Analyst Conference Call Summary

semiconductors

conference date: August 13, 2026 @ 1:30 PM Pacific Time
for quarter ending: July 26, 2026 (third quarter, Q3 fiscal 2026)

Forward-looking statements

Overview: Great quarter.

Basic data (GAAP):

Revenues were $9.12 billion, a record, up 15% sequentially from $7.91 billion and up 25% from $7.30 billion in the year-earlier quarter.

Net income was $2.54 billion, down 10% sequentially from $2.81 billion and up 43% from $1.78 billion year-earlier.

EPS (diluted earnings per share) were $3.17, down 10% sequentially from $3.51 and up 43% from $2.22 year-earlier.

Guidance:

Raised. For fiscal Q4 2026 (Oct. quarter) expects revenue about $10.25 billion and non-GAAP diluted EPS about $4.02.

Conference Highlights:

Gary Dickerson, CEO, said "Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company's history. As the rapid global adoption of AI drives unprecedented demand for our materials engineering solutions, we are further raising our Semiconductor Systems revenue expectations for calendar 2026 and are confident we will grow faster than the market this year. Based on the increased demand visibility we are receiving from our customers, we expect another strong growth year for Applied Materials in 2027." Non-GAAP EPS was a record.

Q3 had the highest q/q revenue growth in Applied's history. Demand exceeds supply, so customers are giving longer term visibility. So calendar year 2027 is expected to continue to show strong growth, including with better margins. Believes AI is the most fundamental inflection point of our lifetimes. Applied is heavily using AI internally. Demand for semiconductors capable of supporting AI intrastructure far exceeds supply. ICAPS demand is also strong.

The dividend has been increased to $0.53 per share per quarter. To shareholders as of August 20, payable September 10.

In Q3 2026 introduced six new systems for making DRAM and advanced packaging. Also new deposition and etch systmes. Also SENZ platform next-generation smart glasses displays.

In Q3 2026 announced 3 additional EPIC partnerships: Broadcom, UC Berkeley, and Screen Semiconductor Solutions. The new Center will open this fall. Also expanded manufacturing capacity in Singapore.

Gary explained some of the inovative products that are propelling growth for AI related chip production. Applied has doubled manufacturing space in the past few years and is working to meet expanded demand by 2030.

Non-GAAP numbers: net income $2.80 billion, up 22% sequentially from $2.29 billion, and up 41% from $1.99 billion year-earlier. EPS $3.50, up 22% sequentially from $2.86, and up 41% from $2.48 year-earlier.

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

Semiconductor Systems sales were $7.04 billion, up sequentially from $5.97 billion, and up from $5.56 billion year-earlier. Revenue by type, as % of total: Foundry, logic and other 67%, DRAM 26%, Flash 7%. Segment operating income, GAAP, was $2.66 billion; non-GAAP $2.67 billion.

Applied Global Services (AGS) revenue was $1.78 billion, up sequentially from $1.67 billion and up from $1.46 billion year earlier. GAAP and Non-GAAP operating income was $536 million.

Other (formerly display) segment revenue was $294 million, up sequentially from $280 million and up from $275 million year-earlier. Non-GAAP operating loss was $118 million.

Cash and equivalents (including long-term investments) balance ended at $9.2 billion, sequentially from $na billion. Cash flow from operating activities was $3.04 billion. Capital expenditures were $707 million. Free cash flow $2.33 million. $420 million was used for cash dividends. Used $440 million to repurchase shares. Long-term debt was $5.2 billion.

Cost of goods sold was $4.53 billion, leaving gross profit of $4.59 billion. Operating expenses of $1.51 billion consisted of: research and development $1.1 billion; selling and marketing, $249 million; general and administrative $162 million; restructuring $0 million; legal settlement $0 million. Leaving income from operations of $3.08 billion. Interest and other expense net $43 million. Income tax $369 million.

Q&A selective summary:

Semi systems growth outlook? Demand strengthened again in quarter. Customers starting new projects. Greater than 30% growth in Q4, then a record 2027. Wafer fab equipment is the fastest growing part of the market. Customers are proving 8 quarter rolling forecasts for us. Plus we expect go gain market share.

Gross margins going forward? Have been rising. Value-based pricing is working. Margins can still grow, there are several drivers.

Some of your customers are talking about 3 to 5 year visibility? We do have visibility for five years from our longest customers. More detail at 2 years. Longer lead times on purchase orders. Supply demand gap continues to grow, especially in DRAM. We are the leader in CMOS, etc., including for future architectures like 3D DRAM.

Will be adding employees over the next few quarters, so that is a margin headwind, but margins will continue to grow over this time.

We are putting a wide range of capacity in place by 2028.

Larger customers are becoming more interested in scheduled deliveries, so are cooperating with us more. Technology discussions go out perhaps 10 years into the future. It takes time to bring those innovations to market.

ICAPS business? We see a change in dynamics, with increasing customer use and growth in China. Expect it to grow in both 2026 and 2027. We also expect 2027 growth outside of China.

We expect to increase margins over time in the services business. Also the growing installed base and increased utilization should improve margins.

We expect NAND growth in 2027, too.

Cap ex will be higher than normal, but still decline as a % of revenue as we go into 2027.

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