Analyst Conference Call Summary

semiconductors

conference date: February 12, 2026 @ 1:30 PM Pacific Time
for quarter ending: January 31, 2026 (first quarter, Q1 fiscal 2026)

Forward-looking statements

Overview: Better than expected results.

Basic data (GAAP):

Revenues were $7.01 billion, up 3% sequentially from $6.80 billion and down 2% from $7.17 billion in the year-earlier quarter.

Net income was $2.03 billion, up 7% sequentially from $1.90 billion and up 71% from $1.19 billion year-earlier.

EPS (diluted earnings per share) were $2.54, up 7% sequentially from $2.38 and up 75% from $1.45 year-earlier.

Guidance:

For Q2 Fiscal 2026 expects revenue between $7.15 and $8.15 billion. Non-GAAP Diluted EPS between $2.44 and $2.84. For full year expects semiconductor business segment growth over 20%.

Conference Highlights:

Gary Dickerson, CEO, said "Applied Materials delivered strong results in our fiscal first quarter, fueled by the acceleration of industry investments in AI computing. The need for higher performance and more energy-efficient chips is driving high growth rates for leading-edge logic, high-bandwidth memory and advanced packaging. These are areas where Applied is the process equipment leader, and we expect to grow our semiconductor equipment business over 20 percent this calendar year." Record DRAM revenue. Revene and earnings were above mid-point of guidance range. China revenue declined 7% y/y due to US government restrictions, but still represented 30% of overall revenue.

In February 2026 announced Samsung will join Applied's EPIC Center in Silicon Valley. Introduced deposition, etch, and modification systems Viva, Sym3 Z Magnum, and Spectral, for gate-all-around transistors at 2nm.

Sees good leading indicators for process equipment demand in 2026. Spending mix should improve to leading-edge foundry logic, GAA, DRAM, and advanced packaging, Applied's strengths. But sees ICAPS flat in 2026. Sees double digit growth rate, going forward, for the services business.

Non-GAAP numbers: net income $1.90 billion, up 10% sequentially from $1.73 billion, and down 2% from $1.95 billion year-earlier. EPS $2.38, up 10% sequentially from $2.17, and flat from $2.38 year-earlier.

[note: ICAPS = IoT, Communications, Automotive, Power and Sensors]

Semiconductor Systems sales were $5.14 billion, up sequentially from $4.76 billion, but down from $5.60 billion year-earlier. Revenue by type, as % of total: Foundry, logic and other 62%, DRAM 34%, Flash 4%. Segment operating income, GAAP, was $1.43 billion; non-GAAP $1.69 billion.

Applied Global Services (AGS) revenue was $1.56 billion, down sequentially from $1.63 billion and up from $1.35 billion year earlier. GAAP and Non-GAAP operating income was $438 million.

Display segment revenue was $312 million, down sequentially from $415 million and up from $216 million year-earlier. Non-GAAP operating loss was $34 million.

Cash and equivalents (including long-term investments) balance ended at $7.29 billion. Cash flow from operating activities was $1.69 billion. Capital expenditures were $646 million. Free cash flow $1.04 billion. $365 million was used for cash dividends. Used $337 million to repurchase shares. Long-term debt was $6.5 billion.

Cost of goods sold was $3.58 billion, leaving gross profit of $3.44 billion. Operating expenses of $1.60 billion consisted of: research and development $928 million; selling and marketing, $222 million; general and administrative $189 million; restructuring $12 million; legal settlement $253 million. Leaving income from operations of $1.83 billion. Interest and other income net $497 million. Income tax $302 million.

Q&A selective summary:

WFE growth for industry? Our 20% growth is second-half weighted. We are leading in the fastest growing WFE segments and expect to gain share. Packaging will be high-growth for several years. We should be well-set for 2027 and the next few years.

Pricing, margins? At highest margin level in 25 years, yet great value for customers. Targetting data center AI computing, which will drive margin growth.

View on China? That is more of an ICAPS story, where there was rapid growth, but now in a period of digestion.

Exit rate given our growth projection? Can project that from 20% calendar 2026 projection. Limitation is clean room space, new factories should come on line each quarter and into 2027.

We have plenty of upside from a manufacturing basis. We have room to scale considerably to the upside. We are working with suppliers to maintain lead times. Our customers are also somewhat constrained by a lack of trained service engineers.

Op ex expectations? Controlled in Q1. For Q2 we plan 6% sequential growth for EPIC lab and other growth projects. These are organic investments. Spending will grow slower than revenue.

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