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

Applied Materials forecast fourth-quarter revenue above Wall Street expectations on Thursday, betting that unabated demand for advanced AI chips will continue to fuel robust spending on its semiconductor manufacturing equipment.

The company, which supplies tools for key wafer fabrication processes such as physical vapor deposition and ion implantation, is benefiting from increased spending by chipmakers to support a rapid build-out of AI infrastructure.

Applied Materials forecast fourth-quarter revenue of around $10.25 billion, plus or minus $500 million, compared with analysts' average estimate of $9.54 billion, according to data compiled by LSEG.

"We expect 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," Chief Financial Officer Brice Hill said.

The company expects overall packaging revenue to grow more than 70% in calendar year 2026, ahead of its prior projection of over 50%. DRAM revenue is expected to increase significantly in the second half of the year.

"Customers continue to give us longer visibility than we've ever had, with some conversations now extending to 2030," Hill said on a post-earnings call.

Yet, its shares fell 4% in extended trading on high investor expectations heading into the results. The stock has more than doubled this year.

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

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