Applied Materials Posts Record $10.4 Billion Quarter as DRAM Tools Surge

Applied Materials reported fiscal fourth-quarter revenue of $10.41 billion, up 53% year over year and a company record, as memory makers and foundries bought more equipment for AI chips. Adjusted earnings per share rose 92% to $4.16, beating the $4.02 midpoint the company gave in August, while GAAP EPS climbed 43% to $3.40. The quarter ended October 25.

"AI continues to fuel strong incremental demand for semiconductors," chief executive Gary Dickerson said. He added that Applied is on track to grow its Semiconductor Systems business more than 40% in calendar 2026, which for the company runs from its fiscal second quarter through the first quarter of fiscal 2027. Shares traded about 1.5% higher after hours, according to Investing.com.

Where the money came from

Semiconductor Systems, the division selling deposition, etch, inspection and other chipmaking tools, generated $8.0 billion in revenue. That is up 64% from $4.88 billion a year earlier and up 14% from $7.04 billion in the prior quarter. The segment's operating margin widened to 38.8% from 29.3%.

DRAM customers accounted for 33% of segment sales, up from 28% a year earlier and 26% in the third quarter. By MLQ.ai's calculation from those shares, that is roughly $2.6 billion, about double the year-ago level. Flash memory rose to 9% of sales from 6%. Foundry and logic, still Applied's biggest market, fell to 58% from 66%. In plain terms, memory tools are now driving close to half of the equipment business.

Applied Global Services, which maintains and upgrades installed tools, grew 26% to $1.90 billion.

Margins and the full-year picture

GAAP gross margin rose to 50.4% from 48.0% in the year-ago quarter, and GAAP operating margin reached 35.1% from 25.2%. The year-ago figure carried $181 million of restructuring charges, which explains part of that jump.

For the full fiscal 2026, revenue rose 21% to a record $34.45 billion. GAAP EPS gained 46% to $12.62, and adjusted EPS gained 37% to $12.89. China's share of annual revenue fell to 27% from 30%.

GAAP net income for the fourth quarter was $2,718 million, up from $1,897 million a year earlier. Quarterly revenue has climbed steadily through the year: $7.01 billion in Q1, $7.91 billion in Q2, $9.12 billion in Q3 and $10.4 billion in Q4.

What happened to China's share?

Sales to China rose 35% to $2.64 billion, yet China's share of revenue fell to 25% from 29% a year earlier and 28% in the third quarter. Other regions simply grew faster.

Taiwan, home to TSMC, was the largest single market at $2.92 billion, or 28% of revenue. South Korea, home to Samsung and SK Hynix, contributed 17%. The United States accounted for 13%, with US sales doubling to $1.32 billion. The earnings release did not discuss US export controls.

Guidance, buybacks and the Besi stake

Applied forecast first-quarter fiscal 2027 revenue of $11.1 billion, plus or minus $500 million. At the midpoint, that is roughly 58% above the $7.01 billion of the year-ago quarter. Adjusted EPS guidance is $4.35, plus or minus 20 cents. The company did not give a GAAP EPS forecast.

Cash from operations was a record $3.30 billion, with free cash flow of $2.6 billion. Applied spent $2.00 billion on buybacks — chief financial officer Brice Hill called it the largest quarterly repurchase in more than eight years — and paid $421 million in dividends.

The company also agreed to an accelerated share purchase that raises its stake in Dutch hybrid-bonding equipment maker BE Semiconductor Industries, or Besi, to about 20%. Intel, Kioxia, Besi and UCLA joined its EPIC research center in Silicon Valley, bringing announced partners to 15.

The results landed on a turbulent day for chip stocks, following Nvidia chief executive Jensen Huang's resignation and record margins at memory makers riding AI demand. With DRAM tool demand doubling year over year and first-quarter guidance implying another 58% revenue jump, Applied enters fiscal 2027 with memory — not foundry — as its fastest-growing engine.