Applied Materials (AMAT) is set to report its fiscal second-quarter earnings on Thursday, with Wall Street anticipating strong results fueled by surging demand for AI chip manufacturing equipment. The stock, trading near its all-time high of $447, stood at $431, up 70% year-to-date and 156% over the past 12 months.
Analysts project adjusted earnings per share of $2.68, up from $2.39 a year earlier, and revenue of $7.7 billion, an 8% year-over-year increase. System sales are expected to rise 11% to $5.8 billion, while the remainder comes from services. The company’s key role in AI chip production—supplying critical tools for wafer processing to giants like TSMC, Samsung, and Micron—has driven a sharp reversal in capital spending after a post-pandemic lull.
AI spending is the primary growth engine. Applied Materials’ equipment is used in the most advanced stages of semiconductor manufacturing, making it indispensable for high-performance AI chips. This has led analysts to sharply raise price targets. Citi’s Atif Malik lifted his target from $420 to $450, citing strong revenue and profit growth, with a projected CY27 EPS of $15.72. Cantor Fitzgerald’s C.J. Muse went further to $550, while HSBC and UBS set targets of $517 and $480, respectively. The average analyst target has climbed from $203 a year ago to $384.
However, caution lingers. China, a significant revenue source, is expected to show flat sales growth due to export controls and rising domestic competition. Additionally, the stock’s forward P/E ratio of 40—nearly double NVIDIA’s 23 and the S&P 500’s 21—has some analysts flagging valuation concerns. Technical patterns, including an abandoned baby candlestick and a rising wedge, suggest a possible short-term pullback around earnings.
Looking ahead, annual revenue is projected to hit $31.5 billion in fiscal 2026, up 11%, and $38.2 billion in 2027, with EPS reaching $14.30. The company’s history of beating estimates has some forecasting Q2 revenue above $7.8 billion. Elon Musk’s endorsement of the company’s terafab product has also drawn fresh attention. While the AI-driven demand story remains compelling, investors will watch whether Applied Materials can deliver numbers that justify its stretched valuation.
