Applied Materials’ AI engine powers record revenue and a stronger fiscal Q1 target

AI-driven semiconductor demand helped Applied Materials, Inc. (NASDAQ:AMAT) deliver a record fiscal year, with fourth-quarter revenue jumping 53% to US$10.409 billion and non-GAAP diluted EPS nearly doubling to US$4.16. Management then pointed to another step up in the first quarter of fiscal 2027, forecasting revenue of approximately US$11.1 billion, plus or minus US$500 million.

Record Growth Expands Applied Materials’ Margins

The fourth-quarter performance was not simply a volume story. GAAP operating income rose to US$3.658 billion from US$1.712 billion a year earlier, lifting operating margin to 35.1% from 25.2%. GAAP diluted EPS increased 43% to US$3.40, while non-GAAP diluted EPS rose 92% from US$2.17 to US$4.16.

For the full year, revenue reached a record US$34.446 billion, up 21%, while GAAP net income climbed 44% to US$10.088 billion. GAAP diluted EPS was US$12.62, compared with US$8.66 in fiscal 2025. Non-GAAP EPS reached US$12.89, up 37%, although the adjusted figure excludes acquisition-related items, restructuring charges and other specified adjustments.

Semiconductor Systems Carries the Earnings Burden

Semiconductor Systems supplied most of the acceleration. Its fourth-quarter revenue rose to US$7.996 billion from US$4.879 billion, while operating margin expanded to 38.8% from 29.3%. Annual revenue reached US$26.142 billion, with foundry and logic accounting for 63% of the mix, DRAM 30% and flash memory 7%.

Applied Global Services was steadier but still improved: quarterly revenue rose 26% to US$1.896 billion and operating margin reached 30.5%. The company said it was on track to grow Semiconductor Systems by more than 40% in calendar 2026, tying that expectation to continued demand associated with AI computing. No comparison with analyst estimates was provided, so the extent of any earnings surprise cannot be established from the release alone.

US$11.1 Billion Q1 Target Includes Tax Benefit

Applied’s fiscal first-quarter outlook calls for revenue of US$11.1 billion, within a US$500 million range, and non-GAAP diluted EPS of US$4.35, plus or minus US$0.20. The EPS outlook includes a US$0.04-per-share tax benefit linked to intra-entity intangible-asset transfers and excludes US$0.01 per share of known acquisition charges, alongside other items the company says cannot yet be predicted.

Cash generation remains a notable feature of the results. Operating cash flow reached a record US$3.300 billion in the quarter and US$8.868 billion for the year. Applied returned US$2.42 billion to shareholders in the quarter, including US$2.00 billion of buybacks, its largest quarterly repurchase in more than eight years according to the chief financial officer.

EPIC Expansion Meets Export Controls Settlement

The company unveiled its EPIC Center in Silicon Valley and added Intel, KIOXIA, BE Semiconductor Industries and UCLA Samueli School of Engineering to its research network, bringing announced partnerships to 15. Applied says the facility is intended to bring chipmakers, equipment suppliers and researchers together to shorten development cycles for advanced transistors, memory, interconnects and packaging.

That expansion arrives alongside a significant compliance cost. Applied recorded a US$253 million legal settlement with the US Commerce Department’s Bureau of Industry and Security to resolve a previously disclosed export-controls matter. The charge is excluded from the company’s non-GAAP results, making the GAAP figures the clearer measure of its reported cost, even as the business continues to navigate a supply chain and customer base concentrated in Asia. China represented 27% of annual revenue and Taiwan 26% in fiscal 2026.

Besi Investment Raises Strategic Stakes

Applied also entered an accelerated share purchase agreement that would increase its investment in Besi to approximately 20% of the Dutch semiconductor packaging equipment maker’s outstanding shares. The filing does not disclose the purchase price or explain whether the higher holding will alter the accounting treatment of the investment. Applied separately introduced its VeritySEM 20 metrology system, designed for process control in high-NA EUV manufacturing.