Applied Materials, Inc.

Applied Materials supplies equipment, services and software used to manufacture semiconductors and displays. Semiconductor Systems is its largest business; Applied Global Services supports customers' installed equipment. AI-related chip demand is an important growth driver identified by management.

Fourth-quarter results

Revenue grew 53%. Reported gross margin was 50.4%, up from 48.0%, while operating margin increased to 35.1% from 25.2%. Semiconductor Systems sales were $8.00 billion, versus $4.88 billion; Applied Global Services sales were $1.90 billion, versus $1.51 billion.

The quarter included a $653 million unrealized loss on strategic investments, compared with a $467 million gain a year earlier. The adjusted earnings measure removes those investment movements and selected acquisition, restructuring and tax items. The per-share reconciliation identifies a 68-cent adjustment for the current unrealized loss, within the 76-cent gap between reported and adjusted EPS.

The full fiscal year

In the year ended October 25, 2026, revenue was $34.45 billion, compared with $28.37 billion. Reported operating income was $11.09 billion, net income was $10.09 billion and diluted EPS was $12.62. Adjusted diluted EPS was $12.89, compared with $9.42 a year earlier.

Semiconductor Systems contributed $26.14 billion of annual revenue, compared with $21.44 billion. Applied Global Services contributed $6.90 billion, up from $5.74 billion.

Cash, investment and borrowing

Quarterly operating cash flow of $3.30 billion, less $684 million of capital spending, produced $2.62 billion of free cash flow. Applied repurchased $2.00 billion of stock and paid $421 million of dividends in the quarter.

Across the full fiscal year, operating cash flow was $8.87 billion and capital spending was $2.67 billion, leaving $6.20 billion of free cash flow. Annual share repurchases totaled $3.18 billion and dividends $1.57 billion.

At October 25, cash and equivalents were $7.24 billion, with $2.10 billion in short-term investments. Short-term debt was $1.30 billion and long-term debt was $5.23 billion on the reported balance sheet.

Earlier expectations and the next outlook

The fourth quarter exceeded the midpoints of August's revenue and adjusted EPS forecasts while remaining inside their respective $9.75 billion to $10.75 billion and $3.82 to $4.22 ranges.

On November 12, Applied forecast fiscal first-quarter 2027 revenue of $10.6 billion to $11.6 billion and adjusted EPS of $4.15 to $4.55. The EPS forecast includes a four-cent tax benefit related to transfers of intangible assets within the group.

Corporate investment and development

Applied's November results release reported an accelerated share-purchase agreement intended to increase its stake in BE Semiconductor Industries, or Besi, to approximately 20%. It also reported the opening of its EPIC research center and four new partnerships, bringing announced EPIC engagements to 15.

Our analysis of the equipment boom and investment loss explains the split between operating growth, reported profit and adjusted earnings.