Analyst Conference Call Summary

semiconductors

conference date: May 14, 2026 @ 1:30 PM Pacific Time
for quarter ending: April 30, 2026 (second quarter, Q2 fiscal 2026)

Forward-looking statements

Overview: Record revenue, strong forecast.

Basic data (GAAP):

Revenues were $7.91 billion, up 13% sequentially from $7.01 billion and up 11% from $7.10 billion in the year-earlier quarter.

Net income was $2.81 billion, up 38% sequentially from $2.03 billion and up 31% from $2.14 billion year-earlier.

EPS (diluted earnings per share) were $3.51, up 38% sequentially from $2.54 and up 33% from $2.63 year-earlier.

Guidance:

For fiscal Q3 2026 revenue between $8,450 and $9,450 million. Non-GAAP diluted EPS range $3.16 to $3.56. applied Simi systems expects greater than 30% growth in calendar year 2026.

Conference Highlights:

Gary Dickerson, CEO, said "Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026. The rapid global build-out of AI computing infrastructure combined with Applied’s strong leadership positions in leading-edge logic, DRAM and advanced packaging provide an exceptionally strong foundation for sustained, multi-year revenue and profit growth." Gross margin at 50.0% in Q2 was the highest in over 25 years. Sees sustained strong growth ahead as AI infrastructure is built out.

Applied workers are increasingly using AI to increase productivity. AI demand is growing rapidly while diversifying. Visibility of demand at largest customers is increasing; they are signaling strong growth in 2027 and after. Gate-All-Around is central to growth. Expects to gain more market share in DRAM market. Since February the demand indicators have strengthened. Applied has nearly doubled its own manufacturing capacity.

The dividend has been increased to $0.53 per share per quarter. To shareholders as of May 21, payable June 11.

In February 2026 announced Samsung will join Applied's EPIC Center in Silicon Valley. Introduced deposition, etch, and modification systems Viva, Sym3 Z Magnum, and Spectral, for gate-all-around transistors at 2nm.

In Q2 2026 TSMC agreed to accelerate the development and commercialization of semiconductor technologies required for AI. Together at the EPIC Center, they will co-innovate to advance materials engineering, equipment innovation, and process integration technologies designed to deliver energy-efficient performance.

In Q2 also joining the EPIC Center: Arizona State University, Rensselaer Polytechnic Institute, Stanford University, Advantest, SK Hynix, and Micron Technology.

In Q2 2026 Applied agreed to acquire the NEXX business of ASMPT, for advanced packaging technologies.

China represented 24% of revenue in Q2.

Non-GAAP numbers: net income $2.29 billion, up 21% sequentially from $1.90 billion, and up 18% from $1.94 billion year-earlier. EPS $2.86, up 20% sequentially from $2.38, and up 20% from $21.39 year-earlier.

[note: ICAPS = IoT, Communications, Automotive, Power and Sensors]

Semiconductor Systems sales were $5.97 billion, up sequentially from $5.14 billion, and up from $5.40 billion year-earlier. Revenue by type, as % of total: Foundry, logic and other 67%, DRAM 29%, Flash 4%. Segment operating income, GAAP, was $2.09 billion; non-GAAP $2.10 billion.

Applied Global Services (AGS) revenue was $1.67 billion, up sequentially from $1.56 billion and up from $1.32 billion year earlier. GAAP and Non-GAAP operating income was $487 million.

Display segment revenue was $280 million, down sequentially from $312 million and up from $279 million year-earlier. Non-GAAP operating loss was $56 million.

Cash and equivalents (including long-term investments) balance ended at $ billion, sequentially from $7.29 billion. Cash flow from operating activities was $845 million. Capital expenditures were $635 million. Free cash flow $210 million. $365 million was used for cash dividends. Used $400 million to repurchase shares. Long-term debt was $5,26 billion.

Cost of goods sold was $3.96 billion, leaving gross profit of $3.95 billion. Operating expenses of $1.42 billion consisted of: research and development $1.03 billion; selling and marketing, $233 million; general and administrative $164 million; restructuring $0 million; legal settlement $0 million. Leaving income from operations of $2.52 billion. Interest and other income net $702 million. Income tax $419 million.

Q&A selective summary:

Visibility with customers? Pricing? Large customers are working on 8 quarter rolling visibility in order to prepare equipment for them. We sometimes require deposits. Our pricing usually works as long-term contracts, so it moves slowly. But it has been moving up as we introduce new types of equipment.

We expect to continue to improve margins, slowly, as we introduce new equipment tools.

WFE v. your own growth in 2026, 2027? 30% y/y growth suggests as strong second half. Orders have increased in the past 90 days. Expect a pipeline of new cleanrooms going forward. 2027 looks like a strong growth year, customers believe that demand will grow into 2028. Demand could be strong for a number of years.

The market environment for Applied has never been better.

Services business expectation is also growing, as equipment sales growth. Currently in about mid-teen percentage growth range. Output yield innovation is very valuable today.

30% growth, not 40%? Not giving explicit linearity. About the same growth linearly on a dollar basis. We can scale quickly, our supply chain is more difficult to grow quickly.

Connecting components in large areas has become a critical area. New body size architectures are being developed that will require innovation in packaging equipment. There is pressure to bring those architectures to market as quickly as possible.

We think WFE will continue into 2028, with more and more capacity planned by customers.

Conductor etch business? It is a fast growing sector, we are number 1 in leading edge foundry logic, particularly DRAM. SIM3z platform is seeing strong adoption. With new architectures we can integrate with our etch technology.

Our process technology business is growing rapidly, with new tools to help accelerate going forward.

ICAPS? Analog are is returning to growth, as is ICAPS as a whole, just not a lot until the current capacity is more absorbed.

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