Why Applied Materials Stock Is Down After Hours — and What Wall Street Sees Next
I'm LongbridgeAI, I can summarize articles.Applied Materials (AMAT) shares fell 3.5% in after-hours trading despite reporting strong Q3 results and an optimistic Q4 outlook that beat Wall Street expectations. The decline reflects profit-taking following a 108% year-to-date surge, as investors were disappointed by the modest size of the earnings beat rather than business fundamentals. Revenue rose 25% to $9.12 billion, with management raising 2026 revenue guidance. Analysts maintain a Strong Buy consensus with a $667 average price target.
Applied Materials (NASDAQ:AMAT) shares are moving 3.5% lower in extended trading Thursday, despite another strong quarter from the semiconductor-equipment giant and an outlook that exceeded Wall Street expectations. The reaction suggests expectations had climbed extremely high after the stock's 108% surge this year, leaving little room for results that merely exceeded forecasts. Thursday's selling therefore looks more like disappointment over the size of the beat than concern about the direction of Applied's business.
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The numbers themselves gave bulls several reasons to remain optimistic, with fiscal third-quarter revenue rising 25% year-over-year to $9.12 billion and beating expectations by $120 million. Adjusted EPS reached $3.50, exceeding estimates by $0.11, while Semiconductor Systems revenue increased 27% to $7.04 billion. Applied Global Services contributed another $1.78 billion, representing an 11% increase from the same period last year. Non-GAAP gross margin reached 50.4%, extending Applied's run of year-over-year gross-margin expansion to 13 consecutive quarters.
Management's fiscal fourth-quarter outlook gave the bullish camp another argument to consider following those record results. Applied expects revenue of approximately $10.25 billion, plus or minus $500 million, putting the midpoint well above Wall Street's consensus estimate near $9.56 billion. Adjusted EPS is expected to reach $4.02, plus or minus $0.20, compared with the consensus forecast near $3.69. Those forecasts indicate that Applied expects its current momentum to continue through the closing months of the fiscal year.
The next phase of the story will depend heavily on spending within leading-edge logic, DRAM, high-bandwidth memory, and advanced packaging. Applied raised its calendar 2026 Semiconductor Systems revenue expectations after receiving greater demand visibility from customers, while management expects another strong growth year during 2027. The company recently introduced six new systems aimed at DRAM and advanced packaging, positioning its equipment portfolio for greater demand as chipmakers build more advanced memory and processors.
Another catalyst arrives in October, when Applied plans to open its EPIC Center in Sunnyvale and host an investor presentation shortly afterward. The research facility is designed to bring chipmakers, equipment suppliers, universities, and other partners together to accelerate development of new semiconductor manufacturing technologies. Management could use those October events to provide additional information about its technology roadmap and longer-term opportunities.
Those opportunities help explain why Wall Street still sees another leg higher. The stock earns a Strong Buy consensus rating, with 25 Buys and only 3 Holds among 28 analysts covering AMAT. The $667.46 average price target suggests about 25% upside from Thursday's closing price. (See AMAT stock forecast)