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1. Company Snapshot

1.a. Company Description

Applied Materials, Inc.provides manufacturing equipment, services, and software to the semiconductor, display, and related industries.It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.


The Semiconductor Systems segment develops, manufactures, and sells various manufacturing equipment that is used to fabricate semiconductor chips or integrated circuits.This segment also offers various technologies, including epitaxy, ion implantation, oxidation/nitridation, rapid thermal processing, physical vapor deposition, chemical vapor deposition, chemical mechanical planarization, electrochemical deposition, atomic layer deposition, etching, and selective deposition and removal, as well as metrology and inspection tools.The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity comprising spares, upgrades, services, remanufactured earlier generation equipment, and factory automation software for semiconductor, display, and other products.


The Display and Adjacent Markets segment offers products for manufacturing liquid crystal displays; organic light-emitting diodes; and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices.The company operates in the United States, China, Korea, Taiwan, Japan, Southeast Asia, and Europe.Applied Materials, Inc.


was incorporated in 1967 and is headquartered in Santa Clara, California.

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1.b. Last Insights on AMAT

Applied Materials' recent performance was driven by AI-driven product momentum and margin gains. The company's better-than-expected earnings announcement led to a 1.2% increase in trading. JPMorgan Chase upgraded its rating, raising the price target from $220 to $260, citing an overweight rating. The company's Q4 earnings beat estimates, with strong cash returns, despite a year-over-year decline in earnings and key segments. High margins indicate pricing power and cash generation capacity. International revenue trends are being examined for their implications on Wall Street's forecasts.

1.c. Company Highlights

2. Applied Materials' Fiscal 2025 Results Exceed Expectations

Applied Materials reported record annual revenue of $28.4 billion, a 4% increase from fiscal 2024, driven by growth across all segments. The company achieved record foundry systems revenue, DRAM sales outside China, and revenue in Taiwan and Korea. Non-GAAP gross margin increased 120 basis points to 48.8%, the highest level in 25 years. Non-GAAP earnings per share (EPS) rose 9% to $8.77, with actual EPS for the fourth quarter coming in at $2.17, beating estimates of $2.11. The strong financial performance was accompanied by a robust outlook for fiscal 2026, driven by AI computing and growth in leading-edge foundry/logic, DRAM, and high-bandwidth memory.

Publication Date: Nov -15

📋 Highlights
  • Record Revenue:: Fiscal 2025 revenue hit $28.4 billion, a 4% increase from fiscal 2024, with all segments contributing to growth.
  • Gross Margin Milestone:: Non-GAAP gross margin reached 48.8%, the highest in 25 years, up 120 basis points year-over-year.
  • 2026 AI-Driven Growth:: Anticipates accelerated wafer fab spending in H2 2026, with AI computing driving 15% of leading-edge and DRAM wafer starts (mid-30% CAGR).
  • Headcount Reduction:: Implements workforce reductions to offset Q1 costs from timing of merit increases and equity expenses, enabling productivity scaling.
  • DRAM Sales Surge:: Leading-edge DRAM revenue surged 50% in fiscal 2025, with expectations of stronger 2026 growth across customers.

Segment Performance and Outlook

The company's Semiconductor Systems segment is expected to drive growth in 2026, with revenue projected to be around $5.025 billion in Q1. Applied Materials has strong positions in gate-all-around, backside power, DRAM, and advanced packaging, with innovations in the pipeline to enhance performance. The company's PVD technology is performing well, with growth expected in 2026.

Guidance and Valuation

Guidance for Q1 includes revenue of $6.85 billion, plus or minus $500 million, and non-GAAP EPS of $2.18, plus or minus $0.20. The company's valuation metrics, including a P/E Ratio of 25.64 and EV/EBITDA of 20.12, indicate a premium valuation. However, with a ROIC of 22.03% and ROE of 36.12%, the company's strong profitability metrics justify the premium. Analysts estimate revenue growth of 2.2% for the next year, which may not fully capture the company's growth potential driven by AI solutions.

Growth Drivers and Challenges

The company is well-positioned to benefit from the growing demand for AI data center solutions, with 15% of leading-edge wafer starts and DRAM wafer starts allocated towards AI data center solutions, growing at a mid-30% CAGR. However, the company faces challenges, including a $110 million impact from the affiliate rule in Q1 and a remaining $600 million headwind spread throughout the rest of 2026. The company's China business has returned to normalized levels, with expectations of mid-20s level silicon products into next year.

Operational Improvements

Applied Materials is focused on driving margin improvements through pricing and cost programs. The company expects gross margins to increase in the back half due to better absorption on costs and improvements in pricing processes. The headcount reduction announced will enable the company to scale more productively and capture growth opportunities in 2026 and beyond.

3. NewsRoom

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This analyst's top chip pick isn't flashy, but it could benefit from ‘unprecedented' momentum

Dec -04

Source: marketwatch.com

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Applied Materials, Inc. $AMAT Shares Bought by Groupe la Francaise

Dec -04

Source: defenseworld.net

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Applied Materials Stock Surges On AI Chip Boom

Dec -03

Source: forbes.com

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Applied Materials, Inc. (AMAT) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

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30% of the S&P 500 Is Mag 7 Tech Stocks, but This ETF Refuses to Own a Single One

Dec -02

Source: 247wallst.com

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Boston Family Office LLC Buys 1,420 Shares of Applied Materials, Inc. $AMAT

Dec -02

Source: defenseworld.net

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Potentially 12%-15% Consistent Income: Monthly Options Series (December 2025)

Nov -30

Source: seekingalpha.com

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Is AMAT Stock A Buy At This Discount?

Nov -28

Source: forbes.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.74%)

6. Segments

Semiconductor Systems

Expected Growth: 10.2%

Strong demand for Applied Materials' semiconductor systems, driven by increasing adoption of artificial intelligence, 5G, and Internet of Things, will fuel growth.

Applied Global Services

Expected Growth: 8.2%

Applied Materials' global services and maintenance growth is driven by rising demand for semiconductor devices, increasing complexity in chip design, and growing need for yield improvement, leading to increased adoption of its comprehensive services and support offerings.

Display and Adjacent Markets

Expected Growth: 10.2%

Increasing demand for advanced logic and memory chips drives growth in Display and Adjacent Markets for Applied Materials, Inc. This is fueled by the rising adoption of 5G-enabled devices, IoT, and AI applications, which is expected to continue in the forecast period.

Corporate and Other

Expected Growth: 10.4%

Applied Materials' corporate and other operations are driven by increasing demand for semiconductor materials and services, as well as the company's focus on innovation and cost reduction. The growth is also fueled by the rising adoption of artificial intelligence, 5G, and Internet of Things (IoT) technologies.

7. Detailed Products

Etch Systems

Etch systems are used to create high-aspect-ratio structures and patterns on silicon wafers, enabling the production of advanced semiconductors.

Deposition Systems

Deposition systems are used to deposit thin films of material onto silicon wafers, enabling the production of advanced semiconductors.

Metrology and Inspection Systems

Metrology and inspection systems are used to measure and inspect the properties of silicon wafers and semiconductor devices.

CMP Systems

Chemical mechanical planarization (CMP) systems are used to planarize silicon wafers, enabling the production of advanced semiconductors.

Wafer Cleaning Systems

Wafer cleaning systems are used to clean and prepare silicon wafers for further processing.

Ion Implantation Systems

Ion implantation systems are used to introduce dopants into silicon wafers, enabling the production of advanced semiconductors.

Physical Vapor Deposition (PVD) Systems

PVD systems are used to deposit thin films of material onto silicon wafers, enabling the production of advanced semiconductors.

Chemical Vapor Deposition (CVD) Systems

CVD systems are used to deposit thin films of material onto silicon wafers, enabling the production of advanced semiconductors.

Display and Adjacent Markets

Display and adjacent markets solutions are used in the production of displays, such as OLED and LCD displays.

8. Applied Materials, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Applied Materials, Inc. faces moderate threat from substitutes, as customers have limited alternatives for its specialized semiconductor manufacturing equipment.

Bargaining Power Of Customers

Applied Materials, Inc. has a diverse customer base, which reduces the bargaining power of individual customers, giving the company an upper hand in negotiations.

Bargaining Power Of Suppliers

Applied Materials, Inc. relies on a few key suppliers for critical components, giving them some bargaining power, but the company's large scale and diversified supply chain mitigate this risk.

Threat Of New Entrants

The high barriers to entry in the semiconductor manufacturing equipment industry, including significant capital expenditures and technological expertise, make it difficult for new entrants to challenge Applied Materials, Inc.'s market position.

Intensity Of Rivalry

The semiconductor manufacturing equipment industry is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 25.38%
Debt Cost 4.82%
Equity Weight 74.62%
Equity Cost 11.85%
WACC 10.06%
Leverage 34.01%

11. Quality Control: Applied Materials, Inc. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Lam Research

A-Score: 5.5/10

Value: 0.8

Growth: 8.1

Quality: 8.3

Yield: 2.0

Momentum: 9.0

Volatility: 4.7

1-Year Total Return ->

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KLA

A-Score: 5.4/10

Value: 0.8

Growth: 8.4

Quality: 7.9

Yield: 2.0

Momentum: 8.5

Volatility: 5.0

1-Year Total Return ->

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Broadcom

A-Score: 5.4/10

Value: 0.0

Growth: 7.6

Quality: 8.1

Yield: 3.0

Momentum: 9.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Applied Materials

A-Score: 4.9/10

Value: 1.6

Growth: 8.1

Quality: 8.1

Yield: 2.0

Momentum: 5.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Texas Instruments

A-Score: 4.5/10

Value: 1.5

Growth: 3.6

Quality: 6.9

Yield: 6.0

Momentum: 3.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Microchip Technology

A-Score: 3.3/10

Value: 2.9

Growth: 1.9

Quality: 3.6

Yield: 5.0

Momentum: 2.5

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

269.44$

Current Price

269.44$

Potential

-0.00%

Expected Cash-Flows