Applied Materials (AMAT) Q1 2026 earnings summary

Executive summary

• Q1 FY2026 revenue was $7.01 billion, down 2% year-over-year, with non-GAAP EPS at $2.38 (flat) and GAAP EPS at $2.54 (up 75%), driven by strong AI-related demand and leadership in advanced semiconductor equipment.

• Net income rose 71% to $2.03 billion, supported by improved gross margin, lower tax rate, and record DRAM and services revenue.

• The company is accelerating investments in AI infrastructure, high-bandwidth memory DRAM, and advanced packaging, with leadership in these high-growth segments.

• Semiconductor industry revenues are projected to reach $1 trillion in 2026, with over 20% growth expected in the semiconductor equipment business this year.

• Growth momentum is expected to continue into 2027, supported by increased customer visibility and capacity expansion plans.

Financial highlights

• Q1 revenue was $7.01 billion, down 2% year-over-year but up 3% sequentially; non-GAAP EPS was $2.38, flat year-over-year and up 10% sequentially.

• GAAP gross margin was 49.0%, up 0.2 points year-over-year; non-GAAP gross margin was 49.1%.

• GAAP operating income was $1.83 billion (26.1% margin); non-GAAP operating income was $2.11 billion (30.0% margin).

• Cash from operations was $1.69 billion; free cash flow was $1.04 billion, with $702 million returned to shareholders via dividends and buybacks.

• China accounted for 30% of overall revenue.

Outlook and guidance

• Q2 FY2026 revenue is expected at $7.65 billion ±$500 million, with non-GAAP EPS guidance at $2.64 ±$0.20.

• Non-GAAP gross margin is projected at approximately 49.3%; operating expenses at ~$1.415 billion; tax rate at ~11%.

• Semiconductor Systems revenue is projected at $5.8 billion, AGS at $1.6 billion, and other revenue at $250 million.

• The company anticipates more than 20% growth in its semiconductor equipment business for the calendar year, with growth weighted toward the second half due to clean room capacity constraints.