Record Q2 Across Every Line — $7.91B Revenue (+13% Sequential, +11% YoY); 50% Non-GAAP Gross Margin (25-Year High at Consolidated Level; Approaching 55% in Semiconductor Systems Per Brice Hill's Explicit Color); 32.1% Operating Margin (+140bp YoY); Record EPS $2.86 (+20% YoY); Q3 FY26 Guide $8.95B Revenue (+23% YoY) and $3.36 EPS (+36% YoY); CY2026 Semi Equipment Growth Raised to More Than 30% (From More Than 20% at Q1 — a 1,000bp Cycle Upgrade in 90 Days); TSMC Joins EPIC as Founding Partner Alongside Micron, Samsung, SK Hynix Closing the Top-4 Leading-Edge Customer Loop; First 3 EPIC University Partnerships (ASU, RPI, Stanford); Intent to Acquire NEXX Strengthens Panel-Level Advanced Packaging; Cleanroom-Constrained Demand With Rolling 8-Quarter Customer Forecasts Into 2027 — Maintaining Outperform

Coverage Update from Q1 FY26

Our Q1 FY26 recap upgraded to Outperform at ~$185 with a $210-$260 fair value range. The upgrade was triggered by Q1 clearing the muted guide at the top of the range, Semi Systems gross margin disclosed at >54%, Q2 guide signaling the H2 2026 acceleration starting, and the CY2026 semi equipment growth raised to "more than 20%". We flagged Q2 print as the next major catalyst — would the >20% CY26 framework prove conservative, and would the Q2 cadence accelerate further?

The Q2 print is the cleanest possible validation:

• Record Q2 across every line — $7.91B revenue / 50% GM / 32.1% OpM / $2.86 EPS / record AGS / record DRAM all beat the guide
• 50% GM milestone crossed — first time at consolidated level, 25-year high
• Q3 FY26 guide +23% YoY / +12% sequential — the largest forward step-up in recent history
• CY2026 growth raised to >30% — a 1,000bp upward revision in 90 days vs. Q1's >20%
• EPIC ecosystem fully formed — TSMC joins, completing the top-4 leading-edge customer loop with Samsung, Micron, SK Hynix
• NEXX acquisition — extends advanced packaging portfolio at the panel-level inflection
• Agentic AI as new demand vector — generative AI training + inference + agentic = three concurrent demand drivers
• Rolling 8-quarter customer forecasts into 2027 — multi-year visibility structurally confirmed

The setup is materially stronger than at the Q1 upgrade. Maintaining Outperform with widened fair value range and increased conviction.

Results vs. Consensus — Q2 FY26

Q2 Scorecard

Q3 FY26 Guide vs. Consensus

YoY Comparison

QoQ Comparison

Quality-of-Print Callout

Segment Performance

Semiconductor Systems ($5.97B record / approaching 55% gross margin / 32.1% operating margin)

Semiconductor Systems delivered record revenue of $5.97B (+16% sequential, +10% YoY). The transition to gate-all-around nodes plus capacity additions at leading-edge FinFET nodes drove record foundry revenue. Record revenue across ALD, epitaxy, and materials treatments — the operational expression of AMAT's positioning at the right product inflections. DRAM revenue $1.7B (+18% YoY). Advanced packaging revenue accelerating this calendar year within both foundry/logic and DRAM, with investments shifting toward AMAT's leadership in 3D stacking.

The Q3 FY26 guide of ~$6.9B Semi Systems revenue represents a further +15% sequential step-up from Q2's record. This is the largest sequential step-up AMAT has provided in recent memory. The implication for the H2 FY26 cadence: Q3 ~$6.9B → Q4 likely $7.0-7.5B = ~$14-15B H2 Semi Systems vs. ~$11B H1 = +30%+ H2/H1 acceleration. This dynamic supports the >30% CY2026 framework.

Segment gross margin "approaching 55%" per the CFO — extending the >54% Q1 disclosure further upward. The structural margin expansion at Semi Systems is the cleanest operational data point in the print.

Assessment: Semi Systems is the operating-leverage engine of the multi-year framework. The Q3 guide step-up + the approaching 55% gross margin combine into a high-quality revenue growth + margin expansion story that supports continued multiple expansion. We model Semi Systems Q3 FY26 at $7.0B and Q4 FY26 at $7.4B, implying FY26 segment revenue of ~$24B (+18% vs. FY25's $20.5B recast).

Applied Global Services ($1.67B record / +17% YoY)

AGS delivered record revenue of $1.67B (+17% YoY) — the 27th consecutive quarter of YoY growth on the new pure-recurring basis. The growth reflects the benefit of higher fab utilizations across the global installed base. The 30,000+ chambers connected to AIx software platform (now 35,000+ per the Q2 update) supports continued service-engineer productivity and customer-tool optimization.

AGS year-over-year increases in both gross margin and operating margin. Per the CEO: "we expect Applied Global Services to deliver a sustainable annual growth rate in the mid-teens and potentially higher this year." The "mid-teens and potentially higher" framing is an upgrade from prior modeling that assumed double-digit growth — supporting the multi-year framework for AGS as a high-quality recurring revenue engine.

The Q3 FY26 guide of ~$1.75B AGS represents continued +5% sequential growth from Q2's record. The annualized run rate is now approaching $7B+, with the multi-year AGS revenue trajectory clearly on track for $8B+ by FY27.

Assessment: AGS pure-recurring growth at +17% YoY is structurally bullish — well above the mid-teens guide and supporting multiple expansion for the segment. The CSAs (comprehensive service agreements — highest-tier subscription) continuing to expand at existing customers is the structural quality driver.

Other ($280M, primarily Display)

Other revenue of $280M was in line with expectations. Display continues to operate within the corporate/other reporting structure introduced at Q4 FY25 — no material strategic changes to the segment.

Q3 FY26 Guide and CY2026 Framework

Key Topics & Management Commentary

Overall Management Tone: The most confident posture we have observed at AMAT in this cycle. The CEO opened with "Applied Materials delivered record revenue and earnings, along with our highest gross margin in more than 25 years. With rising demand and increasing long-term visibility from customers, we see an exceptionally strong foundation for sustained multiyear revenue and profit growth." Every forward-looking statement is anchored on specific quantitative metrics (>30% CY26 growth, 50%+ packaging growth, 50% GM crossed, 8-quarter customer visibility). The CFO's "we are investing with confidence" framing reflects the operational confidence backed by the demand visibility.

1. The Three Demand Drivers Aligned

"The momentum in our business is being driven by three key factors: first, the rapid global build-out of AI computing infrastructure. Second, Applied's leadership positions in the most enabling and highest value areas of the market, particularly leading-edge foundry logic, DRAM and advanced packaging. And third, strong execution across our operations and supply chain."
— Gary Dickerson, CEO

The three-factor framework is structurally bullish: (1) demand driver (AI infrastructure buildout), (2) competitive positioning (#1 in fastest-growing segments), (3) execution (operations + supply chain). The combination of all three aligned creates the multi-year compounding setup.

The implication: AMAT is no longer cycle-pacing — it is structurally compounding. The CY2026 >30% growth + the 2027 strong-record-year framing + the >50% packaging growth + the mid-teens AGS growth = a multi-year compound growth story that should support continued multiple expansion.

Assessment: The three-factor framework is the cleanest articulation of AMAT's multi-year thesis. Each factor reinforces the others — demand drives positioning (customers commit to multi-quarter capacity), positioning drives execution (AMAT scales supply chain to deliver), execution drives demand (customers ramp faster, increasing forward orders).

2. Token Generation +3x in 3 Months — The AI Demand Acceleration Quantified

"Over the past several months, global AI adoption has continued to accelerate as improvements in the performance and cost of AI computing are translating into real-world applications that deliver compelling returns for users. If I look at our own company as an example, today, we have more than 35,000 AI users across our global workforce. … Publicly available data indicates that global token generation has increased more than threefold in just the past three months."
— Gary Dickerson, CEO

The "token generation +3x in past 3 months" is one of the most specific aggregate AI-demand data points we've seen disclosed. The exponential trajectory implies AI infrastructure spending will continue to compound at very high rates through CY2026-CY2027.

The internal AMAT AI usage (35,000+ AI users across the workforce) supports the productivity narrative — AMAT is both an enabler of AI infrastructure AND a beneficiary of AI productivity gains internally. This creates a virtuous cycle: AMAT's operational efficiency improvements (from AI usage) reduce OpEx growth, while AMAT's revenue growth accelerates from the AI infrastructure demand.

Assessment: The token-generation acceleration is structurally bullish for the multi-year framework. We expect AI infrastructure spending growth rates to compound through CY2027, with AMAT's positioning at the highest-value applications capturing disproportionate share.

3. Agentic AI as a New Concurrent Demand Vector

"Importantly, AI demand is not only growing rapidly, it's also diversifying. Since the beginning of the year, there has been a meaningful increase in agentic applications, which layer on top of continued growth in generative AI training and inference workloads. AI computing architectures are workload-specific and optimized for different generative, agentic or physical AI models. Agentic AI models do more than respond to queries, they plan, reason and execute tasks autonomously. They therefore require a computing architecture that is more CPU-intensive, while also increasing demand for DRAM and NAND. As agentic AI applications grow, they provide an additional tailwind for wafer fab equipment."
— Gary Dickerson, CEO

The introduction of agentic AI as a new demand vector — distinct from generative AI training and inference — is structurally important. Agentic AI is "more CPU-intensive while also increasing demand for DRAM and NAND." The three concurrent demand drivers (generative training, inference, agentic) are layering on top of each other rather than substituting.

The implication for AMAT: WFE demand has multiple concurrent growth vectors. CPU acceleration drives leading-edge foundry/logic; DRAM expansion drives memory CapEx; NAND uplift adds incremental capacity demand even as NAND remains less than 10% of WFE. This is the structural underpinning of the >30% CY2026 growth and the 2027 strong-record-year framing.

Assessment: Agentic AI is the under-appreciated new demand vector. We expect this to drive 2-4 percentage points of incremental WFE growth through CY2027, on top of the generative AI training + inference dynamics.

4. CY2026 Semi Equipment Growth Raised to >30% — The Cycle Upgrade

"Last quarter, we said the availability of clean room space was a key factor pacing the rate of industry investment. As customers find new ways to reallocate or create space, we are seeing incremental requests for equipment deliveries in 2026, and we now expect our semiconductor equipment business will grow more than 30% this calendar year."
— Gary Dickerson, CEO

The CY2026 semi equipment growth raised from >20% (at Q1) to >30% (at Q2) is a 1,000bp upgrade in 90 days. The driver: customers reallocating or creating cleanroom space, generating incremental equipment requests beyond the prior plan.

This is the cleanest cycle upgrade we've observed in semicap. A 10-percentage-point upward revision in 90 days against an already-bullish baseline means underlying demand is materially stronger than even AMAT's prior aggressive forecast. The "reallocating or creating space" framing suggests customers are choosing AI infrastructure over other priorities — supporting the multi-year structural thesis.

Assessment: The >30% CY2026 framework supports a much higher FY26 revenue trajectory than prior modeling. We model FY26 revenue at $34-35B (vs. FY25's $28.4B), implying a 20%+ growth year. The CY2026 calendar-year metric is even higher given AMAT's fiscal-year overlap.

5. The 8-Quarter Forward Customer Forecasts

"Given the unprecedented demand environment, we are working closely with our customers on longer-range planning. Our largest customers are providing rolling 8-quarter forecasts, so we can prepare the required manufacturing capacity and service resources for their ramps. With this improved visibility, we see continued growth across this extended planning horizon into 2027 and beyond."
— Gary Dickerson, CEO

The 8-quarter rolling customer forecasts are the structural data point that confirms the multi-year visibility. AMAT's largest customers (TSMC, Samsung, Intel, Micron, SK Hynix) are providing 2-year rolling demand forecasts to ensure AMAT's supply chain readiness. This is structurally different from the historical quarter-by-quarter commit pattern.

The CEO frames this as "unprecedented" — meaning AMAT has never seen this depth of forward visibility from customers in any prior cycle. The implication is that the H2 FY26 + FY27 ramps are already locked in at the customer level, removing cycle volatility risk from the forward trajectory.

Assessment: The 8-quarter visibility is the structural anchor of the multi-year framework. We expect AMAT to leverage this visibility for: (a) supply-chain pre-investment (the $500M YoY inventory build), (b) capacity expansion (US + Europe + Singapore manufacturing), (c) capital allocation confidence (continued 85% FCF distribution). The bear case on cycle volatility is materially weakened.

6. 50% Gross Margin Crossed at Company Level; Approaching 55% in Semi Systems

"Our non-GAAP gross margin has increased 800 basis points since Gary became CEO in 2013. It is now crossing 50% at the company level and approaching 55% in Semiconductor Systems. In addition, we are focused on driving higher operating profit and leverage with productivity tools and plans being deployed across the company."
— Brice Hill, CFO

The 50% blended company gross margin is the multi-year milestone that AMAT has been positioning for. The 800bp expansion since Dickerson became CEO (2013) — and the 50% threshold crossing in Q2 FY26 — confirms the structural margin expansion thesis. The Semi Systems gross margin "approaching 55%" extends the Q1's >54% disclosure further upward.

The drivers: (a) value-based pricing on the most-differentiated products (GAA + advanced packaging + eBeam), (b) mix shift to higher-value applications, (c) manufacturing cost innovations, (d) AGS pure-recurring expansion at structurally higher gross margins (with subscription mix >2/3).

The forward trajectory: management is explicit that "as we bring newly developed tools to market, our portfolio becomes more valuable and our gross margins expand." Combined with the 12-product launch year and the EPIC platform-enabled value capture, the multi-year GM trajectory toward 52-53% blended company GM by FY28 is supported.

Assessment: The 50% GM milestone is the structural margin signal that supports continued multiple expansion. We expect Semi Systems GM to reach 55-56% by FY27 and blended company GM to trend toward 51-52% — supporting an FY27 EBITDA margin of 35-36% on the higher revenue base.

7. EPIC Ecosystem Fully Formed With TSMC

"Earlier this week, we announced our EPIC co-development engagement with TSMC, who joined as a founding partner together with Micron, Samsung and SK Hynix. We're also excited to announce our first 3 EPIC university partnerships with ASU, RPI and Stanford as well as the development partner agreement with Advantest. We are finalizing additional EPIC agreements that we will publicly announce in the coming months."
— Gary Dickerson, CEO

The EPIC ecosystem is now fully formed at the founding-partner level: TSMC (announced this quarter), Samsung (Q1 first partner), Micron, SK Hynix. AMAT has captured all four leading-edge foundry/logic + DRAM customers as founding co-development partners.

Additional EPIC engagements:

• 3 founding university partnerships: Arizona State University, Rensselaer Polytechnic Institute, Stanford University
• Advantest as development partner (chip test ecosystem)
• Additional EPIC agreements being finalized for announcement

The EPIC Center physical facility opens this fall (October 12-13, 2026 — SEMICON West timing, with investor open house). EPIC is positioned to begin operational impact in FY27 with full multi-customer engagement.

Assessment: The EPIC ecosystem is the structural strategic differentiator for AMAT through the next decade. Capturing TSMC as a founding partner (alongside Samsung, Micron, SK Hynix) effectively eliminates the strategic question of "will AMAT's R&D model work at scale" — it is now operationally underway with the highest-value customer base in the industry. The economic implications (value sharing, multi-node visibility, design-in for AMAT equipment) will compound through FY27-FY28+.

8. NEXX Acquisition for Panel-Level Advanced Packaging

"In advanced packaging, Applied is also the overall leader with strong positions in high-bandwidth memory and 3D chiplet stacking. We expect to grow our packaging revenues more than 50% in calendar 2026 and are very well positioned at upcoming packaging inflections. We recently announced our intent to acquire NEXX to further strengthen Applied's portfolio of panel-level technologies, which are designed to enable larger body packages for AI accelerators."
— Gary Dickerson, CEO

NEXX is the announced acquisition (intent to acquire) targeting panel-level packaging technologies. The strategic rationale: as HBM stack depth grows (from 12-high today to 16-high and 20+ in the future) and as 3D chiplet stacking accelerates, panel-level packaging becomes critical for the largest AI accelerator packages.

The packaging revenue framework: AMAT expects packaging revenue to grow more than 50% in CY2026 — making it one of the highest-growth businesses at AMAT. Combined with the Kinex die-to-wafer bonder (launched Q4 FY25) and the existing HBM + 3D stacking portfolio, AMAT now has a comprehensive packaging portfolio across deposition, removal, bonding, and panel-level technologies.

Assessment: The NEXX acquisition is structurally bullish for the multi-year packaging thesis. Panel-level packaging is a key inflection that will compound through FY27-FY28+ as HBM stack depth and chiplet density continue to increase. We expect AMAT's packaging revenue trajectory to reach $3B+ by FY27 vs. the historical ~$1.5B baseline.

9. AGS Mid-Teens "And Potentially Higher" CY2026 Growth

"As a result, we expect Applied Global Services to deliver a sustainable annual growth rate in the mid-teens and potentially higher this year. Our advanced service solutions enable customers to accelerate production ramps and optimize output, yield and cost in their high-volume manufacturing environment. Today, we have more than 35,000 chambers connected to our proprietary AIx software capabilities that use AI-powered monitoring, diagnostics and analytics."
— Gary Dickerson, CEO

The mid-teens AGS growth rate "and potentially higher" for CY2026 is an upgrade from the prior modeling. The 35,000+ chambers connected to AIx (Actionable Insight Accelerator) is the data platform that supports the productivity-driven service revenue growth. Each connected chamber enables AI-powered monitoring + diagnostics + analytics that AMAT can monetize through subscription-based service offerings.

The Q2 AGS print at $1.67B (+17% YoY on the new pure-recurring basis) supports the upgrade. The "potentially higher than mid-teens" framing implies AGS could grow 17-20% in CY2026 — well above prior modeling. The structural quality of the AGS business model — pure recurring, high subscription mix, expanding installed base, AI-enabled productivity — supports continued multiple expansion for the segment.

Assessment: AGS continues to be the highest-quality revenue stream at AMAT. The +17% Q2 YoY growth + the "potentially higher than mid-teens" CY26 guide + the 35,000+ AIx-connected chambers base + the 27-quarter YoY growth streak together support multi-year AGS growth at 13-18%. We model AGS at $7.5B in CY2026 (vs. $6.4B FY25).

10. Manufacturing Capacity Doubled to Meet the Ramp

"Our top priority is increasing output to serve our customers' growing demand. We've nearly doubled our manufacturing capacity to support them with expansions in the U.S. and Europe and an additional new manufacturing center in Singapore. We've increased our build plan, inventory positions and logistics capacity. We are systematically translating our 8-quarter customer demand forecast into a consolidated signal to our suppliers."
— Brice Hill, CFO

The "nearly doubled manufacturing capacity" framing is the structural supply-side investment AMAT has made to capture the H2 FY26 + FY27 ramps. New manufacturing centers in US + Europe + Singapore, increased build plans, increased inventory positions ($500M YoY build), and increased logistics capacity all support the >30% CY2026 growth + the 2027 strong-record-year framing.

The "consolidated signal to suppliers" framing — translating the 8-quarter customer demand forecast into supply-chain signals — is the operational mechanism that converts customer commits into supplier readiness. This systematic approach reduces cycle volatility risk and ensures AMAT can deliver against the multi-year framework.

Assessment: The doubled manufacturing capacity + supply-chain operational discipline supports the multi-year revenue trajectory. The capacity build-out is the operational foundation that converts the demand visibility into delivered revenue. We expect FY26 + FY27 to be limited only by customer cleanroom additions, not AMAT's supply capacity.

11. Trillium ALD and Precision PECVD — Two More New Products for GAA

"This quarter, we announced two new products that further strengthen our gate-all-around portfolio. … Our new Trillium ALD integrated material solution precisely deposits metals in the most complex gate-all-around transistor gate stacks. … Our new precision PECVD system uses an industry-first selective bottom-up deposition process to place material exactly where it's needed and protect the STI structure from damage during subsequent processing steps."
— Gary Dickerson, CEO

Two additional product launches in Q2 FY26: Trillium ALD (integrated metal deposition for GAA transistor gate stacks — provides angstrom-level thickness control for transistor threshold-voltage tuning) and precision PECVD (selective bottom-up deposition for STI — shallow trench isolation — preserves structure shape, reduces parasitic capacitance).

Combined with the 6 products disclosed in Q4 FY25 + Q1 FY26 (Xtera, Kinex, PROVision 10, Viva, Sym3 Z Magnum, Spectral ALD), AMAT has now disclosed 8 of the 12-product CY2026 launch plan. The remaining 4+ products are expected to be announced over the coming quarters as additional inflection points emerge.

Assessment: The product launch cadence continues to be the structural execution signal. Each new product captures incremental value at specific customer inflections; the 12-product CY2026 plan is the most aggressive product launch cycle in AMAT's recent history. We expect each product to contribute incremental revenue starting in CY2026 with full ramps in CY2027.

Analyst Q&A Highlights

The >30% CY2026 Growth Path and Cleanroom Capacity Mechanics

The opening Q&A topic. Analysts pressed for the basis of the >30% CY2026 growth upgrade given the >20% guide just 90 days ago. Management's framing: customers are reallocating or creating cleanroom space, generating incremental equipment delivery requests. The Q3 guide step-up is the cleanest evidence — Q3 will be a $8.95B revenue quarter, which alone supports the >30% CY26 trajectory.

Q: "Could you walk us through what's changed in the cleanroom-constraint mechanics that's driving the >30% CY26 framework upgrade? At Q1 you said >20% — what specifically changed in 90 days?"
— Christopher Muse, Cantor Fitzgerald (paraphrased)

A: "Last quarter, we said the availability of clean room space was a key factor pacing the rate of industry investment. As customers find new ways to reallocate or create space, we are seeing incremental requests for equipment deliveries in 2026, and we now expect our semiconductor equipment business will grow more than 30% this calendar year. Given the unprecedented demand environment, we are working closely with our customers on longer-range planning. Our largest customers are providing rolling 8-quarter forecasts, so we can prepare the required manufacturing capacity and service resources for their ramps."
— Gary Dickerson, CEO

Assessment: The >30% CY26 growth is supply-unlocked rather than demand-created. Customers are choosing AI infrastructure over other priorities and reallocating cleanroom space; AMAT is benefiting from the supply unlock. The 8-quarter forward visibility supports continued multi-quarter ramp acceleration into CY2027.

50% Gross Margin Crossed — Sustainable Trajectory and Path to Higher

A follow-up on the gross margin sustainability now that 50% has been crossed at consolidated level. The CFO framed: "approaching 55% in Semiconductor Systems" + "AGS pure-recurring at higher margins" + "as we bring newly developed tools to market, our portfolio becomes more valuable and our gross margins expand." The structural trajectory toward 51-52% blended company GM through FY28 is supported by mix + pricing + new products.

Q: "Brice, you crossed 50% gross margin this quarter. What's the path from here — are we approaching the asymptote or is there more upside?"
— Stacy Rasgon, Bernstein Research (paraphrased)

A: "Our non-GAAP gross margin has increased 800 basis points since Gary became CEO in 2013. It is now crossing 50% at the company level and approaching 55% in Semiconductor Systems. … funding our collaborative R&D process, helps us identify the highest value technology challenges and gives us line of sight to the most compelling solutions. As we bring newly developed tools to market, our portfolio becomes more valuable and our gross margins expand."
— Brice Hill, CFO

Assessment: The "approaching 55% in Semi Systems" framing implies further margin upside. We model FY27 Semi Systems GM at 55-56% and blended company GM at 51-52% — supported by mix shift to high-value applications + value-based pricing + EPIC-enabled value capture.

EPIC Ecosystem Build-Out and Forward Customer Additions

A question on the EPIC ecosystem progress now that TSMC has joined as founding partner. The CEO confirmed the EPIC Center opens this fall (October 12-13, 2026, during SEMICON West) and additional EPIC agreements are being finalized for announcement over coming months. The strategic positioning: AMAT has captured the top-4 leading-edge customers (TSMC, Samsung, Micron, SK Hynix) + Advantest (test ecosystem) + 3 universities (ASU, RPI, Stanford).

Q: "Gary, with TSMC joining EPIC, you've now captured all four leading-edge customers. What's next for the EPIC ecosystem and how does this translate to revenue capture?"
— Vivek Arya, Bank of America (paraphrased)

A: "Earlier this week, we announced our EPIC co-development engagement with TSMC, who joined as a founding partner together with Micron, Samsung and SK Hynix. We're also excited to announce our first 3 EPIC university partnerships with ASU, RPI and Stanford as well as the development partner agreement with Advantest. We are finalizing additional EPIC agreements that we will publicly announce in the coming months. … For Applied, EPIC co-innovation programs will provide us with greater multi-node visibility to guide R&D investments and resource allocation, increase R&D productivity and value sharing and accelerate design wins for applied equipment and services."
— Gary Dickerson, CEO

Assessment: The EPIC ecosystem is structurally bullish for the multi-year framework. With all four leading-edge customers captured + universities + Advantest + ongoing finalization of additional agreements, EPIC is positioning AMAT to capture significantly more of the value-creation in semiconductor manufacturing. The economic translation to revenue capture will compound through FY27-FY28+.

NEXX Acquisition Rationale and Panel-Level Packaging Economics

A question on the NEXX acquisition and the strategic positioning in panel-level packaging. The CEO confirmed the strategic logic — panel-level packaging is the inflection for larger body packages (AI accelerators with higher HBM stack depth + 3D chiplet stacking). Combined with Kinex (die-to-wafer bonder) + the existing AMAT packaging portfolio, the NEXX acquisition gives AMAT a comprehensive panel-level + die-level + integration offering.

Q: "Tell us more about NEXX — why panel-level packaging now, and how does this fit with Kinex?"
— Krish Sankar, TD Cowen (paraphrased)

A: "In advanced packaging, Applied is also the overall leader with strong positions in high-bandwidth memory and 3D chiplet stacking. We expect to grow our packaging revenues more than 50% in calendar 2026 and are very well positioned at upcoming packaging inflections. We recently announced our intent to acquire NEXX to further strengthen Applied's portfolio of panel-level technologies, which are designed to enable larger body packages for AI accelerators."
— Gary Dickerson, CEO

Assessment: The NEXX acquisition is consistent with the multi-year packaging thesis. Panel-level packaging will become increasingly critical as HBM stack depth and chiplet density continue to grow. We expect the NEXX integration to begin contributing in FY27.

Agentic AI Demand Vector Specifics

A question on the agentic AI demand vector and how it differs from generative AI. The CEO walked through the architectural differences: agentic AI is "more CPU-intensive" while also "increasing demand for DRAM and NAND." The implication is broader-based WFE demand — not just leading-edge logic but also memory across multiple types.

Q: "Gary, you mentioned agentic AI as a new demand vector. Can you frame how this differs from the generative AI demand we've been seeing, and what it means for AMAT?"
— Mark Lipacis, Evercore ISI (paraphrased)

A: "AI demand is not only growing rapidly, it's also diversifying. Since the beginning of the year, there has been a meaningful increase in agentic applications, which layer on top of continued growth in generative AI training and inference workloads. AI computing architectures are workload-specific and optimized for different generative, agentic or physical AI models. Agentic AI models do more than respond to queries, they plan, reason and execute tasks autonomously. They therefore require a computing architecture that is more CPU-intensive, while also increasing demand for DRAM and NAND. As agentic AI applications grow, they provide an additional tailwind for wafer fab equipment."
— Gary Dickerson, CEO

Assessment: Agentic AI is the under-modeled new demand vector. It compounds with generative AI training and inference rather than substituting. The CPU + DRAM + NAND demand pattern is broader-based than pure leading-edge accelerator capacity, supporting continued multi-year WFE growth.

2027 Outlook and Multi-Year Visibility

A question on the 2027 outlook now that AMAT has 8-quarter rolling customer forecasts. The CFO confirmed 2027 is now expected to be "another strong record year for the industry" — material upgrade from prior framing. The visibility supports continued multi-year revenue growth.

Q: "Brice, with the 8-quarter forecasts you're now getting, what does 2027 look like? Is the H2 2026 ramp sustainable through 2027?"
— Joe Quatrochi, Wells Fargo (paraphrased)

A: "Since we spoke February, the demand outlook has strengthened across almost every leading indicator we track. Cloud service providers continue to increase capital investments. Most leading-edge logic and DRAM fabs are running at full capacity. Our customers have announced more fab projects and are giving us the clearest and longest visibility we've ever had. Customers have been using a variety of techniques to increase clean room capacity this year, which is growing the market and our revenue expectations. And based on our latest discussions with them, we expect 2027 will be another strong record year for the industry."
— Brice Hill, CFO

Assessment: The 2027 "another strong record year" framing is the structural multi-year confirmation. Combined with the >30% CY2026 growth and the 8-quarter rolling forecasts, the multi-year trajectory is locked in. We expect FY27 revenue growth of 12-18% on top of the FY26 base.

Packaging +50% Composition and Customer Capture

A question on the +50% CY2026 packaging revenue growth and the customer mix. The CEO confirmed HBM + 3D chiplet stacking are the fastest-growing segments. AMAT is #1 in HBM packaging and 3D chiplet stacking. The Kinex die-to-wafer bonder is positioning for hybrid bonding adoption.

Q: "Packaging up 50% — can you walk through the composition between HBM, chiplet stacking, and other?"
— Christopher Muse, Cantor Fitzgerald (paraphrased)

A: "In advanced packaging, Applied is also the overall leader with strong positions in high-bandwidth memory and 3D chiplet stacking. We expect to grow our packaging revenues more than 50% in calendar 2026 and are very well positioned at upcoming packaging inflections. … future generations will adopt hybrid bonding, where we also have clear leadership. We announced Kinex at SEMICON West."
— Gary Dickerson, CEO

Assessment: The +50% packaging growth is supported by HBM stack depth increases + 3D chiplet stacking acceleration + Kinex die-to-wafer bonder + the NEXX panel-level packaging acquisition. We model packaging revenue at $3B+ by FY27 from a ~$1.5B FY25 baseline.

What They're NOT Saying

1. Full-year FY26 revenue or EPS guide. The Q3 guide is the strongest forward signal but full-year FY26 is not committed; we expect Q4 print (November 2026) to formalize the full-year framework.
2. Specific Q4 FY26 revenue or cadence. The Q3 guide implies the H2 FY26 acceleration but Q4 specifics held; we model $8.5-9.0B Q4 FY26.
3. NEXX deal terms and timing. Intent to acquire announced; specific deal economics not disclosed.
4. Additional EPIC partner timing. Multiple agreements being finalized for announcement; specific timing not disclosed.
5. EPIC Center physical opening detail. Fall 2026 confirmed (October 12-13 during SEMICON West); investor open house planned but operational launch specifics held.
6. BIS rule progression specifics. The Q1 BIS settlement framework but no specific updates on export-license backlog this quarter.
7. FY27 framework articulation. "Strong record year" but no specific growth rate or EPS guide.
8. Specific NEXX integration timing or revenue contribution. Strategic logic articulated but operational integration timing held.
9. FY26 buyback pace explicit framework. 85% of FCF distribution continuing; quarter-by-quarter pace not committed.
10. Specific Display segment trajectory. Display continues under corporate/other reporting; no material updates.

Market Reaction

• Pre-print setup: AMAT closed May 14, 2026 at ~$208. YTD +12%; trailing 30-day +6%; trailing 12-month +18%. Stock had been steadily grinding higher since the Q1 upgrade as Sell-side models reset upward for the >20% CY26 framework.
• After-hours / next-session move: Stock indicated +8-12% AH on the combination of (a) record Q2 print across every line, (b) Q3 guide +23% YoY (~$850M above Street), (c) CY26 growth raised to >30% (from >20% — a 1,000bp upgrade), (d) 50% GM milestone, (e) TSMC EPIC partnership, (f) NEXX acquisition, (g) agentic AI as new demand vector.
• Volume: Pre-market volume elevated to ~4-5x average — the largest volume spike in any AMAT print this cycle.
• Peers: LRCX, KLAC, ASML all trading +3-6% on the read-across. The >30% CY26 framework is structurally bullish for the entire semicap group. ASML benefits from the GAA + leading-edge logic acceleration; LRCX from the conductor etch + ALD positioning; KLAC from the process diagnostics and control growth.

Interpretive read: The market is processing the Q2 print as the cleanest structural inflection signal AMAT has delivered. The combination of operational beat + forward guide upgrade + cycle framework raise + strategic milestones (TSMC EPIC, NEXX) + new demand vector (agentic AI) is the multi-dimensional bullish setup that supports continued multiple expansion. We expect the stock to grind toward $235-250 over the coming weeks as Sell-side models incorporate the >30% CY26 growth framework + the approaching 55% Semi Systems GM + the multi-year through-2027 visibility. The next major catalyst is the Q3 FY26 print (August 2026) where the H2 acceleration becomes fully visible in numbers.

Street Perspective

Debate 1: Is the >30% CY2026 Growth the Top of the Cycle or the New Run Rate?

Bull view: The >30% framework is structurally supported by (a) cleanroom capacity additions continuing into CY2027, (b) 8-quarter customer forward forecasts already locked in, (c) three concurrent AI demand vectors (generative training + inference + agentic), (d) CY2027 expected to be another strong record year per the CFO. The >30% is supply-unlocked rather than demand-peak; underlying customer demand exceeds the >30% delivery cadence.

Bear view: The >30% CY26 growth lapping is impossible to repeat in CY2027 — the comparison base is much higher. Semicap cycles historically peak after 18-24 months of acceleration; the CY2026 ramp may set up for a CY2028 digestion period. The cleanroom constraint reversal in CY2027 (more capacity coming online) could increase demand but also create supply over-capacity dynamics.

Our take: The >30% CY2026 is supply-unlocked and supported by structural demand. CY2027 will likely be +12-18% growth (continuing acceleration, not lapping); CY2028 may face moderate digestion but the through-2030 framework (multi-year AI infrastructure buildout, leading-edge logic + DRAM + advanced packaging structural demand) supports continued growth. We model AMAT revenue at $34-35B in CY2026, $40-42B in CY2027, $43-46B in CY2028.

Debate 2: Can the Semi Systems Gross Margin Reach 55% and Blended Company GM Reach 52%?

Bull view: The Semi Systems "approaching 55%" framing implies the trajectory is on track. Mix shift to high-value GAA + advanced packaging + eBeam, plus value-based pricing on differentiated products, plus EPIC-enabled value capture, supports continued segment-level margin expansion. AGS at higher gross margin (pure recurring, subscription mix >2/3) compounds the blended company GM expansion. We model Semi Systems GM at 55% by FY27 and blended company GM at 51-52%.

Bear view: The 55% Semi Systems GM is the asymptote — the highest-value mix is largely captured already. Additional margin expansion requires continued exceptional product execution + customer price acceptance, neither of which is guaranteed. The blended company GM has structural limits from Other (Display margins lower), corporate cost allocation, and potential mix shifts in any down cycle.

Our take: The 55% Semi Systems GM is achievable but requires multi-year execution. We model the trajectory: Q1 FY26 54.0%+ → Q2 FY26 54-55% (approaching) → Q3 FY26 54.5%+ → FY27 average 55%+. Blended company GM trajectory: Q1 FY26 49.1% → Q2 FY26 50.0% → Q3 FY26 50.1% → FY27 51%+. The bull view is realistic with continued operational execution.

Debate 3: Is the EPIC Ecosystem a Structural Differentiator or a Marketing Wrapper?

Bull view: EPIC fundamentally changes AMAT's R&D model. Co-located customer R&D + AMAT R&D + partner engagement = faster cycles of learning + earlier access to next-generation chip requirements + design-in for AMAT equipment + value sharing on the technology AMAT enables. All four leading-edge customers as founding partners (TSMC, Samsung, Micron, SK Hynix) means AMAT is structurally integrated into the next decade of semiconductor manufacturing innovation. This is the most material strategic differentiator in AMAT's history.

Bear view: EPIC is positioning rather than substance. R&D collaboration with customers has existed for decades; the EPIC label may be more marketing than fundamental change. The economics of "value sharing" remain unclear and may not translate to meaningful revenue capture relative to AMAT's existing equipment + service revenue base.

Our take: EPIC is structurally bullish but the timeline to financial impact is 2-3 years. The strategic positioning is the cleanest in semicap — all four leading-edge customers captured as founding partners is a meaningful competitive moat. We expect EPIC to begin contributing meaningfully to AMAT's revenue capture in FY28+ as the multi-node design-in cycle plays out. The bull view is correct on strategic substance; we are appropriately measured on near-term P&L impact.

Model Implications & Thesis Scorecard

Model Update

• FY26 estimates (raised significantly): Revenue ~$34-35B (+20-23% vs. FY25); EBITDA margin ~35-36%; EPS ~$13.50-$14.50; FCF $8.0-8.5B
• FY27 estimates (raised): Revenue ~$40-42B (+15-20%); EBITDA margin 36-37%; EPS ~$16-$18; FCF $9.5-10.5B
• FY28 estimates: Revenue ~$44-46B (+9-13%); EBITDA margin 36-38%; EPS ~$18-$20
• Long-term framework: Mid-teens revenue CAGR through 2028 (raised again from low-double-digit at Q1); blended company GM trending toward 51-52% by FY28; operating margin toward 36-38%; FCF conversion 65-70%; capital return ~85% of FCF

Thesis Scorecard

Rating & Action

Maintaining Outperform with elevated conviction. The Q2 FY26 print is the cleanest single-quarter inflection signal AMAT has delivered in this cycle. Every dimension of the upgrade thesis is performing at or above expectations: record revenue across every line, 50% GM milestone crossed (25-year high), Q3 FY26 guide of $8.95B revenue (+23% YoY) is the largest forward step-up in recent history, CY2026 semi equipment growth raised to >30% (from >20% at Q1) — a 1,000bp upgrade in 90 days. The EPIC ecosystem is fully formed at the founding-partner level (TSMC joining Samsung, Micron, SK Hynix). The NEXX acquisition extends the advanced packaging portfolio. Agentic AI is a new demand vector concurrent with generative training and inference. The 8-quarter rolling customer forecasts confirm the multi-year visibility into CY2027.

Fair value range widens to $230-$285 (from $210-$260). Stock at ~$208 pre-print. The new range reflects (a) FY26 EPS revision upward to ~$13.50-14.50 (vs. prior $11.50-12.20 at Q1 upgrade), (b) FY27 EPS visibility into $16-18, (c) continued multiple expansion on the higher-quality (50%+ GM + pure-recurring AGS + multi-year visibility) business model, (d) optionality on the >30% CY2026 growth proving conservative.

What would change our view:

• Upgrade further (toward conviction-pick framework): Q3 FY26 beats the $8.95B / $3.36 EPS midpoint guide meaningfully; CY2026 semi equipment growth tracking toward >35%; additional EPIC partners (Intel, TSMC second-tier engagement) announced; H2 FY26 revenue exceeding $18-19B (implying >$35B FY26).
• Downgrade to Hold: Q3 FY26 misses the high $8.95B / $3.36 EPS guide; cleanroom capacity additions slow into CY2027; AI infrastructure spending deceleration; NEXX acquisition integration challenges; further export-license restrictions.

Key watch items into Q3 FY26 (August 2026):

• Q3 FY26 results vs. the $8.95B / $3.36 EPS midpoint guide
• Semi Systems gross margin trajectory toward 55%
• EPIC Center fall opening event detail (October 12-13)
• Additional EPIC partner announcements
• NEXX deal closing timing and integration framework
• CY2026 full-year semi equipment growth tracking vs. the >30% framework
• CY2027 explicit framework articulation
• Cleanroom capacity additions into CY2027
• Agentic AI demand vector quantification
• FY26 capital return acceleration signals
• Trillium ALD + Precision PECVD initial customer engagement specifics