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Can HBM and Packaging Demand Accelerate AMAT's Revenue Growth?
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Key Takeaways
AMAT expects HBM DRAM and advanced packaging to be among its fastest-growing segments in 2026.
HBM needs 3-4x more wafer starts per bit, lifting demand for AMAT's wafer fabrication tools.
Packaging demand is rising as HBM and 3D chiplet stacking support denser, lower-power AI systems.
Applied Materials’ (AMAT - Free Report) growth outlook is being driven by strong demand for high-bandwidth memory (HBM) and advanced packaging. Rising demand in Artificial Intelligence (AI) is driving investments toward leading-edge logic, HBM DRAM and advanced packaging, all of which are expected to be its fastest-growing segments in 2026. The above-mentioned segments are expected to contribute significantly to AMAT's semiconductor equipment business, which is expected to grow more than 20% in 2026.
HBM DRAM is more equipment-intensive than standard DRAM. AMAT stated that HBM requires 3-4 times more wafer starts per delivered bit than standard DRAM. At the same time, the number of dies in the HBM stacks is expected to rise from 12 layers to more than 16-20 layers. This increases demand for wafer starts and the number of process steps required, and supports higher demand for AMAT's wafer fabrication equipment.
Advanced packaging is also seeing strong growth. Management expects HBM packaging and 3D chiplet stacking to be the fastest-growing areas within packaging in 2026. These technologies are needed to connect more GPUs, memory and high-speed I/O at higher density. This helps drive higher performance with lower power consumption in AI systems and is driving higher customer investment in AI energy-efficient computing.
Applied Materials has strong positioning in these areas. Management stated that the company has a leading market share in HBM and advanced packaging, supported by its strengths in deposition and etch technologies. These segments are expected to grow significantly in 2026 and remain key drivers of the company’s semiconductor equipment business. The Zacks Consensus Estimate for AMAT's 2026 and 2027 revenues indicates year-over-year growth of 9.3% and 19.2%, respectively.
How Competitors Fare Against AMAT
AMAT competes with companies like Lam Research (LRCX - Free Report) and ASML Holdings (ASML - Free Report) in the semiconductor equipment market.
Lam Research and IBM have signed a five-year agreement to work on chip technology below 1 nanometer. Under this agreement, LRCX and IBM will focus on developing new materials, new manufacturing processes and High-NA EUV lithography to support future logic chips. Both companies will focus on solving the next set of challenges needed for High NA EUV and sub-1nm chips.
ASML is witnessing strong demand from DRAM and logic customers, which are ramping up leading-edge nodes using ASML’s NXE:3800E EUV systems. ASML 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 surged 80.2% in the past six months compared with the Zacks Electronics - Semiconductors industry’s growth of 9.1%.
AMAT 6-Month Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, Applied Materials trades at a forward price-to-sales ratio of 8.79X, higher than the industry’s average of 7.43X.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 and 2027 earnings implies year-over-year growth of 17.9% and 26.4%, respectively. The estimates for fiscal 2026 and 2027 have been revised upward over the past 60 and 30 days, respectively.
View the Zacks #1 Rank List
Image: Bigstock
Can HBM and Packaging Demand Accelerate AMAT's Revenue Growth?
Key Takeaways
Applied Materials’ (AMAT - Free Report) growth outlook is being driven by strong demand for high-bandwidth memory (HBM) and advanced packaging. Rising demand in Artificial Intelligence (AI) is driving investments toward leading-edge logic, HBM DRAM and advanced packaging, all of which are expected to be its fastest-growing segments in 2026. The above-mentioned segments are expected to contribute significantly to AMAT's semiconductor equipment business, which is expected to grow more than 20% in 2026.
HBM DRAM is more equipment-intensive than standard DRAM. AMAT stated that HBM requires 3-4 times more wafer starts per delivered bit than standard DRAM. At the same time, the number of dies in the HBM stacks is expected to rise from 12 layers to more than 16-20 layers. This increases demand for wafer starts and the number of process steps required, and supports higher demand for AMAT's wafer fabrication equipment.
Advanced packaging is also seeing strong growth. Management expects HBM packaging and 3D chiplet stacking to be the fastest-growing areas within packaging in 2026. These technologies are needed to connect more GPUs, memory and high-speed I/O at higher density. This helps drive higher performance with lower power consumption in AI systems and is driving higher customer investment in AI energy-efficient computing.
Applied Materials has strong positioning in these areas. Management stated that the company has a leading market share in HBM and advanced packaging, supported by its strengths in deposition and etch technologies. These segments are expected to grow significantly in 2026 and remain key drivers of the company’s semiconductor equipment business. The Zacks Consensus Estimate for AMAT's 2026 and 2027 revenues indicates year-over-year growth of 9.3% and 19.2%, respectively.
How Competitors Fare Against AMAT
AMAT competes with companies like Lam Research (LRCX - Free Report) and ASML Holdings (ASML - Free Report) in the semiconductor equipment market.
Lam Research and IBM have signed a five-year agreement to work on chip technology below 1 nanometer. Under this agreement, LRCX and IBM will focus on developing new materials, new manufacturing processes and High-NA EUV lithography to support future logic chips. Both companies will focus on solving the next set of challenges needed for High NA EUV and sub-1nm chips.
ASML is witnessing strong demand from DRAM and logic customers, which are ramping up leading-edge nodes using ASML’s NXE:3800E EUV systems. ASML 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 surged 80.2% in the past six months compared with the Zacks Electronics - Semiconductors industry’s growth of 9.1%.
AMAT 6-Month Performance Chart
Image Source: Zacks Investment Research
From a valuation standpoint, Applied Materials trades at a forward price-to-sales ratio of 8.79X, higher than the industry’s average of 7.43X.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 and 2027 earnings implies year-over-year growth of 17.9% and 26.4%, respectively. The estimates for fiscal 2026 and 2027 have been revised upward over the past 60 and 30 days, respectively.
Image Source: Zacks Investment Research
Applied Materials currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.