AMAT · Applied Materials
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a weekly close above $412
Note written ·
Price against the kill line
10.1% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a weekly close above $412.00, on record since 11 November 2026; only a weekly close settles it. The shares are down 30.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A weekly close above $412, the 16 September 2026 low, which would show the shares recovering ahead of the chip sector. Fiscal first-quarter 2027 revenue above the $11.6 billion top of the company's guide would also show the shares leading.
Research onlyNot in the portfolio.
Catalyst
The business · as of
Applied Materials sells the machines chipmakers use to deposit, etch, implant and inspect layers on silicon wafers, plus service and spare parts. Its buyers are foundries, memory makers and logic producers such as TSMC, Samsung and Intel. It earns money on tool sales and recurring service. Revenue was $9,115 million in the quarter to 26 July 2026.
What is changing, and what follows · as of
- What is changing now
- On 12 November 2026 the company reported record fiscal fourth-quarter revenue of $10.41 billion. Its chief executive said wafer fab equipment demand should rise more than 30% in 2027.
- What follows for the company
- The company plans to double systems output from fourth-quarter 2026 levels by 2028. Its chief financial officer calls clean-room space a gating factor. Gross margin held at 50.4% in the fourth quarter.
- What follows for its customers, suppliers and competitors
- Per the company, leading-edge fabs at buyers like Taiwan Semiconductor (TSM) and Micron (MU) run full. Lam Research (LRCX) and KLA (KLAC) fell with the shares on 13 November 2026. MKS Instruments (MKSI) and Ultra Clean (UCTT) supply parts.
What the price assumes · as of
At the 13 November 2026 close (filed figures to 20 August 2026), the shares trade at 31.7 times earnings, 9.5 times sales and 32.0 times operating profit, with a 1.9% free-cash-flow yield. Those multiples hold only if revenue keeps growing near the 24.8% of the latest filed quarter while the operating margin stays near its 33.7%.
Key figures from the filings · Technology
Quarter to 26 July 2026, filed 20 August 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 9,115
- Revenue, change on a year (%)
- +24.8
- Gross margin (%)
- 50.3
- Operating margin (%)
- 33.7
- Free cash flow, four quarters ($M)
- 5,623
- Net cash, cash less debt ($M)
- 1,490
- Price to earnings (×)
- 31.7
- Enterprise value to sales (×)
- 9.5
All filed numbers
What Applied Materials reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 9,115 | +24.8 | 50.3 | 33.7 |
| first filed | 7,910 | +11.4 | 49.9 | 31.9 |
| first filed | 7,012 | −2.1 | 49.0 | 26.1 |
| first filed | 6,800 | −3.5 | 48.0 | 25.2 |
| first filed | 7,302 | +7.7 | 48.8 | 30.6 |
| first filed | 7,100 | +6.8 | 49.1 | 30.5 |
| Pre-tax income ($M) | 2,907 |
| Net income ($M) four quarters: 9,267 | 2,538 |
| Diluted shares, change on a year (%) against the quarter to 27 July 2025 | −0.2 |
| Operating cash flow ($M) | 8,396 |
| Capital spending ($M) | 2,773 |
| Free cash flow ($M) | 5,623 |
| Cash and short-term investments ($M) | 9,233 |
| Debt ($M) non-current long-term debt plus current maturities plus short-term borrowings | 7,743 |
| Net cash, cash less debt ($M) | 1,490 |
| Deferred revenue ($M) +32.4% on a year | 3,271 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 7,691 |
| Inventory ($M) | 6,564 |
| Shareholders' equity ($M) | 25,626 |
| Market value ($M) | 294,028 |
| Enterprise value, market value plus net debt ($M) | 292,538 |
| Enterprise value to sales (×) | 9.5 |
| Enterprise value to operating income (×) | 32.0 |
| Price to earnings (×) | 31.7 |
| Price to book value (×) | 11.5 |
| Free-cash-flow yield (%) | 1.9 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 1.8% of shares outstanding sold short, 2.2 days of average trading to cover, +4.8% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $4.5M |
| 12 monthsfrom | $0 | $180.6M |
Linked companies · as of
The thesis
Applied Materials looks more likely to lag the S&P 500 than lead it over the next three months. The business is strong. On 12 November 2026 its chief executive said wafer fab equipment demand should rise more than 30% in 2027. But the shares fell on the next session anyway, as brokers cut targets on sector valuations. Nvidia's results on 17 November 2026 and TSMC's 2027 spending guide in January decide the call.
The fiscal fourth-quarter report on 12 November 2026 showed record revenue of $10.41 billion, up 53% from a year earlier. Adjusted earnings per share (EPS) were $4.16, against $2.17 a year earlier. Benzinga put forecasts at $10.30 billion and $4.06. The company guided fiscal first-quarter 2027 revenue to $11.1 billion, plus or minus $0.5 billion, and adjusted EPS to $4.35, plus or minus $0.20, per the Investing.com call transcript. The low end of each range sits below the consensus Benzinga reported before the report: $10.894 billion and $4.26.
The shares closed at $370.50 on 13 November 2026, down from $380.95 the session before. That is 49.9% below the 52-week intraday high of $739.67 set on 30 June 2026. On 13 November 2026, Benzinga tied the fall in Applied Materials, Lam Research and KLA to news of Nvidia chief executive Jensen Huang's departure. The same day, 11 brokers cut their targets on Applied Materials. Benzinga reported that most of them cited valuations across chip-equipment stocks rather than the company's results.
Bullish and bearish views on Applied Materials, Inc.
The bull case on Applied Materials, Inc. (AMAT), in brief: management sees 2027 equipment demand up 30%. The bear case: a strong outlook did not stop the selling.
Bull case
- Management sees 2027 equipment demand up 30%. On the 12 November 2026 call, chief executive Gary Dickerson said wafer fab equipment demand should rise more than 30% in 2027 and called 2027 another record year, per the Investing.com transcript.
- Margins are at a high. The 12 November 2026 release reported a fourth-quarter gross margin of 50.4% under generally accepted accounting principles (GAAP). The 10-Q shows the operating margin at 33.7% in the quarter to 26 July 2026, against 25.2% in the quarter to 26 October 2025.
- Customers' leading-edge fabs are full. Chief financial officer Brice Hill said on 12 November 2026 that leading-edge logic and DRAM fabs run at full utilization. He named leading-edge DRAM and advanced packaging as the strongest growth areas for 2027.
- Output is set to double by 2028. The company said on 12 November 2026 that it plans to double systems output from fourth-quarter 2026 levels by 2028 and to raise output every quarter in fiscal 2027.
- Cash is going back to shareholders. Benzinga reported on 12 November 2026 that fourth-quarter buybacks totalled $2.0 billion, the largest quarterly amount in more than eight years. Free cash flow was $5,623 million over the four quarters to 26 July 2026, per the 10-Q.
- Foundry and memory budgets are rising. TSMC kept its 2026 capital-spending range at $60–64 billion on 15 October 2026. Samsung guided 2026 spending to about KRW 84.4 trillion on 29 October 2026, roughly 60% above 2025, per Light Reading.
Bear case
- A strong outlook did not stop the selling. The shares fell 2.7% on 13 November 2026, the first full session after the report and the 30% equipment-growth outlook. JPMorgan cut its target to $500 from $660 that day, and Needham cut to $470 from $580, per Benzinga.
- The lowest broker target is close to the price. Evercore ISI lowered its target to $430 on 13 November 2026. JPMorgan, Wells Fargo, TD Cowen and B. Riley sit at $500, per Benzinga.
- Clean-room space limits how much ships. On 12 November 2026, chief financial officer Brice Hill called clean-room capacity "a gating factor" for industry tool demand. He said first-quarter revenue would be slightly higher with perfect supply.
- China's share keeps shrinking. China was 25% of fourth-quarter revenue, against 29% a year earlier, per Benzinga on 12 November 2026. Hill said China would likely be under 25% of the business in 2027.
- AI spending fear sets the sector price. Fortune reported on 5 November 2026 that tech stocks had their biggest sell-off since Covid, as investors priced an early end to the AI data-center boom.
- Insiders have only sold. SEC Form 4 filings show chief financial officer Brice Hill selling 7,500 shares at $479.25 on 25 August 2026. Director Judy Bruner sold 1,000 shares at $465.00 on 8 September 2026. Chief accounting officer Adam Sanders sold 725 shares at $544.56 on 2 October 2026.
Price setup
The shares closed at $370.50 on 13 November 2026. Adjusted daily closes put the 50-day moving average at $437.91 and the 200-day at $446.00 on that date, both above the price. The 50-day sits below the 200-day. The 3-month change is −30.7%.
The rebound after the election sell-off ran from a $332.71 close on 6 November 2026 to $395.08 on 11 November 2026. It gave back ground over the next two sessions. The mid-September low, which Invezz reported broken on 10 November 2026, is the nearest prior low above the price. A weekly close back above it would put the shares in their pre-sell-off range. The 52-week closing low is $220.23, set on 20 November 2025.
From that low to the June high, the shares more than tripled. They now sit about half below the peak. Three-month returns across liquid stocks had a standard deviation of 27% in 2026, against 15% in 2017. That wide spread leaves the call close to even odds.
Catalysts ahead
- 17 November 2026: Nvidia third-quarter fiscal 2027 results. Sets AI capital-spending sentiment after the 5 November 2026 sell-off and the news of its chief executive's departure. These two events dragged chip-equipment shares lower on 13 November 2026.
- 19 November 2026: Ex-dividend date for the $0.53 quarterly dividend, payable 10 December 2026. A routine event. With the $2.0 billion fourth-quarter buyback, it shows how much cash the company returns.
- ~9 December 2026 (est.): Federal Reserve rate decision. A rate increase would weigh on equipment-stock valuations, which drove the 13 November 2026 target cuts more than results did.
- ~14 January 2027 (est.): TSMC fourth-quarter 2026 results and 2027 capital-spending guide. A 2027 range well above the $60–64 billion 2026 range would back management's call for more than 30% equipment growth. It would challenge the lag view.
- ~11 February 2027 (est.): Applied Materials fiscal first-quarter 2027 results. Revenue against the $10.6–11.6 billion guide will show whether clean-room and supply limits are capping shipments.
What would change the view
A weekly close above $412, the 16 September 2026 low, which would show the shares recovering ahead of the chip sector. Fiscal first-quarter 2027 revenue above the $11.6 billion top of the company's guide would also show the shares leading.
What it trades with
Applied Materials trades with the chip-equipment group. On 13 November 2026, Benzinga reported Lam Research falling alongside Applied Materials and KLA after Nvidia's leadership news. That ties the shares to Nvidia's 17 November 2026 results and to AI-spending sentiment generally. HSBC called the equity correction "overdone" on 13 November 2026, per Benzinga, which shows the sector reading is still divided. Customer budgets at TSMC, Samsung and Micron set orders for all three equipment makers. Rate expectations feed in through valuations: the shares trade at 31.7 times trailing earnings, on filed figures to 20 August 2026.
The evidence, claim by claim (8)
- Fiscal fourth-quarter 2026 revenue was a record $10.41 billion, up 53% from a year earlier, with a 50.4% GAAP gross margin; adjusted EPS was $4.16, against $2.17 a year earlier. Applied Materials fiscal fourth-quarter 2026 earnings release · as of
- Fiscal first-quarter 2027 guidance: revenue of $11.1 billion, plus or minus $0.5 billion, and adjusted EPS of $4.35, plus or minus $0.20. Applied Materials 12 November 2026 earnings call, Investing.com transcript · as of
- Chief executive Gary Dickerson said wafer fab equipment demand should rise more than 30% in 2027 and called 2027 another record year. Applied Materials 12 November 2026 earnings call, Investing.com transcript · as of
- The company plans to double systems output from fourth-quarter 2026 levels by 2028; its chief financial officer called clean-room capacity a gating factor. Applied Materials 12 November 2026 earnings call, Investing.com transcript · as of
- JPMorgan cut its target to $500 from $660 and Needham to $470 from $580; most firms cutting targets cited chip-equipment valuations rather than results. Benzinga, 13 November 2026 · as of
- Fiscal fourth-quarter share repurchases totalled $2.0 billion, the company's largest quarterly buyback in more than eight years. Benzinga, 12 November 2026 · as of
- TSMC reaffirmed 2026 capital spending of $60–64 billion and said 2026–2028 spending would be significantly higher than the prior three years. TSMC third-quarter 2026 earnings call · as of
- Chief financial officer Brice Hill sold 7,500 shares at $479.25 on 25 August 2026, and chief accounting officer Adam Sanders sold 725 shares at $544.56 on 2 October 2026. SEC Form 4 filings, 27 August 2026 and 5 October 2026 · as of
Sources
- Earnings call transcript: Applied Materials tops Q4 2026 forecasts as AI demand lifts outlook · za.investing.com
- Applied Materials Announces Fourth Quarter and Fiscal Year 2026 Results · globenewswire.com ·
- These Applied Materials Analysts Slash Price Targets Despite Strong Q3, Raised FY Outlook on >30% WFE Gro · benzinga.com
- NVIDIA
- Live: Will Applied Materials Crush Q4 Earnings Tonight After the Bell? · 247wallst.com ·
- Applied Materials Earnings Due Thursday: What Investors Need to Know · benzinga.com
- Tech stocks are suffering their biggest selloff since Covid, as investors see premature end to AI datacenter boom · fortune.com ·
- Applied Materials stock: death cross pattern nears ahead of earnings · invezz.com ·
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