Applied Materials posts record $9.12bn quarter on AI chip demand
Applied Materials (NASDAQ: AMAT) delivered what it described as its strongest quarterly performance in company history for the three months ended 26 July 2026, posting revenue of $9.12 billion, up 25 percent year over year, and record non-GAAP diluted earnings per share of $3.50, a 41 percent increase on the prior-year period. GAAP net income reached $2.54 billion, up 43 percent, while operating cash flow hit a quarterly record of $3.04 billion.
The Semiconductor Systems division, which makes up the bulk of the business, generated revenue of $7.04 billion at a non-GAAP operating margin of 38.0 percent, compared with 33.2 percent a year earlier. DRAM grew its share of segment mix to 26 percent from 22 percent, reflecting accelerating investment in high-bandwidth memory required by AI accelerator clusters. The company distributed $860 million to shareholders in the quarter through a combination of $440 million in buybacks and $420 million in dividends.
New products and the EPIC Centre
Applied used the results announcement to detail six new chipmaking systems for DRAM and advanced packaging. Notable additions include the Centura Prime Epi, which combines strain engineering with doping control in transistor source-drain regions to improve drive current and power efficiency in next-generation DRAM and HBM stacks, and the VeritySEM 7AP, an eBeam metrology tool offering sub-10nm sensitivity for inspecting the thick, warped substrates common in chiplet and HBM architectures.
The company also reported three new additions to its EPIC Centre research and commercialisation programme, bringing the total to 11 engagements. Broadcom joins as an innovation partner focused on advanced packaging for AI systems; the University of California, Berkeley joins as a research collaborator; and SCREEN Semiconductor Solutions joins to co-develop wafer-cleaning process solutions. A new US$500 million Tampines Campus in Singapore, which more than doubles Applied's advanced cleanroom capacity in the region, was also flagged as part of a broader manufacturing expansion to meet projected demand through 2030.
Market context and competitive positioning
Applied Materials sits at the centre of a capital spending cycle that is increasingly shaped by AI infrastructure build-out. Hyperscalers and merchant semiconductor vendors are competing for capacity in leading-edge logic, advanced DRAM and heterogeneous packaging, all areas where Applied has positioned itself as a primary equipment supplier. Its closest peers in the wafer-fabrication equipment market include ASML, Lam Research and KLA, each of which is similarly exposed to the AI spending wave, though with different tool portfolios and customer concentration profiles.
Chief executive Gary Dickerson said the company is raising its Semiconductor Systems revenue expectations for calendar 2026 and expects "another strong growth year" in 2027. For the fourth quarter of fiscal 2026, Applied guided for revenue of $10.25 billion, plus or minus $500 million, and non-GAAP diluted EPS of $4.02, plus or minus $0.20, implying continued double-digit sequential growth.
One detail worth noting for compliance watchers: the GAAP-to-non-GAAP reconciliation tables reference a $253 million charge settled with the US Commerce Department Bureau of Industry and Security to resolve an export controls matter, booked in an earlier quarter of fiscal 2026. That settlement did not affect the Q3 figures but is a reminder that the semiconductor equipment sector remains under close scrutiny from US export-control authorities, particularly regarding shipments to China, which accounted for 28 percent of Applied's Q3 revenue, down from 35 percent a year earlier. Further tightening of US BIS licensing requirements could affect that revenue line in future periods.