Applied Materials Posts Record Fiscal Q3 and Guides Far Above Consensus, but Shares Slip After Hours

by Henry Nakamura · August 13, 2026

Earnings Reporter, Earnings Dispatch

Applied Materials reported what it called the largest sequential revenue increase in its history for its fiscal third quarter of 2026 — the three months ended July 26, 2026 — and then guided current-quarter sales far above Wall Street's forecast. Shares of the semiconductor-equipment maker, which trades on the Nasdaq under the ticker AMAT, nonetheless fell in extended trading on Thursday evening. According to the results release posted to the company's investor relations site, revenue for the quarter was $9.115 billion, up 25% from the year-ago period, while non-GAAP diluted earnings per share rose 41% to $3.50 and GAAP diluted earnings per share rose 43% to $3.17.

The report landed after the close of regular trading on Thursday, time-stamped 4:01 p.m. Eastern, and it cleared the bar analysts had set. Benzinga reported that the consensus called for revenue of $8.99 billion and adjusted earnings of $3.40 a share, meaning Applied beat on both lines. The gap between the GAAP and non-GAAP earnings figures — 33 cents — is worth keeping straight, because most of the headlines and the company's own guidance are framed on the non-GAAP basis. It is also worth keeping the calendar straight: Applied's fiscal year does not track the calendar year, so the quarter just reported is fiscal Q3 2026 even though it covers the spring and early summer.

Margins told a similar story on both measures. Applied reported a GAAP gross margin of 50.3% and a non-GAAP gross margin of 50.4%, with a GAAP operating margin of 33.7% against a non-GAAP operating margin of 34.0%. On the earnings call, according to a transcript published by Investing.com, management described the non-GAAP operating margin as a record, up 190 basis points sequentially and 330 basis points year over year.

The segment detail showed where the growth came from. Semiconductor Systems, the largest business, generated $7.040 billion in revenue with a non-GAAP gross margin of 55.4% and a non-GAAP operating margin of 38.0%. Within that segment, the company disclosed a customer mix of 67% foundry and logic, 26% DRAM and 7% flash memory. Applied Global Services, the parts-and-service arm, contributed $1.781 billion at a 35.6% non-GAAP gross margin and a 30.1% non-GAAP operating margin. The Display and other category brought in $294 million and ran an operating loss of $118 million.

Cash generation set a record as well. Applied reported $3.037 billion of cash provided by operating activities for the quarter and $2.33 billion of non-GAAP free cash flow. It returned $860 million to shareholders during the period, split between $440 million of share repurchases and $420 million of dividends.

The guidance was the part of the release that moved furthest from expectations. For the fiscal fourth quarter, Applied said it expects revenue of about $10.25 billion, plus or minus $500 million, and non-GAAP diluted earnings per share of about $4.02, plus or minus 20 cents. Reuters, in a story carried by Yahoo Finance, put the LSEG analyst consensus for fourth-quarter revenue at $9.54 billion — meaning the low end of Applied's range, $9.75 billion, still sits above where analysts were. Technology outlet ts2.tech reported that the FactSet consensus for adjusted earnings was $3.71 a share, and Benzinga cited a $3.69 consensus; either figure sits below the $4.02 midpoint the company guided to.

Chief executive Gary Dickerson tied the quarter and the outlook to artificial-intelligence demand. "Applied Materials delivered another record-breaking quarter, including the highest sequential revenue growth in the company's history," he said in the release. He added: "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." On the following calendar year, Dickerson said: "Based on the increased demand visibility we are receiving from our customers, we expect another strong growth year for Applied Materials in 2027."

Chief financial officer Brice Hill pointed to the margin trend and to capacity plans that run well past the current cycle. "Applied Materials achieved its 13th consecutive quarter of year-over-year gross margin expansion, demonstrating the increasing value we create by enabling better chips, systems and fab returns," Hill said. He also said: "We expect continued strong revenue growth in the second half of the calendar year, particularly in DRAM as well as leading-edge foundry-logic and advanced packaging." On the longer horizon, Hill added: "Looking further ahead, we are making additional manufacturing capacity investments to support projected demand through the end of the decade." Speaking to Reuters, Hill went further on visibility, saying: "Customers continue to give us longer visibility than we've ever had, with some conversations now extending to 2030." Reuters reported that management now expects packaging revenue to grow more than 70% in calendar 2026, up from a prior projection of more than 50%. The Investing.com transcript put China at 26% of combined Semiconductor Systems and Applied Global Services revenue in the quarter.

None of it was enough to keep the stock from sliding. AMAT closed the regular session at $534.54, down 2.48% on the day, according to market data site StockAnalysis, which showed the shares at $507.70 in after-hours trade as of 7:59 p.m. Eastern, a decline of 5.02% from that close. Earlier in the evening the move was shallower — Benzinga logged the stock down 3.14% at $517.78 shortly after the release, and ts2.tech recorded a nearly 3% decline at $519.70, while Reuters put the extended-hours drop at about 4% — so the drift was downward as the call progressed. The context matters: Reuters noted the stock has more than doubled this year, and StockAnalysis lists a 52-week range of $154.47 to $739.67 against a market capitalization of about $424 billion. When a stock has run that far, a beat and a raise can still be read as merely meeting an already-elevated bar.

The report closed out a session in which the broad market set records. The S&P 500 finished at 7,798.99, up 0.65% and a record close, while the Nasdaq Composite added 0.81% to 26,803.03, the Dow Jones Industrial Average edged up 0.13% to 53,839.99 and the Russell 2000 gained 0.24% to 3,052.85 in its own record finish. The macro backdrop was cooperative: the Bureau of Labor Statistics reported Thursday morning that the producer price index for final demand was unchanged in July and up 4.7% over 12 months, down from 5.5% in the 12 months through June, though the measure excluding foods, energy and trade services rose 0.4% on the month and 4.7% over 12 months.

Analysts were left to judge whether the 2027 setup is already in the numbers. CFRA's Brooks Idlet, quoted by Reuters, said: "We think calendar year 2027 consensus estimates leave room for upside if recent strength continues." This article reports results and market reaction and is not investment advice.