20% growth guidance exceeds expectations, Applied Materials (AMAT.US) surges in pre-market! Wall Street is bullish on the upward cycle through 2027

On Friday, Applied Materials (AMAT.US) became the market focus after Wall Street praised its earnings guidance. As of press time, the company’s stock rose nearly 11% in pre-market trading, while other chip equipment stocks like Lam Research (LRCX.US), ASML (ASML.US), and KLA (KLAC.US) showed mixed performance.

Wells Fargo analyst Joe Quattrochi gave Applied Materials an “Overweight” rating with a target price of $435. The analyst was impressed with the company’s earnings guidance, especially amid industry-wide upward revisions.

In a client report, he emphasized: “Although the company did not disclose specific estimates for 2026 calendar year (C2026) wafer fab equipment (WFE), it expects semiconductor system revenue to grow over 20% year-over-year, well above Wall Street’s previous consensus of 11%.”

Quattrochi pointed out: “Similar to peers, Applied Materials expects revenue to be more weighted toward the second half of the year. Based on current wafer fab readiness, this trend could lay the foundation for a strong 2027. AI remains a core demand driver, with WFE growth mainly led by advanced logic/foundry (F/L), DRAM/HBM, and advanced packaging; at the same time, we remain positive on the stability of ICAPS business and the latest outlook for the Chinese market—this could help Applied Materials outperform the WFE market in 2026.”

Evercore ISI analyst Mark Lipacis also expressed a positive outlook, stating that after the report, he expects the valuation gap between Applied Materials and peers like ASML, Lam Research, and KLA to narrow. He rated Applied Materials as “Outperform” with a target price of $400.

In his client report, Lipacis wrote: “We expect that as WFE accelerates in 2027 and Applied Materials benefits from the ramp-up in DRAM+HBM and advanced F/L spending, this valuation gap will shrink.”

Bank of America analyst Vivek Arya was even more optimistic, saying it’s time for Applied Materials to “shine.” Arya raised the target price from $350 to $420 and reaffirmed a “Buy” rating.

Arya stated that as the world’s largest semiconductor equipment company with the broadest product portfolio, Applied Materials has effectively met the huge demand for AI during this multi-year wafer fab equipment (WFE) cycle focused on advanced logic/foundry (F/L) and DRAM.

He further noted in the client report: “Beyond cyclical growth, Applied Materials’ leadership in DRAM (the world’s top supplier), advanced packaging, and deposition and conductor etching processes is the core engine for its cross-cycle market share gains—our forecast is that its calendar year 2026 market share will increase by about 100 basis points. Notably, nearly all revenue growth this year came from outside China, as ICAPS/China sales remained flat year-over-year.”

It is understood that Applied Materials released its Q1 FY2026 earnings after the US stock market closed on Thursday. The results not only exceeded market expectations but also provided a highly optimistic guidance that injected confidence into the semiconductor industry’s full recovery. In the first quarter ending January 25, 2026, the company reported revenue of $7.01 billion, slightly down year-over-year but significantly above the analyst forecast of $6.87 billion. Non-GAAP earnings per share reached $2.38, well above the expected $2.21.

Compared to the already secured quarterly results, Wall Street analysts were more encouraged by the company’s optimistic outlook for future growth. The company expects Q2 FY2026 revenue to rise to about $7.65 billion, with EPS guidance between $2.44 and $2.84 (excluding some items), a substantial jump over the average Wall Street estimate of $2.29.

Applied Materials CEO Gary Dickerson expressed a highly ambitious outlook during the earnings call. He pointed out that as AI computing investments accelerate, the company’s full-year semiconductor equipment growth rate could surpass 20%. Dickerson further predicted that 2026 would be a historic turning point for the global semiconductor industry, with total industry output reaching the $1 trillion milestone.