Semiconductor machinery manufacturer Applied Materials (NASDAQ: AMAT) announced better-than-expected revenue in Q2 CY2026, with sales up 24.8% year on year to $9.12 billion. On top of that, next quarter’s revenue guidance ($10.25 billion at the midpoint) was surprisingly good and 6.1% above what analysts were expecting. Its non-GAAP profit of $3.50 per share was 3.1% above analysts’ consensus estimates.
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Applied Materials (AMAT) Q2 CY2026 Highlights:
- Revenue: $9.12 billion vs analyst estimates of $9.04 billion (24.8% year-on-year growth, 0.9% beat)
- Adjusted EPS: $3.50 vs analyst estimates of $3.39 (3.1% beat)
- Adjusted Operating Income: $3.1 billion vs analyst estimates of $3.03 billion (34% margin, 2.3% beat)
- Revenue Guidance for Q3 CY2026 is $10.25 billion at the midpoint, above analyst estimates of $9.66 billion
- Adjusted EPS guidance for Q3 CY2026 is $4.02 at the midpoint, above analyst estimates of $3.69
- Operating Margin: 33.7%, up from 30.6% in the same quarter last year
- Free Cash Flow Margin: 25.6%, down from 28.1% in the same quarter last year
- Inventory Days Outstanding: 132, down from 146 in the previous quarter
- Market Capitalization: $435.2 billion
“Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company’s history,” said Gary Dickerson, President and CEO.
Company Overview
Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ: AMAT) is the largest provider of semiconductor wafer fabrication equipment.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Applied Materials’s 7.4% annualized revenue growth over the last five years was decent. Its growth was slightly above the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore’s Law) could make yesterday’s hit product obsolete today. Applied Materials’s annualized revenue growth of 7.2% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. 
This quarter, Applied Materials reported robust year-on-year revenue growth of 24.8%, and its $9.12 billion of revenue topped Wall Street estimates by 0.9%. Company management is currently guiding for a 50.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 36.4% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will spur better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’s capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Applied Materials’s DIO came in at 132, which is 11 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Applied Materials’s Q2 Results
We were impressed by Applied Materials’s strong improvement in inventory levels. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. Investors were likely hoping for more, and shares traded down 5.1% to $512.52 immediately following the results.
So do we think Applied Materials is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
