APPLIED MATERIALS INC /DE (AMAT): what the price assumes

In the published model solve dated 2026-Q2, anchored at $462.43, APPLIED MATERIALS INC /DE (AMAT) is priced for today's economics sustained for ~13.0 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/AMAT

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 12.7% cost of capital; growth searched up to the 27.5% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Applied sells the widest set of chipmaking process tools of anyone, and the part of the business that services the installed base has quietly grown into half the order book: backlog at the October 2025 year end was $15,002 million, of which Applied Global Services held $7,141 million against Semiconductor Systems at $7,105 million.
• The price is the risk: at roughly 49 times trailing operating profit, it needs today's economics to hold for about 14.6 years, and among comparable fast growers only around 11% held such a pace even a decade.
• Next marker is the fiscal third-quarter report on August 13, 2026, where the company has guided revenue to $8.95 billion give or take $500 million.

Bull Case

Most equipment companies own a step. Applied owns a shelf. Deposition, etch, chemical mechanical planarization, metrology and inspection, wafer packaging and ion implantation all sit inside one product line, which means the company sells into more of a fab's process flow than any single-technique competitor can reach. That breadth is not a marketing claim; it is the reason a chipmaker changing a transistor structure has to talk to Applied about several steps at once rather than one. The customer list follows the whole electronics economy rather than one end market: "Our customers' products are used across personal computing devices, mobile phones, artificial intelligence (AI) and data center servers, automobiles, connected devices, industrial applications and consumer electronics."

The quieter half of the moat is what happens after the tool ships. "The AGS segment provides services, spares and factory automation software to customer fabrication plants globally to help customers optimize performance of our large, global installed base of semiconductor and other equipment." Every system sold becomes an annuity of spares, upgrades and software, and the 10-Q says the driver plainly: demand for "service and spares is driven by our large and growing installed base of manufacturing systems". The scale of that annuity is easy to miss. Backlog at the October 2025 fiscal year end totaled $15,002 million, and Applied Global Services accounted for $7,141 million of it against $7,105 million for Semiconductor Systems. The services book is now marginally larger than the systems book, which is a different company from the one most people picture when they hear "equipment maker."

Profitability reflects both halves. On trailing revenue of about $29.0 billion the company produced roughly $8.8 billion of operating profit, a conversion rate of 29.9 cents on the dollar that sits in the top group of its peer set and ahead of Nova at 27.4, Teradyne at 26.5, ACM Research at 12.5 and Onto Innovation at 10.0. Return on equity runs 33.1% on a book of $29.92 a share. Interest is covered better than thirty times over, and the company is not consuming cash.

Capital comes back on a schedule rather than in gestures. During fiscal 2025 the board declared one quarterly dividend of $0.26 a share and three of $0.32, with dividends paid over the year of $1.4 billion, up from $1.2 billion the prior year. Share count has fallen about 2.5% a year over the four years to April 2026. Neither is dramatic on its own. Compounded against an installed base that grows every time a tool ships, they are the mechanism by which a cyclical business turns into a per-share one.

Bear Case

The uncomfortable fact is that the price has already booked the decade. Every family of valuation method lands below it, not narrowly but by wide distances: the asset-based approaches and the no-growth earnings-power lens both sit around a fifth of the price, peer multiples land well under it, and even the forward cash-flow methods do not reach it except by one route that assumes the exit multiple never compresses. There is no standard frame that gets to $536.80. What is being bought is a specific future, and the terms of that future are legible: today's economics, held, for roughly 14.6 years. Among companies that have grown comparably fast, only about 11% were still running at that pace a decade later.

That is the demand. The supply of reasons it might not be met starts with who writes the cheques. The 10-K's own heading is blunt: "We are exposed to risks associated with a highly concentrated customer base." A handful of leading-edge foundry, logic and memory manufacturers set the capital budget for the entire industry, and their spending is lumpy by construction, because a fab is built once and equipped once. Applied's own risk language names the mechanism that quietly erodes the annuity too: "manufacturers' ability to reconfigure and re-use equipment, resulting in diminished need to purchase new equipment and services from us". A tool re-purposed for another node is a tool not bought.

Then there is the part that is decided in Washington and Beijing rather than in Santa Clara. The most recent quarterly filing states that "The United States government has implemented export regulations for U.S. semiconductor technology sold or provided to customers in China, which have limited our ability to provide certain products", and China still accounted for 24% of combined Semiconductor Systems and Applied Global Services revenue in the most recent quarter. The company also warns that "Increases in tariffs increase our costs and can negatively impact our margins". Roughly a quarter of the revenue base sits behind a policy variable that no operating improvement can hedge.

Competitively, the breadth argument has a symmetrical reading. "Substantial competition exists across all the segments of our business." Applied competes with focused specialists at nearly every step, and on the trailing numbers the specialists are converting revenue into operating profit at least as well: Lam Research at 34.3 cents on the revenue dollar and ASML at 32.7, against Applied's 29.9. Being present at more steps has not translated into being the most profitable at any of them. None of this says the business is weak. It says a business with concentrated customers, a policy-exposed quarter of its revenue and peers who out-convert it is being priced as though the next fourteen years are already settled, and the settlement is the part nobody has seen yet.

Valuation

The unusual thing here is not the multiple. It is the calendar. At $536.80 the shares change hands at roughly 49 times trailing operating profit, and read backwards, that price is consistent with the company holding today's rate of profit growth, at the fastest pace it can fund out of its own returns, for about 14.6 years. The near-term rate is not the stretch; Applied has run at that kind of pace before. The stretch is the duration. Of companies that reached comparable growth, only around 11% carried it as far as a decade, and that is the record this price has to beat. Applied's multiple also stands above the upper quartile of its own peer group.

The methods are unanimous in a way that is itself the finding. Nothing reaches the price. The book-value approaches and the no-growth earnings-power lens, which capitalizes an average of five years of operating profit at the cost of capital and credits no growth at all, both land at roughly a fifth of where the shares trade. Peer multiples land under. The forward-looking discounted cash-flow work gets nearest, and the single route that approaches the price does so only by carrying the current exit multiple forward without compression, which is an assumption rather than a finding. When every frame lands below the price, the price is not expensive relative to a benchmark; it is outside what the benchmarks can describe.

Against the cohort, Applied's economics are strong but not singular. Trailing revenue of about $29.0 billion converted to roughly $8.8 billion of operating profit, 29.9 cents on the dollar. Lam Research runs 34.3 and ASML 32.7, while Nova sits at 27.4 and Teradyne at 26.5. Applied is comfortably in the upper half of that group and not at the top of it, which matters because the multiple it carries is at the top.

The filing-sourced inputs behind the picture are worth stating cleanly. The company reports two segments, Semiconductor Systems and Applied Global Services, with the display operations now folded into corporate and other. Backlog at the October 2025 fiscal year end was $15,002 million, split $7,105 million to Semiconductor Systems, $7,141 million to Applied Global Services and $756 million to corporate and other. Dividends paid during fiscal 2025 came to $1.4 billion against $1.2 billion the year before.

Solvency is the one part of the file that asks nothing of the reader. Operating profit covers the interest bill better than thirty times over, the company is not consuming cash, and the share count has fallen about 2.5% a year over the four years to April 2026. The balance sheet will not be what decides this holding. What decides it is whether a business whose customers number in the handful, whose largest single geography is subject to export licensing, and whose peers convert revenue at least as efficiently, can hold its current trajectory across a stretch of years longer than most technology cycles last.

Catalysts

The next hard information arrives on August 13, 2026, when Applied reports fiscal third-quarter results. The bar it set for itself is specific: revenue of $8.95 billion, give or take $500 million, which would be growth of close to 23% against the same quarter a year earlier. That guide is the single most consequential number in this report, because the entire price rests on how long a rate like that can persist rather than on whether it can be hit once.

The quarter behind it was strong. Fiscal second-quarter revenue reached $7.91 billion, up 11% on the year and 13% sequentially, with gross margin of 49.9% and net income of $2.81 billion. The sequential step is the part worth holding onto: it is the shape of an order book accelerating rather than a comparison flattering itself.

The offsetting item is jurisdictional. China represented 24% of combined Semiconductor Systems and Applied Global Services revenue in the quarter, and the company paid $253 million to resolve a United States export controls matter. Management's stated expectation is for the China business and the worldwide ICAPS product line, which serves non-leading-edge nodes, to be flat to slightly higher across the calendar year. Flat is a reasonable planning assumption. It is also a reminder that a quarter of the revenue base moves on licensing decisions rather than on customer demand.

Peer Cohorts (Per Segment, With Filing Citations)

Semiconductor Systems (reported)

• LRCX (LAM RESEARCH CORPORATION)
• FY2025 10-K: …must deliver high productivity and be cost-effective. Demand from cloud computing, artificial intelligence, 5G, the Internet of Things, and other markets is driving the need for increasingly powerful and cost - efficient semiconductors. At the same time, there are growing technical challenges with traditional…
• FY2025 10-K: …Our ALTUS ® systems combine CVD and ALD technologies to deposit the highly conformal or selective films as needed for advanced tungsten or molybdenum metallization (ALTUS ® Halo) applications in both logic and memory. The Multi-Station Sequential Deposition architecture enables nucleation layer formation and bulk…
• KLAC (KLA CORPORATION)
• FY2025 10-K: …Process; and PCB and Component Inspection. Semiconductor Process Control The Semiconductor Process Control segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related services, which helps IC manufacturers achieve target yield throughout the entire semiconductor…
• FY2025 10-K: …the preceding periods. Revenue is also impacted by average customer pricing, customer revenue deferrals associated with volume purchase agreements, the effect of fluctuations in foreign currency exchange rates, increased trade restrictions as discussed in the "Executive Summary" section above and the availability of…
• ASML (ASML HOLDING NV)
• FY2025 20-F: …Scope 3 CO 2 e emissions intensity All other indirect carbon dioxide emissions that occur in an organization's value chain expressed as a percentage of revenue or gross profit. SEC The United States Securities and Exchange Commission SEMI Semiconductor Equipment and Materials International SEMI S2 SEMI S2 - Safety…
• FY2025 20-F: …plans, expected business and industry trends and outlook, including expected semiconductor industry size and trends and trends in markets served by our customers, expected trends in product mix and geography, expected growth in the semiconductor market and industry and ecosystem and expectations of worldwide…
• TER (TERADYNE, INC.)
• FY2025 10-K: …number of major customers for the foreseeable future. In 2025, our Semiconductor Test segment achieved considerable growth driven by robust demand from Artificial Intelligence ("AI") applications in networking and with vertically integrated producer ("VIP") compute solutions. Memory test revenue remained stable…
• FY2025 10-K: …the current segment structure and presentation requirements. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services inclusive of storage and system level test products. The Robotics segment includes operations related to the…
• ACLS (AXCELIS TECHNOLOGIES INC)
• FY2025 10-K: …(including the introduction of 5G mobile networks), artificial intelligence, large language models (e.g. ChatGPT), data analytics and visualization, and the growth in the Internet of Things, and the increasing complexity of device features. These chips are used in power management, data input, such as image sensors,…
• FY2025 10-K: …sites in key market segments. ● We continued our investment in our Customer Solutions & Innovation ("CS&I") aftermarket business to drive financial growth and increased customer satisfaction levels, including the "Digital Tool Box," an innovative service offering with online training, remote diagnosis and install,…
• ONTO (ONTO INNOVATION INC.)
• FY2025 10-K: …Ushio, Canon, GigaVis Co. Ltd. and PDF Solutions. Each of our products also competes with products that use different metrology, inspection or lithography techniques. Some of our competitors have greater financial, engineering, manufacturing and marketing resources, broader product offerings and service capabilities…
• FY2025 10-K: …to complex measurement and process problems. We believe that customer service and technical support for our systems are crucial factors that distinguish us from our competitors and are essential to building and maintaining close, long-term relationships with our customers. We generally provide a warranty for our…
• NVMI (NOVA LTD.)
• FY2025 20-F: …manufactures to overcome new challenges in dimensions, materials and chemical engineering. The Semiconductor Market - Update According to Gartner forecasts, semiconductor revenues are expected to grow by 33% in 2026, following a growth of 21% in 2025. WFE (Wafer Fab Equipment) is expected to grow by 12% in 2026,…
• FY2025 20-F: …for advanced applications, which require dimensional, material and chemical metrology. • Grow our production facilities and offices footprint to meet semiconductor demand and our strategic plans and continue to develop modern and streamlined core business processes through new ERP and Service CRM infrastructure. •…
• ACMR (ACM Research, Inc.)
• FY2025 10-K: …which may allow them to pursue design, development, manufacturing, sales, marketing, distribution and service support of their products; • more extensive customer and partner relationships, which may position them to identify and respond more successfully to market developments and changes in customer demands; •…
• FY2025 10-K: …goods, software, and technology related to the semiconductor sector. 33 Table of C ontents As a result of the new restrictions, the ability of ACM Shanghai to acquire such parts from Japan and the Netherlands to fulfill customer requirements, and the ability of ACM Shanghai's customers in mainland China to scale…

Applied Global Services (reported)

• LRCX (LAM RESEARCH CORPORATION)
• FY2025 10-K: …resources to research and development ("R&D") programs and seek to maintain close and responsive relationships with our customers and suppliers. We believe current challenges for customers at various points in the semiconductor manufacturing process present opportunities for us. We expect to continue to make…
• FY2025 10-K: …We offer a broad range of services to deliver value throughout the lifecycle of our equipment, including customer service, spares, upgrades, and new and refurbished non-leading edge products in our deposition, etch, and clean markets. Many of the technical advances that we introduce in our newest products are also…
• KLAC (KLA CORPORATION)
• FY2025 10-K: …to the customers, and (2) deferred service revenue, which is recorded when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring services to the customer under the terms of a contract. Deferred service revenue typically results from warranty services, and…
• FY2025 10-K: …and testing wafers and reticles, integrated circuits ("IC"), advanced packaging, light-emitting diodes, power devices, compound semiconductor devices, microelectromechanical systems ("MEMS"), data storage and PCBs as well as general materials research. We also provide comprehensive support and services across our…
• ASML (ASML HOLDING NV)
• FY2025 20-F: …orders from our customer. Control over these services is transferred to the customer upon receipt of customer sign-off. Billable parts represent spare parts including optical components relating to our systems installed in the customer's factories while in operation, through purchase orders from our customer.…
• FY2025 20-F: …can help humanity manage its challenges and seize opportunities by facilitating sustainable living and e-mobility, accessible healthcare, food security and the transition to renewable energy. Our customers' products are used in a wide variety of applications, impacting society's GHG emissions both positively and…
• TER (TERADYNE, INC.)
• FY2025 10-K: …global provider of automated test equipment and robotics products. Our automated test systems are used to test semiconductors, wireless products, data storage, silicon photonics, and complex electronics systems in many industries including consumer electronics, wireless, automotive, industrial, computing,…
• FY2025 10-K: …2023-01-01 2023-12-31 0000097210 us-gaap:TransferredAtPointInTimeMember ter:MemoryMember ter:SemiconductorTestMember 2024-01-01 2024-12-31 0000097210 us-gaap:OperatingSegmentsMember ter:RoboticsMember 2023-12-31 0000097210 us-gaap:FairValueInputsLevel2Member us-gaap:CashEquivalentsMember…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.