The unstoppable wave of AI! Applied Materials (AMAT.US) financial report and outlook far exceeded expectations, declaring the deepening evolution of the semiconductor equipment "super cycle".

Global semiconductor equipment giant Applied Materials, Inc. (AMAT.US) announced its second quarter fiscal 2026 financial results after the US stock market on Thursday, and with a report card that can be described as "bursting" and performance guidance that far exceeds Wall Street expectations, it sent a clear signal to the market: the AI-driven semiconductor investment boom is not only showing no signs of abating, but is actually accelerating, laying an exceptionally solid foundation for the company's growth in the coming years. Boosted by this news, the company's stock price rose nearly 7% in after-hours trading, continuing its strong performance this year. The financial report showed that in the second quarter ending April 26, Applied Materials achieved revenue of $7.91 billion, an 11% year-on-year increase, higher than analysts' average expectations of $7.65 billion; net profit reached $2.81 billion, or $3.51 per share, a significant increase from the $2.14 billion and $2.63 per share in the same period last year, with adjusted earnings per share reaching $2.86, far exceeding analysts' expectations of $2.66. While expanding revenue, Applied Materials' earnings quality also reached historical levels. In the second quarter, the company's non-GAAP gross margin reached 50%, an 80 basis point increase year-on-year, setting a record high in over 25 years. The non-GAAP operating margin expanded by 140 basis points year-on-year, reaching 32.1%. The company's CFO Brice Hill detailed the engine behind the profit improvement. He pointed out that the core semiconductor systems business gross margin has approached 55%, which benefited from the "value pricing method" for differentiated products and cost innovation at the manufacturing end. Since CEO Gary Dickerson took over the company in 2013, Applied Materials' non-GAAP gross margin has increased by an astounding 800 basis points. Looking at the segmented business sectors, departments closely related to AI chip manufacturing all recorded record revenues. The Semiconductor Systems department saw a 10% year-on-year revenue increase, reaching a record $5.97 billion. Among them, Logic Chip Equipment revenue set a new historical record due to leading customers such as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US), Samsung (SSNLF.US) moving towards Gate-All-Around (GAA) advanced nodes, and driving additional capacity for existing FinFET nodes. DRAM equipment revenue reached $1.7 billion, an 18% year-on-year increase, with Applied Materials emphasizing its position as the world's leading supplier of memory process equipment and expecting to gain more market share in the next generation of transistor and device architecture. Applied Global Services (AGS) also performed well, with revenue increasing by 17% year-on-year to $1.67 billion, benefiting from higher factory utilization rates and expanding installed base. Hill also raised the mid-double-digit growth target for the AGS business. The highlight of this financial report is the third quarter performance guidance provided by Applied Materials, which surprised market participants. The company expects net revenue in the third quarter ending in July to be approximately $8.95 billion, fluctuating up and down by $500 million, meaning that the year-on-year growth rate will be close to 23%, far exceeding analysts' estimate of $8.09 billion. At the same time, the company expects adjusted earnings per share to reach $3.36, fluctuating up and down by $0.20, a nearly 36% year-on-year increase, while Wall Street's general expectation was only $2.88. For the full year, Applied Materials has significantly raised the growth prospects for its core business. Dickerson stated during the conference call that the company currently expects the revenue growth rate of its semiconductor equipment business in the calendar year 2026 to exceed 30%, a significant increase from the previous forecast of "over 20%". In the highly advanced packaging field, the company expects a revenue growth of over 50% in 2026. Dickerson summarized this as, "We are now fully leveraging the AI growth we have invested in." AI demand for computing power is booming: from "generative" to "agentive" During the conference call after the financial report, Dickerson described the current industry outlook in a rare strong tone. He pointed out that global AI adoption is accelerating, with the demand hotspots expanding from generative AI to "agentive AI" applications. Unlike before, agentive AI requires more CPU-intensive computing architectures, which greatly drives the demand for DRAM and NAND storage chips, creating a huge incremental market for wafer fab equipment (WFE). Dickerson emphasized: "The foundation for our continued revenue and profit growth over the coming years is exceptionally strong. This AI computing demand will be a DRIVE for many years to come." Hill added that nearly every leading indicator the company tracks is strengthening, including capital expenditures from cloud service providers, wafer fab utilization rates, and announcements of new wafer fab projects. Applied Materials is currently tracking over 100 factory construction projects globally, adding more than 10 in just the past quarter. Unprecedented long-term demand visibility is the key to management's confidence. Dickerson revealed that large customers are currently providing rolling forecasts for up to eight quarters, "a level of long-term visibility I have never seen in this industry at any time." Based on this, the company has already provided a forecast for "another record year" for the industry outlook in 2027. Applied Materials continues to increase its investment in AI with practical actions. Just days before the financial report announcement, the company announced a major joint innovation partnership with global chip foundry giant Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR. The two will collaborate in the new Silicon Valley "EPIC Center" built by Applied Materials with an investment of up to $5 billion, from basic research to large-scale production technology acceleration. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR is the first founding partner of this facility, with Samsung, Micron (MU.US), SK Hynix, and other memory and logic chip giants subsequently announced to join. Dickerson explained that the EPIC collaboration model brings not only immediate revenue opportunities for Applied Materials, but more importantly, it provides "long-term roadmap visibility across multiple technology nodes," which will effectively guide the company's future research and development focus, forming a self-reinforcing positive cycle. To meet the surging orders, Applied Materials has already heavily invested in the supply chain. Hill stated that through expansions in the US, Europe, and Singapore, the company's manufacturing capacity has "almost doubled" over the past few years. Additionally, the company has increased material readiness, inventory levels, and logistics support this quarter to ensure seamless support for customers' aggressive expansion plans over the next few years. Overall, as every new data center, AI accelerator card, and inference chip must pass through their precision equipment to come into existence, Applied Materials firmly occupies the "physical bottleneck" of the AI computing supply chain. William Kerwin, Senior Technology Stock Analyst at Morningstar, commented after the financial report that this strong performance and guidance fully reflect that the "AI-driven wafer fab equipment investment upswing cycle is further strengthening." In the closing remarks of the financial report conference call, Hill painted a long-term growth picture for the company: "The investments we have made in the past have put the company in an extremely advantageous position. With AI generating new incremental demand across the entire semiconductor industry, we will continue to focus on expanding revenue, improving profit margins, and strengthening operational leverage."