Earnings Call Insights: Applied Materials (AMAT) Q1 2026
Management View
- Gary Dickerson, President and CEO, reported that “Applied Materials delivered revenue and earnings above the midpoint of our guided range” and described strong performance and outlook for 2026, citing “the acceleration of investments in AI computing” as a primary growth driver. He revealed expectations to “grow our semiconductor equipment business more than 20% this calendar year,” with demand weighted towards the second half due to cleanroom availability pacing investment. Dickerson emphasized leadership in leading-edge logic, high bandwidth memory (HBM) DRAM, and advanced packaging, stating, “Gate-all-around nodes grow our available market considerably while also providing a catalyst for multiple points of market share gain.”
- Dickerson introduced new products, noting, “Our unique cold field emission eBeam technology…revenues to double this calendar year to more than $1 billion and support process diagnostics and control, being one of our fastest-growing businesses in 2026.” He added, “In 2026, we are planning to launch more than a dozen new products, including 3 for advanced logic and DRAM, which we announced earlier this week.”
- Dickerson announced an “EPIC co-development agreement, Samsung Electronics,” and described the EPIC platform as enabling “faster cycles of learning and accelerated transfer of next-generation technologies into high-volume manufacturing.”
- Brice Hill, Senior VP and CFO, stated, “Looking ahead to Q2, we anticipate strong growth in our Semiconductor Systems business along with healthy gross margin and increasing profitability for the company.” He emphasized capacity planning: “Over the past several years, we’ve nearly doubled our system manufacturing capacity and strengthened our supply chain operations.”
- Hill reported, “Revenue of $7 billion was in the upper end of our guidance range and down 2% year-over-year.” He highlighted, “Non-GAAP gross margin was 70 basis points above the midpoint of our expectation and grew 20 basis points year-over-year to 49.1%.”
Outlook
- Brice Hill provided guidance for Q2: “We expect company revenue of $7.65 billion, plus or minus $500 million, which should be up around 9% sequentially. We expect non-GAAP EPS of $2.64 and plus or minus $0.20.” Semiconductor Systems revenue is expected to be “around $5.8 billion,” with AGS revenue at “about $1.6 billion” and Other revenue at “around $250 million.” Hill added, “We expect non-GAAP gross margin to increase to approximately 49.3%.”
- Dickerson projected, “We expect strong growth momentum to be carried into 2027.”
Financial Results
- Q1 revenue was reported at “$7 billion,” with China revenue down 7% year-over-year, representing 27% of combined semi equipment and AGS sales and 30% of overall sales.
- Non-GAAP gross margin reached “49.1%.” Non-GAAP OpEx was “$1.34 billion,” with R&D investments up 8% and G&A spending reduced. Non-GAAP operating profit was “$2.1 billion,” and non-GAAP EPS was “$2.38.”
- The Semiconductor Systems segment recorded revenue of “$5.14 billion.” AGS delivered record revenue of “$1.56 billion,” up 15% year-over-year.
- Cash from operations totaled “$1.69 billion,” and free cash flow was “$1 billion.” Shareholder returns were “$702 million” in dividends and buybacks.
Q&A
- Christopher Muse, Cantor Fitzgerald: Questioned WFE growth and Applied’s drivers for share gains. Gary Dickerson responded that Applied expects to “grow our semi equipment business more than 20% this calendar year” with second half weighting, citing AI as the main driver and emphasizing leadership in high-growth segments. Muse followed on margin drivers; Dickerson explained, “We’re now at the highest level in 25 years, and I strongly believe we’re driving the right actions to sustainably increase the value we create for customers and for Applied.”
- Sreekrishnan Sankarnarayanan, TD Cowen: Asked about changes in ICAPS and China outlook. Dickerson noted, “We now see ICAPS…flattish overall, both globally and in China.” Sankarnarayanan followed up on advanced packaging; Dickerson stated, “advanced packaging WFE spending is increasing…driving advanced packaging to be one of our highest growth businesses this year.”
- Stacy Rasgon, Bernstein: Inquired about the trajectory for achieving 20% growth and exit rates. Hill stated, “We’re signaling 20% — greater than 20% for the calendar year. We’re also signaling that the second half will be higher.” Rasgon asked about growth constraints; Hill confirmed cleanroom capacity is a limiting factor but expects new factories to open opportunities in 2027.
- Mark Lipacis, Evercore ISI: Asked about WFE intensity and share capture. Dickerson indicated, “Our longer-term composition model is different…now we’re seeing a significant divergence in the end market growth rates.”
- Timothy Arcuri, UBS: Questioned AGS growth and systems manufacturing capacity. Hill explained, “Q1 has 15% year-over-year growth for AGS and our Q2 guide should be approximately over 12%.” On capacity, Hill said, “We have significant upside from a manufacturing perspective.”
Sentiment Analysis
- Analysts focused on sustainability of growth, share gains, margin expansion, and supply chain readiness, with a tone that was largely positive but probing for potential constraints and execution risks.
- Management maintained a confident and optimistic tone throughout, especially on growth prospects, margin improvement, and leadership in key technology segments. Dickerson stated, “I have very high confidence that we’ll be able to sustain that margin growth going forward.”
- Compared to the previous quarter, both analysts and management expressed greater confidence, as visibility into customer demand and operational readiness improved.
Quarter-over-Quarter Comparison
- Guidance language shifted from cautious optimism about a “positive fab equipment spending mix” in Q4 2025 to clear confidence in “more than 20%” growth for the equipment business and strong momentum into 2027.
- Strategic focus sharpened on AI-driven segments—leading-edge logic, HBM DRAM, and advanced packaging—whereas the previous quarter included more caution regarding trade restrictions and market mix.
- Analysts’ questions in both quarters centered on market share, margin drivers, China exposure, and supply chain; however, the current quarter saw more detailed forward-looking statements and a firmer tone regarding growth drivers.
- Key metrics such as non-GAAP EPS, gross margin, and AGS growth were higher or more robustly guided in the current quarter.
- Management’s tone evolved from guarded optimism (amid trade restrictions and market mix headwinds) to assertive confidence, citing improved demand visibility and operational capacity.
Risks and Concerns
- Management highlighted customer cleanroom space as a primary constraint pacing investment and growth in 2026.
- Exposure to China remains, with revenue down 7% year-over-year, and 27% of combined semi equipment and AGS sales from China.
- Hill referenced an accrual of “$252.5 million related to an export controls compliance matter” but stated, “The Department of Justice and SEC have closed their inquiries into this matter with no enforcement actions.”
- Analysts probed for sustainability of margin expansion, potential supply chain challenges, and customer capacity constraints.
Final Takeaway
Applied Materials’ Q1 2026 call highlighted accelerating AI-driven demand, with management projecting over 20% growth in its semiconductor equipment business for the calendar year and continued momentum into 2027. The company emphasized new product launches, deepened customer partnerships, and operational investments as core contributors to sustainable growth. While cleanroom capacity and China exposure remain watchpoints, robust guidance and a strong innovation pipeline signal confidence in capturing value from the industry’s structural AI tailwinds.