Applied Materials lifts outlook on sustained AI demand, shares rise
CEO Gary Dickerson confirms customer forecasts span three years, underpinned by advanced packaging and logic manufacturing growth.
Applied Materials shares advanced following comments from chief executive Gary Dickerson, who indicated that customer forecasts for semiconductor equipment demand extend several years into the future. The remarks, delivered alongside the company’s second-quarter fiscal 2026 results, reinforced the thesis that artificial intelligence infrastructure spending will remain a durable driver for the industry. The stock rose alongside peers including Lam Research and ASML, reflecting broader investor confidence in the sector's trajectory.
The Santa Clara-based manufacturer reported record revenue of $7.91 billion for the second quarter of fiscal 2026, an 11 per cent increase year-on-year. Earnings per share also posted strong gains, with GAAP EPS rising 33 per cent to $3.51 and Non-GAAP EPS increasing 20 per cent to $2.86. Dickerson noted that the company’s largest customers provide directional forecasts for equipment demand extending roughly three years ahead, offering visibility well beyond the current fiscal year.
Management expects the equipment division to grow by more than 30 per cent in calendar year 2026. This growth is being propelled by accelerated investment in leading-edge logic, DRAM manufacturing, and advanced packaging. Specifically, revenue from advanced packaging equipment is projected to increase by 50 per cent this year, driven by the complex manufacturing processes required for next-generation AI chips.
Industry data supports the optimism surrounding capital expenditure. According to World Semiconductor Trade Statistics, the total semiconductor market is expected to cross $1.5 trillion in 2026 and reach $1.9 trillion in 2027. This expansion is largely attributed to explosive demand for AI infrastructure, high-bandwidth memory, and advanced computing platforms, areas where Applied Materials holds leading technology positions.
Wall Street analysts maintain a consensus "Strong Buy" rating on the stock, with a mean price target of $631.44 and a high target of $900 per share. The current share price, trading near $570, sits at a valuation of 47.4 times forward earnings. While these multiples exceed historical averages for semiconductor equipment companies, they reflect expectations of continued above-cycle growth supported by the AI investment cycle.
In addition to operational updates, the company announced new partnerships via its EPIC Center aimed at the commercialisation of next-generation semiconductor technology. Management also highlighted ongoing investments in inventory, production planning, and logistics capacity to support customer growth. Dickerson emphasised that the infrastructure for AI computing is still in its initial stages, suggesting significant room for further capital deployment.
