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Should You Buy, Sell or Hold AMAT Stock at a P/S Valuation of 9.59X?
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Key Takeaways
AMAT's 111% YTD rally has lifted its P/S to 9.59X, well above the industry's 5.25X multiple.
AI-led WFE demand and leadership in HBM and 3D chiplet stacking are expanding AMAT's growth opportunities.
AMAT's AGS revenues hit a record $1.78B, up 22%, as services demand and fab optimization gained momentum.
Applied Materials (AMAT - Free Report) stock trades at a premium with a price-to-sales (P/S) multiple of 9.59X, which is much above the industry’s P/S of 5.25X. AMAT’s value score of F also suggests its overvaluation.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
This has resulted in AMAT shares climbing 111% year to date, outperforming the Zacks Computer and Technology sector and the Zacks Electronics - Semiconductors industry’s appreciation of 24.1% and 39%, respectively.
AMAT YTD Performance Chart
Image Source: Zacks Investment Research
Given the rise in share price and valuation combination, investors might ask: Should they buy, sell or hold the stock? Let’s discuss the fundamentals in detail.
AMAT Rides on AI-Led WFE Demand
Applied Materials 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.
AMAT’s AGS Business is Gaining Momentum
AMAT’s Applied Global Services (“AGS”) business has shown consistent growth in the past few quarters. In the third quarter of fiscal 2026, AGS benefited from increasing demand for services that help semiconductor manufacturers improve fab performance and accelerate production ramps. AGS revenues reached a record $1.78 billion, up 22% year over year, and its operating margin improved 280 basis points year over year.
AMAT’s AGS is benefiting from the semiconductor industry’s focus on increasing output and yield. Management said customers are simultaneously bringing new fabs online and optimizing existing production facilities. More than 37,000 chambers are connected to Applied Materials’ AIx software, which supports AI-powered monitoring, diagnostics and predictive analytics for fab operations.
The company has nearly doubled manufacturing space over the past several years and plans to double quarterly system output from current levels by 2028.
AMAT added more than 1,500 manufacturing and AGS support employees in the third quarter of fiscal 2026 and plans further capacity to meet demand through 2030. AMAT’s customers are also providing longer-term forecasts enabling AGS revenues to grow more than 20% in 2026 and at a sustainable mid-teens annual rate over the longer term. For the fourth quarter of fiscal 2026, Applied Materials expects AGS revenues to be approximately $1.84 billion.
AMAT’s Broad Portfolio Helps it Challenge its Competitors
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) , Lam Research (LRCX - Free Report) and Camtek (CAMT - Free Report) at bay. The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power.
KLA Corporation remains a dominant player in process control, wafer inspection and yield management solutions, while Camtek focuses on semiconductor inspection, metrology, advanced packaging and high-performance computing applications. Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
All of these companies operate based on large capital expenditure. AMAT is particularly seeing strong customer visibility. Based on longer-term customer demand signals, the company opened its newest manufacturing center in Singapore during the quarter. AMAT is hiring and training manufacturing and customer-support personnel with the objective of doubling quarterly system output from current levels by 2028.
AMAT’s diversified product base has helped it retain its margins. 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 60 days.
Image Source: Zacks Investment Research
Conclusion: Buy AMAT Stock Now
AMAT’s broad portfolio, rising AI-driven WFE demand, expanding semiconductor equipment business and investments in manufacturing capacity support further growth. Given these factors, we suggest that investors should accumulate this Zacks Rank #2 (Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
View the Zacks #1 Rank List
Image: Bigstock
Should You Buy, Sell or Hold AMAT Stock at a P/S Valuation of 9.59X?
Key Takeaways
Applied Materials (AMAT - Free Report) stock trades at a premium with a price-to-sales (P/S) multiple of 9.59X, which is much above the industry’s P/S of 5.25X. AMAT’s value score of F also suggests its overvaluation.
AMAT Forward 12-Month (P/S) Valuation Chart
Image Source: Zacks Investment Research
This has resulted in AMAT shares climbing 111% year to date, outperforming the Zacks Computer and Technology sector and the Zacks Electronics - Semiconductors industry’s appreciation of 24.1% and 39%, respectively.
AMAT YTD Performance Chart
Image Source: Zacks Investment Research
Given the rise in share price and valuation combination, investors might ask: Should they buy, sell or hold the stock? Let’s discuss the fundamentals in detail.
AMAT Rides on AI-Led WFE Demand
Applied Materials 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.
AMAT’s AGS Business is Gaining Momentum
AMAT’s Applied Global Services (“AGS”) business has shown consistent growth in the past few quarters. In the third quarter of fiscal 2026, AGS benefited from increasing demand for services that help semiconductor manufacturers improve fab performance and accelerate production ramps. AGS revenues reached a record $1.78 billion, up 22% year over year, and its operating margin improved 280 basis points year over year.
AMAT’s AGS is benefiting from the semiconductor industry’s focus on increasing output and yield. Management said customers are simultaneously bringing new fabs online and optimizing existing production facilities. More than 37,000 chambers are connected to Applied Materials’ AIx software, which supports AI-powered monitoring, diagnostics and predictive analytics for fab operations.
The company has nearly doubled manufacturing space over the past several years and plans to double quarterly system output from current levels by 2028.
AMAT added more than 1,500 manufacturing and AGS support employees in the third quarter of fiscal 2026 and plans further capacity to meet demand through 2030. AMAT’s customers are also providing longer-term forecasts enabling AGS revenues to grow more than 20% in 2026 and at a sustainable mid-teens annual rate over the longer term. For the fourth quarter of fiscal 2026, Applied Materials expects AGS revenues to be approximately $1.84 billion.
AMAT’s Broad Portfolio Helps it Challenge its Competitors
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) , Lam Research (LRCX - Free Report) and Camtek (CAMT - Free Report) at bay. The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power.
KLA Corporation remains a dominant player in process control, wafer inspection and yield management solutions, while Camtek focuses on semiconductor inspection, metrology, advanced packaging and high-performance computing applications. Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
All of these companies operate based on large capital expenditure. AMAT is particularly seeing strong customer visibility. Based on longer-term customer demand signals, the company opened its newest manufacturing center in Singapore during the quarter. AMAT is hiring and training manufacturing and customer-support personnel with the objective of doubling quarterly system output from current levels by 2028.
AMAT’s diversified product base has helped it retain its margins. 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 60 days.
Image Source: Zacks Investment Research
Conclusion: Buy AMAT Stock Now
AMAT’s broad portfolio, rising AI-driven WFE demand, expanding semiconductor equipment business and investments in manufacturing capacity support further growth. Given these factors, we suggest that investors should accumulate this Zacks Rank #2 (Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here