Applied Materials, Inc. Q1 FY2026 Earnings Call

· Earnings call transcript and AI-powered summary

Overview

  • Applied Materials reported fiscal Q1 2026 results that exceeded the midpoint of guidance, supported by accelerating AI-related semiconductor demand.
  • Management expects the company’s semiconductor equipment business to grow over 20% in calendar year 2026, with demand weighted toward the second half due to cleanroom capacity constraints.
  • Industry AI investment is driving major increases in demand for leading-edge logic, HBM DRAM, and advanced packaging—segments where Applied holds strong #1 positions.
  • Company maintains strong visibility into customer build plans for 2026–2027, supported by customers’ long-term expansion roadmaps.

Financial Performance (Fiscal Q1 2026)

  • Revenue: $7.0B, down 2% year-over-year but at upper end of guidance.
  • Non-GAAP EPS: $2.38, flat year-over-year and at the high end of guidance.
  • Non-GAAP gross margin: 49.1%, up 20 bps YoY and 70 bps above guidance midpoint. Highest level in 25 years.
  • Cash from operations: $1.69B; free cash flow: $1B.
  • Shareholder returns: $702M distributed through buybacks and dividends.
  • Inventory increased $500M YoY to support expected growth.

Segment Highlights

  • Semiconductor Systems:
    • Revenue: $5.14B, down 8% YoY.
    • Record DRAM revenue within the segment.
    • Non-GAAP gross margin above 54% (up 100 bps YoY).

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Operator: Welcome to the Applied Materials' First Quarter of Fiscal 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Mike Sullivan, Corporate Vice President of Investor Relations. Please go ahead. Michael Sullivan: Good afternoon, everyone, and thank you for joining today's call. With me are Gary Dickerson, our President and CEO; and Brice Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call includes forward-looking statements, which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning these risks and uncertainties is discussed in our most recent Form 10-K and other filings with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures can be found in today's earnings press release and in our quarterly earnings materials, which are available on our website at ir.appliedmaterials.com. Before we begin, I have several calendar announcements. On Tuesday morning, February 24, Applied will host new product briefings at the SPIE Lithography and Patterning Conference in San Jose, and you're welcome to join us in person. We are also very pleased to announce the first event in our 2026 master class series. We plan to cover transistors and wiring on Wednesday, April 8, at 9:00 in the morning Pacific Time and will host a live webcast. Finally, we're excited to announce 2 special events during SEMICON West. On Monday a

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