Applied Materials fails to escape profit-taking despite solid earnings

Published: 2026-05-18 02:35:55 ET AMAT

Applied Materials shares fell almost 1% on Wall Street on Friday, unable to buck a broader wave of profit-taking sweeping the semiconductor sector. This comes despite the equipment manufacturer delivering a robust set of results the previous evening, reporting record Q2 revenue and earnings, in addition to an upbeat outlook.

Vincent Gallet

Published on 05/18/2026 at 02:35 am EDT

Record Q2 earnings and revenue...Applied Materials reported record adjusted EPS for Q2 2025-2026, up 20% y-o-y to $2.86. This comfortably beat the consensus of $2.68, according to Jefferies.The performance was driven by a higher-than-expected adjusted operating margin, which improved by 1.4% to 32.1%, above the consensus of 31%, despite operating expenses coming in slightly above estimates at $1.42bn.The chip equipment maker's adjusted gross margin rose 0.8 point to 50% (against expectations of it remaining flat), benefiting from improved manufacturing costs and pricing, Jefferies noted.Revenue climbed 11% to $7.91bn, surpassing the consensus of about $7.68bn, primarily fueled by stronger-than-anticipated revenue from foundry and logic within the Semiconductor Systems segment....accompanied by a bright outlook...Building on this momentum, the Santa Clara-based group issued optimistic guidance for its fiscal third quarter, targeting adjusted EPS of $3.36, plus or minus 20 cents, on projected revenue of $8.95bn, plus or minus $500m."Applied Materials delivered record quarterly performance, and we now forecast our semiconductor equipment business will grow by more than 30% in 2026," stated CEO Gary Dickerson."The rapid global build-out of AI infrastructure, combined with Applied's strong leadership positions, provides an exceptionally solid foundation for sustained, multi-year revenue and earnings growth," he continued."The outlook is rising, but the key takeaway for us was increased confidence in the sustainability of growth extending into 2027 and beyond," noted Jefferies, which maintains a "buy" rating with a target price of $510."Customers are now providing eight-quarter forecasts with visibility extending into 2028, and Applied remains particularly well-positioned given its relative exposure to leading-edge foundry, logic, and DRAM," the broker added....but not enough to prevent profit-takingDespite this clearly high-quality release, Applied Materials shares are down 2.7% in early Wall Street trading, reflecting profit-taking that brings its YTD gain to approximately 67%.This selling pressure is part of a broader trend across the semiconductor sector today, as evidenced by declines of 4.2% for AMD, 4% for Nvidia, 5.4% for Micron, and 6.6% for Intel.The AI-winning sector had previously been immune to inflationary fears, but it is now being caught up as US yields reach a critical zone, prompting investors to reduce risk exposure.This wave of profit-taking appears all the more justified as some question the velocity of the gains recorded in recent weeks, which some see as a source of fragility."Semiconductor stocks have been among the top performers in recent weeks, with the VanEck Semiconductor ETF gaining over 50% since late March," noted Michael J. Kramer, founder of Mott Capital Management."But when an ETF rises so sharply in such a short period, the question is no longer about strong momentum, but whether the trade has become too crowded and vulnerable to a pause," the market professional warned.