Latest quarter
Applied Materials reported Q3 FY2026 revenue of $9.1 billion, compared with the consensus of $9.0 billion, and adjusted EPS of $3.50, compared with the consensus of $3.38. The company also reported diluted EPS of $3.17, versus $2.22 in Q3 FY2025.
Revenue increased 24.8% from a year earlier, while diluted EPS increased 42.8%. The filing said Semiconductor Systems remained the largest revenue contributor, with higher spending by foundry and logic customers reflecting demand for leading-edge manufacturing technologies; memory-customer spending also increased with DRAM technology transitions. Applied Global Services revenue increased on higher long-term service-agreement revenue and customer spending on spares.
Applied Materials reported gross margin of 50.3%, up 1.5 percentage points from a year earlier, and operating margin of 33.7%, up 3.2 percentage points. The filing attributed the gross-margin increase primarily to higher revenue, higher average selling prices, lower material and manufacturing costs, and favorable product mix. Free cash flow was $2.3 billion, compared with $2.1 billion a year earlier. Gross margin came within the company’s 50.1% Q3 guidance.
| Q3 FY2026 | Q3 FY2025 | Change | |
|---|---|---|---|
| Revenue | $9.1 billion | $7.3 billion | 24.8% |
| Diluted EPS | $3.17 | $2.22 | 42.8% |
| Gross margin | 50.3% | 48.8% | 1.5 percentage points |
| Operating margin | 33.7% | 30.6% | 3.2 percentage points |
| Free cash flow | $2.3 billion | $2.1 billion | 13.7% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $3.50 | $3.38 | Beat by 3.55% |
| Revenue | $9.1 billion | $9.0 billion | Beat by 1.31% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
| Against its own guidance | For | Guided | Reported | Result |
|---|---|---|---|---|
| Gross margin | Q3 FY2026 | 50.1% | 50.3% | Within the guide |
What management said on the call
Gary Dickerson said demand for advanced semiconductors had strengthened as customers addressed clean-room-space constraints and increased requests for tool deliveries. He said customers were providing longer-term commitments and rolling eight-quarter forecasts, while a gap remained between demand and supply for advanced chips. Dickerson said leading-edge foundry logic, DRAM and advanced packaging should account for around 80% of wafer-fab-equipment growth in 2026 and 2027.
Dickerson said Applied Materials expected overall packaging revenue to grow more than 70% in calendar 2026, Applied Global Services to grow more than 20%, and process diagnostics and control to grow more than 50%. He also said the company was using AI in research, services, operations and corporate functions, and that its EPIC Center was on track to begin operations in the coming months.
Brice Hill said Q3 revenue, operating profit and non-GAAP EPS increased sequentially and year over year, while the company’s gross margin expanded for a 13th consecutive year-over-year quarter. Hill said value-based pricing, product mix and cost improvements contributed to margins, and that the company expected to continue improving gross margins over time. He also said Applied Materials had added more than 1,500 people in manufacturing and AGS customer support during the quarter and was preparing capacity to double quarterly system output from current levels by 2028; he said this was a capacity plan, not a revenue forecast.
Analysts asked about the pace of calendar-2026 semiconductor-systems growth, gross-margin progression, customer visibility and 2028 capacity. Hill said the company would not provide Q1 guidance on the call, but expected sequential growth in Q1. He said customers provided detailed tool and node requirements for eight quarters and that Applied Materials had planning visibility of about five years for its largest customers. Hill also said clean-room availability would determine industry shipment levels in 2027.
Guidance
Applied Materials raised its calendar-2026 packaging-revenue growth expectation to more than 70%, from more than 50% previously. Brice Hill said Semiconductor Systems growth for calendar 2026 was now expected to be above the company’s prior more-than-30% outlook. The company continues to expect AGS revenue growth of more than 20% and process diagnostics and control revenue growth of more than 50% in calendar 2026.
| Metric | For | Guide | Previous guide | Change |
|---|---|---|---|---|
| Revenue growth, Semiconductor Systems | Calendar 2026 | 30.0% | — | New |
| Revenue growth, Packaging | Calendar 2026 | 70.0% | — | New |
| Revenue growth, Process Diagnostics and Control | Calendar 2026 | 50.0% | — | New |
| Revenue growth, Ags | Calendar 2026 | 20.0% | — | New |
| Revenue, Other | Through FY2027 | $400.0 million | — | New |
| Tax rate | FY2027 | 13.0% | — | New |
| Tax rate, non-GAAP | Q4 FY2026 | 11.0% | — | New |
| Operating expenses | Q4 FY2026 | $1.6 billion | Q3 FY2026: $1.5 billion | Raised |
| Gross margin | Q4 FY2026 | 50.4% | Q3 FY2026: 50.1%; reported 50.3% | Raised |
| Revenue, Other | Q4 FY2026 | $510.0 million | Q3 FY2026: $300.0 million | Raised |
| Revenue, Ags | Q4 FY2026 | $1.8 billion | — | New |
| Revenue, Semiconductor Systems | Q4 FY2026 | $7.9 billion | Q3 FY2026: $6.9 billion | Raised |
| Revenue growth, Advanced Packaging | CY2026 | 50.0% | — | New |
| Revenue growth, Semiconductor Equipment | CY2026 | 30.0% | — | New |