TLDR
- Applied Materials reports Q2 earnings Thursday, with Wall Street expecting $2.68 EPS and $7.7 billion in revenue, up 8% year-over-year.
- AMAT stock is up 70% this year and trading around $431, near its all-time high of $447.
- AI-driven chip manufacturing demand is the key growth engine, with customers including TSMC, Samsung, and Micron.
- Chinese sales growth is expected to be flat due to export controls and rising domestic competition.
- Analyst price targets range from $450 to $550, though some flag valuation concerns with a forward P/E of 40.
Applied Materials stock is trading around $431, just below its all-time high of $447, as investors gear up for Thursday’s second-quarter earnings report.
The company has gained 70% year-to-date, reflecting strong investor confidence heading into results.
Wall Street expects adjusted EPS of $2.68, up from $2.39 a year ago. Revenue is projected at $7.7 billion, an 8% year-over-year increase.
System sales are seen rising 11% to $5.8 billion, with the balance coming from services and support.
AMAT makes equipment used across a wide range of semiconductor manufacturing steps. For AI chips specifically, its machines are involved in the most critical stages of turning raw silicon wafers into finished chips.
Its customer list reads like a who’s who of global chipmaking: TSMC, Samsung, GlobalFoundries, and Micron are all in the mix.
Chip manufacturers spent years holding back capital after the post-pandemic boom-bust cycle. That hesitancy has now reversed. Chipmakers are racing to bring top-end capacity online, with new fabs coming online later this year and through 2028.
Analysts expect AMAT’s sales and earnings growth to accelerate sharply in its fiscal Q4, which ends in October.
China: The Headwind to Watch
China has been a meaningful revenue source for AMAT in recent years, but that tailwind is fading.
Export controls have cut off AMAT’s high-end equipment sales to Chinese customers. On top of that, Chinese domestic competitors are gaining ground at the lower end of the market.
The company itself has flagged that Chinese sales growth will be flat this year. That said, rising AI demand out of South Korea, Taiwan, and the U.S. is expected to more than offset the slowdown.
Annual revenue for AMAT is projected to hit $31.5 billion in fiscal 2026, up 11%. Analysts then see that jumping to $38.2 billion in 2027, with EPS reaching $14.30.
Analyst Targets and Valuation Questions
Citi’s Atif Malik raised his target from $420 to $450 this week, citing strong revenue and profit growth ahead.
Cantor Fitzgerald’s C.J. Muse went further, lifting his target to $550 from $500. HSBC set a target of $517, while UBS raised theirs to $480 from $430.
The average analyst price target has climbed from $203 a year ago to $384 today.
However, AMAT’s forward P/E sits at 40 — nearly double NVIDIA’s 23 and well above the S&P 500’s 21. Some analysts see that as stretched.
One notable catalyst came from Elon Musk, who tapped Applied Materials for its terafab product, drawing fresh attention to the stock.
On the charts, AMAT is sitting above its 50-day and 100-day moving averages. Technicians have flagged an abandoned baby candlestick pattern alongside a rising wedge — a combination that can signal short-term pullback risk around an earnings event.
Based on recent reporting history, AMAT has regularly beaten expectations, leading some analysts to forecast Q2 revenue could come in above $7.8 billion when results land Thursday afternoon.
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