BofA revamps Applied Materials stock price target after CEO message

Applied Materials (AMAT) reported its Q1 earnings on February 12. The earnings beat consensus estimates for adjusted EPS and revenue, and the stock is trading 10% higher at the time of writing, Friday morning, Feb. 13, according to Yahoo Finance.

The supplier of semiconductor and semiconductor-related fabrication equipment reported revenue of $7 billion, a 2% year-over-year decline, yet the earnings report got investors excited and prompted Bank of America analyst Vivek Arya to raise his price target for Applied Materials.

The cause of excitement was CEO Gary Dickerson’s prepared remarks during the earnings call: “For Applied, we expect to grow our semiconductor equipment business more than 20% this calendar year. We see the demand profile weighted towards the second half of the calendar year, with availability of customer cleanroom space being a key factor pacing the rate of investment.”

Dickerson continued by making this great outlook sound even better. “Our largest customers are giving us increased longer-term visibility to ensure we have operational capacity and service support in place for their ramps," he added.

"Based on this visibility, we expect strong growth momentum to be carried into 2027.”

To put it all in perspective, we can look at the complete Q2 guidance versus what analysts expected. The numbers come from the Bank of America research note shared with TheStreet.

Applied Materials Q2 2026 outlook vs. estimates prior to earnings:

The great outlook makes even more sense when we consider what the Semiconductor Industry Association (SIA) estimates for 2026. 

“The global semiconductor industry posted its highest-ever annual sales in 2025, nearly hitting $800 billion, and global sales in 2026 are projected to reach roughly $1 trillion,” stated SIA CEO John Neuffer. 

Bank of America raises Applied Materials stock price target

Following the report’s release, Bank of America analyst Vivek Arya and his team updated their view on AMAT stock.

New BofA Q2 estimates are:

• Revenue of $7.65 billion
• Non-GAAP diluted EPS of $2.64
• Non-GAAP gross margin of 49.3%

The team estimates the company will gain approximately 1% in 2026, thanks to cyclical growth, leadership in DRAM, advanced packaging, and deposition and conductor etch systems.

Analysts raised their non-GAAP EPS estimates for 2026 and 2027 by 18% and 24% to $11.86 and $14.57, respectively.

BofA’s noted key likes:

• Applied Global Services could grow at a rate higher than the typical low-double-digit pace through steady install base expansion, with all recurring revenue helping fund capital returns.
• Applied Materials captures more than 50% of the serviceable addressable market share in inflection points such as Gate-All-Around (GAA) and backside power delivery, where revenue opportunities increase by 30% versus FinFET.
• Systems' gross margins of 54% improved by 1% year over year and can expand further as Applied Materials prices to value.

Related: Bank of America resets Amazon stock price target after earnings

Arya reiterated his buy rating for AMAT stock and raised the price target to $420 from $350, based on his 29 multiple of his price-to-earnings ratio estimate for calendar year 2027.

He said the multiple is at the high end of Applied Materials’ historical trading range of 10 to 30. The numbers are justified by the potential for wafer fab equipment outgrowth in 2026 and 2027, Arya added, and they remain at a discount relative to other large peers, given a more balanced growth profile and lower profitability.

According to the team, downside risks for AMAT are:

• Slower-than-expected capital spending cycle
• Delay in memory capacity adds
• Market share loss in deposition, implant, thermal, chemical mechanical planarization, etch, or process control segments
• Demand destruction in PCs and mobile as a headwind
• Merger and integration risk, along with macro headwinds

Recent Applied Materials activity

Applied Materials reached a settlement agreement with the U.S. Department of Commerce, Bureau of Industry and Security, regarding allegations that certain customer shipments to China between November 2020 and July 2022 did not comply with the U.S. Export Administration Regulations, based on the company’s misunderstanding of the applicability of those regulations.

The company has agreed to pay $252.5 million to the Department of Commerce. The U.S. Department of Justice and the SEC have closed their related investigations without action.

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• Morgan Stanley drops eye-popping Broadcom price target

Applied Materials announced that Samsung Electronics will join the new, $5 billion Equipment and Process Innovation and Commercialization (EPIC) Center in Silicon Valley. According to Applied Materials, its EPIC Center will open this year as the world’s largest facility for collaborative research and development of semiconductor process technology and manufacturing equipment.

The co-development programs at the EPIC Center will be designed to speed up the development and deployment of next-generation semiconductor technologies. The joint research and development programs will work on new materials and process technologies for chips, multiple manufacturing processes (nodes) ahead of the current generation.

Applied Materials introduced new deposition, etch, and materials-modification systems that boost the performance of logic chips at 2nm and beyond. The transition to GAA transistors is a pivotal moment for the industry, as it will enable energy-efficient computing needed to deliver more powerful AI chips.

“The rapid progress of AI is pushing compute performance to the limit, and breakthroughs in computing begin with the transistor,” said Dr. Prabu Raja, president of the Semiconductor Products Group at Applied Materials.

“To keep pace in the angstrom era, Applied is delivering materials engineering breakthroughs that improve energy-efficient compute. Together, these new systems extend Applied’s longstanding leadership in driving major transistor and wiring inflections, while helping customers accelerate their chip roadmaps to keep up with the blistering pace of AI.”

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