Applied Materials, Inc. (NASDAQ: AMAT) on Wednesday reported record revenue of $7.91 billion for the second quarter of fiscal 2026, up 11% from the same period a year earlier, and said it now expects its semiconductor equipment business to grow more than 30% in calendar 2026.
The Santa Clara, California-based company posted GAAP diluted earnings per share of $3.51 and non-GAAP diluted EPS of $2.86, up 33% and 20% year over year, respectively. Net income rose 31% to $2.81 billion. GAAP gross margin came in at 49.9% and non-GAAP gross margin at 50.0%, each 0.8 percentage points higher than the prior-year quarter.
#Semiconductor Systems Revenue Rises 10% on Foundry and DRAM Demand
Semiconductor Systems, the company's largest segment, generated revenue of $5.97 billion in the quarter, compared with $5.40 billion a year earlier. Foundry, logic and other accounted for 67% of segment revenue, with DRAM at 29% and flash memory at 4%. Non-GAAP operating margin in the segment expanded to 35.2% from 33.0%.
Applied Global Services revenue rose to $1.67 billion from $1.42 billion, with non-GAAP operating margin widening to 29.2% from 26.6%. The shift partly reflects an internal reorganization, effective in the first quarter of fiscal 2026, that moved Applied's 200-millimeter equipment business into Semiconductor Systems from Applied Global Services. Prior-period figures were recast.
China generated $2.09 billion of revenue, or 27% of the total, up from 25% a year earlier. Taiwan contributed 27% and Korea 20%.
#CEO Cites AI Infrastructure Build-Out
"Applied Materials delivered record quarterly performance, and we now expect our semiconductor equipment business to grow more than 30 percent in calendar 2026," Gary Dickerson, President and CEO, said in the earnings release. "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."
The company announced several partnership engagements at its EPIC Center in Silicon Valley during the quarter, including agreements with TSMC, SK hynix, Micron Technology, Advantest Corporation, and academic institutions Arizona State University, Rensselaer Polytechnic Institute and Stanford University. The agreements follow a previously announced partnership with Samsung Electronics. Applied also entered an agreement to acquire ASMPT Limited's NEXX business, which supplies large-area advanced packaging deposition equipment.
Applied competes directly with Lam Research and Tokyo Electron in deposition and etch equipment. The wafer fabrication equipment market has been concentrated among this small group of vendors, with demand currently shaped by capital spending cycles at leading-edge logic foundries and memory makers.
#Capital Returns and Outlook
Applied generated $845 million in cash from operations in the quarter, down from $1.57 billion a year earlier. Non-GAAP free cash flow fell to $210 million from $1.06 billion. The company attributed the change in part to working capital movements and higher capital expenditures, which rose to $635 million from $510 million.
The company returned $765 million to shareholders during the quarter, consisting of $400 million in share repurchases and $365 million in dividends. The board approved a 15% increase to the quarterly cash dividend, raising it to $0.53 per share from $0.46. Applied said the move marks nine consecutive years of dividend increases and that its dividend per share has more than doubled compared with four years ago.
For the third quarter of fiscal 2026, Applied guided to total revenue of $8.95 billion, plus or minus $500 million, and non-GAAP diluted EPS of $3.36, plus or minus $0.20. The guidance excludes known charges related to completed acquisitions and includes certain tax items disclosed in the release.
Year-to-date results included a $253 million legal settlement charge in the first quarter, related to a settlement with the U.S. Commerce Department Bureau of Industry and Security to resolve a previously disclosed export controls compliance matter. Restructuring charges of $12 million in the first half related to a workforce reduction plan announced in the fourth quarter of fiscal 2025.
Management projected continued growth into the third quarter on the back of AI-driven equipment demand, though the company cited risks including global trade and export regulations, tariffs, geopolitical conditions, customer concentration, and the timing of technology transitions as factors that could affect actual results.