Prediction: Applied Materials Books Its First $10 Billion Quarter This Fall

Applied Materials (NASDAQ:AMAT) has never generated $10 billion of revenue in a single quarter. Management expects the current one (the chip-equipment maker's fiscal fourth quarter of 2026, which runs through late October) to be the first. Alongside its fiscal third-quarter report last month, the company put a midpoint of $10.25 billion on fourth-quarter revenue, plus or minus $500 million, about 51% above the year-ago period.

But the milestone isn't a formality. That guidance range bottoms out at $9.75 billion, so management's own forecast leaves room to fall short of the mark.

And shares trade around $462 as of this writing, down about 38% from their 52-week high of $739.67. Plenty of investors, it seems, still doubt how long growth like this can last.

Still, I think the company gets there. Here's a closer look at why.

Image source: Getty Images.

A record either way

Applied's fiscal third quarter (the period ended July 26) was itself record-setting, with revenue rising 25% year over year to $9.12 billion, the highest in the company's history, and non-GAAP (adjusted) earnings per share reaching a record $3.50, up 41%.

Because $9.12 billion is the standing record, even the bottom of the fourth-quarter guidance range would set a new one.

In other words, the suspense isn't about whether the quarter will be good. It's about the size of the miss it would take to keep the company under $10 billion -- more than $250 million below the guidance midpoint.

The year-over-year math gets help from a soft comparison, too. In the year-ago period, Applied's fiscal fourth-quarter revenue fell 3% to $6.80 billion.

Management keeps beating its own numbers

Growth has accelerated every quarter this fiscal year. Revenue slipped 2% year over year in the fiscal first quarter, then rose 11% in the second quarter and 25% in the third. In dollars: $7.01 billion, then $7.91 billion, then $9.12 billion, in the span of two quarters.

The company's forecasts have also run low all year. Applied guided its fiscal first quarter to $6.85 billion of revenue and delivered $7.01 billion. It guided the second quarter to $7.65 billion and delivered $7.91 billion. And it guided the third quarter to $8.95 billion and delivered $9.12 billion. Adjusted earnings per share, meanwhile, came in at or above the top of the guidance range in the first two quarters and near the top in the third.

So a miss big enough to keep fourth-quarter revenue under $10 billion would be a sharp break from the pattern. After all, every quarter of fiscal 2026 has landed $160 million to $260 million above the guidance midpoint, not below it.

Demand is the reason. "Based on the increased demand visibility we are receiving from our customers, we expect another strong growth year for Applied Materials in 2027," said CEO Gary Dickerson in the fiscal third-quarter earnings release.

Sure, equipment revenue can be lumpy, and a few delayed shipments or a new trade restriction may push sales in a given quarter below the line. But nothing the company has said since August points the other way.

Does the milestone make the stock a buy?

A $10 billion quarter, by itself, wouldn't make the stock a buy. What it would do is reset the earnings behind the stock's valuation. Management guided fourth-quarter adjusted earnings per share to $4.02, plus or minus $0.20, up about 85% from the year-ago quarter's $2.17. If earnings land there, Applied will have earned about $12.76 per share in fiscal 2026, up about 35% from $9.42 the year before.

At about $462, shares cost about 36 times those fiscal 2026 earnings -- and about 25 times analysts' expected earnings for fiscal 2027. Put those two figures side by side, and the message is that the market is already counting on fiscal 2027 being another strong year.

Maybe so. But semiconductor equipment demand moves in cycles, and I've covered enough of them over a decade writing about tech stocks to respect how quickly orders can turn. The fourth quarter can prove the ramp is still going. It can't prove how long it lasts.

Ultimately, I expect Applied Materials to clear the line this fall, probably with room to spare, when it reports results -- likely in November.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials. The Motley Fool has a disclosure policy.