Applied Materials AMAT shares have climbed 72.5% year to date (YTD), outperforming the Zacks Computer and Technology sector and the Zacks Electronics - Semiconductors industry’s appreciation of 16.8% and 26.1%, respectively.
AMAT YTD Performance Chart
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The rise in stock price has made AMAT stock trade at a premium. Currently, AMAT has a price-to-sales (P/S) multiple of 8.04X, which is much above the industry’s P/S of 4.96X. AMAT’s value score of D also suggests its overvaluation.
AMAT Forward 12-Month (P/S) Valuation Chart
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Given the rise in share price and valuation combination, investors might ask: Should they buy, sell or hold the stock? Let’s discuss the fundamentals in detail.
AI and Capacity Expansion Trends Strengthen AMAT’s Growth
Applied Materials is well positioned to capitalize on AI-driven semiconductor demand as leading-edge foundry-logic, DRAM and advanced packaging are expected to account for around 80% of wafer fab equipment growth in 2026 and 2027. AMAT’s leadership in these areas, particularly HBM and 3D chiplet stacking, strengthens its exposure to rising AI computing requirements and fab capacity investments globally.
AMAT introduced six new chipmaking systems in the latest quarter, spanning DRAM and advanced packaging. Enhanced Centura Prime Epi targets faster, more power-efficient DRAM and HBM, while Producer Avila 2 supports higher-layer-count HBM. AMAT also introduced Opta Quad CMP, Nokota VMax 2 ECD, and new eBeam systems addressing demanding packaging, plating, metrology and defect-analysis requirements for advanced architectures and yield optimization across fabs.
As the opportunity broadens beyond equipment sales, chipmakers race to increase output and yield, benefiting wafer fabrication equipment manufacturers like AMAT. Applied Materials expects advanced packaging revenues to grow more than 70% in calendar 2026, while DRAM revenues, including HBM packaging, rose 52% year over year in the fiscal third quarter. Process diagnostics and control revenues are also expected to increase more than 50% this year overall through 2026.
Furthermore, Applied Global Services (AGS) adds an important recurring growth engine. AGS generated record third-quarter revenues of $1.78 billion, up 22% year over year, with gross margin reaching 35.6% and operating margin at 30.1%. Since more than 37,000 chambers are connected to AIx software, supporting AI-powered monitoring, diagnostics and predictive analytics, AGS is expected to grow above 20% in 2026 further and improve profitability.
Strong customer visibility further supports AMAT’s growth outlook. Most leading-edge logic and DRAM fabs are operating at full capacity, customers announced more than 10 new fab projects during the third quarter of fiscal 2026, and some forecasts extend to 2030. AMAT plans to double quarterly system output by 2028. Applied Materials’ fiscal fourth-quarter revenue guidance of $10.25 billion also signals accelerating momentum into 2027.
AMAT’s Broad Portfolio Helps it Challenge its Competitors
AMAT’s broad portfolio positions the company to capture a larger share of customer spending as semiconductor manufacturing becomes increasingly materials-intensive while also keeping its competitors like KLA Corporation KLAC, Lam Research LRCX and Camtek CAMT at bay. The breadth of Applied Materials' portfolio also reduces its dependence on any single semiconductor technology cycle and supports stronger pricing power.
KLA Corporation remains a dominant player in process control, wafer inspection and yield management solutions, while Camtek focuses on semiconductor inspection, metrology, advanced packaging and high-performance computing applications. Lam Research competes with Applied Materials across deposition and etch technologies, including advanced atomic layer deposition systems used in leading-edge semiconductor manufacturing.
All of these companies operate based on large capital expenditures. AMAT is particularly seeing strong customer visibility. Based on longer-term customer demand signals, the company opened its newest manufacturing center in Singapore during the quarter. AMAT is hiring and training manufacturing and customer-support personnel with the objective of doubling quarterly system output from current levels by 2028.
Continuous competitive environments require continued execution because customers can standardize around fewer toolsets or negotiate across broad equipment purchases. The competitive environment also pressures margin, but AMAT’s value-based pricing has supported its bottom line. For the fourth quarter of fiscal 2026, Applied Materials expects non-GAAP earnings of $4.02 per share (+/- 20 cents), indicating 85% year-over-year growth at the midpoint. The Zacks Consensus Estimate reflects year-over-year growth of 86.6%. The estimates have been revised upward in the past 30 days.
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Conclusion: Buy AMAT Stock Now
AMAT’s broad portfolio, rising AI-driven WFE demand, expanding semiconductor equipment business and investments in manufacturing capacity support further growth. Therefore, investors should consider buying AMAT stock for long-term growth potential. Given these factors, we suggest investors accumulate this Zacks Rank #2 (Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).