Quarter beats estimates on AI-linked equipment demand
Applied Materials reported second-quarter revenue of $9.12 billion, up 24.8% year on year and about 0.9% above analyst estimates of $9.04 billion. Adjusted EPS reached $3.50 versus consensus of $3.39, a 3.1% beat, and adjusted operating income came in at $3.10 billion, a 34% margin and a 2.3% beat. Operating margin expanded to 33.7% from 30.6% a year earlier, while inventory days outstanding improved to 132 from 146 in the prior quarter. Despite the outperformance, shares traded down to $500.50 from $534.54 immediately before the report.
Management attributed the results to robust demand for semiconductor manufacturing equipment, particularly in leading-edge logic and DRAM tied to artificial intelligence infrastructure. CEO Gary Dickerson said customers "have found new ways to address clean room space constraints and significantly increase their demand for tool deliveries," with additional support from expanded services and advanced packaging execution.
Forecast lifted as customer capex commitments deepen
For the third quarter, Applied guided revenue to $10.25 billion at the midpoint, well above analyst estimates of $9.66 billion, with adjusted EPS guidance of $4.02 versus consensus of $3.69. CFO Brice Hill told analysts that semiconductor systems demand has strengthened beyond prior 30% growth expectations, supported by ongoing customer capex increases and multi-year demand signals. Hill said Applied now receives detailed eight-quarter forecasts and multi-year technology roadmaps from customers, improving planning and supply chain alignment.
Analyst questions zero in on margins and visibility
The five analyst questions surfaced during the call touched on growth durability and near-term profitability. Stacy Rasgon of Bernstein Research asked why gross margins were guided flat despite higher revenue; Hill attributed the pressure to ramp costs for new hires and service engineers and to business mix changes, with improvement expected over time. Krish Sankar of TD Cowen asked whether stronger scheduling visibility translated into pricing flexibility or added cost; Hill said deeper customer collaboration reduces uncertainty but still requires investment in capacity and supply chain readiness.
Services and advanced packaging framed as next growth levers
Harlan Sur of JPMorgan asked about the growth and margin path for services, and Hill pointed to AI-enabled solutions and a growing installed base as drivers of higher service margins. On the demand outlook, C. J. Muse of Cantor Fitzgerald asked about the updated semiconductor systems trajectory, while Vivek Arya of Bank of America Securities probed how long-term customer agreements shape Applied's visibility. StockStory said it will track adoption of new advanced packaging and DRAM solutions, execution on manufacturing and supply chain expansion, and sustained services growth as AI-driven monitoring and analytics scale, alongside progress in panel-level packaging and further customer commitments.
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