Applied Materials (AMAT) has reported another busy quarter, with Q2 2026 revenue at US$7.9b and basic EPS of US$3.53, backed by net income excluding extra items of US$2.8b. The company has seen quarterly revenue move from US$7.1b and EPS of US$2.64 in Q2 2025 to US$7.9b and EPS of US$3.53 in Q2 2026, while trailing twelve month EPS sits at US$10.70 on net income of US$8.5b. This gives a sense of how profitability is feeding through the income statement and supporting higher margins.

See our full analysis for Applied Materials.

With the latest figures on the table, the next step is to see how these margins and growth trends line up against the widely followed narratives around Applied Materials's long term earnings power.

Margins Point To 29.3% Profitability

• On a trailing twelve month basis, Applied Materials generated US$29.0b in revenue and US$8.5b in net income excluding extra items, which works out to a net margin of 29.3% compared with 24% in the prior year period.
• Consensus narrative views this margin level as a key support for long term growth, and the recent data both backs and tests that view:
  • Trailing EPS over the last twelve months sits at US$10.70, with quarterly EPS moving from US$2.23 in Q3 2025 to US$3.53 in Q2 2026, which lines up with the idea that higher value equipment and services are helping margins.
  • At the same time, analysts expect earnings to grow about 17.9% per year and revenue about 16.1% per year, so the 29.3% margin is already quite high, leaving less room for error if those growth assumptions prove too optimistic.

Revenue And EPS Trend Support Bulls

• Looking across the last six quarters, quarterly revenue has ranged between US$6.8b and US$7.9b while basic EPS has moved from US$1.46 in Q1 2025 to US$3.53 in Q2 2026, and trailing twelve month EPS increased from US$7.71 in Q1 2025 to US$10.70 by Q2 2026.
• Bulls argue that strong demand for advanced chip equipment and services can keep this earnings trend going, and the numbers here give that argument some support but also set a high bar:
  • Trailing earnings growth of 26% over the past year fits with the bullish view that AI related and high performance computing demand is flowing through to Applied Materials' income statement.
  • However, the bullish narrative assumes revenue growth of 20.8% per year and margins rising from 27.8% to 30.9%, which would require an even steeper path than the 16.1% revenue growth and current 29.3% margin referenced in the broader forecasts.

Bulls point to this earnings run rate as proof that AI era chip spending could justify higher long term expectations, but the current margin and growth figures already look demanding for future performance to match. 🐂 Applied Materials Bull Case

Valuation Gap Echoes Bearish Caution

• At a current share price of US$436.69, the stock trades on a 40.7x P/E, which is below the US Semiconductor industry average of 64.8x and the peer average of 48.3x, yet the DCF fair value in the dataset is US$208.44, implying a wide gap between price and that cash flow based estimate.
• Bears focus on this valuation gap and on more modest growth assumptions, and the recent figures both support and challenge those concerns:
  • The bearish narrative assumes revenue growth of 3.9% per year and margins rising from 24.1% to 25.8%, which looks cautious when set against the reported 26% earnings growth over the last year and a current 29.3% net margin.
  • At the same time, with a single allowed analyst price target of US$502.71 above the current price, anyone leaning on the DCF fair value of US$208.44 is effectively siding with a much more conservative view of how future cash flows should be priced.

Skeptics highlight how the wide gap between the current price, the single allowed analyst target, and DCF fair value keeps valuation firmly in focus for anyone worried about downside risk. 🐻 Applied Materials Bear Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Applied Materials on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With both optimism and concern running through the numbers, this is a moment to move quickly, weigh the trade offs, and decide where you stand. To see a concise breakdown of the key positives and the main risk flagging investors, start with these 4 key rewards and 1 important warning sign

Explore Alternatives

Applied Materials carries a 40.7x P/E with a DCF fair value of US$208.44, so valuation concerns linger despite strong margins and earnings.

If that kind of pricing makes you cautious, you can quickly compare other opportunities with 49 high quality undervalued stocks and see which stocks look more reasonably valued right now.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.