01—Abstract
Summary
Summary of the 10-Q filed February 19, 2026. Cited figures are marked; the original filing is the authoritative source.
Applied Materials, Inc. (AMAT) reported its financial results for the first quarter of fiscal year 2026, ending January 25, 2026.
The company demonstrated strong profitability with net income of $2.03 billiona, a significant increase from $1.19 billion in the prior year's quarter, translating to diluted earnings per share of $2.54 compared to $1.45. Revenue for the quarter was $7.01 billion, a slight decrease from $7.17 billion in the comparable period last year. Despite the modest revenue dip, the company achieved an improved gross margin of 49.0%, up from 48.8% year-over-year, driven by higher average selling prices and lower material/manufacturing costs.
A notable event impacting the current quarter's results was a $253 millionb legal settlement related to export controls compliance, which was factored into operating expenses and reduced operating income. The company's balance sheet remains robust, with total assets of $37.64 billion and a healthy cash position of $7.22 billion in cash and cash equivalents. Financing activities during the quarter were primarily driven by share repurchases ($337 million) and dividend payments ($365 million), indicating a continued commitment to returning capital to shareholders.
Management highlighted strategic priorities including ongoing investments in R&D to drive innovation and develop new materials engineering capabilities, as well as the growth of its service business. The company faces ongoing industry cyclicality and global trade uncertainties, but is strategically positioning itself for future growth.
02—Key points
Key Highlights
- Net income surged by 71% year-over-year to $2.03 billion, with diluted EPS increasing to $2.54 from $1.45.
- Revenue for the quarter was $7.01 billion, a slight decrease of 2.1% compared to the prior year's $7.17 billion.
- Gross margin improved to 49.0% from 48.8% due to higher average selling prices and reduced material/manufacturing costs.
- A significant legal settlement of $253 million for export control compliance impacted operating expenses.
- The Semiconductor Systems segment remains the largest revenue contributor, though it saw a 7.8% decline year-over-year.
- The Applied Global Services (AGS) segment showed strong growth with a 15% increase in revenue.
- The company maintained a strong liquidity position with $7.22 billion in cash and cash equivalents and significant investment balances.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Applied Materials kept $0.29.
- Revenue$7.01B100.0%
- Cost of revenue−$3.58B51.0%
- Gross profit$3.44B49.0%
- Operating costs−$1.60B22.9%
- Operating income$1.83B26.1%
- Interest, other & tax$195.0M2.8%
- Net income$2.03B28.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed February 19, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $7.01B$7.17B | −2.1% |
| Cost of Revenue | $3.58B$3.67B | −2.5% |
| Gross Profit | $3.44B$3.50B | −1.7% |
| R&D Expenses | $928.00M$859.00M | +8.0% |
| SG&A Expenses | $411.00M$462.00M | −11.0% |
| Operating Expenses | $1.60B$1.32B | +21.4% |
| Operating Income | $1.83B$2.17B | −15.8% |
| Net Income | $2.03B$1.19B | +71.0% |
| EPS (Basic) | $2.55$1.46 | +74.7% |
| EPS (Diluted) | $2.54$1.45 | +75.2% |
| Shares Outstanding (Basic) | 793.00M814.00M | −2.6% |
| Shares Outstanding (Diluted) | 799.00M819.00M | −2.4% |
05—Questions
Frequently Asked Questions
How did Applied Materials perform in terms of profitability compared to the previous year?
Applied Materials demonstrated significantly improved profitability in the first quarter of fiscal year 2026 compared to the prior year. Net income increased by 71% to $2.03 billion, and diluted earnings per share rose to $2.54 from $1.45, reflecting strong operational execution and favorable pricing.
What was the primary driver behind the slight decrease in overall revenue?
The overall revenue for the quarter saw a slight decrease of 2.1% to $7.01 billion. This was primarily driven by a 7.8% decline in revenue from the Semiconductor Systems segment, which was partially offset by a strong 15% increase in revenue from the Applied Global Services (AGS) segment.
How did the legal settlement impact the company's financial results?
The company incurred a $253 million legal settlement related to export controls compliance in the first quarter of fiscal year 2026. This charge was recorded within operating expenses and contributed to a decrease in operating income, although it did not prevent net income from substantially increasing year-over-year due to strong underlying operational performance and a favorable tax rate.
What is the company's current financial health and liquidity position?
Applied Materials maintains a strong financial position with $7.22 billion in cash and cash equivalents and additional investments totaling $6.26 billion. The company generated $1.69 billion in cash from operating activities during the quarter, indicating robust cash flow generation. Management believes current liquidity is sufficient for the next 12 months.
06—Continue