Wall Avenue spent the week panicking about AI killing software program corporations. Utilized Supplies simply reminded everybody that any individual nonetheless has to construct the chips.
jumped 12% on Friday after the semiconductor gear big crushed Q1 fiscal 2026 estimates and dropped a steerage bombshell: it expects its semi gear enterprise to develop greater than 20% this calendar yr. In a market starved for precise AI beneficiaries — not simply corporations claiming to make use of it — AMAT delivered the receipts.
The Numbers Don’t Lie
The outcomes inform a easy story: AI chip demand is accelerating, and Utilized Supplies is the corporate promoting the pickaxes.
Q1 income got here in at $7.01 billion, beating the $6.88 billion consensus by practically 2%. Non-GAAP earnings hit $2.38 per share versus the $2.21 Wall Avenue anticipated — a 7.7% beat.
Gross margins expanded to 49.1%, the best stage in 25 years for the corporate. And this wasn’t only a one-quarter blip: Utilized posted file DRAM income in its Semiconductor Techniques division and file companies income in its Utilized International Companies phase, which noticed a 15% year-over-year bounce to $1.56 billion.
However right here’s what actually lit a fireplace beneath the inventory. Q2 steerage got here in at roughly $7.65 billion in income and $2.64 in non-GAAP EPS — each properly above consensus expectations of $7.03 billion and $2.29, respectively.
That’s not a modest beat on steerage. That’s an announcement.
“Utilized Supplies delivered robust leads to our fiscal first quarter, fueled by the acceleration of {industry} investments in AI computing,” CEO Gary Dickerson stated. “The necessity for greater efficiency and extra energy-efficient chips is driving excessive development charges for modern logic, high-bandwidth reminiscence and superior packaging.”
Why This Issues Proper Now
The timing of those outcomes couldn’t be extra vital. For the previous two weeks, markets have been gripped by AI disruption fears — software program shares cratered, actual property names obtained hit, even trucking corporations bought off on worries that AI instruments may automate their companies. The S&P 500 is monitoring for its worst week since November.
Utilized Supplies simply lower by way of the noise with a easy message: the bodily infrastructure buildout for AI isn’t slowing down. It’s dashing up.
Dickerson didn’t mince phrases on the earnings name, projecting that world semiconductor revenues may “probably attain $1 trillion in 2026” — sooner than most {industry} forecasts had predicted. The corporate expects to launch greater than a dozen new merchandise this yr, and its chilly subject emission (CFE) E-beam know-how enterprise is predicted to double income to over $1 billion in calendar 2026.
CFO Brice Hill added context on the availability facet: “Over the previous a number of years, we now have practically doubled our system manufacturing functionality, strengthened our provide chain and elevated our inventories in preparation for market development.”
Morgan Stanley analyst Joseph Moore captured the shift in sentiment forward of the print: “Relative to a few months in the past, the demand atmosphere has improved meaningfully, with supply-chain checks pointing to elevated near-term power.”
How you can Play the Semiconductor Gear Increase
AMAT’s outcomes don’t exist in a vacuum. They validate the complete semiconductor gear thesis — and there are a number of methods to get publicity.
- Utilized Supplies (AMAT) — at round $370 after at this time’s gap-up, the inventory has run 32% year-to-date. However Wall Avenue is scrambling to boost targets. Citi simply lifted to $400 from $250. UBS raised to $405 from $285. B. Riley sees $400. Even after at this time’s transfer, these targets suggest 8-10% extra upside. With the corporate guiding to twenty%+ gear income development, the inventory isn’t as costly because it seems at ~27x ahead earnings. This stays the very best pure-play on AI’s bodily layer.
- — buying and selling round $231, Lam is Utilized’s closest peer in etch and deposition instruments. The corporate already reported robust leads to late January, guiding for 10-15% wafer fab gear spending development in 2026. With a consensus “Robust Purchase” score and a $237 common worth goal, Lam provides probably the most direct read-across from AMAT’s outcomes. It’s cheaper on a relative foundation and studies subsequent in late April.
- — at roughly $1,451, KLA is the inspection and metrology chief. Its Q2 leads to January confirmed income of $3.3 billion (beating $3.25 billion consensus) with industry-leading margins — 62.8% gross, 43.6% working. Analyst targets have been ratcheted as much as a median of $1,665 after these outcomes. In a world the place chip complexity retains rising, KLA’s course of management instruments turn into extra vital at each node.
- — buying and selling close to $1,407, the Dutch lithography monopoly is the last word gatekeeper for superior chipmaking. ASML’s file €13.2 billion in This fall orders (reported in late January) already confirmed the demand image that AMAT is now reinforcing. For buyers who need publicity to probably the most irreplaceable firm within the semiconductor provide chain, ASML is it.
- — at round $409, SMH provides diversified publicity throughout the highest 25 U.S.-listed semiconductor names.
It’s up over 60% up to now yr and holds heavy positions in AMAT, LRCX, KLAC, and ASML alongside chip designers like Nvidia and Broadcom. For buyers who don’t wish to decide particular person winners, SMH is the cleanest option to personal the complete AI infrastructure stack.
The Bear Case (and Why It’s Manageable)
Not every thing was good in AMAT’s report. Income was technically down 2% year-over-year. China income declined 7% and now represents 27% of semiconductor gear gross sales, down from greater ranges — a direct consequence of ongoing U.S. export restrictions. The corporate additionally disclosed a $252.5 million settlement with the Division of Commerce over alleged export management violations, although each the DOJ and SEC closed their inquiries with no enforcement actions.
There’s additionally a respectable query about valuation. At $370, AMAT trades at roughly 27x ahead earnings after a inventory that’s practically doubled up to now yr. Choices pricing earlier than the report implied a 6% transfer in both route — suggesting merchants anticipated a giant response however weren’t positive which manner.
The counterargument is simple: AMAT simply guided Q2 income 9% above the place the quarter was monitoring, tasks 20%+ development for the complete yr, and is sitting on the heart of what Dickerson referred to as a “tipping level” in AI-driven semiconductor demand. When an organization is accelerating right into a multi-year capex supercycle, paying 27x earnings for it isn’t unreasonable.
What to Watch
Three catalysts are value circling on the calendar. First, AMAT’s fiscal Q2 outcomes (anticipated in mid-Might) will present whether or not the $7.65 billion steerage holds up — any upside revision would push targets even greater. Second, {industry} bellwether TSMC’s month-to-month income information in March and April will present real-time affirmation of foundry demand tendencies. And third, the broader AI infrastructure spending image will get clearer as Microsoft, Google, Amazon, and Meta launch their Q1 2026 capex numbers in late April.
The AI {hardware} buildout isn’t a story anymore. Utilized Supplies simply put laborious numbers behind it — and the market is paying consideration.
