Applied Materials Falls 6% Despite Record $10.41 Billion Quarter

Applied Materials reported record quarterly revenue of $10.41 billion, up 53.1% year over year, and its stock still fell 6% to $358.54 on November 13. At least ten brokerages cut their price targets on the stock that day. JPMorgan and Goldman Sachs were among them. Every firm kept a Buy-equivalent rating.

The company posted the results after the close on November 12. Adjusted EPS came in at $4.16. Both figures beat Wall Street expectations. The beat marked the sixth consecutive EPS estimate the company has exceeded. Adjusted gross margin expanded to 50.6% from 48.1%.

Guidance also came in above expectations. Applied Materials guided Q1 FY2027 revenue to $11.1 billion, plus or minus $500 million, with adjusted EPS of $4.35. CEO Gary Dickerson said: "AI continues to fuel strong incremental demand for semiconductors and Applied has built the most-enabling portfolio to advance the AI-computing roadmap."

Why did analysts cut targets after a beat-and-raise quarter?

Most firms attributed the cuts to valuation compression across chip equipment stocks. JPMorgan called that compression "severe." Wells Fargo said elevated expectations required a bigger beat-and-raise from the company.

Bank of America, UBS, Wells Fargo and Jefferies joined JPMorgan and Goldman Sachs in lowering targets. Needham set the lowest new target at $470. That figure still sits above the November 12 close of $380.95.

Applied Materials stock is down 19% over the past month. The stock has now surrendered roughly a fifth of its value in a month despite record results.

How far did the selloff spread across chip equipment?

Lam Research (NASDAQ:LRCX) fell 5% to $222.72. KLA (NASDAQ:KLAC) fell 6% to $148.08. Both companies reported their own strong quarters in October. Lam posted record September-quarter revenue of $8.22 billion on October 21. KLA reported revenue of $4.14 billion on October 28, up 28.9% year over year.

The sector is trading as a unit. The beat at Applied Materials is not pulling its stock away from Lam Research and KLA. Analysts see the valuation compression applying to the whole equipment group.

What separates the three equipment makers?

Applied Materials runs the widest wafer fab equipment platform of the three. Its portfolio covers:

• Deposition
• Etch
• Chemical mechanical planarization
• Ion implant
• Process diagnostics

The company also earns recurring service and spares revenue through Applied Global Services. It sells display equipment as well. That breadth lets Applied Materials capture spending across most steps of chipmaking.

Lam Research concentrates on deposition and etch for memory and advanced logic. Its success ties closely to memory and leading-edge capacity builds. KLA dominates process control, inspection and metrology, selling the tools chipmakers use to find defects and measure wafers. Applied Materials offers the most diversified exposure in the group.

Can the spending cycle outrun the valuation worries?

Goldman Sachs and UBS still expect Applied Materials to gain market share as equipment spending picks up into 2027 and 2028. Management expects WFE demand to rise more than 30% in 2027.

The bears point to risks the company itself disclosed. Those include export controls, tariffs and a concentrated customer base. During fiscal 2026, the company disclosed a $253 million settlement with the U.S. Bureau of Industry and Security. CFO Brice Hill said: "Our Q1 number would be slightly higher if everything were perfectly available."

More price target revisions are likely as additional firms digest the guidance. The debate over chip equipment valuations could keep the group volatile in the near term.