Applied Materials, Inc. Q1 FY2026 earnings call

• Delivered strong revenue, margins, and cash flow in 2026Q1.
• Focused on operational discipline and supply chain execution.
• Returned capital to shareholders through repurchases and dividends.
• Investing in R&D and capacity to support long-term growth.
• Complying with all regulations, with demand in China mixed by segment.
• Services growth supported by expanding installed base, higher attachment to performance-based agreements, and analytics-driven optimization.

In 2026Q1, Applied Materials delivered strong results driven by strong demand across AI, foundry-logic, and memory. Foundry-logic remains healthy with strength at leading nodes, while memory is improving, led by DRAM and HBM-related investments. Advanced packaging is a strong growth vector. Revenue contribution details weren't provided in absolute terms but focus was on the performance across these segments.

• AI demand remains robust and broad-based, supporting sustained WFE strength.
• Gross margin expected to trend favorably as mix normalizes and cost actions take hold.
• DRAM WFE is leading the recovery, with DRAM outpacing NAND near term.
• Backlog remains elevated with a book-to-bill around unity, expecting stability as demand broadens across segments.

• Export controls impacting China demand in certain leading-edge areas.
• Regulatory developments like CFIUS-related matters monitored closely, with outlook reflecting current regulatory environment.

Q: Could you discuss the sustainability of AI-related demand into the next few quarters and how it influences your WFE outlook?

A: AI demand remains robust and broad-based, supporting sustained WFE strength. Continued investment in leading-edge foundry-logic, advanced packaging, and improving trends in DRAM and NAND give confidence in demand durability over the coming quarters.

Q: How should we think about gross margin trajectory given mix and any supply constraints?

A: Gross margin will reflect product and customer mix, as well as continued improvements in productivity and cost. Managing supply constraints proactively, and expecting margins to trend favorably as mix normalizes and cost actions take hold.

Q: Can you comment on the cadence of orders in foundry-logic versus memory and any color on regional trends?

A: Foundry-logic remains healthy with strength at leading nodes, while memory is improving, led by DRAM and HBM-related investments. Regionally, continued momentum in the U.S. and Taiwan, with activity also picking up in Korea.

Q: What are you seeing in advanced packaging, and how does Applied Materials, Inc. differentiate?

A: Advanced packaging is a strong growth vector driven by heterogeneous integration and AI. Differentiates with a comprehensive toolset across wafer-level packaging, hybrid bonding, and inspection/metrology, enabling customers to scale performance and power efficiently.

Q: Could you update us on your capacity expansion plans and lead-time improvements?

A: Continue to expand capacity in critical product lines and are investing in supply resiliency. Lead times are improving as we qualify additional suppliers and streamline our operations.

Q: How are you approaching capital returns and balance sheet priorities this year?

A: Priorities remain to invest in the business for long-term growth, maintain a strong balance sheet, and return excess cash to shareholders through buybacks and dividends. Expect to continue repurchasing shares at a steady pace while funding strategic investments.

Q: Any update on China demand and export controls impact?

A: Continue to comply with all regulations. Demand in China remains mixed by segment, with mature nodes steady and certain leading-edge areas impacted by restrictions. Global footprint and broad portfolio allow support across regions within the regulatory framework.

Q: On services, can you talk about growth drivers and attachment rates?

A: Services growth is supported by our expanding installed base, higher attachment to performance-based agreements, and analytics-driven optimization. Investing in automation and remote capabilities to enhance uptime and yield for our customers.

Q: How are you positioned for gate-all-around and backside power transitions?

A: Well positioned with a broad suite of deposition, etch, CMP, and inspection/metrology solutions. Gate-all-around and backside power introduce new materials and integration challenges where leadership in materials engineering and co-optimization is a key differentiator.

Q: Any color on equipment pricing and competitive dynamics?

A: Pricing remains rational, reflecting the value of performance and total cost of ownership. Competitive dynamics are stable, and continue to win based on technology differentiation, productivity, and service.

Q: Can you discuss EUV-related process steps and opportunities for Applied Materials, Inc. as customers scale HVM?

A: EUV scaling increases requirements for patterning adjacencies, hard mask engineering, clean, and metrology/inspection. Integrated solutions help customers improve line-edge roughness, CD control, and defectivity as EUV moves deeper into HVM and to higher NA.

Q: What is your outlook for NAND versus DRAM WFE into the next few quarters?

A: DRAM WFE is leading the recovery, particularly with HBM-driven investments, while NAND is improving at a slower pace as supply/demand rebalances. Expect both segments to grow through the year, with DRAM outpacing NAND near term.

Q: Can you update us on your long-term model and OpEx trajectory?

A: Continue to target a balanced long-term model with operating leverage as revenue scales. OpEx will grow at a measured pace focused on R&D and customer enablement, with discipline on overhead.

Q: Any updates on HBM-specific tools and demand visibility?

A: Seeing strong pull for tools supporting HBM, including patterning, dielectric deposition, and advanced packaging steps like hybrid bonding and TSV-related processes. Visibility extends through multiple quarters given customers’ capacity plans.

Q: How is your metrology and inspection business trending?

A: Metrology and inspection are growing as process complexity increases. E-beam and optical platforms, along with computational products, are gaining traction to address challenging use cases in leading-edge logic and memory.

Q: What is the status of your supply chain localization and resiliency initiatives?

A: Made progress diversifying suppliers, increasing dual-sourcing, and localizing critical components. These actions improve resiliency, reduce lead times, and support compliance with evolving trade regulations.

Q: Could you comment on CFIUS or regulatory developments that could impact your outlook?

A: Closely monitor regulatory developments, including CFIUS-related matters. Outlook reflects current regulatory environment, with appropriate assumptions incorporated. Will continue to engage with authorities and customers to ensure compliance.

Q: What are you seeing in mature nodes and ICAPS-related demand?

A: ICAPS demand remains healthy, supporting power, automotive, and industrial applications. While growth is moderating from peak levels, broad portfolio across deposition, etch, and inspection positions well in mature and specialty nodes.

Q: Any update on your backlog and book-to-bill?

A: Backlog remains elevated with a book-to-bill around unity. Working through the backlog as supply improves and expecting stability as demand broadens across segments.

Q: Are you seeing any pushouts or cancellations?

A: Seen some timing shifts typical for the industry, but no material cancellations. Overall demand signals remain constructive.

Q: Can you discuss your R&D priorities over the next year?

A: Priorities include gate-all-around, backside power, advanced packaging, EUV adjacencies, new materials for scaling, and expanding metrology/inspection capabilities with AI-driven analytics.

Q: Any updates on services margins and mix?

A: Services margins are stable to improving, supported by higher attachment, software content, and productivity initiatives. Mix continues to shift toward performance-based contracts.

Q: How should we think about OpEx growth versus revenue in the near term?

A: Near term, OpEx will grow modestly, below the pace of revenue, as driving operating leverage while prioritizing R&D and customer support