Traction in WFE and Display Products to Drive AMAT's Q1 Earnings

Applied Materials AMAT is set to report its first-quarter fiscal 2026 results on Feb. 12. Investor attention is firmly focused on its surging semiconductor systems business that is driven by the AI market.

Applied Materials has been experiencing growing traction for its foundry, logic, dynamic random access memory (DRAM), flash memory and advanced packaging wafer fabrication equipment as a rising number of semiconductor chip manufacturing companies are producing high quality chips used in AI and high performance computing.

Click here to know how AMAT’s overall fiscal first-quarter results are likely to be.

Growth in the Semiconductor Systems Segment to Propel AMAT

The semiconductor systems business, which is the largest contributor to AMAT’s top line, grew 4.5% throughout fiscal 2025, with strength across flash memory, DRAM and logic. AMAT’s flash memory or NAND sales nearly doubled to $1.41 billion in fiscal 2025 from the year-ago sales of $747.4 million.

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. price-eps-surprise | Applied Materials, Inc. Quote

In the fourth quarter of fiscal 2025, DRAM revenues grew nearly 16% year over year. These factors are likely to have persisted in the to-be-reported quarter, lifting revenues of AMAT’s semiconductor systems segment. In the previous quarter, AMAT reported that its leading-edge foundry/logic, DRAM and advanced packaging will be the fastest-growing areas of the WFE market.

AMAT’s Display and Applied Global Services to Surge in FY26

AMAT’s display business has rebounded in the fiscal 2025 with year-over-year growth of 19.8%. In the fourth quarter of fiscal 2025, the display revenues grew 68.2% year over year as Applied Materials shipped a richer mix of advanced systems and increased prices broadly. These factors are likely to have benefited AMAT’s corporate and other segment’s revenues in the to-be-reported quarter.

Traction in advanced form factors like thin, light, curved and flexible displays, and new use cases like augmented and virtual reality are at the core of AMAT’s display segment’s growth story. The gross margin of AMAT’s display business hit the highest mark in the past 25 years, coming in at 48.8%, growing 120 basis points year over year. This trend is likely to have persisted in the to-be-reported quarter.

The company’s Applied Global Services segment is also likely to have seen steady growth, aided by strong demand for comprehensive service agreements and the expansion of its subscription-based business.

Zacks Rank and Other Stocks to Consider

AMAT carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IPG Photonics IPGP sports a Zacks Rank #1 at present. IPG Photonics shares have surged 75.8% in the trailing 12-month period. IPG Photonics is set to report fourth-quarter 2025 results on Feb. 12.

MKS MKSI sports a Zacks Rank #1. MKS shares have gained 126.7% in the past 12-month period. The company is likely to report its fourth-quarter 2025 results on Feb. 17, 2026.

Analog Devices ADI carries a Zacks Rank #2 at present. Analog Devices shares have gained 59.1% in the trailing 12-month period. Analog Devices is set to report its earnings on Feb. 18, 2026.

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