AMAT to Post Q1 Earnings: Time to Buy, Sell or Hold the Stock?

Core Viewpoint - Applied Materials (AMAT) is expected to report a decline in revenues and earnings for the first quarter of fiscal 2026, with strong demand in wafer fabrication equipment driven by AI and high-performance computing [2][3][9]. Financial Expectations - AMAT anticipates revenues of $6.85 billion (+/- $500 million), a decrease of 3.87% year-over-year, while the Zacks Consensus Estimate is $6.89 billion [2][9]. - Non-GAAP earnings are projected at $2.18 (+/- $0.20), reflecting a 7.98% decline from the previous year's figure, with the consensus estimate at $2.19 per share [3][9]. Earnings Performance - AMAT has a strong earnings surprise history, beating the Zacks Consensus Estimate in the past four quarters with an average surprise of 4.17% [4]. - The Earnings ESP is +3.06%, indicating a potential earnings beat this season [5][6]. Market Demand and Growth Drivers - Increased demand for wafer fabrication equipment is attributed to the rising use of semiconductors in AI and high-performance computing, particularly in foundry, DRAM, and advanced packaging [7][9]. - AMAT's NAND sales nearly doubled to $1.41 billion in fiscal 2025, indicating growing prominence in the market despite a lower market share [8][9]. Segment Performance - The display business showed a year-over-year growth of 19.8% in fiscal 2025, with a significant 68.2% increase in the fourth quarter, benefiting from advanced systems and price increases [11]. - The Applied Global Services segment is expected to see steady growth due to strong demand for service agreements and subscription-based business expansion [12]. Competitive Positioning - AMAT leads in GAA transistors at 2nm and below, which are essential for next-generation semiconductor manufacturing [10][22]. - The company is well-positioned to capitalize on the growing demand for AI-driven semiconductors through its innovations in chip manufacturing [23]. Investment Outlook - AMAT shares have increased by 74.9% over the past six months, outperforming the Zacks Electronics – Semiconductors industry [13]. - The company is currently trading at a forward price-to-sales ratio of 8.46X, slightly above the industry average of 8.26X [16]. - Given the continuous strength in wafer fabrication equipment and the demand for advanced semiconductor technologies, AMAT is recommended as a buy [24].