower share count enhanced per-share results.
Two issues stand out. Non-GAAP free cash flow fell sharply as the company increased build plans and inventory positions, which can pressure near-term cash conversion. In addition, the Other segment shifted to an operating loss, suggesting pockets of weakness outside the core Systems and Services franchises. Nonetheless, rising gross and operating margins underscore competitive positioning in key deposition and advanced packaging steps that are central to current industry spending priorities.
For context, analyst estimates ahead of the release called for quarterly EPS of 2.67 and revenue of 7,647.01 million. The current annual estimates stand at EPS of 11.09 and revenue of 31,395.26 million.
GuruFocus Valuation Check
Based on GuruFocus’s proprietary metrics, Applied Materials Inc AMAT carries a GF Value of $197.59 against a current price of $440.56, indicating the shares appear overvalued. The magnitude of the premium, at approximately 123.0% over GF Value, suggests limited margin of safety at today’s price despite strong fundamentals.
The company’s GF Score is 86/100, which is categorized as Strong. A 10/10 Profitability Rank and 10/10 Growth Rank reflect best-in-class margins and expansion characteristics typical of leading WFE suppliers during secular upcycles. Financial Strength at 8/10 and a Moat Score of 8/10 point to a solid balance sheet and durable competitive advantages in core process technologies. A 4.5-star Predictability rating indicates a strong record of consistent operating performance over time.
Insider Activity shows insiders sold $4.5 million in the last three months, with no buying reported. Net selling can be a cautionary signal for valuation-sensitive investors, especially when combined with a sizable premium to GF Value. For a deeper dive, visit the Applied Materials Inc stock page on GuruFocus.
Explore the complete 8-K earnings release (here) from Applied Materials Inc for further details.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
