Applied Materials saw a sharp premarket gain after releasing second-quarter guidance that exceeded Wall Street forecasts, a sign investors are pricing continued momentum from AI-related chip demand and tightening memory markets.
Shares of the Santa Clara, California-based company climbed 11.7% in premarket trading on Friday. The rise followed the companys projection for roughly $7.65 billion in revenue for the second quarter, plus or minus $500 million, a range that sits above analysts consensus estimate of $7.01 billion based on LSEG data. Applied Materials also forecast adjusted earnings of $2.64 per share for the quarter versus analyst estimates of $2.28.
Management linked the stronger quarter to accelerating industry investments in AI computing. CEO Gary Dickerson said the quarter was "fueled by the acceleration of industry investments in AI computing," adding that AI workloads were driving demand for higher-performance, more energy efficient chips across leading-edge logic, high-bandwidth memory and advanced packaging.
Analysts and industry metrics cited by the company point to a broader pattern: rapid expansion of AI data centers by hyperscalers and growing need for high-bandwidth memory are tightening chip supply chains and prompting additional spending on wafer-fab and packaging equipment. That dynamic is central to Applied Materials positioning as the largest U.S. semiconductor equipment maker, with exposure across DRAM/HBM, advanced logic and packaging segments.
Industry forecasts included by market observers in the companys narrative note projections that equipment sales used to make chip wafers will rise, with an industry groups December forecast calling for about a 9% increase to $126 billion in 2026 and a further 7.3% gain to $135 billion in 2027.
The upbeat outlook from Applied Materials also lifted sentiment for peers. Shares of ASML, the worlds largest supplier of chip equipment, rose 1.8%. U.S. competitors Lam Research and KLA also advanced, with Lam Research climbing 2% and KLA gaining more than 1% in thin trading volumes.
Applied Materials stock has outpaced broader semiconductor sector gains so far this year, rising about 28% year-to-date compared with a 14% gain for the Philadelphia Semiconductor index.
Market context and implications
Applied Materials guidance and executive commentary underscore how AI workload requirements - higher performance and greater energy efficiency - are shaping capital spending by chipmakers and hyperscalers. That investment pattern is supporting demand for equipment across memory, logic and packaging, which in turn influences order books for major equipment suppliers.
Quotes referenced
"Fueled by the acceleration of industry investments in AI computing," - Applied Materials CEO Gary Dickerson
"AMAT has a leadership position in DRAM/HBM, Advanced Logic, and Packaging and is benefiting from strong GenAI-driven spending," - RBC analysts