Applied Materials forecasts revenue above estimates, shares fall on high expectations

Applied Materials said it 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.

Applied Materials, which supplies equipment used in key wafer fabrication processes including deposition, chemical mechanical planarization and inspection, is benefiting from increased spending by chipmakers to support a rapid build-out of AI infrastructure.

Revenue for the quarter ended July 26 grew 25% to $9.12 billion, surpassing the estimate of $8.99 billion.

Even so, its shares dropped more than 5% in extended trading as lofty investor expectations overshadowed the results. The stock has more than doubled this year.

Expectations are elevated as the chip equipment maker reports after peers Lam Research and KLA posted solid quarterly performances and forecast revenue growth, Stifel's Brian Chin said.

According to CFRA analyst Brooks Idlet, the results and the forecast were not enough to impress the Street, but the print was still solid as momentum clearly continues to improve. "We think calendar year 2027 consensus estimates leave room for upside if recent strength continues."