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AMAT's Etch Business Crosses $1B: Can DRAM Momentum Continue?

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Key Takeaways

  • AMAT's etch business exceeded $1B in Q3, driven by strong DRAM demand for AI applications.
  • New DRAM wins include advanced gapfill tools and Pioneer dielectric patterning systems.
  • AMAT sees 50% revenue growth from leading DRAM customers in fiscal 2025, eyeing share gains.

Applied Materials (AMAT - Free Report) is witnessing strong growth in its memory business, which is being driven by strong demand for advanced Dynamic Random Access Memory (DRAM). In the third quarter of fiscal 2025, a key highlight was Applied Materials’ etch business, which crossed $1 billion in quarterly revenues for the very first time. Management attributed this growth to be supported by increased customer investments in high-performance DRAM for AI workloads.

Applied Materials also noted new customer wins during the third quarter. It secured new production positions at major DRAM makers for its most advanced chemical vapor deposition system, which is used for next-generation gapfill technology, and its new Pioneer dielectric patterning system. These tools are designed to meet the advanced requirements for next-generation memory.

Looking ahead, Customers are preparing to move to vertical transistor or 4F2 architectures, and the transition is expected to begin in 2027-2028. Applied Materials sees an opportunity to gain more than five points of incremental market share. Moreover, in fiscal 2025, Applied Materials expects revenues from its leading-edge DRAM customers to rise about 50%.

Applied Materials’ DRAM portfolio is delivering record results today, and its future roadmap suggests room for more share gains. AI-driven workloads are increasing requirements for high-bandwidth, high-performance memory, further fueling new DRAM demand, where Applied Materials remains well-positioned to capitalize on this opportunity, supporting its long-term growth trajectory.

How Competitors Fare Against Applied Materials

Semiconductor heavyweights like Lam Research (LRCX - Free Report) and ASML Holding (ASML - Free Report) are also seeing strong momentum as memory makers invest in next-generation technologies.

In the fourth quarter of fiscal 2025, Lam Research secured several new application wins at a major DRAM manufacturer using its latest conductor etch tool, Akara. Moreover, for the full fiscal 2025, Lam Research recorded its highest DRAM revenues so far, where the growth was driven by node upgrades and higher demand for HBM.

In the second quarter of 2025, ASML Holding highlighted strong customer demand for its products. The demand was driven by ASML’s DRAM and logic customers, which are ramping leading-edge nodes using ASML Holding’s NXE:3800E EUV systems. Additionally, ASML Holding noted that multiple DRAM customers are adopting EUV lithography, which helps in shortening cycle time and lowering costs.

AMAT’s Price Performance, Valuation and Estimates

Shares of Applied Materials have gained 1.2% year to date compared with the Electronics - Semiconductors industry’s growth of 16.4%.

AMAT YTD Price Return Performance

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From a valuation standpoint, Applied Materials trades at a forward price-to-sales ratio of 4.47X, lower than the industry’s average of 8.65X.

AMAT Forward 12-Month P/S Ratio

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The Zacks Consensus Estimate for Applied Materials’ fiscal 2025 and 2026 earnings implies year-over-year growth of 8.3% and 1.5%, respectively. The estimates for fiscal 2025 and 2026 have been revised downward in the past 30 days.

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Applied Materials currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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ASML Holding N.V. (ASML) - free report >>

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Applied Materials, Inc. (AMAT) - free report >>

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