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AMAT Rides on AI-Led WFE Demand: Can it Sustain the Momentum?
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Key Takeaways
AMAT is positioned for AI-led WFE growth as advanced logic, DRAM and packaging drive 2026-27 demand.
AMAT expects advanced packaging revenues to grow over 70% in 2026, with DRAM revenues up 52%.
AMAT plans to double quarterly system output by 2028 as leading-edge fabs operate at full capacity.
Applied Materials (AMAT - Free Report) is well positioned to capitalize on AI-driven semiconductor demand as leading-edge foundry-logic, DRAM and advanced packaging are expected to account for around 80% of wafer fab equipment (WFE) growth in 2026 and 2027. AMAT’s leadership in these areas, particularly HBM and 3D chiplet stacking, strengthens its exposure to rising AI computing requirements and fab capacity investments globally.
AMAT introduced six new chipmaking systems in the latest quarter, spanning DRAM and advanced packaging. Enhanced Centura Prime Epi targets faster, more power-efficient DRAM and HBM, while Producer Avila 2 supports higher-layer-count HBM. AMAT also introduced Opta Quad CMP, Nokota VMax 2 ECD and new eBeam systems addressing demanding packaging, plating, metrology and defect-analysis requirements for advanced architectures and yield optimization across fabs.
As the opportunity broadens beyond equipment sales, chipmakers race to increase output and yield, benefiting wafer fabrication equipment manufacturers like AMAT. Applied Materials expects advanced packaging revenues to grow more than 70% in 2026, while DRAM revenues, including HBM packaging, rose 52% year over year in the fiscal third quarter. Process diagnostics and control revenues are also expected to increase more than 50% this year overall through 2026.
Strong customer visibility further supports AMAT’s growth outlook. Most leading-edge logic and DRAM fabs are operating at full capacity, customers announced more than 10 new fab projects during the third quarter of fiscal 2026, and some forecasts extend to 2030. AMAT plans to double quarterly system output by 2028. Applied Materials’ fiscal fourth-quarter revenue guidance of $10.25 billion also signals accelerating momentum into 2027.
How Competitors Fare Against AMAT
AMAT’s broad portfolio positions the company to capture a larger share of customer spending as semiconductor manufacturing becomes increasingly materials-intensive while also keeping its competitors like KLA Corporation (KLAC - Free Report) and Lam Research (LRCX - Free Report) at bay.
KLA Corporation remains a dominant player in process control, wafer inspection and yield management solutions, while Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power, helping it adapt amid the continuous competitive pressure of KLA Corporation and Lam Research.
The rise in stock price has made AMAT stock trade at a premium. Currently, AMAT has a price-to-sales (P/S) multiple of 7.98X, which is much above the industry’s P/S of 4.88X. AMAT’s value score of D also suggests its overvaluation.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Applied Materials expects non-GAAP earnings of $4.02 per share (+/- 20 cents), indicating 85% year-over-year growth at the midpoint. The Zacks Consensus Estimate suggests year-over-year growth of 86.6%. The estimates have been revised upward in the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
AMAT Rides on AI-Led WFE Demand: Can it Sustain the Momentum?
Key Takeaways
Applied Materials (AMAT - Free Report) is well positioned to capitalize on AI-driven semiconductor demand as leading-edge foundry-logic, DRAM and advanced packaging are expected to account for around 80% of wafer fab equipment (WFE) growth in 2026 and 2027. AMAT’s leadership in these areas, particularly HBM and 3D chiplet stacking, strengthens its exposure to rising AI computing requirements and fab capacity investments globally.
AMAT introduced six new chipmaking systems in the latest quarter, spanning DRAM and advanced packaging. Enhanced Centura Prime Epi targets faster, more power-efficient DRAM and HBM, while Producer Avila 2 supports higher-layer-count HBM. AMAT also introduced Opta Quad CMP, Nokota VMax 2 ECD and new eBeam systems addressing demanding packaging, plating, metrology and defect-analysis requirements for advanced architectures and yield optimization across fabs.
As the opportunity broadens beyond equipment sales, chipmakers race to increase output and yield, benefiting wafer fabrication equipment manufacturers like AMAT. Applied Materials expects advanced packaging revenues to grow more than 70% in 2026, while DRAM revenues, including HBM packaging, rose 52% year over year in the fiscal third quarter. Process diagnostics and control revenues are also expected to increase more than 50% this year overall through 2026.
Strong customer visibility further supports AMAT’s growth outlook. Most leading-edge logic and DRAM fabs are operating at full capacity, customers announced more than 10 new fab projects during the third quarter of fiscal 2026, and some forecasts extend to 2030. AMAT plans to double quarterly system output by 2028. Applied Materials’ fiscal fourth-quarter revenue guidance of $10.25 billion also signals accelerating momentum into 2027.
How Competitors Fare Against AMAT
AMAT’s broad portfolio positions the company to capture a larger share of customer spending as semiconductor manufacturing becomes increasingly materials-intensive while also keeping its competitors like KLA Corporation (KLAC - Free Report) and Lam Research (LRCX - Free Report) at bay.
KLA Corporation remains a dominant player in process control, wafer inspection and yield management solutions, while Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power, helping it adapt amid the continuous competitive pressure of KLA Corporation and Lam Research.
AMAT’s Price Performance, Valuation and Estimates
Applied Materials shares have climbed 70.6% year to date, outperforming the Zacks Computer and Technology sector and the Zacks Electronics - Semiconductors industry’s appreciation of 16% and 24.2%, respectively.
AMAT YTD Performance Chart
Image Source: Zacks Investment Research
The rise in stock price has made AMAT stock trade at a premium. Currently, AMAT has a price-to-sales (P/S) multiple of 7.98X, which is much above the industry’s P/S of 4.88X. AMAT’s value score of D also suggests its overvaluation.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
Applied Materials expects non-GAAP earnings of $4.02 per share (+/- 20 cents), indicating 85% year-over-year growth at the midpoint. The Zacks Consensus Estimate suggests year-over-year growth of 86.6%. The estimates have been revised upward in the past 30 days.
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.