Applied Materials is betting on AI and posts strong results — FB view

Freedom Broker analysts maintained their “Buy” rating on Applied Materials (AMAT) shares. The experts believe that accelerating investment in AI infrastructure will support demand for chipmaking equipment. After a strong fiscal Q3, the company raised its expectations for Semiconductor Systems and issued a fiscal Q4 outlook above prior guidance. The analysts’ target price is $664, which, at the current price of $508,80, implies upside of about 30,5%.

Applied Materials — a supplier of chipmaking equipment

Applied Materials (AMAT) is one of the world’s largest manufacturers of equipment for the semiconductor industry. Its systems are used for material deposition, etching, polishing, and process control in the production of logic processors and memory chips.

The company’s customers include the largest chipmakers, including TSMC (TSM), Samsung, Micron, and SK Hynix. Increasing complexity of modern processors, dynamic random-access memory (DRAM), high-bandwidth memory (HBM), and advanced packaging technologies raises the number of production steps and expands the market for Applied Materials’ equipment.

Record revenue and profit growth

For fiscal Q3 2026, Applied Materials reported record revenue of $9,12 bn, up 25% from $7,30 bn a year earlier.

GAAP operating income reached a record $3,08 bn, or 33,7% of revenue. Net income rose 43% to $2,54 bn from $1,78 bn, while diluted earnings per share also increased 43% to $3,17 from $2,22. Adjusted earnings per share totaled a record $3,50, up 41% year over year. Adjusted operating margin rose to 34,0% from 30,7%.

The company also generated a record $3,04 bn in operating cash flow and returned $860 mn to shareholders — $440 mn via share buybacks and $420 mn in dividends.

AI accelerates the investment cycle

In Freedom Broker analysts’ view, the key factor supporting the investment case is continued growth in capital expenditures by semiconductor manufacturers. Applied Materials has already said it is raising its 2026 revenue expectations for its Semiconductor Systems division, which specializes in equipment for manufacturing semiconductor chips, and expects to grow faster than the market.

Client investment trends remain an important signal. In July, TSMC raised its 2026 capex forecast to $60–64 bn from the previous range of $52–56 bn. The company plans to allocate about 70–80% of this investment to advanced process technologies and another 10–20% to advanced packaging, testing, and related areas.

Results from equipment makers also provide additional support for the industry cycle. ASML (ASML) raised its 2026 revenue forecast to €43–45 bn from €36–40 bn, while Lam Research (LRCX) increased quarterly revenue 15,1% quarter over quarter to $6,72 bn and delivered a strong outlook for the next quarter. For Applied Materials, this means better visibility into future orders amid rising investment in manufacturing advanced processors, memory, and AI chips.

Key information for investors

Freedom Broker set a target price for Applied Materials at $664 and maintains a “Buy” rating. At a share price of $508,80, the upside potential is about 30,5%.

Analysts see an attractive combination of structural growth in AI infrastructure investment, rising demand for DRAM and HBM, development of advanced packaging, and expansion of Applied Materials’ technology footprint across different stages of chip production.

An additional supportive factor is the technical picture: after the pullback, the shares formed a base, while the medium-term structure remains positive. At the same time, analysts assess the risk of the investment idea as high.

Prior-quarter figures

In fiscal Q2 2026, Applied Materials also beat market expectations: revenue rose to $7,91 bn from $7,10 bn a year earlier, and profit totaled $2,81 bn versus $2,14 bn a year earlier. Adjusted EPS reached $2,86.

In June, Applied Materials entered into an agreement with EssilorLuxottica (EL) to jointly develop technologies for smart glasses and augmented reality devices. The partnership is aimed at creating more compact and energy-efficient optical systems.

In spring, the company announced a partnership with Micron Technology (MU) and SK Hynix within the EPIC Center research hub for semiconductor technologies. The work will focus on next-generation technologies for AI and high-performance computing, including DRAM, HBM, and advanced 3D packaging.

Not an individual investment recommendation.