APPLIED MATERIALS INC /DE: revenue up 53%, but one-offs held profit back and the multiple sits above its own history

On 12 November APPLIED MATERIALS INC /DE reported results for the fourth quarter of fiscal 2026 (October-December 2026). Revenue reached a record 10,409 million dollars, up 53.1% year over year, EBITDA came in at 3,816 million (margin 36.7% versus 26.9% a year earlier), and GAAP net income was 2,718 million, or +43.3%. One-off items totalling 603 million dollars lowered GAAP profit relative to the adjusted figure, so profit growth lagged revenue growth. On the portal's model the upside to fair value is +39%, yet EV/EBITDA LTM of 25.7 is 43% above its own three-year average of 18.1. Our conclusion: rather attractive – on the strength of the portal model's +39% upside, although the multiple above history requires confirmation that growth is sustainable. Our view: the share is rather attractive at the current price; upside on the portal model +39%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue rose 53.1% year over year, and the acceleration from 24.8% a quarter earlier was driven by semiconductor equipment

— EBITDA margin rose to 36.7% from 26.9% on the back of a 50.4% gross margin and operating leverage

— One-off items of 603 million dollars lowered GAAP profit, so net income grew only 43.3%

— Free cash flow reached a record 2,616 million dollars, with 2,420 million returned to shareholders through buybacks and dividends

— Net cash increased from 2.0 billion to 2.8 billion dollars, and net debt to EBITDA LTM stands at -0.24

— A dividend yield of 0.52% is not an argument for the share, as the company prioritises buybacks

— EV/EBITDA LTM of 25.7 is 43% above its own three-year average of 18.1, which limits the upside

Key figures, USD bn

Revenue rose 53.1% year over year, and the acceleration from 24.8% a quarter earlier was driven by semiconductor equipment

Revenue for the fourth quarter of fiscal 2026 was 10,409 million dollars, up 53.1% year over year. A quarter earlier growth was 24.8%, so there was an acceleration. The main contribution came from the Semiconductor Systems segment: its revenue reached 7,996 million dollars versus 4,879 million a year earlier. Applied Global Services revenue was 1,896 million dollars, up from 1,506 million.

Within Semiconductor Systems, the share of foundry and logic fell to 58% from 66%, while DRAM rose to 33% from 28% and flash memory to 9% from 6%. This points to a shift in demand towards memory. Geographically, revenue in Taiwan was 2,916 million dollars (28% of the total), in China 2,642 million (25%), and in Korea 1,811 million (17%).

Full-year revenue for fiscal 2026 grew 21% to 34,446 million dollars. The company notes that its Semiconductor Systems business is on track to grow more than 40% in calendar 2026. This confirms strong demand for chipmaking equipment tied to artificial intelligence.

EBITDA margin rose to 36.7% from 26.9% on the back of a 50.4% gross margin and operating leverage

EBITDA for the reported quarter was 3,816 million dollars, with a margin of 36.7% versus 26.9% a year earlier. This increase was driven primarily by gross margin: 50.4% on a GAAP basis versus 48.0%, and 50.6% versus 48.1% on a non-GAAP basis. The operating margin reached 35.1% versus 25.2%.

Operating expenses rose from 1,553 million to 1,593 million dollars, just 2.6%, while revenue grew 53.1%. This produced operating leverage. Research and development spending was 1,129 million dollars versus 917 million, marketing and selling 250 million versus 212 million, and general and administrative 218 million versus 243 million.

Gross profit at Semiconductor Systems reached 4,400 million dollars with a margin of 55.0% versus 52.7% a year earlier. Applied Global Services showed a gross margin of 35.1% versus 34.1%. Margin improvement in both segments confirms favourable pricing and utilisation.

One-off items of 603 million dollars lowered GAAP profit, so net income grew only 43.3%

GAAP net income was 2,718 million dollars, up 43.3% year over year. Adjusted (non-GAAP) net income reached 3,321 million dollars, up 92% from 1,732 million a year earlier. The 603 million dollar gap between GAAP and non-GAAP represents one-off items that in aggregate lowered GAAP profit.

The largest one-off was an unrealised loss on strategic investments of 653 million dollars. Profit was also affected by acquisition integration costs (8 million), amortisation of acquired intangibles (14 million) and tax effects. Without these items profit would have been materially higher.

For the full year, GAAP net income was 10,088 million dollars versus 6,998 million a year earlier, up 44%. The one-off items are largely non-cash, as confirmed by strong cash flow.

Free cash flow reached a record 2,616 million dollars, with 2,420 million returned to shareholders through buybacks and dividends

Operating cash flow for the quarter was 3,300 million dollars versus 2,828 million a year earlier. Capital expenditures fell to 684 million dollars from 785 million, and free cash flow reached a record 2,616 million dollars versus 2,043 million a year earlier.

The company returned 2,420 million dollars to shareholders: 2,000 million in share repurchases and 421 million in dividends. The buyback was the largest quarterly one in more than eight years. For the full fiscal year, 3,177 million dollars went to buybacks and 1,571 million to dividends.

Cash and short-term investments at the end of the period were 7,239 million and 2,100 million dollars respectively. Debt consisted of 1,299 million in short-term and 5,233 million in long-term liabilities. Net cash increased from 2.0 billion to 2.8 billion dollars.

Net cash increased from 2.0 billion to 2.8 billion dollars, and net debt to EBITDA LTM stands at -0.24

As of 25 October 2026, the company's net debt was -2,807 million dollars, i.e. a net cash position of 2.8 billion dollars. A year earlier, on 26 October 2025, the figure was -2,018 million dollars. Thus net cash increased by 0.8 billion dollars.

Net debt to EBITDA for the trailing twelve months is -0.24, reflecting the absence of debt burden. Interest expense for the quarter was 68 million dollars, down from 71 million a year earlier. The company does not need borrowed funds to finance its operations.

The strong balance sheet allows the company to actively return capital to shareholders and invest in research. During the quarter the company also announced partnerships within the EPIC Center with Intel, KIOXIA, Besi and UCLA, expanding opportunities for future growth.

A dividend yield of 0.52% is not an argument for the share, as the company prioritises buybacks

Over the trailing twelve months the company paid dividends of 1,571 million dollars, and the dividend yield is 0.52%. This is a low figure explained by the priority given to share buybacks: 2,000 million dollars went to buybacks in the quarter, 4.7 times more than the 421 million paid in dividends.

The company does not disclose its dividend policy in the press release, but actual payments are growing: dividends for the quarter were 421 million dollars versus 365 million a year earlier. If current profit and the payout ratio hold, the dividend may rise next year, but its yield will remain low.

For a dividend-oriented investor the share is unattractive because of the low yield. The main return of capital comes through buybacks, which support the share price. At the same time, buybacks reduce the number of shares outstanding: the average share count for the quarter fell to 793 million from 794 million.

EV/EBITDA LTM of 25.7 is 43% above its own three-year average of 18.1, which limits the upside

The EV/EBITDA multiple for the trailing twelve months is 25.7, 43% above its own three-year average of 18.1. This means the share is valued more expensively than usual, and the room for growth is limited. P/E LTM is 30.0, also indicating a premium valuation.

The company's market capitalisation is 302,972 million dollars. On the portal's model the upside to fair value is estimated at +39%. However, this model may not account for one-off items that distort the profit base. Adjusted profit is higher than GAAP, and using it would lower the multiple.

Comparison with its own history shows the current valuation is above average. This creates a correction risk if revenue growth slows. At the same time, strong financials and industry leadership may justify the premium.

Valuation on the latest reported figures

Bottom line

The report showed record revenue and strong operating leverage: EBITDA margin rose to 36.7%, free cash flow reached 2,616 million dollars, and net cash increased to 2.8 billion. However, GAAP profit growth was held back by one-off items of 603 million dollars, and the dividend yield is only 0.52%. The key question for a holder is whether the company can sustain high growth to justify the premium to its own history. Our conclusion: rather attractive – on the strength of the portal model's +39% upside, although the multiple above history requires confirmation. Our view: the share is rather attractive at the current price; upside on the portal model +39%.