Applied Materials Eyes Nearly 40% Growth as AI Fuels Chip Equipment Demand

Applied Materials NASDAQ: AMAT CEO Gary Dickerson said demand tied to artificial intelligence and data-center computing is strengthening the company’s near-term and long-term outlook, with the semiconductor equipment maker now approaching 40% revenue growth for 2026 based on its recent communications.

Speaking at the Goldman Sachs Communacopia + Technology Conference, Dickerson said Applied had raised its 2026 revenue-growth outlook several times during the year. The company initially projected growth of more than 20% in February, increased that view to more than 30% in May, and has since moved toward 40% growth, he said.

AI Drives Equipment Demand

Dickerson characterized AI, particularly data-center AI, as the largest demand driver for Applied’s business. He said leading-edge foundry logic, DRAM including high-bandwidth memory, and advanced packaging account for 80% of wafer fab equipment growth this year. Applied expects a similar mix in 2027 and beyond, he added.

He pointed to a shift in semiconductor demand between smartphones and data centers. Smartphone wafer starts at leading-edge foundries were four times larger than data-center wafer starts several years ago, according to Dickerson. He said the markets are now approximately equal, and data-center wafer starts could become twice as large as smartphone wafer starts within a few years.

Applied has a rolling eight-quarter customer forecast as well as longer-term commitments, Dickerson said, adding that the company is holding discussions with customers extending through 2030. He said agentic AI is increasing expected demand for CPUs and DRAM, while physical AI could add further computing demand over time.

“AI is the biggest technology inflection I’ve ever seen in my life,” Dickerson said, describing the trend as a multiyear driver rather than a typical semiconductor cycle.

Services and Internal AI Adoption

Dickerson said Applied is using AI primarily to accelerate product development and expand revenue opportunities, rather than focusing solely on cost reduction. He cited a 50% productivity improvement in software and algorithm development for certain products, saying the aim is to bring multibillion-dollar products to market more quickly.

The company also is applying AI to its services business, where Dickerson said demand for yield and output improvements has increased. Applied has more than 37,000 chambers in the field connected to AI-enabled servers, most of them remotely connected, he said. The company is using predictive models, preventive maintenance and chamber-matching capabilities to help customers increase output and improve the number of good chips produced per wafer.

Applied’s services business grew more than 20% year over year, Dickerson said, while service margins improved by 180 basis points. In some cases, he said, new service contracts can more than double revenue per tool.

Advanced Packaging and Process Control Growth

Advanced packaging is expected to be one of Applied’s fastest-growing businesses. Dickerson said the segment is forecast to grow more than 70% this year and is expected to generate between $2 billion and $3 billion in revenue at the midpoint of the company’s forecast range.

High-bandwidth memory and 3D integrated circuits are among the fastest-growing advanced-packaging areas, he said. Applied has added capabilities through acquisitions in panel-level plating and X-ray technology, according to Dickerson.

Applied’s inspection and measurement business, meanwhile, is growing more than 50% in the current calendar year, he said. Dickerson highlighted the company’s electron-beam and optical technologies, which he said support both chip performance improvements and yield gains.

• Semiconductor Systems gross margin has increased by about 190 basis points over the past year to the mid-50% range, Dickerson said.
• Service margins increased 180 basis points over the same period.
• Dickerson said he expects Applied to continue expanding margins because of the value its technologies provide in performance, yield and output.

Regional Outlook and Capital Allocation

In China, Applied is primarily exposed to its ICAPS markets, which include internet-of-things, communications, automotive, power, sensors and consumer electronics. Dickerson said the company is seeing growth in China and gaining some share in areas where it can compete, but expects ICAPS to grow at mid- to high-single-digit rates over time, slower than AI data-center-related markets.

He said regionalization of semiconductor manufacturing is a tailwind for Applied’s service business because newer manufacturing locations often have less-established service infrastructure and less experience ramping production yields.

Dickerson declined to discuss specific customers, including the proposed Terafab effort discussed by conference host Jim Schneider. He said Applied is engaged with companies pursuing AI-compute leadership and is working with customers on technology road maps spanning advanced logic, memory and packaging.

Looking ahead, Dickerson said 2027 should be “a great year” for Applied and that growth should remain strong beyond that period, though he did not provide a numerical forecast. On capital allocation, he said Applied expects to return 80% to 100% of cash to shareholders. Large acquisitions are difficult in the current geopolitical environment, he said, but the company will continue to pursue smaller acquisitions and strategic investments.

About Applied Materials (NASDAQ:AMAT)

Applied Materials, Inc is a global provider of materials engineering solutions used to manufacture semiconductors, displays and other advanced electronic products. The company develops and supplies equipment, services and software that help customers build and improve the performance of chips and display panels.

Its semiconductor products support processes including deposition, etch, patterning, inspection, metrology and materials modification. Applied Materials also provides equipment and services for display manufacturing, including technologies used in producing liquid-crystal and organic light-emitting diode displays, as well as solutions for adjacent markets such as solar and other specialty applications.

Founded in 1967 and headquartered in Santa Clara, California, Applied Materials serves semiconductor and display manufacturers worldwide through operations, customer-support centers and research and development activities across major technology-producing regions.

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