AMAT Q3 FY26: Record $9.1B and a $10.25B Guide — The AI WFE Supercycle Accelerates

Beat on revenue and EPS with 13 straight quarters of margin expansion, DRAM up 52% and packaging guided to +70%, Q4 guide implies 51% growth

Applied Materials just delivered the highest quarter-on-quarter growth in its history, and guided even higher.

Q3 FY26 revenue hit a record $9.1 billion, up 25% year over year and 15% sequentially, with non-GAAP EPS of $3.50 beating the $3.36 consensus by 4.2%. Management then raised the bar for Q4 to $10.25 billion at the midpoint, up 51% year over year, with EPS of $4.02. The message was clear: AI infrastructure demand is broadening and customers are giving Applied eight-quarter rolling forecasts with visibility into 2030.

For a stock up more than 100% year to date into the print, the beat and raise removes the near-term air-pocket risk and points to share gains in the three areas driving 80% of wafer fab equipment growth.

What printed vs expectations

Q3 was a clean beat on both lines. Revenue of $9.1 billion came in about $110 million above the roughly $8.99 billion street estimate, and EPS of $3.50 beat by $0.14. Growth accelerated sharply from Q2, when revenue was $7.91 billion.

Profitability expanded for the 13th consecutive quarter year over year. Non-GAAP gross margin reached 50.4%, up 40 basis points sequentially and 150 basis points year over year, with operating margin at 34%, up 190 basis points sequentially and 330 basis points year over year.

Where the growth came from

• Semiconductor Systems did the heavy lifting at $7.0 billion, up 18% sequentially and 27% year over year, with record foundry logic and DRAM up 52% year over year to record levels including HBM packaging. Segment gross margin hit 55.4%, up 190 basis points year over year, and operating profit rose 45% to $2.7 billion.
• Applied Global Services grew 22% year over year to $1.8 billion, with gross margin 35.6% and operating margin 30.1%. Management now expects AGS to grow more than 20% in calendar 2026 and sustain mid-teens long term, supported by more than 37,000 chambers connected to its AIX software and over 1,000 new support engineers added.
• China was 26% of Semi Systems plus AGS revenue in Q3, and management expects China to increase this calendar year led by 28nm foundry logic.
• Two other businesses inflected. Packaging revenue is now expected to grow more than 70% in calendar 2026, up from more than 50% guided last quarter, helped by six new products launched in the quarter. Process diagnostics and control is expected to grow more than 50% in calendar 2026.

The guide that matters

Q4 FY26 guidance calls for revenue of $10.25 billion plus or minus $500 million and EPS of $4.02 plus or minus $0.20. At the midpoint that is 51% revenue growth and 85% EPS growth year over year.

The mix: Semi Systems about $7.9 billion, up 62% year over year, AGS about $1.84 billion, up 22%, and other revenue about $510 million as display jumps from $294 million in Q3. Corporate gross margin is guided flat at about 50.4%, up 230 basis points year over year, with the flat sequential due to the lower-margin display mix. Operating expense is guided to about $1.58 billion. Q1 FY27 will be a 14-week quarter, so opex steps up.

Management also said other revenue should average about $400 million per quarter through 2027.

Why visibility improved

CEO Gary Dickerson said customers have found ways to address clean-room constraints and have again increased tool delivery demand in the past three months. The company has nearly doubled manufacturing space and is hiring more than 1,500 people this quarter, with capacity to double quarterly system output by 2028.

CFO Bryce Hill said the company now has rolling eight-quarter forecasts from its largest customers and roadmap visibility of about five years, with longer lead-time purchase orders and cancellation charges. More than 10 new fab projects were announced just this quarter.

The three areas where Applied leads — leading-edge foundry logic, DRAM, and advanced packaging — are expected to represent around 80% of wafer fab equipment growth in both 2026 and 2027. That concentration is why management expects to grow faster than the overall market and to gain share.

Margins and pricing power

Gross margin has risen about 300 basis points over the past three years to over 50% at the company level and over 55% in Semi Systems. Hill said the company reprices every tool on value, with higher pricing in both new and existing products, and expects continued expansion as new products carry higher margins.

The EPIC Center, where the first R&D tool moves into the clean room next week, is central to that strategy. Broadcom just joined as the 11th announced EPIC innovation partner, alongside the co-innovation work that management says accelerates the AI roadmap and improves fab returns.

Cash and capital return

Operating cash flow was a record over $3 billion, capex was $707 million, and free cash flow was $2.3 billion. Applied returned $860 million in the quarter, $420 million in dividends and $440 million in buybacks, with $12.8 billion remaining on the authorization. The company reiterated its policy to return 80% to 100% of free cash flow.

What to watch

• Q4 execution against the $10.25 billion guide and whether Semi Systems can sustain 60% plus growth into calendar 2027
• DRAM and HBM mix, including the ramp of 6F squared, 4F squared and 3D DRAM where management says it is number one
• Packaging and diagnostics momentum, both guided to more than 50% to 70% growth in calendar 2026
• China mix and 28nm demand, and display volatility around the $400 million quarterly average
• Gross margin trajectory as value-based pricing and new products offset input costs

Sources

• Q3 2026 Applied Materials Earnings Conference Call transcript, Aug 13, 2026 — Bargo stored transcript (55,793 chars, fetched Aug 14 00:22 CET)
• Q2 2026 Applied Materials Earnings Call transcript, May 14, 2026 — prior quarter guide of $8.95B ±$500M / $3.36 ±$0.20
• Earnings calendar consensus est. $3.36 for FQ3'26 — Bargo earnings calendar
• Market data Aug 13, 2026 — price $553.49, market cap $441.6B, forward P/E 32.1x — Bargo get_quote / get_fundamentals

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