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Post-event FY2026 and FY2027 revenue and earnings estimates rose.
Reported FY2027 revenue below $41.2 billion.
Sell. At the September 4 report-date price of $454.71, shares stand above Fair value of $312.07 and Potential value of $437.56.3
The main risk is that FY2027 revenue falls below $41.2 billion. That would weaken the expected demand acceleration and reduce later earnings and cash.1
The clearest upside is continued estimate delivery. FY2026 and FY2027 revenue and earnings forecasts rose after the August event, while FY2025 still produced positive operating and free cash flow.145
The cycle view is demand-led. Post-event FY2026 and FY2027 revenue estimates rose, supporting stronger equipment demand if customers complete planned spending.1
Sell because the report-date price exceeds both Fair value and Potential value.3
Sell because the report-date price exceeds both Fair value and Potential value.3
APPLIED MATERIALS INC /DE manufactures systems to meet demand represented by order backlog and customer commitments. Backlog consisted of: (1) orders for which written authorizations have been accepted, or shipment has occurred but revenue has not been recognized; and (2) contractual service revenue and maintenance fees. The products and services offered by the AGS segment enhance those of the Semiconductor Systems segment, particularly in markets with demanding global service requirements. Competition in the AGS segment includes a diverse group of third-party service providers as well as customers that choose to perform their own service.
The Semiconductor Systems segment includes semiconductor capital equipment to enable materials engineering steps including etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging, and ion implantation.
The central downside is FY2027 revenue falling below the dated forecast range, followed by weaker margins or persistently high investment. Sales, earnings and free cash flow would then weaken before long-term assumptions matter.
No qualifying structural advantage is established. FY2025 operating profit and operating cash flow are business outcomes, not proof of switching costs, installed-base lock-in or another durable moat.
KLAC, LRCX, ASML and TER are relevant semiconductor-equipment comparisons. Their growth and operating margins differ materially, so they are useful cross-checks rather than interchangeable businesses.
FY2025 operating profit and cash generation were strong, but those results do not establish a structural moat by themselves.5
The highlighted cell is Fair value when every assumption sits at its base level ($312.07). Each row and column shows what Fair value becomes when one assumption moves.
Free cash flow to the firm stays positive in the first projected year at $7.2B after modeled reinvestment of $1.6B, with terminal value at 68.6% of enterprise value. A sudden drop in free cash flow is not projected unless capital spending relative to , reinvestment, or resets materially.
Higher annual estimates would strengthen the near-term acceleration. Lower capital spending would also reduce pressure on free cash flow.
Industry capex was 4.1% of revenue and 2 times depreciation, while Applied Materials raised FY2025 capex to $2.26 billion.5
Following the August 13, 2026 earnings filing, FY2026 and FY2027 revenue estimates rose; the selected observations were dated September 4, 2026. Stronger demand remains conditional on customer spending.
The same demand can fade if concentrated customers defer orders or regional weakness reaches end demand. The evidence does not quantify supply, capacity or lead-time conditions.
No new position; reduce existing exposure. The report-date price exceeds Potential value, so reduce existing exposure. FY2027 revenue below $41.2 billion or capex-to-depreciation above 3 times in FY2028 would further weaken the case.13
Do not average down without first reassessing major-customer concentration. Customer One and Customer Two represented 19% and 15% of FY2025 revenue; the evidence does not establish that a loss, repricing or in-sourcing event occurred.
The report-date price is above Potential value, so near-term operating strength does not provide an adequate entry point.3
Reduce or exit rather than maintain full exposure. FY2027 execution and capital normalization remain unresolved.15
Upward revisions are constructive, but dated annual support ends at FY2027 and the later growth path fades.1
Sell because the September 4 report-date price of $454.71 exceeds Fair value of $312.07 and Potential value of $437.56.3
The business can still deliver strong FY2027 growth, but that operating upside is already more than reflected in the report-date valuation.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
The records this analysis drew on, as they stood when it was run.
Lower sales, weaker factory use and heavier reinvestment would reduce earnings and cash. Customer concentration could accelerate that path.
Customer repricing or weaker factory use pushes GAAP operating margin below 27% for two fiscal years, reducing profit and cash generated from each sales dollar.
Capex to depreciation stays above 3 times in FY2028. Higher reinvestment then absorbs cash that could otherwise support owner returns.5
The cost of equity rises above 12.9216% as investors demand more compensation for risk, lowering what they pay for future earnings.2
The five developments that would weaken our investment case.
A breach would invalidate the near-term acceleration and lower the starting base for later earnings and cash generation.
Current:September 7, 2026 mean estimate: $46.13 billion.
Alert ifReported FY2027 revenue below $41.2 billion.
A sustained breach would reduce profit generated from each sales dollar and weaken the earnings and cash assumptions linked to the margin path.
Current:FY2025 operating income was $8.29 billion on $28.37 billion of revenue.
Alert ifBelow 27% for two consecutive fiscal years.
A breach would show that the build did not normalize, extending reinvestment and reducing cash available after capital spending.
Current:FY2025 capex was $2.26 billion and about 5.2 times depreciation.
Alert ifAbove 3 times in FY2028.
No such event is established by current disclosure. If reported, the affected revenue share would be at risk; the exact sales and margin effect remains unknown.
Current:Customer One and Customer Two represented 19% and 15% of FY2025 revenue.
Alert ifConditional trigger: the next annual filing reports a customer loss, material repricing or in-sourcing event.
That disclosure would turn the attributed exposure into an observed operating change. The current disclosure establishes only the attributed revenue amount.
Current:FY2025 Taiwan-attributed revenue was $6.86 billion.
Alert ifThe next annual filing reports lower Taiwan-attributed revenue and identifies the cause.
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Limitation: Terminal value is 67.2% of this model's value, above the 60% level at which the methodology flags concentration; the value leans on the years beyond the explicit forecast.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Solve for the growth rate that makes the model value equal the report-date share price.
The base-case forecast accelerates revenue through FY2027, then fades growth while holding operating profitability steady and carrying the stated reinvestment schedule.
The bull path requires stronger earnings growth than the base case while operating profitability holds and reinvestment follows the stronger path. Falling annual estimates would disconfirm it.1
That outcome would preserve the near-term forecast path, but the report-date price still exceeds Fair value.
A lower FY2027 revenue or EPS base would weaken the later earnings and cash-flow paths used in valuation.
FY2025 operating cash exceeded reported profit, although capital spending rose from FY2024 and reduced free cash flow.45
It tests whether sales growth reaches shareholders.1
Lower margins would weaken earnings and cash from each sales dollar.5
Persistent spending would leave less free cash after investment.5
A customer loss could cut sales and factory use.6
| $23.06B |
| $25.79B |
| $26.52B |
| $27.18B |
| $28.37B |
| +5.3% |
| Gross profit | $10.91B | $11.99B | $12.38B | $12.90B | $13.81B | +6.1% |
| Operating income | $6.89B | $7.79B | $7.65B | $7.87B | $8.29B | +4.7% |
| Net income | $5.89B | $6.53B | $6.86B | $7.18B | $7.00B | +4.4% |
| EPS (diluted) | $6.40 | $7.44 | $8.11 | $8.61 | $8.66 | +7.9% |
| EBITDA | $7.39B | $8.26B | $8.46B | $8.79B | $9.65B | +6.9% |
| R&D | $2.49B | $2.77B | $3.10B | $3.23B | $3.57B | +9.5% |
| SG&A | $620.0M | $735.0M | $1.63B | $1.80B | $1.77B | +29.9% |
FY2025 generated $7.96 billion of operating cash and $5.70 billion of free cash flow. Free cash flow was lower after $2.26 billion of capital spending, but these figures do not reconcile every difference.45
Diluted shares fell from 845 million in FY2023 to 808 million in FY2025. Continuation is not assumed while capital spending remains elevated.
The cited financial evidence supports strong operating profit and cash generation, but this section does not infer a return-on-capital trend from margins alone.
The weighted average cost of capital was 10.7967% on September 7, 2026. A like-for-like return-on-capital series is not used here.
FY2025 operating cash was $7.96 billion versus $7.00 billion of reported profit.
Near-term earnings are supported by cash, although capital spending reduced the amount left after investment.
Capex increased from $1.19 billion in FY2024 to $2.26 billion in FY2025.
The payoff and normalization timing remain central to future free cash flow.
| Revenue | $28,368,000,000 |
|---|---|
| Cost of revenue | $14,560,000,000 |
| Gross profit | $13,808,000,000 |
| Operating expenses | $5,519,000,000 |
| Operating income | $8,289,000,000 |
| Non-operating items and tax | -$1,291,000,000 |
| Net income | $6,998,000,000 |
| Total assets | $36,299,000,000 |
|---|---|
| Cash | $7,241,000,000 |
| Current assets | $20,881,000,000 |
| Total liabilities | $15,884,000,000 |
| Current liabilities | $7,999,000,000 |
| Shareholders’ equity | $20,415,000,000 |
| Net income | $6,998,000,000 |
|---|---|
| Operating inflow | $8,101,000,000 |
| Depreciation and amortization | $435,000,000 |
| Stock-based compensation | $668,000,000 |
| Operating cash flow | $7,958,000,000 |
| Operating outflow | $143,000,000 |
| Cash available | $16,071,000,000 |
| Beginning cash | $8,113,000,000 |
| Investing outflow | $2,782,000,000 |
| Capex | $2,260,000,000 |
| Other investing activities | $522,000,000 |
| Financing outflow | $5,977,000,000 |
| Net debt issuance | $292,000,000 |
| Share repurchases | $4,895,000,000 |
| Dividends paid | $1,384,000,000 |
| Ending cash | $7,312,000,000 |
| Investing cash flow | -$2,782,000,000 |
| Financing cash flow | -$5,977,000,000 |
Source: SEC EDGAR · Filed 2025-12-12 · SEC EDGAR
| Revenue by geography | Revenue | Share | YoY |
|---|---|---|---|
| China | $8.5B | 30.1% | -15.7% |
| Taiwan | $6.9B | 24.2% | 71% |
| South Korea | $5.6B | 19.8% | 24.8% |
| United States | $3.1B | 10.8% | -19.8% |
| Japan | $2.3B | 8% | 5.5% |
| Southeast Asia | $1.1B | 3.8% | -5.7% |
| Europe | $962M | 3.4% | -33.3% |
Point-in-time financial data used in the 2026-09-07 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-10-30 | $10.8B | $2.6B | $1.7B | $2.6B | $2.3B | $253M | $389M | $201M | $1.9B | $444M | — | -$425M | -$3.5B | — | $3.4B | $3.7B | $3.1B | 19.9% | — | 8.2% | — |
| 2017-10-29 | $14.7B | $4.4B | $3.5B | $3.8B | $3.4B | $345M | $407M | $220M | $1.2B | $430M | — | -$2.5B | $341M | $3.4B | $5B | $7.3B | $5.3B | 26.8% | — | 8.6% | — |
| 2018-10-28 | $16.7B | $5.1B | $3B | $3.8B | $3.2B | $622M | $457M | $258M | $5.3B | $605M | — | $571M | -$5.9B | $5B | $3.4B | $4B | $5.3B | 26.9% | — | 8.3% | — |
| 2019-10-27 | $14.6B | $3.9B | $2.7B | $3.2B | $2.8B | $441M | $363M | $263M | $2.4B | $771M | — | -$443M | -$3.1B | $3.4B | $3.1B | $3.6B | $5.3B | 22.9% | — | 7.4% | — |
| 2020-10-25 | $17.2B | $4.8B | $3.6B | $3.8B | $3.4B | $422M | $376M | $307M | $649M | $787M | — | -$130M | -$1.3B | $3.1B | $5.5B | $5.7B | $5.4B | 25.4% | — | 5.9% | — |
| 2021-10-31 | $23.1B | $7.4B | $5.9B | $5.4B | $4.8B | $668M | $394M | $346M | $3.8B | $838M | — | -$1.2B | -$4.6B | $5.5B | $5.1B | $5.5B | $5.5B | 29.9% | — | 7.0% | — |
| 2022-10-30 | $25.8B | $8.3B | $6.5B | $5.4B | $4.6B | $787M | $444M | $413M | $6.1B | $873M | $0 | -$1.4B | -$7B | $5.1B | $2.1B | $2.6B | $5.8B | 30.2% | — | 9.7% | — |
| 2023-10-29 | $26.5B | $8.5B | $6.9B | $8.7B | $7.6B | $1.1B | $515M | $490M | $2.2B | $975M | $84M | -$1.5B | -$3B | $2.1B | $6.2B | $6.9B | $6B | 28.9% | — | 11.0% | — |
| 2024-10-27 | $27.2B | $8.8B | $7.2B | $8.7B | $7.5B | $1.2B | $392M | $577M | $3.8B | $1.2B | $593M | -$2.3B | -$4.5B | $6.2B | $8.1B | $9.5B | $6.6B | 28.9% | — | 10.5% | — |
| 2025-10-26 | $28.4B | $9.7B | $7B | $8B | $5.7B | $2.3B | $435M | $668M | $4.9B | $1.4B | $292M | -$2.8B | -$6B | $8.1B | $7.3B | $8.6B | $7.1B | 29.2% | — | 11.3% | — |
Applied Materials Inc. (AMAT) trades at 24.5x forward earnings against a peer median of 27.9x. Its EV/EBITDA of 33.9x compares with a peer median of 40.3x. The comparison uses 4 peers: KLA Corporation, Lam Research Corporation, ASML Holding N.V. and Teradyne Inc., as of 2026-09-02 to 2026-09-05.
| Impact |
|---|
| Note |
|---|
| Equipment-demand acceleration | positive | Higher annual revenue forecasts support the near-term cycle through FY2027. |
| Rising capital intensity | negative | Elevated spending can weaken cash available to shareholders if normalization is delayed. |
Positive FY2025 operating cash flow supports execution. Capex rose from $1.19 billion in FY2024 to $2.26 billion in FY2025, while two major customers increase delivery risk.56
| Level | Action | Why |
|---|---|---|
| Only after price falls below Fair value and the operating thesis remains intact. | Reassess rather than buy automatically. | FY2027 revenue must remain at or above $41.2 billion, with no sustained margin breach. |
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Limitation: Terminal value is 68.6% of this model's value, above the 60% level at which the methodology flags concentration; the value leans on the years beyond the explicit forecast.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
| Lam Research Corporation |
| 26.6x |
| 16.6x |
| 44.4x |
| 65.1% |
| 37.4% |
| ASML | ASML Holding N.V. | 28.0x | 18.3x | 53.9% | 37.1% |
| TER | Teradyne Inc. | 30.6x | 12.5x | 36.9x | 36.5% | 33.2% |
