Overview

Applied Materials, Inc. (AMAT) is one of the largest global providers of semiconductor manufacturing equipment, with a market capitalization of roughly $240 billion based on the latest snapshot (market_cap ≈ $239.9B). The company supplies tools and services used in chip fabrication, serving logic, foundry, memory, and specialty device customers, and is a core beneficiary of long-term semiconductor demand drivers such as AI, high-performance computing, automotive, and industrial digitalization.

The stock has significantly outperformed the broader market over the last year, with a 52-week share price increase of about 76% versus roughly 19% for the S&P 500 (52_week_change ≈ 0.76 vs s_and_p_52_week_change ≈ 0.19). Sell-side sentiment is constructive, with an average rating in “buy” territory (recommendation_key: "buy", recommendation_mean ≈ 1.87) and a consensus target price of about $266 (target_mean_price ≈ 266.34), bracketed by a wide range from $180 to $425.

On valuation, AMAT trades on a trailing P/E of about 34.7x (pe_ratio ≈ 34.74) and a forward P/E of ~25.9x (forward_pe ≈ 25.91), reflecting the market’s expectation of earnings growth as the next upcycle in wafer-fab equipment (WFE) spending develops. The stock also carries a high price-to-sales ratio of about 8.46x (price_to_sales_trailing_12_months ≈ 8.46) and a price-to-book of ~11.7x (price_to_book ≈ 11.70), signaling a premium positioning and elevated expectations.

Institutional ownership is strong, with approximately 85% of shares held by institutions (held_percent_institution ≈ 0.854), which tends to support liquidity but can amplify cyclicality in flows during downturns.

Profitability and Cash Flow

Applied Materials exhibits robust profitability and capital efficiency characteristics for a capital equipment provider:

• Operating profitability: The operating margin stands at roughly 28.4% (operating_margin ≈ 0.2844), and EBITDA margin is even higher at about 31.5% (ebitda_margin ≈ 0.3154). These levels are strong in an equipment segment that typically faces heavy R&D and service infrastructure costs, underscoring AMAT’s scale, mix, and pricing power.
• Net profitability: Profit margins are around 24.7% (profit_margins ≈ 0.2467), consistent with a high-value technology provider rather than a commoditized equipment supplier.
• Return on equity: ROE is an impressive ~35.5% (roe ≈ 0.3551), indicating highly efficient use of shareholder capital, though investors should note that leverage can amplify this figure.
• Balance sheet and liquidity: The current ratio is a healthy ~2.61 (current_ratio ≈ 2.61), suggesting solid short-term liquidity. Debt-to-equity is modest to moderate at about 34.5% (debt_to_equity ≈ 34.53), a manageable level given cash generation and cyclicality.
• Cash generation: Free cash flow is approximately $3.65 billion (free_cash_flow ≈ 3,653,250,048), supporting capital returns (dividends and buybacks) and ongoing R&D. The company’s structurally high margins and asset-light service/software revenue streams help sustain strong FCF through the cycle.

From a trend perspective, detailed quarterly margin progression is not provided in this snapshot, but the combination of high ROE, strong operating margins, and elevated FCF suggests the current phase of the cycle is profitable despite some top-line softness.

EPS and Surprise History

The earnings history provided spans over two decades and shows a long record of delivering EPS ahead of or in line with expectations, with occasional shortfalls typical of a cyclical hardware name. More recently (based on the latest data points):

• Recent quarters show consistent positive surprises, with EPS actuals often modestly above estimates. For example:
  • A recent period showed EPS of 2.12 vs an estimate of 2.03 (epsActual 2.12 vs epsEstimate 2.03, ~4.7% surprise).
  • Another quarter delivered EPS of 2.13 vs 1.91 estimated (epsDifference ≈ 0.22, surprisePercent ≈ 11.78%).
  • There are occasional misses, such as a quarter with EPS of 2.09 vs a 2.15 estimate (epsDifference ≈ -0.06), ~-3.0% surprise, but these are relatively contained.
• Over the past several years, the pattern has generally been more beats than misses, often in the mid-single to low double-digit percentage surprise range.

This long history of generally meeting or beating expectations supports management’s credibility in guiding through the semiconductor cycle and suggests the current margin and cash flow profile is not an anomaly.

Growth Profile

The near-term and medium-term growth picture is mixed but constructive:

• Recent fundamentals: The snapshot shows revenue growth at about -3.5% year-over-year (revenue_growth ≈ -0.035), consistent with a cyclical slowdown in WFE spending after prior peaks. Despite top-line contraction, earnings growth remains positive at roughly 13.3% (earning_growth ≈ 0.133), indicating mix, pricing, and cost discipline are supporting EPS even in a softer revenue environment.
• This divergence—negative revenue growth but positive EPS growth—highlights operating leverage and the resilience of the installed-base and services business, which tends to be less volatile than new tool orders.

Structurally, AMAT stands to benefit from several multi-year tailwinds:

• AI and high-performance computing: The ramp of AI data centers, high-bandwidth memory (HBM), and advanced logic nodes should drive elevated capital intensity and more complex process steps, areas where AMAT’s deposition, etch, and inspection tools are critical.
• Node transitions and 3D scaling: As foundries and IDMs push into advanced nodes and 3D architectures (e.g., gate-all-around, 3D NAND layering, backside power delivery), process complexity increases, generally favoring leading tool vendors with deep process integration capabilities.
• Specialty and legacy nodes: Automotive, power electronics, and IoT applications are driving incremental capacity investments at mature nodes. Applied’s broad portfolio allows it to participate meaningfully in this segment, smoothing some of the volatility tied to leading-edge ramps.
• Services and recurring revenue: While exact service mix is not quantified in this dataset, historically AMAT has grown its services and software business, which tends to be more recurring, higher-margin, and less cyclical than pure tool shipments.

In valuation terms, the forward P/E of ~25.9x and the negative near-term revenue growth rate suggest the market is looking through the current downcycle and pricing in a recovery in WFE spending and continued structural growth. The trailing P/E premium to the broader market reflects both this cyclical recovery expectation and the strategic centrality of semi equipment to long-term AI and compute themes.

Competitive Landscape

Applied Materials operates in an oligopolistic, highly specialized industry with high barriers to entry, where process know-how, customer integration, and R&D intensity are critical. Key competitors include:

• ASML Holding N.V. (ASML) – Dominant provider of lithography equipment, particularly EUV and high-NA EUV systems, which are indispensable for advanced logic and memory. While not a direct competitor in most tool categories, ASML’s capex share and strategic importance influence overall WFE allocation and customer budgets. AMAT competes indirectly for capex dollars rather than head-to-head on products.
• Lam Research Corporation (LRCX) – A primary competitor in etch and deposition tools. Lam is particularly strong in memory (NAND/DRAM) and has deep relationships with leading memory manufacturers. Relative to Lam, AMAT benefits from a broader portfolio (including CMP, inspection, and other segments) and a larger installed base, but Lam’s focused product strength can pressure pricing and share in specific segments.
• KLA Corporation (KLAC) – Leader in process control and yield management (inspection and metrology). AMAT competes with KLA in some inspection/metrology segments, but KLA remains the pure-play leader. AMAT’s ability to integrate process and metrology solutions can be an advantage, but KLA’s domain depth and software analytics capabilities remain formidable.
• Tokyo Electron Limited (TEL) – A major Japanese equipment vendor with a broad portfolio, including coaters/developers, etch, deposition, and cleaning tools. TEL is particularly strong in certain process steps and in Japan and Asia customer bases. AMAT competes directly with TEL across multiple categories, with both companies leveraging scale and long-term customer ties.
• Tokyo Seimitsu Co., Ltd. (Accretech) – Focused largely on probing and metrology, more niche versus AMAT but relevant in test and measurement as device complexity rises.

In this landscape, Applied Materials’ competitive advantages include:

• Scale and breadth: AMAT offers one of the broadest portfolios across deposition, etch, CMP, inspection, and related software/services. This breadth supports integrated process offerings, cross-selling, and deep engagement across customer technology roadmaps.
• Customer intimacy and installed base: A large installed base provides recurring service revenue and strong visibility into customer plans. It also creates high switching costs, reinforcing long-term relationships.
• R&D and process integration: High R&D intensity and deep collaboration with leading foundry and IDM customers enable AMAT to co-develop next-generation process steps, sustaining technological relevance across nodes and device types.
• Financial strength: High margins, strong ROE (35.5%), and substantial free cash flow ($3.65B) enable sustained investment in R&D and strategic M&A, allowing AMAT to maintain or expand its technology leadership.

However, the competitive environment is intense, and long-term risks remain:

• Customers can leverage multiple vendors to preserve negotiating power, constraining margin expansion.
• Geopolitical and export-control dynamics—especially U.S.-China restrictions—may shift competitive positions regionally, potentially benefiting or hurting AMAT relative to peers depending on rule specifics.
• The premium valuation (P/E ~35x trailing, P/S ~8.5x) increases sensitivity to any share-loss signals or cyclical disappointments.

Overall, Applied Materials combines strong profitability, a robust balance sheet, and a leading competitive position in a structurally important industry. While exposed to WFE cyclical downturns and policy risk, its financial and strategic positioning appear well suited to capture secular growth from AI, advanced logic and memory, and expanding specialty semiconductor applications.