Semiconductor machinery manufacturer Applied Materials (NASDAQ: AMAT) announced better-than-expected revenue in Q1 CY2026, with sales up 11.4% year on year to $7.91 billion. On top of that, next quarter’s revenue guidance ($8.95 billion at the midpoint) was surprisingly good and 9.2% above what analysts were expecting. Its non-GAAP profit of $2.86 per share was 6.6% above analysts’ consensus estimates.
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Applied Materials (AMAT) Q1 CY2026 Highlights:
- Revenue: $7.91 billion vs analyst estimates of $7.70 billion (11.4% year-on-year growth, 2.7% beat)
- Adjusted EPS: $2.86 vs analyst estimates of $2.68 (6.6% beat)
- Adjusted Operating Income: $2.54 billion vs analyst estimates of $2.37 billion (32.1% margin, 7.1% beat)
- Revenue Guidance for Q2 CY2026 is $8.95 billion at the midpoint, above analyst estimates of $8.20 billion
- Adjusted EPS guidance for Q2 CY2026 is $3.36 at the midpoint, above analyst estimates of $2.90
- Operating Margin: 31.9%, up from 30.5% in the same quarter last year
- Free Cash Flow Margin: 2.7%, down from 14.9% in the same quarter last year
- Inventory Days Outstanding: 146, down from 153 in the previous quarter
- Market Capitalization: $346.5 billion
“Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026,” 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
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Applied Materials grew its sales at a decent 7.9% compounded annual growth rate. 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 recent performance shows its demand has slowed as its annualized revenue growth of 4.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Applied Materials reported year-on-year revenue growth of 11.4%, and its $7.91 billion of revenue exceeded Wall Street’s estimates by 2.7%. Adding to the positive news, Applied Materials’s growth inflected positively this quarter, news that will likely give some shareholders hope. Company management is currently guiding for a 22.6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 22.5% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests 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’ 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 146, which is 4 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.
Key Takeaways from Applied Materials’s Q1 Results
We were impressed by Applied Materials’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its adjusted operating income outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.3% to $461.20 immediately after reporting.
Applied Materials put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
