Technology
60/100
60/100Is AMAT-Applied Materials, a buy?
Friday 14 August 2026
Why now: The stock is selling off today while the multi-year industry drivers (more complex chips, more packaging steps, and large fab investment) remain intact, which can create a long-term entry window if the post-earnings move stabilizes. The timing edge is valuation and sentiment resetting, not a clean chart setup.
Upside: Wall Street’s average price target implies about 28% upside from the current area, but the nearer-term upside depends on AMAT regaining investor confidence that growth can stay strong into the next fiscal year. Longer term, upside is driven by equipment intensity and services growth as chip complexity rises.
Risks: The biggest risk is a semiconductor capital spending downturn (especially memory) that compresses growth and margins, which would look worse given the stock’s high multiple. A second risk is that today’s drop turns into a longer consolidation that keeps the stock below key moving averages for months.
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Scorecard
Read:Strong metricsSolid metricsSelectiveCautionUnfavourableN/A
| Scorecard | 60/100 | |
|---|---|---|
| Company Detail | AMAT - Applied Materials, Inc. | |
| Price as at 14 August 2026 | $505.61 | |
| Market cap | $409.0B | |
| Quality and Fundamental Score (100) | ||
| Breakout / Early-Momentum /20 | 2/20 | |
| Rev/EPS Momentum /20 | 16/20 | |
| Business Quality /15 | 11/15 | |
| Balance Sheet /15 | 14/15 | |
| Valuation /10 | 4/10 | |
| Industry Relative Strength /10 | 4/10 | |
| Macro / Sector Tailwind /10 | 9/10 | |
| Growth | ||
| Cash runway | Cash generative | |
| Revenue YoY | +4.4% | |
| EPS YoY | +0.6% | |
| FCF YoY | -23.9% | |
| Gross margin | 48.7% | |
| Valuation & Trend | ||
| Trailing P/E | 44.2x | |
| Forward P/E | 41.9x | |
| RSI (14d) | 45 | |
| vs 50d SMA | -9.5% | |
| Support cushion | −13.7% | |
| Sentiment | ||
| Wall Street verdict | Mixed | |
| News tone | Positive | |
| Dividend | 0.4% | |
How are these colored?
| Metric | Strong metrics | Solid metrics | Selective | Caution | Unfavourable |
|---|---|---|---|---|---|
| Overall score | ≥ 80 | 70-79 | 60-69 | 50-59 | < 50 |
| Business quality /15 | ≥ 12 | 10-11 | 8-9 | 6-7 | < 6 |
| Balance sheet /15 | ≥ 12 | 10-11 | 8-9 | 6-7 | < 6 |
| Market cap | ≥ $20B | $5B-$20B | $2B-$5B | $1B-$2B | < $1B |
| Cash runway | ≥ 3 yr or cash generative | 1.5-3 yr | 0.75-1.5 yr | 0.25-0.75 yr | < 0.25 yr |
| Revenue YoY | ≥ 15% | 5-15% | 0-5% | -5-0% | < -5% |
| EPS YoY | ≥ 20% | 5-20% | 0-5% | -5-0% | < -5% |
| FCF YoY | ≥ 10% | 1-10% | 0-1% | -5-0% | < -5% |
| Gross margin | ≥ 60% | 40-60% | 25-40% | 10-25% | < 10% |
| Trailing P/E | < 15 | 15-25 | 25-35 | 35-40 | > 40 or neg |
| Forward P/E | < 15 | 15-25 | 25-35 | 35-40 | > 40 or neg |
| RSI (14d) | 50-70 | 45-50 or 70-75 | 40-45 or 75-78 | 30-40 or 78-80 | < 30 or > 80 |
| vs 50d SMA | +2% to +15% | 0-2% or 15-25% | -2-0% or 25-35% | -3--2% or 35-40% | < -3% or > 40% |
| Support cushion | 2-10% above | 0-2% | 10-15% | 15-20% | price below support |
| Wall Street verdict | Aligned | — | Mixed | — | Disagrees |
| News tone | Positive | — | Neutral / Mixed | — | Negative |
| Dividend | Yield ≥ 2% & growing | Growing | Flat payer ≥ 1% | Low / flat | Cutting |
Detailed Analysis — Friday 14 August 2026
What they do
Applied Materials sells semiconductor manufacturing equipment and process tools used to build chips, and it also earns recurring revenue by servicing and upgrading installed tools at customer fabs. It makes money from systems sales across major chipmaking steps and from service contracts and parts tied to its large installed base.
Leadership
Gary E. DickersonCEO
Gary E.
Brice A. HillCFO
Brice A.
Customers & notable contracts
Receiver of capital expenditure: Yes — Applied is a direct receiver of customer capital spending because its largest revenue streams come from chipmakers buying new manufacturing tools and upgrading existing lines.
Main customers
- Leading logic and foundry chipmakers (including advanced-node and leading-edge customers) (Buy front-end wafer fabrication tools across multiple process steps; spend tends to track advanced-node ramps and capacity adds.)
- Major memory manufacturers (DRAM and NAND producers) (Buy capacity and technology-transition tools; spending can be more cyclical but can surge during expansion waves.)
Notable contracts
- Applied Global Services long-term service relationships (Ongoing service, parts, and upgrade work tied to the installed base; typically more recurring than new-tool systems demand.)
Summary thesis
- Applied Materials is a high-quality picks-and-shovels business for global chip manufacturing, with a large installed base that supports a more recurring services stream.
- The long-term case is that technology transitions and advanced packaging increase the number of process steps, raising tool demand per wafer even if unit demand is uneven.
- The near-term issue is price and positioning: the stock is expensive on free cash flow yield and is currently not in a technical uptrend, so the ownership case depends on sustained earnings power through the next spending cycle.
Wall Street alignment
Wall Street: Mixed signals (1 pos / 0 neg)
Analyst consensus
Buy (2.21, 53 analysts) · +28% upside
Smart money tape
+1 net (acc 1 / dist 0, last 26d)
Recent news
News Positive · last 7d
Show 2 headlines from the last 7d
2026-08-13Earnings+supportive
Applied Materials reports fiscal third-quarter 2026 results and issues fiscal fourth-quarter 2026 outlook ↗ · Globe Newswire
Applied Materials reported record quarterly revenue of about 9.12 billion dollars and record non-Generally Accepted Accounting Principles earnings per share of 3.50, with higher year over year margins. The company also guided fiscal fourth-quarter revenue to about 10.25 billion dollars plus or minus 0.50 billion and non-Generally Accepted Accounting Principles earnings per share to about 4.02 plus or minus 0.20, which is supportive for a quality-momentum long thesis because it signals sustained demand and operating leverage.
2026-08-13Filing·
Applied Materials filed a current report dated August 13, 2026, consistent with its earnings release timing. This is material mainly as a formal disclosure vehicle for the quarterly results rather than new incremental fundamentals beyond the earnings announcement.
Dividends
Yield (fwd)
0.37%
Latest (TTM)
$1.91
2025
$1.78
2024
$1.52
Payout ratio: 12%
Technicals
Price
$505.61
RSI (14d)
44.7
50d SMA
$558.76
200d SMA
$388.64
vs 50d SMA
-9.5%
vs 200d SMA
+30.1%
Support (swing low)
$436.34 −13.7%
40-day high (R)
$739.60 +46.3%
Close as of 2026-08-14.
Score breakdown
Scores 60 out of 100 — a mixed overall grade. Balance sheet, sector fit, and earnings trend scored highest. Business quality also helped. Valuation and relative strength versus its industry weighed on the total. The score is capped by a weak technical snapshot (no breakout setup and below the 50-day moving average) plus an expensive valuation for a cyclical equipment name, even though the business quality and macro tailwinds are strong.
Component scores are on the scorecard above.
Momentum evidence
- Where it is now matters: the current print is around $515, down about 3.8% versus the prior close.
- On the last completed daily bar, AMAT was below its 50-day moving average and far below its prior 52-week high, with a low early-momentum score and no breakout state, so this is a reset / consolidation tape rather than an early breakout.
Fundamental evidence
- Applied generated $28.37B of latest annual revenue, $7.00B of net income, and $5.70B of free cash flow, with a gross margin of 48.7%.
- Returns are strong (ROE 40.4% and ROIC 23.6%), and the balance sheet is conservative with net debt to EBITDA slightly negative and a current ratio of about 2.42.
- The red flag is that free cash flow yield is low at about 1.5%, which means the market is already pricing in continued high earnings power.
- Shareholder returns are tilted to buybacks, with share count down about 12.5% over five years, while the dividend yield is very small at roughly 0.37%.
Cash runway: Cash generative (latest annual free cash flow is positive).
Valuation view
AMAT trades at a high valuation for a cyclical equipment supplier: about 44x trailing earnings and about 42x forward earnings, with EV to EBITDA near 35.6 and EV to free cash flow near 68.4. This pricing can still work if growth stays strong and durable, but it leaves little room for a normal semiconductor spending pause.
Macro tailwind
AI-related compute and memory demand, plus more complex chip structures and packaging, push fabs toward more process steps and more tools, which supports equipment demand and service attach over time.
What to watch
Upcoming (1–6 months)
- Management’s next quarterly earnings release and guidance update (next report within the next 1–3 months) for confirmation that orders and backlog remain healthy after the recent volatility.
Ongoing
- Whether the stock can reclaim and hold above the 50-day moving average, and whether free cash flow grows fast enough to justify the current EV to free cash flow multiple.
Long-term case
Over a multi-year horizon, Applied’s opportunity is driven by rising manufacturing complexity: more deposition, etch, and patterning steps, plus more advanced packaging steps, increase tool intensity even if end demand fluctuates. The company’s large installed base supports a steadier services stream, which can help soften the cycle versus pure new-tool revenue.
The long-term swing factor is not whether chips matter, but whether AMAT can hold technology leadership and pricing power while customers keep investing at a high level; the stock’s current valuation assumes it can.
Risks & invalidation
Risks
- A broad semiconductor equipment spending slowdown (especially memory) that lasts longer than expected and pressures both revenue growth and margins.
- Competitive losses in key process tool categories that reduce market share or force pricing concessions during the next capacity wave.
Breaks the thesis
- A sustained breakdown that puts AMAT below the 200-day moving average and keeps it there, signaling the market is repricing the business for a weaker cycle.
Bottom line
Applied Materials is a high-quality semiconductor equipment and services business with real cash flow and strong returns, and the multi-year tailwind from more complex chips and packaging is still the core reason it matters. The problem today is price and tape: the stock is expensive for a cyclical company and is in a weak chart phase, so the next year’s outcome hinges on whether earnings growth stays strong enough to earn that multiple. The swing factor is customer spending durability into the next fiscal year, not the day-to-day noise around a single print.