---
title: "AMAT (Trans): Semi equipment up 30%+ for the year; GPM trending higher"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40810156.md"
description: "The following is Dolphin Research's transcript of AMAT FY26 Q2 earnings call. For our takeaways, see 'Capex Boom Underway: Can AMAT Capture the Windfall?'.I. Key highlights from $Applied Materials(AMAT.US) results.1) Capital returns: Returned $765 mn to shareholders this quarter, incl. $365 mn in dividends and $400 mn in buybacks. In Mar, the company raised its quarterly dividend by 15%, meeting its prior target of doubling the dividend per share..."
datetime: "2026-05-15T05:06:06.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40810156.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40810156.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40810156.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# AMAT (Trans): Semi equipment up 30%+ for the year; GPM trending higher

**Below is Dolphin Research's transcript of Applied Materials AMAT FY26 Q2 earnings call. For our earnings take, see** [**Capex Boom Underway: Can AMAT Catch the Windfall?**](https://longbridge.cn/zh-CN/topics/40807533?channel=SH000001&invite-code=294324&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=9cfb3df2-4578-499b-bc1c-fd019dfb9821)**.**

**I. AMAT earnings highlights recap**

1\. **Capital returns**: Returned $765mn to shareholders this quarter. This included $365mn in dividends and $400mn in buybacks. In Mar., the company raised the quarterly dividend by 15%. This achieved the previously set goal of doubling DPS.

2\. **Q3 FY26 guidance**:

\- **Revenue of $8.95bn (±$0.5bn), up ~23% YoY** - Non-GAAP EPS of $3.36 (±$0.20), up ~36% YoY

\- Semi Systems around $6.9bn, AGS around $1.75bn, Other around $300mn - **Non-GAAP GPM around 50.1%**, Non-GAAP Opex around $1.485bn, Non-GAAP tax rate around 11%

3\. **CY26 outlook**:

\- **Semi equipment to grow 30%+ in CY26** - **Advanced Packaging to grow 50%+ in CY26**

\- **Raised mid/long-term growth for AGS (Applied Global Services) from low-teens to mid-teens (~15%)**. Growth could be higher this year.

\- China and ICAP (mature nodes) to be flat to slightly up for the year - Management expects **CY27 to be another record, strong growth year**

4\. **Key financial metrics**:

\- Revenue of $7.91bn, +13% QoQ and +11% YoY, a record high - Non-GAAP GPM reached 50% (+80bps YoY), the highest in 25 years. Semi Systems GPM hit 54.8%, nearing 55%.

\- Non-GAAP OPM expanded to 32.1% (+140bps YoY) - Non-GAAP EPS hit a record $2.86, +20% YoY

\- Since Gary became CEO in 2013, Non-GAAP GPM has risen by a cumulative 800bps - Op. cash flow was $845mn, capex $635mn, FCF $210mn

5\. **Reporting changes**: The company now discloses GPM by operating segment to improve transparency. It also moved 200mm equipment from AGS back into Semi Systems and recast historicals.

**II. AMAT earnings call details**

**2.1 Management highlights**

1\. **AI compute demand and cycle**

a. Global AI compute deployment keeps accelerating, with public data showing token generation tripled over the past three months. Demand is growing and diversifying toward agentic AI, with training and inference both adding fuel.

b. Agentic AI requires autonomous planning, reasoning, and task execution, lifting CPU intensity. It also boosts DRAM and NAND needs, adding incremental WFE drivers.

c. The key capacity bottleneck is cleanroom space. Customers are freeing capacity via re-layouts and new builds, and orders rose sharply in the last 90 days, prompting AMAT to raise CY26 semi equipment growth to 30%+.

d. The company is tracking 100+ fab projects globally, adding 10+ last quarter. Its largest customers now provide rolling 8-quarter forecasts, extending visibility into 2027 and beyond.

e. In AI compute, **leading-edge Foundry Logic, DRAM, and Advanced Packaging** drive performance, energy efficiency, and cost the most. **AMAT expects these three to contribute 80%+ of WFE YoY growth in 2026, with a similar setup in 2027**.

2\. **Leading-edge Foundry Logic**

a. AMAT holds the No.1 position in advanced logic tools, highly differentiated in deposition, modification and treatment, conductor etch, and e-beam.

b. Gate-all-around (GAA) meaningfully expands AMAT's SAM and creates multiple share-gain opportunities.

c. Launched Trillium ALD integrated materials solution: precisely deposits metals in complex GAA gate stacks. It consolidates multi-step metal deposition on one platform, enabling angstrom-level thickness control and Vt tuning.

d. Introduced a new precision PECVD system for STI, featuring industry-first bottom-up selective deposition. It protects STI structures, reduces parasitic cap and leakage, and improves device performance.

3\. **DRAM**

a. AI compute is driving strong DRAM demand, with customers ramping 6F² and accelerating next-gen device architectures.

b. **AMAT is the top supplier in memory process equipment, with strength in DRAM interconnect, patterning, and peripheral logic**. It has gained ~10pts of DRAM WFE share over the past decade.

c. AMAT expects further DRAM share gains as transistor and device architectures advance to 4F² and 3D DRAM. d. DRAM and Advanced Packaging roadmaps will be detailed at the June master class.

4\. **Advanced Packaging**

a. AMAT is the overall leader, strong in HBM and 3D chiplet stacking. b. Packaging is expected to grow 50%+ in CY26, with strong growth again next year.

c. Announced the planned acquisition of NEX to strengthen large-area panel-level packaging for big AI accelerators. This complements existing bets like hybrid bonding.

d. AMAT operates the industry's only full-flow packaging EPIC center and is deeply engaged in large-form-factor package R&D.

5\. **Conductor Etch and PDC**

a. Conductor etch will be one of the fastest-growing businesses this year. AMAT is No.1 in GAA logic and DRAM conductor etch.

b. Gartner indicates ~3pts share gain in conductor etch in 2025. c. SEM 3 is the fastest-ramping product in AMAT's history. The new SIM 3Z platform has \>250 chambers installed, adding several hundred million dollars to etch.

d. PDC is also among the fastest-growing businesses this year. E-beam leads clearly via cold field emission, delivering highest resolution and fastest imaging, while optical inspection is growing strongly.

e. E-beam imaging advantages synergize with process tools, speeding learning cycles.

6\. **AGS services**

a. The installed base keeps expanding, and customers prefer more advanced services to boost output and yield. AGS revenue hit a record $1.67bn this quarter.

b. Over 35,000 chambers are connected to the proprietary AIx platform, enabling AI-driven monitoring, diagnostics, and analytics.

c. **Management raised mid/long-term AGS growth to mid-teens (~15%)**, with higher growth likely this year given utilization improvement and many fab ramps.

d. AGS GPM rose +30bps QoQ and +120bps YoY; OPM rose +100bps QoQ to 29%, a 2–3 year high. Mix shift toward transactional and parts, new service offerings, and cost restructuring were key drivers.

7\. **EPIC and ecosystem**

a. The global EPIC co-innovation platform aims to compress time-to-commercialization from early research to HVM. It accelerates the industry roadmap.

b. The Silicon Valley EPIC Center remains on track to open in fall 2026. c. Eight partners announced: TSMC as a founding partner alongside Micron, Samsung, and SK Hynix; universities ASU, RPI, Stanford; and tool partner Advantest.

d. EPIC provides earlier multi-node visibility, boosts R&D productivity and value capture, and accelerates design-ins for tools and services.

8\. **Operations and supply chain**

a. AMAT is expanding in the U.S. and Europe and building a new manufacturing hub in Singapore. Manufacturing capacity is nearing a doubling.

b. Customers provide rolling 8-quarter forecasts that AMAT consolidates and relays to 2,000+ direct suppliers. This helps suppliers scale in sync.

c. Facilities are ready to significantly raise output, with roughly 2x capacity potential. The main bottleneck is supply chain responsiveness, not AMAT's own capacity.

d. Over 35,000 internal AI users are driving efficiency gains across R&D, ops, services, and back office. Biz. growth is running well ahead of headcount growth.

**2.2 Q&A**

**Q: Will 8-quarter visibility change ordering practices, such as prepayments or pricing?**

A (Brice): Yes, **we are indeed using 8-quarter rolling visibility with large customers**, mainly for supply chain planning. We have ~2,000 direct suppliers and many parts per tool, and they need lead time to invest and expand.

From a payment standpoint, we ask for deposits from some customers, but it is not universal. **Pricing is typically set via multi-year contracts, often 2–3 years per program, so changes are gradual**. The key driver of higher pricing and GPM over the last two years has been sustained product mix upgrades. Each new solution delivers more value and solves harder problems, strengthening the portfolio and supporting pricing.

A (Gary): On pricing, we are in a favorable position because core AI innovations sit squarely in AMAT's sweet spots—leading-edge logic, DRAM, and Advanced Packaging. Our innovations enable those architectural transitions.

This gives us near-term pricing tailwinds. As we create more value, we can capture more value, and I am highly confident the GPM improvement trend can continue.

**Q: The Q3 50.1% GPM guide seems low (assuming lower China mix). How should we think about margins after Jul.?**

A (Brice): Our guide is 50.1% at the company level. Note we now disclose segment GPM, and Q2 Semi Systems GPM was 54.8%, which reflects the improvement we have discussed.

**For Systems, we expect margins to keep inching up as new tools roll out**. The improvement is gradual but upward, which underpins the 50.1% guide—Q3 slightly above Q2, with further lift as new tools and solutions launch.

**Q: Does 30% YoY growth imply $14.5–15.0bn for Systems in 2H? Could 2027 be even better?**

A (Brice): **30% YoY growth is broadly consistent with your 2H sizing**. Demand signals are very strong, and orders increased notably in the last 90 days as customers identified cleanroom solutions.

Investors should watch the capacity roadmap. We track 100+ fab projects globally and added 10+ last quarter, suggesting a steady pipeline of new cleanrooms enabling wafer starts to expand, driven by AI.

A (Gary): 2027 still looks like a strong growth year. Customers are planning for 2027–2028 because compute demand is rising so fast, with agentic AI stacking on generative AI and lifting CPU, DRAM, and NAND needs well above prior forecasts.

Physical AI down the road adds to this, keeping demand strong for years.

**Q: Is manufacturing capacity ready to double? What is revenue potential at full run-rate?**

A (Brice): Facility space is ready. We need to complete fit-up and hiring as we operate, and we can significantly expand output.

I said last quarter we could double capacity. Some headroom has been used as the business grew, but it is still around that magnitude, and our job is to align suppliers to scale at a similar pace.

**Q: Over the next 1–3 years, will growth be more units or pricing?**

A (Gary): Across customer discussions, everyone sees massive compute demand growth. A customer two days ago was already worried about supply security in 2030.

I will not speculate on pricing. What we see is a broadening customer set, with the fastest-growing markets—leading-edge logic, DRAM, HBM—driving AMAT demand, while new packaging architectures improve tokens/second/watt.

**Q: With Systems up 30%+, will AGS growth accelerate with a lag?**

A (Brice): We previously guided AGS to low-teens. Systems is running higher now, the installed base will be larger, and services and parts demand increase with utilization improving, so we raised AGS to mid-teens (~15%).

This year should be above mid-teens given industry-wide utilization improvement and many new fab ramps.

A (Gary): There has never been a time when output and yield innovations were more valuable. With 35,000+ chambers connected to AIx, we are advancing AI-driven service innovations and predictive models to improve output, yield, and cost.

Beyond the growing tools base pulling AGS, we are also moving up the value curve in services.

**Q: Is the 30% growth guide conservative? Could Systems exceed 40% on the current cadence?**

A (Brice): To reiterate, **we are guiding Systems up 30% YoY. We will not specify a precise linear path, but assuming a straight line from Q3 to Q4 to next year's Q1 is reasonable**.

**Follow-up: Linear by the same dollar step?**

A (Brice): In dollar terms, draw a straight line. Start from the Q3 guide and extend linearly to Q1.

**Q: Will Huawei-related export controls broaden and affect your fab cluster shipments?**

A (Gary): First, on semi equipment, we are growing 30% or more this year. The bottleneck is the supply chain, a sector-wide issue, and our operational capacity could far exceed current levels, but supplier responses take time.

We are pushing as fast as we can and have improved supply chain and ops materially in recent years. **On specific controls, we cannot comment, and all relevant factors are reflected in our quarterly guide and CY outlook**.

Structurally, AI compute innovation drives leading-edge logic, DRAM, HBM, and Advanced Packaging through 2026–2027 and beyond, where AMAT has deep strength and is positioned to gain share.

**Q: Are customers squeezing more from existing fabs via higher dies per wafer and better yield, and does that add growth?**

A (Gary): Absolutely. Output and yield innovations are central for all customers.

It takes time to create new cleanroom space, so the focus on improving existing capacity is intense. That is a key reason services growth is running above prior expectations, helped by our remotely connected chambers and instant expert support.

**Q: AGS GPM rose +30bps QoQ and +120bps YoY, and OPM rose +100bps QoQ to 29%. What drove this, and will opex, down 8% QoQ, rebound?**

A (Brice): Mix shift toward transactional work and parts was a major margin driver, and new service products also helped. Those are the main factors.

On opex, we undertook restructuring to manage costs, but we continue to invest in the business. We are building training centers, adding CSEs, and preparing for ramps, and margins are in a healthy range.

**Q: How does the NEX acquisition align with the hybrid-bonding JV, and what is the panel-level packaging timeline?**

A (Gary): We lead in packaging, with 50%+ growth this year. Connecting multiple compute components in large package footprints is a major focus across the industry, and we are investing in hybrid bonding and in NEX, the leader in large-area plating for packaging.

We also have the only full-flow packaging EPIC center and are working closely with both incumbents and innovators building large-form-factor packages. Packaging grows 50%+ this year, and we expect strong growth again next year.

There is a big push to get new architectures to market quickly. I will not comment on timing, but AMAT is deeply embedded across the ecosystem with the broadest packaging portfolio and sits at the core of enabling these transitions.

**Q: Do the 10+ new projects in the pipeline include the Terra fab?**

A (Brice): To clarify, I said more than 10 new projects. I cannot name specific ones.

**Q: DRAM 1δ has higher litho intensity, and after 4F² deposition intensity rises. Does 1δ become a big node that could temporarily slow DRAM deposition intensity?**

A (Gary): Big picture, AMAT is the No.1 DRAM process equipment supplier, with innovation opportunities at 6F², 4F², and into 3D DRAM.

Near term, upgrades to peripheral CMOS logic to achieve higher-performance, lower-power transistors are a strong driver for us in DRAM, including robust Epi growth, while HBM packaging focuses on more vertical stacking.

AMAT leads in deposition, interconnect, patterning, conductor etch, and e-beam in DRAM. There is significant innovation at 6F² that extends our leadership and contributes to current growth, and we are even better positioned for 4F² and 3D DRAM.

We have gained ~10pts of DRAM WFE share over the last decade, performance has been strong in recent years, and this year is another good one. Materials intensity will increase over time, especially in 3D DRAM, and we are advantaged at 6F², 4F², and 3D.

**Q: Visibility extends to 2028 with new greenfield and NAND projects slated that far out. Could 2028 be another WFE up year?**

A (Brice): We think it is too early to call. This is secular growth, with AI as the leading workload, and we expect customers to keep expanding capacity plans.

Cleanroom space is the current constraint. **We expect customers to keep adding projects, pushing outlooks higher over time**.

**Q: With conductor etch share up 300bps in 2025, how do you reach market leadership?**

A (Gary): Etch is one of our fastest-growing businesses this year. **We are No.1 in GAA conductor etch and in DRAM conductor etch**, and both are among the fastest-growing markets this year.

We keep gaining share in leading-edge logic and remain strong in DRAM. SEM 3 is AMAT's fastest-ramping product ever, and SIM 3Z now has 250+ chambers installed, adding several hundred million dollars to etch.

Another lever is cross-portfolio co-optimization. Working with customers on GAA, interconnect, and new DRAM architectures, integrated solutions help us grow faster.

**Q: Process control share has been declining. How strategic is it?**

A (Gary): I see PDC as one of our best opportunities. It grew fast last year and is among the fastest-growing businesses again this year, and I am very optimistic for 2026 and beyond.

We lead in e-beam with cold field emission, delivering the highest resolution and fastest imaging, and optical inspection is strong this year. We will roll out a series of new technologies over the next few years to drive significant PDC growth.

E-beam also has major synergies with our process tools, where imaging leadership accelerates process optimization and drives tool growth. So I disagree with the premise—it is a great business and one of our fastest growers this year.

**Q: How is AMAT positioned between greenfield and upgrades?**

A (Brice): Most tracked projects are greenfield, especially in logic. We perform very well in greenfield, likely our strongest setting, and we also do well in upgrades.

One difference is NAND, where our participation in upgrades is lower. But we continue to see demand for new fab space and new tools across DRAM and leading-edge logic, and **ICAP (chips for connected devices, communications, and autos)** has also added notable capacity in recent years.

**Q: How does the AGS long-term guide raise relate to the 200mm reclass?**

A (Brice): The view is now clean. We moved 200mm equipment out of AGS, reset the historicals, and those revenues now sit in Systems.

Looking forward, AGS refers to services only. Mid-teens is a good multi-year assumption, and this year will be above that due to higher utilization and many new fab ramps.

**Q: Mix leaned toward Foundry Logic again this quarter. Will DRAM mix rise in 2H, and which area grows fastest in 2027?**

A (Brice): In 2H we see strength across leading-edge logic, DRAM, Advanced Packaging, and NAND (ex-ICAP). ICAP needs to digest capacity added in prior years.

We are not picking a winner between DRAM and logic. Both accelerate in 2H.

**Q: Which areas have the most upside in customers' long-term plans?**

A (Brice): We are not calling a multi-year winner between DRAM and logic; both are very strong, with Advanced Packaging close behind. **For NAND, we raised our bit growth outlook by a few points**, but we still expect demand to be met mainly via upgrades.

**We do not expect many new wafer starts in NAND**, even as bit growth expectations move up.

A (Gary): To add, we see the 2027 semi landscape as similar to 2026, driven by AI compute. The fastest-growing markets in 2026 likely hold their mix in 2027 and beyond.

**Q: When can ICAP return to more meaningful growth?**

A (Brice): ICAP has strong pockets—analog, photonics, and power chips are standouts. Investors should recognize ICAP remains a very strong market and one of our largest.

This is the first year in several that leading-edge logic exceeds ICAP, but ICAP is still adding capacity at a notable pace. Until digestion completes, YoY growth is limited.

Utilization is improving, with 300mm at healthy levels. Longer term, ICAP tools should grow with device growth in the mid-to-high single digits, after absorbing current capacity.

**Q: With the EPIC Center launch nearing, how will it drive innovation and competitive advantage?**

A (Gary): I am excited about EPIC. Customers and the broader ecosystem are racing for AI compute leadership, which drives our leading-edge logic, DRAM, HBM, and Advanced Packaging businesses, and materials innovation underpins those architectural shifts.

Co-locating our customers and partners with our technologists at EPIC will accelerate AMAT and the industry. Announced partners include TSMC, Samsung, SK Hynix, Micron, Advantest, ASU, RPI, and Stanford, with more coming.

EPIC provides better, earlier multi-node visibility as we co-innovate on future product generations and new architectures. That enables earlier design-ins for tools and advanced services and is the right strategy at the right time.

<End of text\>

**Risk disclosures and statements:**[**Dolphin Research disclaimer and general disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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