AMAT Preview
KLAC/LRCX Already Told Us but....
AMAT — FQ3 Preview—The October guide has to catch the peer bar
REPORTS” Thu., Aug. 13 — after close
CALL 4:30 p.m. ET
SHARES $528 | ~31x FY27 Street EPS
THE SETUP
We have July near $9.1 billion and $3.48. The live debate starts with the October guide, where expectations have moved to roughly $10.25+ billion and $4.00 after LRCX, KLAC and Tokyo Electron raised the WFE bar.
Applied Materials reports Thursday. The company guided July revenue to $8.95 billion and non-GAAP EPS to $3.36, while Street has moved to about $9.0 billion and $3.40. Applied has beaten the midpoint in each of the past four quarters, which puts a reasonable July expectation around $9.1 billion and $3.45–$3.50.
October expectations have moved well past the published consensus of roughly $9.4–$9.5 billion and $3.65. UBS is at $10.28 billion and $4.05, and Morgan Stanley expects at least $10.5 billion. Around $10.25 billion and $4.00 is the working revenue and EPS bar. The quality of that guide depends on gross margin, a raise to calendar-2026 Semiconductor Systems growth, and evidence that the DRAM ramp continues into 2027.
May’s setup was specific: sequential Systems growth in October and January, eight-quarter customer forecasts, and cleanroom capacity as the bottleneck. Thursday’s guide puts a number on the first leg of that ramp. A heavier Systems mix should also lift gross margin. China and export controls still matter, but management’s 2027 comments on DRAM and leading-edge logic will determine how much of the October strength carries into next year’s estimates.
How to read the October guide
July should land near $9.1 billion, $3.48 and 50.4% in our model. Unless one of those numbers is materially off, the October package will drive the estimate revisions.
May set the cadence
In May, management said Semiconductor Systems should rise sequentially in both the October and January quarters on the way to more than 30% calendar-2026 growth. Customers were providing eight-quarter forecasts, and cleanroom availability was the main constraint. Applied’s supply chain was not holding back the year.
October should show the first step of the promised ramp, and customer forecasts should still support sequential Systems growth into 2027. A guide below $10 billion would mean that at least one assumption from May has changed, and management will need to identify which one.
The midpoint has been safe. Across the last four completed quarters, revenue came in an average of about $156 million above guidance and non-GAAP EPS beat by about $0.15. Applying that cadence to July gives $9.11 billion and $3.51, close to our $9.12 billion and $3.48 estimate.
The peer bar moved higher
Lam guided September revenue up 21% sequentially, with analysts estimating systems shipments up more than 30%. Tokyo Electron is guiding September systems shipments up roughly 33%. KLAC, Lam and Tokyo Electron all lifted or endorsed calendar-2026 WFE above $150 billion, and the debate has moved to roughly $190 billion in 2027 with upside if DRAM and leading-edge foundry capacity keep expanding.
Quarterly timing differs across the group. AMAT has outgrown Lam over the prior three quarters, and Morgan Stanley’s 20% October systems-shipment estimate would still put AMAT at roughly 44% growth for calendar 2026. A $9.5 billion consolidated guide would imply that AMAT is missing the acceleration its peers just reported. Around $10.25 billion keeps the ramp on schedule; $10.5 billion leaves room for estimates to move higher.
The DRAM question moves to 2027
Applied has the cleanest DRAM leverage among the large U.S. equipment names. DRAM was 29% of Semiconductor Systems revenue in April, and management has said DRAM, leading-edge logic and advanced packaging should account for more than 80% of WFE growth across 2026 and 2027. Advanced packaging alone was about $1.4 billion last year and was tracking to grow more than 50% in 2026, led by HBM.
A good 2026 is already in the numbers. Fiscal-2027 estimates now depend on customer visibility, cleanroom timing and how much of the spending is greenfield wafer capacity rather than upgrades. Bulls want DRAM to remain the fastest-growing market in 2027, with the eight-quarter forecasts still supporting sequential Systems growth. Repeating the current 2026 guide without additional 2027 detail will leave Street’s out-year numbers where they are.
Gross margin should keep moving
April’s 50.0% non-GAAP gross margin was Applied’s best in more than 25 years, and the July framework points to roughly 50.3%. With higher-margin Semiconductor Systems becoming a larger share of sales, pricing improving and Singapore manufacturing efficiencies coming through, the October guide should move into the upper half of 50% and preferably reach about 51% at the exit.
Lam’s path toward mid-50% gross margin now sits in the background for every large equipment name. At roughly 31x current FY27 Street EPS, AMAT needs some incremental margin from the revenue ramp. An October guide near 50.7–51% would provide it. Staying around 50.3% would leave the earnings upgrade heavily dependent on volume.
China remains the swing risk
China was 27% of April-quarter revenue. Management’s latest callback indicated that domestic China remains in a digestion period and that ICAPS has not yet recovered. Any expansion of affiliate rules could shave the forward numbers. Our $10.3 billion October estimate assumes DRAM and leading-edge logic absorb that weakness. A guide closer to $10 billion despite strong peer demand would point to a larger China or ICAPS decline than the market has modeled.
The flow-through
Our $9.12 billion and $3.48 July estimate, followed by a $10.30 billion and $4.00 October guide, puts fiscal-2026 revenue around $34.3 billion and EPS around $12.7 before any further beat. The freshest models are in the same neighborhood. Fiscal-2027 Street remains around $16.8–$17.3, while current analyst cases run from roughly $19 to above $21.
Moving fiscal 2027 toward the higher end of that range requires a $10.25–$10.5 billion October guide, 35–40% calendar-2026 Systems growth and clear 2027 DRAM visibility. Analysts would then start the January quarter from a higher revenue and margin base. At roughly $528, AMAT is already about 31x FY27 Street EPS. The $16.8–$17.3 Street range needs to move closer to $19.
The Call
STREETSIGNAL FORECAST
We expect approximately $9.12 billion of revenue, 50.4% non-GAAP gross margin and $3.48 of non-GAAP EPS. We expect the October guide near $10.3 billion, 50.6–50.8% gross margin and about $4.00 of EPS, with calendar-2026 Semiconductor Systems growth raised to at least 35%.
Lam, KLA and Tokyo Electron have already established the demand backdrop. A July beat is embedded in current estimates. Revisions now depend on the size and margin content of the October ramp, plus enough 2027 DRAM detail to carry that strength into the out-year model.