Applied Materials Posts Record Growth on AI Chip Equipment Surge, Raises 2026 Outlook
The semiconductor equipment giant delivered its highest quarter-on-quarter revenue growth ever as chipmakers race to expand AI manufacturing capacity.
Record Quarter Fueled by AI Infrastructure Boom
Applied Materials delivered "the highest quarter-on-quarter revenue growth in the company's history" in its fiscal third quarter of 2026, CEO Gary Dickerson announced, as chipmakers scramble to build manufacturing capacity for artificial intelligence semiconductors (earnings call, 2026-08-13).
The company has "again made upward revisions" to its revenue growth forecast for 2026 and expects to "grow faster than the overall market" as customers find new ways to address clean room space constraints and accelerate tool deliveries, Dickerson said.
Applied Materials, the dominant supplier of equipment for chip manufacturing, is benefiting from what Dickerson characterized as "two concurrent races" in AI: one for technology leadership and another for production capacity. The company expects leading-edge foundry logic, DRAM, and advanced packaging—areas where it holds strong market positions—to represent "around 80% of wafer fab equipment growth in 2026 and 2027."
Strong Visibility Through 2027 and Beyond
The Santa Clara-based company reported it now receives "rolling 8-quarter forecasts" from its largest customers, providing unprecedented demand visibility. CFO Brice Hill noted that customer conversations "now extend to 2030," with more than 10 new fab projects announced in the quarter alone.
"We have high confidence that 2027 will be another strong growth year for Applied Materials," Dickerson said, citing the "large gap between demand and supply for advanced chips" driven by AI computing.
The fiscal third quarter marked Applied's "13th consecutive quarter of year-over-year gross margin expansion," Hill said, attributing the trend to the value the company's products deliver to customers in the AI ecosystem.
Advanced Packaging and Services See Explosive Growth
Applied Materials expects particularly strong performance in several key segments. The company now projects its overall packaging revenues to grow "more than 70% in calendar 2026," driven by high-bandwidth memory and 3D chiplet stacking technologies critical for AI processors.
The company's Applied Global Services (AGS) business is expected to grow "more than 20% in calendar 2026" with a sustainable long-term annual growth rate in the mid-teens, as customers optimize existing fab performance. Applied has more than 37,000 chambers connected to its AIX software platform for AI-powered monitoring and diagnostics.
In process diagnostics and control, the company expects growth of "more than 50% in calendar 2026," benefiting from its leadership in e-beam inspection technology required for advanced logic and DRAM devices.
New Products and EPIC Center Launch
Applied announced six new products in the quarter, including systems for high-performance DRAM, advanced packaging, and e-beam inspection. The company is preparing to launch operations at its new EPIC Center in Silicon Valley, with the first R&D tool moving into the clean room "next week."
The EPIC collaboration platform now includes 11 announced partnerships, with Broadcom, Screen, and UC Berkeley joining since the last earnings call. The center aims to accelerate technology development by enabling earlier customer engagement and co-innovation.
Dickerson emphasized that AI investments are "on track to deliver compelling returns by accelerating our revenue growth and operating profit margins," while helping the company "scale our revenue significantly faster than our head count."
This article was generated by MarginX from the earnings call on 2026-08-13. It is not investment advice.