<p><strong>Applied Materials, Inc.</strong> (NASDAQ:AMAT) shares fell in premarket trading Friday after the chip equipment maker issued strong third-quarter guidance despite reporting better-than-expected second-quarter results driven by AI-related semiconductor demand.</p>



<p>Applied Materials shares have gained more than 150% over the past year and were trading near their 52-week high of $448.45 ahead of the earnings release, reflecting elevated investor expectations.</p>



<p>Following the announcement of second-quarter results, some investors appeared to engage in profit-taking activity, contributing to the stock's decline despite the company reporting strong financial performance.</p>



<h2>Strong Q2 Results Beat Expectations</h2>



<p>The company reported second-quarter revenue of $7.91 billion, up 11% from a year earlier and above analyst estimates of $7.65 billion. Adjusted earnings came in at $2.86 per share, topping Wall Street expectations of $2.66 per share.</p>



<h2>AI Demand Drives Semiconductor Growth</h2>



<p>Applied Materials said growth was fueled by demand for leading-edge foundry logic, DRAM memory and advanced packaging technologies tied to artificial intelligence infrastructure.</p>



<p>Gross margin expanded to 50%, marking its highest level in more than 25 years, supported by pricing strength, differentiated products and manufacturing efficiencies.</p>



<h2>Segment Performance Shows Broad-Based Strength</h2>



<p>Semiconductor Systems revenue rose 10% year over year to $5.97 billion. DRAM revenue increased 18% to $1.7 billion as AI workloads continued to boost memory demand. Applied Global Services revenue climbed 17% to $1.67 billion, helped by higher fab utilization and expanded advanced service offerings.</p>



<h2>EPIC Center Expands Industry Partnerships</h2>



<p>The company also announced the launch of its EPIC Center, aimed at accelerating co-innovation efforts with partners including<strong> Taiwan Semiconductor Manufacturing Company Ltd. </strong>(NYSE:TSM), <strong>Micron Technology, Inc.</strong> (NASDAQ:MU), <strong>Samsung Electronics Co. Ltd.</strong> (OTC:SSNLF) and <strong>SK Hynix</strong>.</p>



<h2>Advanced Packaging Outlook Remains Strong</h2>



<p>Applied Materials said its advanced packaging business is expected to grow more than 50% in 2026, supported by adoption of chiplet architectures and high-bandwidth memory technology for AI chips. The company added that acquisitions such as NEXT are expected to strengthen its panel-level packaging capabilities.</p>



<p>Management said leading-edge logic, DRAM and advanced packaging are expected to account for more than 80% of wafer fab equipment growth in 2026 and 2027, areas where the company believes it is well positioned.</p>



<h2>Manufacturing Expansion Supports AI Investment Cycle</h2>



<p>To support future demand, Applied Materials said it is expanding manufacturing capacity across the U.S., Europe and Singapore, nearly doubling output capability as part of a broader multi-year AI-driven semiconductor investment cycle.</p>



<h2>Q3 Guidance Tops Wall Street Estimates</h2>



<p>For the third quarter, the company forecast revenue of $8.95 billion, plus or minus $500 million, above analyst estimates of $8.09 billion. Applied Materials also projected adjusted earnings of $3.16 to $3.56 per share, compared with Wall Street expectations of $2.88 per share.</p>



<p>The company raised its outlook for semiconductor equipment growth this calendar year to more than 30%, up from prior guidance of 20%. It also expects semiconductor equipment revenue to grow more than 30% in 2026 as AI infrastructure spending and chip manufacturing investments continue to expand.</p>



<h2>Analyst Consensus &amp; Recent Actions</h2>



<p>The stock carries a Buy rating with an average price forecast of $444.30. Recent analyst moves include:</p>



<ul>
<li><strong>Citigroup</strong>: Buy (Raises forecast to $520.00) (May 12)</li>



<li><strong>Cantor Fitzgerald</strong>: Overweight (Raises forecast to $550.00) (May 11)</li>



<li><strong>HSBC</strong>: Initiated with Buy (Forecast $517.00) (May 8)</li>
</ul>



<h2>Stock Slides Despite Bullish Outlook</h2>



<p><strong>AMAT Price Action:</strong> Applied Materials shares were down 2.82% at $428.15 during premarket trading on Friday. The stock is approaching its 52-week high of $448.45, according to Benzinga Pro data.</p>



<p><em>Image via Shutterstock</em></p>

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<p>Applied Materials (AMAT) reported strong Q2 results with revenue of $7.91 billion, driven by AI demand, and raised its Q3 guidance to $8.95 billion. Despite a 150% stock increase over the past year, shares fell 2.82% in premarket trading. The company achieved a gross margin of 50%, its highest in 25 years, and expects significant growth in advanced packaging and semiconductor equipment due to AI investments.</p>

AI Demand Pushes Applied Materials To Highest Margins In 25 Years