Applied Materials Stock Tanks Despite Q3 Beat, Semiconductor Strength

Wall Street wanted more than the "unprecedented visibility" Applied Materials Inc (NASDAQ:AMAT) boasted about in its third-quarter (Q3) results on Thursday.

Shares of the company slipped on Friday on the heels of several analyst reports:

• JPMorgan analyst Harlan Sur maintained an Overweight rating, and raised the price target from $515 to $660.
• Needham analyst Charles Shi reiterated a Buy rating and price target of $740.

Check out other analyst stock ratings.

JPMorgan: Applied Materials’ growth stems from record Semi Systems strength, Sur said in a note. Margins held above 50%, he added.

• Revenue grew 15% sequentially and 25% year-on-year to $9.12 billion, topping Street expectations of $9.02 billion.
• Semiconductor System revenues grew 18% sequentially and 27% year-on-year to $7.04 billion
• DRAM revenues surged 52% year-on-year to a record high.
• Non-GAAP gross margin expanded by 40 basis points (bps) quarter-on-quarter and 150 bps year-on-year to 50.4%.
• This marked the 13th consecutive quarter of year-on-year expansion in gross margins.
• Semi Systems gross margins reached 55.4%.

Management guided to fiscal fourth-quarter revenue of $10.25 billion at the midpoint, higher than consensus estimates of $9.62 billion, reflecting "continued acceleration of customer demand," the analyst further stated.

Needham: Applied Materials reported a beat-and-raise quarter. Yet, its guidance appears to have fallen short of "heightened buyside expectations," Shi said. The revenue results "set a new sequential record," with Semiconductor Systems at $7 billion, he added.

Management’s third-quarter revenue guidance of $10.25 billion represents 12% sequential growth and points to further growth in Semi Systems, the analyst stated. While the company did not provide guidance for the fiscal fourth quarter, the commentary suggests that "Semi Systems should grow more than 40% YoY in CY26," he further noted.

AMAT Price Action: Shares of Applied Materials had declined by 5.67% to $504.22 at the time of publication on Friday.

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