Applied Materials raises outlook to 30% growth as chipmakers race to expand AI production capacity

Applied Materials boosts its outlook as AI chipmakers scramble to add more production capacity - SiliconANGLE

Applied Materials boosts its outlook as AI chipmakers scramble to add more production capacity Chipmaking industry giant Applied Materials Inc. is expecting stronger sales in its semiconductor equipment business this year compared to what it originally forecast, thanks to surging demand for artificial intelligence chips. The company offered bullish guidance for the current quarter after delivering earnings and revenue in its latest quarter that exceeded Wall Street's expectations. Adjusted earnings for the second quarter were $2.86, far above the Street's consensus estimate of $2.68 and up from $2.39 per share in the year-ago period. Revenue for the quarter came to $7.9 billion, up 11% from a year ago and above the $7.7 billion projection by analysts. The improved results helped Applied to strengthen its bottom line, with net income for the quarter rising to $2.806 billion, up from $2.137 billion in the year-ago quarter. The company followed up with solid guidance for the current quarter. While Wall Street had been forecasting Applied to energize its growth in the fourth quarter, officials said they expect its fortunes to improve much sooner than that. It forecast earnings of $3.36 per share, up 35% from a year earlier and well ahead of the Street's target of $3.21 per share. It's also looking at sales of $8.95 billion in the quarter, above the analyst consensus estimate of $8.72 billion. President and Chief Executive Gary Dickerson (pictured) hailed the company's latest quarterly performance, and said he's expecting the semiconductor equipment business to grow by more than 30% this year. "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," he said. Applied's stock initially gained almost 3% in late trading, only to lose momentum and settle back down. However, the company's shares are still up more than 71% in the year to date, and 152% in the last 12 months. The company's cutting-edge semiconductor manufacturing equipment has proven to be essential to the industry's efforts to build out its high-end chip production capacity. It makes various machines that enable different semiconductor manufacturing processes, and even caters to the most advanced chips for AI, which require fine-tuning that few other manufacturers can provide. Applied's equipment is involved in a number of crucial chip manufacturing steps used to transform blank silicon wafers into highly-efficient processors. Its customers include the world's leading chip manufacturer, Taiwan Semiconductor Manufacturing Co., and the memory chip specialist Micron Technology Inc. When the AI boom first began, chipmakers initially resisted the temptation to commit significant capital to enhance their capacity, because they were wary of the boom-bust cycle that followed the Covid-19 pandemic. However, Applied's customers have woken up to the realization that's unlikely to happen anytime soon with AI. They're now racing to increase their high-end chip production capacity to cater to the industry's unquenchable thirst for AI compute. Dickerson told analysts on a conference call that global AI adoption continues to accelerate, with demand being given added impetus thanks to growing adoption of autonomous AI agents that can perform work without human supervision. He said agentic AI workloads require more central processing unit-intensive computing architectures and also increase demand for dynamic random-access memory and NAND chips, creating an additional tailwind for the company. Senior Vice President and Chief Financial Officer Brice Hill said the company is tracking more than 100 factory projects across the world, and added 10 projects in the previous quarter. He believes fiscal 2027 will be another record year for the semiconductor industry, with customer conversations increasingly extending into 2028. During the quarter, Applied's semiconductor systems business generated record sales of $5.97 billion, up 16% sequentially and 10% compared to the prior year. According to Hill, the industry's transition to gate-all-around nodes helped drive those gains. Meanwhile, the company's DRAM segment racked up sales of $1.7 billion, up 18% from a year ago. According to Dickerson, Applied is now the world's number one process equipment supplier for memory chips, and he added he's confident it will be able to strengthen that position going forward. The company's global services unit added $1.67 billion in sales, up 17% from a year ago, thanks to higher fab utilization, an expanding installed base and customer adoption of advanced services that can help them increase production output and yield.

Applied Materials shares dip despite Q2, guidance beat By Investing.com

Investing.com -- Applied Materials reported record second-quarter revenue on Thursday and forecasted third-quarter revenue above Wall Street expectations, anticipating that robust investment in data centers and AI infrastructure will continue to drive demand for its chip-making equipment. The Santa Clara-based semiconductor equipment company expects revenue of about $8.95 billion, plus or minus $500 million, for the current quarter, compared with analysts' estimates of $8.09 billion. Shares in the company initially jumped in extended hours, before reversing course to fall over 3% in Friday's premarket trading. The stock rallied more than 71% this year. The surge in AI demand is boosting equipment suppliers like Applied Materials, since producing more advanced AI chips calls for additional silicon wafers and increasingly complex manufacturing techniques. Analysts were already hoping strong DRAM demand to drive results for the company. Chip-gear firm generated record revenue of $7.91 billion, up 11% from the same quarter last year. It was also above the consensus estimate of $7.68 billion. "Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026," said Gary Dickerson, President and CEO. "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," he added. Applied's quarterly adjusted profit of $2.86 per share also beat analysts' estimate of $2.68. Following the report, Goldman Sachs analyst James Schneider said Applied Materials shares "should continue to re-rate given strong guidance uplift and improving mix." "We believe many of the investor misconceptions that weighed on the stock in CY25 (such as perceived market share loss in China) should reverse themselves in CY26 as Applied benefits from mix-related tailwinds tied to increased spending on foundry/logic, DRAM, and advanced packaging," he wrote.

Applied Materials Raises Outlook as Semiconductor Equipment Demand Grows -- Update

Applied Materials now expects stronger sales for its semiconductor equipment business this year than it previously forecast as demand for artificial intelligence computing continues to surge. The boost to guidance came as the semiconductor-equipment maker reported higher profit and sales in its latest quarter, with both metrics beating Wall Street's expectations. The stock rose 4.3%, to $459.42, in after-hours trading. Through market close, shares have soared 71% year to date. Chief Executive Gary Dickerson said Applied Materials' results mark a record quarterly performance, and the company expects its growth to continue alongside the rapid global buildout of AI computing infrastructure. For the current fiscal third quarter, the company forecast adjusted per-share earnings of $3.16 to $3.56 and revenue of $8.45 billion to $9.45 billion. Analysts forecast adjusted earnings per share of $2.89 on revenue of $8.14 billion, according to FaceSet. Applied Materials now forecasts its semiconductor equipment business will grow more than 30% this calendar year, Dickerson said, up from its prior forecast for an increase of more than 20%. The company is focused on making sure it has the operations and supply chain to support its customers' growth, and has increased its build plan, inventory positions and logistics capacity, Chief Financial Officer Brice Hill added. "The growth in AI that Applied has been investing for is now in full force," Hill said. Applied Materials's fiscal second-quarter profit came in at $2.81 billion, or $3.51 a share, up from $2.14 billion, or $2.63 a share, a year earlier. Adjusted earnings per share were $2.86, compared with estimates of $2.68 a share according to analysts polled by FactSet. Revenue climbed 11% year over year to $7.91 billion, compared with analyst estimates of $7.68 billion.