Applied Materials Beat Revenue Forecasts. Why Did Its Stock Fall?
The chip manufacturing equipment maker reported its results after its competitors, including Lam Research and KLA, and investor expectations had been too high
Applied Materials expects revenue of $10.3 billion for the current quarter, which is above Wall Street's forecasts / Photo: Michael Vi / Shutterstock.com
Applied Materials, the largest U.S. manufacturer of semiconductor manufacturing equipment, exceeded analysts’ expectations with its revenue forecast for the current quarter. However, investors reacted coolly: shares fell by more than 5% in after-hours trading on August 13. This underscores just how high market expectations are for a company playing a key role in the artificial intelligence boom, Bloomberg notes.
Details
In the fourth quarter of fiscal year 2026, which ends in October, semiconductor equipment manufacturer Applied Materials will report revenue of approximately $10.3 billion, the company said. The average analyst estimate was $9.62 billion, but some estimates were close to $10 billion, according to data compiled by Bloomberg. Applied Materials expects adjusted earnings per share of $4.02 for the current quarter, while analysts had expected $3.72.
Applied Materials is also looking forward to fiscal year 2027 with confidence. Customers are asking for increased equipment production so they can receive it faster, noted Applied Materials CEO Gary Dickerson during a conference call. This gives him confidence that 2027 will be another year of strong revenue growth for the company. “They are constantly pushing us to increase capacity,” Bloomberg quoted Dickerson as saying. “Our customers are being resourceful and finding additional space for production facilities, which is why they are increasing their requests for equipment deliveries.” Dickerson also noted that the company will need time to ramp up equipment production to the level required to meet demand.
"Customers continue to give us a longer horizon of predictability than ever before: some discussions now extend as far as 2030," Reuters quotes Chief Financial Officer Bryce Hill as saying.
In the third quarter of fiscal year 2026, which ended on July 26, Applied Materials’ revenue rose 25% to $9.12 billion. Analysts had forecast revenue of $9 billion, according to Bloomberg. Adjusted earnings rose to $3.50 per share, compared with Wall Street’s forecast of $3.42 per share.
How did the market react?
Following the release of its earnings report, the company’s stock plummeted 5.2% to nearly $507 during after-hours trading on August 13. Last month, Applied Materials’ competitor, KLA, faced a similar market reaction.
This year, investors have been actively buying Applied Materials shares, expecting the company to be one of the main beneficiaries of the AI boom, Bloomberg explains. However, following a rally that has seen the stock rise by more than 100% since the start of the year, Applied Materials is finding it increasingly difficult to meet market expectations, the agency notes.
Investors' expectations were too high because the chip manufacturing equipment maker reported its results after its competitors, including Lam Research and KLA, which posted strong quarterly results and forecast revenue growth, Stifel analyst Brian Chin explained to Reuters.
“The results and outlook [for revenue in the current quarter] weren’t enough to impress Wall Street, but the report was still strong, and the momentum is clearly continuing to improve,” Reuters quotes CFRA analyst Brooks Aidlet as saying. “We believe that the consensus forecasts for calendar year 2027 leave room for stronger results if the current momentum continues.”
This article was AI-translated and verified by a human editor
