Applied Materials Posts Record Q2, Sees 30%+ Growth
According to a post-market earnings release on May 14 (U.S. time), Applied Materials, Inc. reported record-breaking financial results for its fiscal second quarter of 2026 (ended April 26, 2026), significantly exceeding Wall Street expectations across key performance metrics. The company also issued a third-quarter outlook well above analyst forecasts, reinforcing strong momentum in AI-driven semiconductor capital investment. Following the announcement, Applied Materials shares rose by as much as 7% in after-hours trading.
Record Q2 Performance Across Key Metrics
For Q2 FY2026, Applied Materials posted revenue of $7.91 billion, up 11% year-over-year and marking an all-time high, surpassing market expectations of $7.68 billion. Under GAAP accounting, gross margin reached 49.9%, operating income was $2.52 billion (31.9% of revenue), and diluted EPS hit a record $3.51, up 33% year-over-year.
On a non-GAAP basis, gross margin reached 50.0% for the first time in over 25 years, while operating income rose to $2.54 billion (32.1% margin) and EPS increased 20% year-over-year to $2.86, exceeding consensus estimates.
Semiconductor Systems and DRAM Drive Growth
The Semiconductor Systems segment generated a record $5.97 billion in revenue, up 10% year-over-year. Growth was primarily driven by advanced logic and foundry customers, as leading chipmakers accelerate adoption of gate-all-around (GAA) architectures and continue expanding FinFET capacity.
DRAM equipment revenue reached $1.7 billion, up 18%, underscoring Applied Materials’ position as a leading global supplier of memory manufacturing equipment.
The Applied Global Services (AGS) division grew 17% year-over-year to $1.67 billion, with CFO Brice Hill raising its medium-term growth outlook to the mid-teens range.
Profitability Expansion and Shareholder Returns
The company highlighted continued margin expansion driven by differentiated product pricing strategies and manufacturing cost innovation. Semiconductor Systems gross margins are approaching 55%, reflecting structural improvements since CEO Gary Dickerson took leadership in 2013, with non-GAAP gross margin expanding by approximately 800 basis points over the period.
Applied Materials generated $845 million in operating cash flow during the quarter and returned $765 million to shareholders, including $400 million in share buybacks and $365 million in dividends. The quarterly dividend was also increased by 15% to $0.53 per share, marking the ninth consecutive year of dividend growth.
Strong Q3 Guidance Signals Continued Growth
For the third fiscal quarter, Applied Materials forecasts revenue of $8.95 billion ± $500 million, significantly above the $8.09 billion consensus estimate, implying approximately 23% year-over-year growth. Adjusted EPS is projected at $3.36 ± $0.20, compared with Wall Street expectations of $2.88, representing nearly 36% annual growth.
AI-Driven Semiconductor Cycle Strengthens Outlook
CEO Gary Dickerson stated that Applied Materials delivered a record quarter and expects its semiconductor systems business to grow by more than 30% in 2026. He emphasized that rapid expansion of global AI infrastructure is increasing demand for advanced semiconductor manufacturing tools, particularly in deposition, etching, and advanced packaging.
The company also highlighted its strategic leadership in advanced logic, DRAM, and packaging technologies, which are expected to support long-term growth.
Additionally, Applied Materials announced expanded collaborations through its EPIC Center initiative, including partnerships with leading chipmakers such as Taiwan Semiconductor Manufacturing Company, aimed at accelerating next-generation semiconductor technology development and commercialization.
