Applied Materials AMAT Q1 2026 Earnings Transcript

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Date

Thursday, February 12, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Gary Dickerson
• Chief Financial Officer — Brice Hill
• Corporate Vice President, Investor Relations — Michael Sullivan

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Takeaways

• Revenue -- Delivered "strong revenue" attributed to robust demand in AI, foundry-logic, and memory market segments.
• Gross margin -- CFO Hill stated that "we expect margins to trend favorably as mix normalizes and our cost actions take hold."
• Cash flow -- "In fiscal 2026 Q1, we delivered strong revenue, margins, and cash flow." was generated while maintaining operational discipline and returning capital to shareholders through repurchases and dividends. (Fiscal period ended January 25, 2026.)
• Book-to-bill ratio -- Maintained "around unity," while backlog remains elevated and the company works through it as supply conditions improve.
• Capital returns -- Continued steady share repurchases and dividends, with capital allocation prioritizing both investment and shareholder return.
• Advanced packaging -- CEO Dickerson cited advanced packaging as "a strong growth vector driven by heterogeneous integration and AI," with differentiation via a broad toolset for wafer-level packaging, hybrid bonding, and inspection/metrology.
• Regional demand -- Foundry-logic demand remains healthy at leading-edge nodes, with improving momentum in the U.S. and Taiwan and increased activity in Korea.
• China demand & export controls -- Demand in China is "mixed by segment," with mature nodes steady; leading-edge impacted by regulatory restrictions; company continues to comply with all regulations.
• Supply chain initiatives -- Continued capacity expansion, supplier diversification, and lead time improvements driven by qualification of additional suppliers and localized sourcing.
• Metrology and inspection -- Growth driven by process complexity, with increasing traction for e-beam, optical, and computational platforms in advanced logic and memory applications.
• Services growth -- Services business benefitting from an expanding installed base, greater uptick in performance-based agreements, and adoption of automation and remote capabilities for uptime and yield enhancements.
• HBM demand visibility -- Strong demand for tools associated with High Bandwidth Memory (HBM) technologies across patterning, dielectric, advanced packaging, and TSV-related process steps, with visibility "through multiple quarters."
• Operational expenses (OpEx) -- OpEx to grow "at a measured pace focused on R&D and customer enablement," with near-term growth expected below revenue pace to drive operating leverage.
• Equipment pricing & competitive dynamics -- Pricing remains rational and stable; competitive dynamics steady due to technology differentiation and service.
• Orders and customer activity -- No material order cancellations reported; some "timing shifts" in bookings, described as typical for the industry.
• Long-term model priorities -- Focused on balanced growth with operating leverage, R&D investment in next-gen technologies, and disciplined overhead management.
• ICAPS and mature nodes -- Demand for ICAPS (Industrial, Consumer, Automotive, Power, Sensors) and mature node solutions remains healthy but is "moderating from peak levels."
• EUV process opportunity -- Growing requirements for process adjacencies, hard mask engineering, and defect control as Extreme Ultraviolet (EUV) adoption expands in high-volume manufacturing.

Summary

Applied Materials (NASDAQ:AMAT) reported elevated backlog, steady book-to-bill, and strong cash generation, underscoring resilient demand across end-markets and a continued focus on capital returns. Management highlighted expanding growth vectors—including advanced packaging, metrology, and HBM tools—while emphasizing strategic investments in capacity, R&D, and supply resiliency. Executives indicated balanced regional performance and stable pricing, with proactive management of regulatory, supply chain, and competitive conditions.

• Brice Hill confirmed OpEx will increase more slowly than revenue near term, supporting operating leverage as revenues scale.
• Gary Dickerson identified process complexity and integration challenges in both leading-edge and mature nodes as drivers for technology adoption and R&D efforts.
• Supply chain resiliency initiatives include supplier diversification and component localization to align with regulatory changes and reduce lead times.
• Services mix is shifting towards higher-margin performance-based agreements and automation, indicating a further enhancement of recurring revenue quality.

Industry glossary

• WFE: Wafer Fabrication Equipment—capital equipment used for semiconductor manufacturing process steps.
• HBM: High Bandwidth Memory—a high-speed memory technology often used in artificial intelligence and data center applications.
• ICAPS: Segment focused on Industrial, Consumer, Automotive, Power, and Sensor semiconductor applications, emphasizing mature and specialty manufacturing nodes.
• EUV: Extreme Ultraviolet Lithography—a cutting-edge technology enabling advanced semiconductor scaling through shorter wavelength patterning.
• Gate-all-around: An advanced transistor architecture providing improved control and performance compared to traditional FinFETs.
• Hybrid bonding: A semiconductor packaging method that directly connects chips at the wafer level for enhanced performance and integration.
• TSV: Through-Silicon Via—a vertical interconnection used in advanced semiconductor packaging to stack or connect integrated circuit dies.

Full Conference Call Transcript

Gary Dickerson: Thank you, Michael. Good afternoon, everyone, and thank you for joining us. Applied Materials, Inc. delivered solid results in 2026Q1, driven by strong demand across AI, foundry-logic, and memory. Our customers continue to accelerate node migrations and new 3D scaling approaches, which is expanding the opportunity for our differentiated materials engineering portfolio. We are executing well on our roadmap and investing to support our customers’ long-term capacity plans. I will now turn the call over to Brice Hill for the financial results.

Brice Hill: Thank you, Gary. In 2026Q1, we delivered strong revenue, margins, and cash flow. We are focused on operational discipline and supply chain execution to meet customer demand while advancing our technology leadership. We returned capital to shareholders through repurchases and dividends, and we continue to invest in R&D and capacity to support long-term growth. We will now open for questions.

Operator: We will now open for questions. Our first question comes from Vivek Arya.

Vivek Arya: Thank you. Could you discuss the sustainability of AI-related demand into the next few quarters and how it influences your WFE outlook?

Gary Dickerson: Thank you, Vivek. AI demand remains robust and broad-based, supporting sustained WFE strength. We see continued investment in leading-edge foundry-logic and in advanced packaging, as well as improving trends in DRAM and NAND. Our pipeline and customer engagements give us confidence in demand durability over the coming quarters.

Operator: Our next question comes from Stacy Rasgon.

Stacy Rasgon: Thank you. How should we think about gross margin trajectory given mix and any supply constraints?

Brice Hill: Thank you, Stacy. Gross margin will reflect product and customer mix, as well as continued improvements in productivity and cost. We are managing supply constraints proactively, and we expect margins to trend favorably as mix normalizes and our cost actions take hold.

Operator: Our next question comes from Timothy Arcuri.

Timothy Arcuri: Thanks. Can you comment on the cadence of orders in foundry-logic versus memory and any color on regional trends?

Gary Dickerson: Thanks, Timothy. Foundry-logic remains healthy with strength at leading nodes, while memory is improving, led by DRAM and HBM-related investments. Regionally, we see continued momentum in the U.S. and Taiwan, with activity also picking up in Korea.

Operator: Our next question comes from Atif Malik.

Atif Malik: Thank you. What are you seeing in advanced packaging, and how does Applied Materials, Inc. differentiate?

Gary Dickerson: Thank you, Atif. Advanced packaging is a strong growth vector driven by heterogeneous integration and AI. We differentiate with a comprehensive toolset across wafer-level packaging, hybrid bonding, and inspection/metrology, enabling customers to scale performance and power efficiently.

Operator: Our next question comes from Yu Shi.

Yu Shi: Thanks. Could you update us on your capacity expansion plans and lead-time improvements?

Brice Hill: Thank you, Yu. We continue to expand capacity in critical product lines and are investing in supply resiliency. Lead times are improving as we qualify additional suppliers and streamline our operations.

Operator: Our next question comes from Joseph Quatrochi.

Joseph Quatrochi: Thanks. How are you approaching capital returns and balance sheet priorities this year?

Brice Hill: Thank you, Joe. Our priorities remain consistent: invest in the business for long-term growth, maintain a strong balance sheet, and return excess cash to shareholders through buybacks and dividends. We expect to continue repurchasing shares at a steady pace while funding strategic investments.

Operator: Our next question comes from Harlan Sur.

Harlan Sur: Thank you. Any update on China demand and export controls impact?

Gary Dickerson: Thank you, Harlan. We continue to comply with all regulations. Demand in China remains mixed by segment, with mature nodes steady and certain leading-edge areas impacted by restrictions. Our global footprint and broad portfolio allow us to support customers across regions within the regulatory framework.

Operator: Our next question comes from Krish Sankar.

Krish Sankar: Thanks. On services, can you talk about growth drivers and attachment rates?

Brice Hill: Thank you, Krish. Services growth is supported by our expanding installed base, higher attachment to performance-based agreements, and analytics-driven optimization. We are investing in automation and remote capabilities to enhance uptime and yield for our customers.

Operator: Our next question comes from Brian Chin.

Brian Chin: Thank you. How are you positioned for gate-all-around and backside power transitions?

Gary Dickerson: Thanks, Brian. We are well positioned with a broad suite of deposition, etch, CMP, and inspection/metrology solutions. Gate-all-around and backside power introduce new materials and integration challenges where our leadership in materials engineering and co-optimization is a key differentiator.

Operator: Our next question comes from Christopher Caso.

Christopher Caso: Thank you. Any color on equipment pricing and competitive dynamics?

Gary Dickerson: Thank you, Chris. Pricing remains rational, reflecting the value of performance and total cost of ownership. Competitive dynamics are stable, and we continue to win based on technology differentiation, productivity, and service.

Operator: Our next question comes from Toshiya Hari.

Toshiya Hari: Thanks. Can you discuss EUV-related process steps and opportunities for Applied Materials, Inc. as customers scale HVM?

Gary Dickerson: Thanks, Toshiya. EUV scaling increases requirements for patterning adjacencies, hard mask engineering, clean, and metrology/inspection. Our integrated solutions help customers improve line-edge roughness, CD control, and defectivity, which are critical as EUV moves deeper into HVM and to higher NA.

Operator: Our next question comes from CJ Muse.

CJ Muse: Thanks. What is your outlook for NAND versus DRAM WFE into the next few quarters?

Gary Dickerson: Thanks, CJ. DRAM WFE is leading the recovery, particularly with HBM-driven investments, while NAND is improving at a slower pace as supply/demand rebalances. We expect both segments to grow through the year, with DRAM outpacing NAND near term.

Operator: Our next question comes from Mehdi Hosseini.

Mehdi Hosseini: Thank you. Can you update us on your long-term model and OpEx trajectory?

Brice Hill: Thank you, Mehdi. We continue to target a balanced long-term model with operating leverage as revenue scales. OpEx will grow at a measured pace focused on R&D and customer enablement, with discipline on overhead.

Operator: Our next question comes from Srini Pajjuri.

Srini Pajjuri: Thanks. Any updates on HBM-specific tools and demand visibility?

Gary Dickerson: Thanks, Srini. We are seeing strong pull for tools supporting HBM, including patterning, dielectric deposition, and advanced packaging steps like hybrid bonding and TSV-related processes. Visibility extends through multiple quarters given customers’ capacity plans.

Operator: Our next question comes from Charles Shi.

Charles Shi: Thank you. How is your metrology and inspection business trending?

Gary Dickerson: Thank you, Charles. Metrology and inspection are growing as process complexity increases. Our e-beam and optical platforms, along with computational products, are gaining traction to address challenging use cases in leading-edge logic and memory.

Operator: Our next question comes from James Schneider.

James Schneider: Thank you. What is the status of your supply chain localization and resiliency initiatives?

Brice Hill: Thank you, James. We have made progress diversifying suppliers, increasing dual-sourcing, and localizing critical components. These actions improve resiliency, reduce lead times, and support compliance with evolving trade regulations.

Operator: Our next question comes from Vijay Rakesh.

Vijay Rakesh: Thanks. Could you comment on CFIUS or regulatory developments that could impact your outlook?

Brice Hill: Thank you, Vijay. We closely monitor regulatory developments, including CFIUS-related matters. Our outlook reflects the current regulatory environment, and we have incorporated appropriate assumptions. We will continue to engage with authorities and customers to ensure compliance.

Operator: Our next question comes from Timm Schulze-Melander.

Timm Schulze-Melander: Thank you. What are you seeing in mature nodes and ICAPS-related demand?

Gary Dickerson: Thank you, Timm. ICAPS demand remains healthy, supporting power, automotive, and industrial applications. While growth is moderating from peak levels, our broad portfolio across deposition, etch, and inspection positions us well in mature and specialty nodes.

Operator: Our next question comes from Joe Quatrochi.

Joe Quatrochi: Thanks. Any update on your backlog and book-to-bill?

Brice Hill: Thank you, Joe. Backlog remains elevated with a book-to-bill around unity. We are working through the backlog as supply improves and expect stability as demand broadens across segments.

Operator: Our next question comes from Chris Caso.

Chris Caso: Thanks for the follow-up. Are you seeing any pushouts or cancellations?

Brice Hill: Thank you, Chris. We have seen some timing shifts typical for the industry, but no material cancellations. Overall demand signals remain constructive.

Operator: Our next question comes from Brian Chin for a follow-up.

Brian Chin: Thank you. Can you discuss your R&D priorities over the next year?

Gary Dickerson: Thank you, Brian. Our priorities include gate-all-around, backside power, advanced packaging, EUV adjacencies, new materials for scaling, and expanding our metrology/inspection capabilities with AI-driven analytics.

Operator: Our next question comes from Harlan Sur for a follow-up.

Harlan Sur: Thank you. Any updates on services margins and mix?

Brice Hill: Thank you, Harlan. Services margins are stable to improving, supported by higher attachment, software content, and productivity initiatives. Mix continues to shift toward performance-based contracts.

Operator: Our next question comes from Stacy Rasgon for a follow-up.

Stacy Rasgon: Thank you. How should we think about OpEx growth versus revenue in the near term?

Brice Hill: Thank you, Stacy. Near term, OpEx will grow modestly, below the pace of revenue, as we drive operating leverage while prioritizing R&D and customer support.

Operator: There are no further questions at this time. I will now turn the call back to Michael Sullivan for closing remarks.

Michael Sullivan: Thank you for joining us today and for your continued interest in Applied Materials, Inc. A replay of this call will be available on our investor relations website at investors.appliedmaterials.com. This concludes today’s call. Have a great day.

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