01—Abstract
Summary
Summary of the 8-K filed August 13, 2026. Cited figures are marked; the original filing is the authoritative source.
Applied Materials reported record third-quarter fiscal 2026 results (quarter ended July 26, 2026), with revenue of $9.12 billiona, up 25% year over year, and the highest sequential revenue growth in the company's history.
GAAP EPS was $3.17b (up 43%) and non-GAAP EPS was a record $3.50 (up 41%). GAAP gross margin was 50.3% and non-GAAP gross margin was 50.4%, marking the 13th consecutive quarter of year-over-year gross margin expansion. Semiconductor Systems revenue rose about 26% to $7.04 billion, with DRAM rising to 26% of segment revenue from 22%.
Cash from operations was a record $3.04 billionc, and non-GAAP free cash flow was $2.33 billion, up 14%. The company returned $860 million to shareholders through $440 million in buybacks and $420 million in dividends. Management guided fiscal Q4 2026 revenue to $10.25 billion (±$500 million) and non-GAAP EPS to $4.02 (±$0.20).
The EPS outlook includes a $0.05d per share net tax benefit from intra-entity intangible asset transfers and excludes $0.01 per share of acquisition-related charges. Management said it expects another strong growth year in 2027, citing increased customer demand visibility, and is making additional manufacturing capacity investments to support projected demand through the end of the decade. The CEO attributed demand strength to AI-driven adoption and said the company expects to grow faster than the overall semiconductor equipment market in calendar 2026.
Investors should note several items that affect GAAP comparisons. Q3 GAAP results included a $220 million unrealized loss on strategic investments, which was excluded from non-GAAP results. The nine-month GAAP results include a $253 million legal settlement with the U.S. Commerce Department's Bureau of Industry and Security over an export controls compliance matter, which reduced nine-month GAAP EPS by $0.32.
Q3 GAAP tax expense fell sharply to a 12.7% effective rate from a prior-year period that included a valuation allowance charge. Geographically, China revenue was roughly flat at $2.51 billion but fell to 28% of total revenue from 35%, while U.S. revenue more than doubled to $1.37 billion. This 8-K furnishes the earnings release under Item 2.02 and is not deemed filed under Section 18 of the Exchange Act.
02—Key points
Key Highlights
- Record Q3 FY2026 revenue of $9.12 billion, up 25% year over year, with the highest sequential revenue growth in company history
- GAAP EPS of $3.17 (up 43%) and record non-GAAP EPS of $3.50 (up 41%); GAAP gross margin of 50.3% and non-GAAP of 50.4%
- Semiconductor Systems revenue of $7.04 billion (up about 26%) with non-GAAP operating margin of 38.0%, up from 33.2%; DRAM rose to 26% of segment revenue
- Q4 FY2026 guidance of $10.25 billion revenue (±$0.5 billion) and non-GAAP EPS of $4.02 (±$0.20), with management expecting another strong growth year in 2027
- Record operating cash flow of $3.04 billion and non-GAAP free cash flow of $2.33 billion (up 14%); $860 million returned to shareholders in the quarter
- Q3 GAAP results were affected by a $220 million unrealized loss on strategic investments, excluded from non-GAAP; nine-month GAAP results include a $253 million BIS export-controls legal settlement
- Revenue mix shifted: China fell to 28% of revenue from 35%, while U.S. revenue more than doubled to $1.37 billion and Europe nearly tripled to $483 million
03—Questions
Frequently Asked Questions
What drove the strong Q3 revenue growth and what is the outlook for the rest of the year?
Management attributed growth to rapid global adoption of AI, which is driving demand for materials engineering solutions. The CFO expects continued strong second-half revenue growth, particularly in DRAM, leading-edge foundry-logic, and advanced packaging. Q4 FY2026 revenue is guided to $10.25 billion ±$500 million, and the company expects to grow faster than the market in calendar 2026.
Why do GAAP and non-GAAP EPS differ, and how large is the gap this quarter?
In Q3, GAAP EPS was $3.17 versus non-GAAP EPS of $3.50, a $0.33 gap. The largest driver was a $220 million unrealized loss on strategic investments (about $0.31 per share), which management excludes from non-GAAP results. Other adjustments included acquisition-related amortization, acquisition deal costs, and tax items. Year to date, the $253 million BIS legal settlement is excluded from non-GAAP results and reduced nine-month GAAP EPS by $0.32.
Is the company's profitability improving, and how did Semiconductor Systems perform?
Yes. Q3 GAAP operating margin was 33.7% versus 30.6% a year earlier, and non-GAAP operating margin was 34.0% versus 30.7%. Semiconductor Systems generated $7.04 billion in revenue with a 37.7% GAAP operating margin, up from 33.0%. Applied Global Services revenue rose 22% to $1.78 billion with a 30.1% operating margin. The company reported its 13th consecutive quarter of year-over-year gross margin expansion.
How is the company deploying capital, and what does its cash flow look like?
Q3 operating cash flow was $3.04 billion and capital expenditures were $707 million, leaving non-GAAP free cash flow of $2.33 billion. The company returned $860 million to shareholders, including $440 million in share repurchases and $420 million in dividends. Management is also making additional manufacturing capacity investments to support projected demand through the end of the decade, and it expanded Singapore operations with a US$500 million Tampines Campus. Accounts receivable rose to $7.69 billion from $5.19 billion at fiscal year-end 2025, which is worth monitoring alongside the revenue growth.
04—Continue