Applied Materials Q1 Earnings Beat Estimates, Revenues Fall Y/Y

Core Insights - Applied Materials (AMAT) reported first-quarter fiscal 2026 non-GAAP earnings of $2.38 per share, exceeding the Zacks Consensus Estimate by 8.7% and remaining flat compared to the previous year [1] - The company has consistently beaten the Zacks Consensus Estimate in the last four quarters, with an average surprise of 5.2% [1] Financial Performance - AMAT's revenues for the first quarter of fiscal 2026 were $7.01 billion, surpassing the Zacks Consensus Estimate by 1.79%, but decreased by 2.2% year over year [2] - The stock price increased by 11.8% in pre-market trading following the earnings report, and the stock has surged 112% over the past year [2] Segment Performance - Semiconductor Systems generated revenues of $5.14 billion, accounting for 73.3% of total revenues, but declined by 8.1% year over year [3] - Applied Global Services reported revenues of $1.56 billion, representing 22.2% of total revenues, with a year-over-year increase of 15.2% [3] - Other revenues reached $312 million, up 44.4% year over year [3] Geographic Revenue Breakdown - Revenue contributions from various regions included: - United States: $656 million (9%) - Europe: $221 million (3%) - Japan: $525 million (7%) - Korea: $1.46 billion (21%) - Taiwan: $1.72 billion (25%) - Southeast Asia: $335 million (5%) - China: $2.1 billion (30%) [4] - Year-over-year growth was observed in Taiwan (45.6%) and Southeast Asia (17.1%), while declines were noted in Japan (2.8%), Europe (33.0%), China (6.6%), Korea (12.5%), and the United States (28.5%) [4] Margins and Expenses - The non-GAAP gross margin was reported at 49.1%, an increase of 20 basis points year over year [5] - Non-GAAP operating expenses were $1.34 billion, up 1.7% year over year, leading to a non-GAAP operating margin of 30.0%, down 60 basis points from the previous year [5] Balance Sheet and Cash Flow - As of January 25, 2026, cash and cash equivalents plus short-term investments totaled $8.51 billion, slightly down from $8.57 billion in the prior quarter [6] - Long-term debt stood at $6.45 billion, and the company generated non-GAAP free cash flow of $1.04 billion, returning $702 million to shareholders through share repurchases and dividends [6] Q2 Guidance - For the fiscal second quarter of 2026, AMAT expects net sales of $7.65 billion (+/- $500 million), above the Zacks Consensus Estimate of $7.03 billion, indicating a year-over-year decline of 1% [9] - The company anticipates non-GAAP earnings per share of $2.64 (+/- $0.20), with a projected non-GAAP gross margin of approximately 49.3% and operating expenses around $1.42 billion [10]