Applied Materials AMAT stock’s 52-week low was recorded at $154.47 on Sept. 3, 2025. Since then, AMAT stock has climbed 283.7%. Year to date, AMAT stock has surged 130.6%, outperforming the Zacks Electronics - Semiconductors industry’s growth of 42.7%.
AMAT YTD Performance Chart
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The massive rise in the stock price has made AMAT trade at a premium. Currently, Applied Materials has a price-to-sales (P/S) multiple of 12.06X, which is much above the industry’s P/S of 8.93X. 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.
AMAT Gains From Traction Across its Broad Product Portfolio
Applied Materials has an unmatched breadth across semiconductor manufacturing. Applied Materials offers solutions across deposition, materials engineering, etch, metrology, inspection, packaging and process integration, allowing customers to optimize manufacturing flows using a single vendor across multiple stages of production. AMAT’s semiconductor systems segment delivered record revenues of $5.97 billion during the second quarter of fiscal 2026, representing 10% year-over-year growth and 16% sequential growth.
Revenue composition further highlights the shift toward AI-driven semiconductor investment. Foundry, logic and other applications contributed 67% of segment revenue, DRAM accounted for 29%, and flash memory represented just 4%. The higher contribution from foundry-logic and DRAM is increasingly driving demand for leading-edge logic chips, high-bandwidth memory, and advanced packaging technologies.
Management believes that leading-edge foundry-logic, DRAM and advanced packaging will account for more than 80% of the year-over-year growth in wafer fabrication equipment spending during 2026. In the second quarter of fiscal 2026, AGS generated $1.665 billion of revenues, up from $1.42 billion a year earlier, while its gross margin improved to 34.7% and its operating margin rose to 29.2%.
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.
AMAT’s CapEx Spend & AI Demand Signal Future Cash Flow Strength
In the second quarter of fiscal 2026, AMAT’s operating cash flow declined to $845 million from $1.686 billion in the prior quarter, and free cash flow decreased to $210 million from $1.04 billion in the prior quarter. AMAT’s expanding manufacturing capacity and strengthening supply chain readiness can be a probable reason.
AMAT is investing in building plans, inventory positions and logistics capacity to ensure that it can meet accelerating customer demand. Customers are providing longer-term demand forecasts, allowing Applied Materials to prepare manufacturing resources well in advance and support expected industry growth through 2027 and beyond.
The company also expects its semiconductor equipment business to grow more than 30% in 2026 as customers expand cleanroom capacity and accelerate equipment pull-ins. This demand mix aligns with Applied Materials’ stated leadership positions and supports a more durable multi-year spending cycle than prior compute-driven upturns, suggesting future cash flow strength.
Beyond all these, Applied Materials’ ability to generate sufficient cash to return capital to shareholders is a green flag. During the second quarter of fiscal 2026, Applied Materials distributed $765 million through $400 million of share repurchases and $365 million in dividends while simultaneously funding investments in production capacity and supply chain capabilities.
The favorable mix shift toward AI-driven markets is already translating into stronger financial performance. Applied Materials reported record fiscal second-quarter 2026 revenues of $7.91 billion, up 11% year over year, while non-GAAP earnings per share increased 20% to a record $2.86. The Zacks Consensus Estimate for fiscal 2026 earnings currently implies growth of 29%. 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. Strong earnings momentum, upward estimate revisions and continued shareholder returns reinforce the bullish case. Therefore, investors should consider buying AMAT stock for long-term growth potential. Given these factors, we suggest that investors should accumulate this Zacks Rank #1 (Strong Buy) stock at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Applied Materials, Inc. (AMAT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).