Capex Boom Ahead: Can AMAT Catch the Windfall?

Applied Materials (AMAT) released its fiscal Q2 2026 results (through Apr 2026) before U.S. market open on May 15 Beijing time. Key takeaways are as follows.

1) Core metrics: AMAT posted revenue of $7.9bn (+11% YoY), beating consensus ($7.7bn). Growth was driven by AI compute infrastructure build-out, which lifted demand for advanced logic, DRAM and advanced packaging tools.

$Applied Materials(AMAT.US) GPM came in at 49.9%, up 90bps QoQ and above the Street (49.1%). Margin expansion in the semi systems segment on new tool ramps supported the overall GPM improvement.

2) Segment details: AMAT’s biz. is split between Semiconductor Systems and Services, with semi equipment the largest contributor at over 70% of revenue. Services provide recurring maintenance and upgrades.

Within Semiconductor Systems: (i) Logic revenue was $4.0bn, up 25% QoQ, fueled by GAA-node ramps and new products. (ii) DRAM revenue was $1.73bn, down 1% QoQ, reflecting timing mismatches between customer capacity adds and delivery cycles.

3) Opex: Operating expenses rose to approx. $1.42bn (+8% YoY). R&D increased to $1.03bn this quarter, while G&A declined. The company announced in late Oct 2025 a workforce reduction of roughly 4%, and headcount rose 3% QoQ this quarter as momentum improved.

4) Next-quarter guide: AMAT guides fiscal Q3 2026 revenue to $8.45–9.45bn, well above the Street ($8.15bn), with the midpoint up 13% QoQ. Non-GAAP EPS is guided to $3.16–3.56, also comfortably ahead of consensus ($2.68).

Dolphin Research view: Blowout next-quarter guide, cooler full-year outlook

Revenue and GPM both beat expectations, with growth propelled by AI infrastructure that lifted demand for advanced logic, DRAM and advanced packaging. The mix and new product cycles supported profitability.

The Q3 guide is particularly strong, at $8.45–9.45bn (midpoint +13% QoQ) vs. $8.15bn expected. EPS guidance of $3.16–3.56 also tops the Street’s $2.68, implying broad-based strength.

With downstream capex rising, AMAT is entering a revenue expansion phase, led by advanced logic, memory and advanced packaging demand. New tool iterations should lift GPM further, supporting an improving operating trajectory.

After the upside Q3 guide, the stock jumped as much as 7% after-hours. Management then offered a more cautious full-year view, stating that ‘Semiconductor Systems growth in calendar 2026 should exceed 30%’.

Disaggregating the Q3 guide suggests semi systems growth is already approaching ~30% next quarter. In other words, despite rising capex, the full-year outlook implies no major acceleration thereafter, tempering market enthusiasm.

Beyond the quarter, the market is focused on several developments. These include wafer-fab capex trajectories and memory-cycle dynamics.

a) Wafer-fab capex: AI and memory demand are pushing multiple leading foundries to raise capex outlooks again, a key driver of AMAT’s share price. Higher spend points to stronger tool orders.

Specifically, 1) TSMC raised its 2026 capex guide to the higher end of $52–56bn, implying an annual increase of roughly $15bn. 2) Micron lifted 2026 capex to $25bn; 3) Samsung and SK hynix recently indicated they will significantly increase 2026 capex.

Aggregating these outlooks, global core wafer-fab capex growth in 2026 is tracking near 30%. The bulk of the increase comes from TSMC’s advanced nodes and memory makers’ expansions.

b) Memory growth likely to accelerate: memory accounts for roughly 20–30% of AMAT’s semi revenue. In the current upcycle, Micron, SK hynix and Samsung are all stepping up capex materially.

AMAT has a relative edge in DRAM, as DRAM/HBM manufacturing is more reliant on deposition, CMP and advanced packaging. This skews AMAT’s memory revenue mix toward DRAM.

From a memory supply chain perspective, tight supply leads to price increases, which drive memory makers to expand capex and, in turn, boost upstream equipment orders. The recent acceleration in AMAT’s memory revenue growth reflects the pricing uplift and has already provided a tangible boost to equipment vendors’ results.

Given many memory makers manage capex in positive correlation with revenue, rising memory prices and profits could push capex higher. This would support sustained high growth for AMAT’s memory-related biz.

AMAT’s current market cap is $349.6bn, implying about 27x PE on fiscal 2027 post-tax core OP (assuming a 2-yr revenue CAGR of 23%, GPM of 50.2%, and a 14% tax rate). Historically, the PE range has been 18–30x, placing the stock slightly above the midpoint.

Versus peers such as ASML (32x PE) and Lam Research (42x PE), AMAT screens relatively cheaper. With the memory and AI semi upcycle, its multiple could move toward the upper end of the historical range.

Overall, AMAT delivered a solid print, especially with a next-quarter guide well ahead of expectations. However, the comparatively cautious full-year commentary cooled near-term sentiment, erasing the after-hours pop.

Over the medium term, memory leaders (Micron, SK hynix, Samsung) and core logic players (TSMC, Intel) are signaling optimism in capex plans. Sustained memory price gains could drive additional capex hikes, creating upside for equipment names like AMAT.

Separately, while TSMC publicly deferred High-NA EUV adoption, Low-NA EUV capacity expansions still require AMAT’s deposition and etch. The company should also benefit from 2nm expansions and subsequent node transitions.

In this capacity expansion upcycle, upstream semi equipment has comparatively high visibility. AMAT tends to guide conservatively, and could again raise its full-year view (semi systems growth: last quarter 20% → this quarter 30%). As capex ramps, revenue growth is likely to accelerate into 2H, with both earnings and valuation having room to move higher.

Below are the detailed takeaways from AMAT’s results per Dolphin Research:

I. Key operating metrics: revenue and GPM both up

1.1 Revenue

AMAT delivered fiscal Q2 2026 revenue of $7.9bn (+11% YoY), beating the Street ($7.7bn). Growth was powered by AI infrastructure demand, lifting advanced logic, DRAM and advanced packaging equipment.

Management guides next-quarter revenue to $8.45–9.45bn, with the midpoint up 13% QoQ and well ahead of the Street ($8.15bn). The QoQ increase is mainly driven by Semiconductor Systems, with AGS services also up sequentially. Given prior ‘back-half weighted’ commentary, 2H performance should be stronger.

1.2 Gross margin

Gross profit was $3.95bn (+13% YoY) in Q2, with GPM at 49.9%, up 90bps QoQ and above 49.1% consensus. Both Semiconductor Systems and AGS services posted GPM improvement this quarter.

With new tools rolling out, systems margins should continue to trend higher. Non-GAAP GPM is guided to 50.1% next quarter, supported by new products and stronger downstream demand.

1.3 Opex and profit

Operating expenses were $1.42bn in Q2 (+8% YoY). The prior quarter saw a sharp opex increase due to a one-off item.

The step-up last quarter reflected a $250mn settlement charge.【On Feb 11, 2026, AMAT announced a settlement with the U.S. Dept. of Commerce’s BIS.】

Within core opex:

R&D was $1.03bn (+15% YoY).
S&M was $230mn (+8% YoY).
G&A was $160mn (-21% YoY), reflecting the headcount reduction plan announced in late Oct 2025 (approx. 4% of total employees).

Core OP was $2.52bn (+16% YoY), with an OPM of 32%. Profit growth was driven by higher revenue and GPM expansion.

II. Business updates: capex keeps rising, Semi Systems accelerates

AMAT revised segment reporting from last quarter. The 200mm equipment biz. moved from Services into Semiconductor Systems, and the display biz. was consolidated into ‘Other’.

By segment, Semiconductor Systems remains the largest revenue source at 75%, spanning deposition, etch and CMP across logic and memory wafer-fab applications. The remainder is primarily Applied Global Services (maintenance, upgrades), accounting for ~21%.

2.1 Semiconductor Systems

Systems revenue was $5.97bn in Q2, up 16% QoQ, beating the Street ($5.8bn). Growth was driven by advanced logic and advanced packaging demand.

The systems portfolio serves logic and memory end-markets. (i) Logic revenue was $4.0bn, +25% QoQ, and remains the primary driver. (ii) DRAM revenue was $1.7bn, -1% QoQ, due to a mismatch between customers’ ramp pace and delivery timing.

As AMAT’s tools serve wafer-fab production, foundries are the immediate buyers. With TSMC, Micron and others lifting capex (see earlier table), 2026 core wafer-fab capex growth near ~30% lays the groundwork for faster company growth.

2.2 Services

Services revenue was $1.67bn in Q2 (+17% YoY), slightly above the Street ($1.6bn). Growth remains resilient on installed-base expansion.

The 200mm equipment biz. shifted from Services into Semi Systems this quarter. Services will focus more on maintenance, spares management, and smart-manufacturing solutions such as predictive maintenance and remote diagnostics.

Given the recurring nature of maintenance demand, volatility is low. AMAT now expects annual growth of around 15% (previously low-double digits).

2.3 Regional revenue

Mainland China and Taiwan remain the company’s largest markets, contributing 26% and 27% of revenue this quarter. With Samsung and SK hynix stepping up DRAM tool purchases, Korea’s revenue share rebounded to ~20% and could trend higher.

Mainland China revenue now approaches ~30% of total and remains subject to uncertainty. Last quarter’s settlement with BIS partially eased the impact of U.S.-China semiconductor frictions.

Prior BIS controls directly restricted certain equipment exports. On Sep 29, 2025, BIS stipulated that entities 50%+ owned by parties on the Entity List would be subject to the same export controls, expanding restrictions.

Following Nov U.S.-China talks, BIS suspended this rule for one year from Nov 10, 2025. While this specific measure is paused, about 20% of equipment to China remains restricted, including advanced nodes, NAND, DRAM and parts of the ICAPS market (IoT, comms, auto, power and sensors).

Dolphin Research historical coverage on AMAT:

Feb 13, 2026 call notes ‘AMAT (Trans): Semi Equipment to Grow 20%+, Strength Through 2027’

Feb 13, 2026 earnings take ‘AMAT: Capex Supercycle Arrives, It’s Spring for Tool Makers!’

Dec 10, 2025 deep dive ‘Memory Heats Up: Can AI Capex Power AMAT’s Reacceleration?’

Nov 10, 2025 call notes ‘AMAT (Trans): Flat 1H Next Year, Growth Skews to 2H’

Nov 10, 2025 earnings take ‘Memory Is ‘On Fire’: Can AMAT Keep Benefiting?’

Sep 18, 2025 deep dive ‘Everything AI Is Up: When Will AI Capex ‘Full Suite’ Break Out?’

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