Morgan Stanley expects Applied Materials (AMAT) to surpass the consensus estimate in its first quarter fiscal 2026 earnings results, prompting the financial firm to increase its price target to $364 from $273.
The bank also retained its Overweight rating on the stock.
“Relative to three months ago, when AMAT commented that it expected ‘slow growth until our OctQ and JanQ,’ the demand environment has improved meaningfully, with supply-chain checks pointing to increased near-term strength,” said Morgan Stanley analysts, led by Shane Brett, in a Monday investor note. “We expect the company to guide closer to MSe than Street ($7.2–7.3bn / +3–4% q/q vs. Street at ~$7.0bn / +2% q/q), which would represent the first 2%+ guidance beat since JanQ24.”
Applied Materials plans to release its Q1 results and guidance post-market on Thursday, Feb. 12. A consensus estimate calls for revenue of $6.88B. It expects adjusted earnings per share of $2.21 and GAAP EPS of $2.16.
“While AMAT does not always provide a WFE outlook at JanQ earnings, if pressed, we believe management would guide to low-to-mid-teens growth, with upside risk dependent on customer clean-room availability,” Brett added.
Morgan Stanley noted that Applied Materials needs to demonstrate it is not “undergrowing” in the wafer fabrication equipment market.
“We’re OW as we don’t think AMAT will materially undergrow WFE anymore as ICAPS ceases to be a significant drag and China DRAM comps ease, but the stock is still priced for underperformance vs. WFE,” Brett said. “Our model implies performance in line with WFE (AMAT 17%/19% vs. WFE 16%/19%), assuming ICAPS grows ~2% over 2025–27 while the remainder of the portfolio grows ~54%. To sustainably outgrow WFE, either ICAPS growth would need to reaccelerate or AMAT’s leading-edge logic and DRAM businesses would need to materially outperform—outcomes we see as possible but are not yet prepared to underwrite.”