Applied Materials Raises Calendar 2026 Systems Outlook
The equipment maker guided fourth-quarter revenue to $10.25 billion plus or minus $500 million after a record $9.12 billion quarter.
Applied Materials (AMAT) posted record revenue of $9.12 billion in the third quarter ended July 26, 2026, up 25% from a year earlier, after 11% year-over-year growth in the prior quarter and a 2% decline two quarters earlier. President and CEO Gary Dickerson called it the highest sequential revenue growth in the company’s history.
The materials-engineering company said rapid global adoption of AI is driving demand for its equipment and that it is further raising Semiconductor Systems revenue expectations for calendar 2026. It is confident it will grow faster than the market this year and, based on increased demand visibility from customers, expects another strong growth year in 2027.
GAAP gross margin was 50.3% and non-GAAP gross margin 50.4%, marking the 13th consecutive quarter of year-over-year gross-margin expansion. Senior Vice President and CFO Brice Hill said this was the 13th consecutive quarter of year-over-year gross-margin expansion. GAAP operating income was a record $3.08 billion, or 33.7% of revenue; non-GAAP operating income was a record $3.10 billion, or 34.0%. GAAP diluted earnings were $3.17 a share, up 43% from a year earlier. Record non-GAAP EPS was $3.50, up 41%.
Semiconductor Systems generated $7.04 billion of revenue. Foundry, logic and other accounted for 67% of the segment, DRAM 26% and flash memory 7%. Segment GAAP gross margin was 55.3% and operating margin 37.7%. Applied Global Services revenue was $1.78 billion, with GAAP gross margin of 35.6% and operating margin of 30.1%. Other revenue was $294 million and included an operating loss of $118 million.
Hill said the company expects continued strong revenue growth in the second half of the calendar year, particularly in DRAM as well as leading-edge foundry-logic and advanced packaging, and that it is making additional manufacturing-capacity investments to support projected demand through the end of the decade.
Cash from operations was a record $3.04 billion. Non-GAAP free cash flow was $2.33 billion. The company distributed $860 million to shareholders through $440 million in share repurchases and $420 million in dividends.
China accounted for 28% of revenue, down from 35% a year earlier. The United States rose to 15% from 9%, Korea was 17% and Taiwan 22%.
Applied introduced six new chipmaking systems for DRAM and advanced packaging, including Opta Quad CMP for hybrid bonding and Nokota VMax 2 ECD for next-generation packaging. It also unveiled deposition and etch systems aimed at extending scaling in logic and memory for next-generation AI chips.
EPIC Center R&D partnerships expanded to 11 engagements with chipmakers, universities and innovation partners. Broadcom, the University of California, Berkeley and SCREEN Semiconductor Solutions joined the center. Applied also announced a $500 million Tampines campus in Singapore that more than doubles its advanced cleanroom capacity there.
For the fourth quarter of fiscal 2026, Applied expects total revenue of $10.25 billion plus or minus $500 million and non-GAAP diluted EPS of $4.02 plus or minus $0.20. The EPS outlook excludes known charges related to completed acquisitions of $0.01 a share, includes a normalized tax benefit of share-based compensation of $0.01 a share, and a net income tax benefit related to intra-entity intangible asset transfers of $0.05 a share.
Dickerson’s comment that the company is further raising Semiconductor Systems revenue expectations for calendar 2026 follows the second-quarter statement that the semiconductor equipment business was expected to grow more than 30% in calendar 2026. Hill’s second-half comment on DRAM, leading-edge foundry-logic and advanced packaging is the operating thread the company is using to frame the rest of the year.