Date: May 14, 2026 | Source: Motley Fool (fool.com) / investing.com / company press release
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Mike Sullivan (CVP, Investor Relations, Applied Materials): Good afternoon, everyone, and thank you for joining today's call. With me are Gary Dickerson, our President and CEO, and Brice Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call includes forward-looking statements which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning these risks and uncertainties is discussed in our most recent Form 10-Q and other filings with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures can be found in today's earnings press release and in our quarterly earnings materials, which are available on our website.
Gary Dickerson (President & CEO, Applied Materials): Thank you, Mike. In our second fiscal quarter, Applied Materials delivered record revenue and earnings, along with our highest gross margin in more than 25 years. With rising demand and increasing long-term visibility from customers, we see an exceptionally strong foundation for sustained multiyear revenue and profit growth. The momentum in our business is being driven by three key factors: first, the rapid global build-out of AI computing infrastructure. Second, Applied's leadership positions in the most enabling and highest value areas of the market, particularly leading-edge foundry logic, DRAM and advanced packaging. And third, strong execution across our operations and supply chain.
In my prepared remarks, I will provide an update on how our markets are evolving, explain how Applied is enabling the AI road map with our differentiated technology and exciting pipeline of new products and outline how we're transforming the way we work with customers, partners and across the company to drive higher velocity, increase operating leverage and scale more efficiently. Over the past several months, global AI adoption has continued to accelerate as improvements in the performance and cost of AI computing are translating into real-world applications that deliver compelling returns for users. If I look at our own company as an example, today, we have more than 35,000 AI users across our global workforce.
(Speaker continues on AI infrastructure demand, the company's inflection-focused innovation strategy — new Trillium ALD and PECVD platforms for advanced transistor gate stacks and shallow-trench isolation, leadership in GAA foundry logic, DRAM/HBM and advanced packaging — and the planned NEXX acquisition and EPIC Center to accelerate co-innovation with customers across multiple nodes. Management highlighted that customer-provided eight-quarter forecasts are enhancing supply chain planning and delivering improved visibility into multiyear growth, supporting investments in expanded manufacturing capacity in the U.S., Europe and Singapore.)
Brice Hill (CFO, Applied Materials): (Financial review.) Revenue in the second quarter was $7.91 billion, reflecting 13% sequential growth and 11% year-over-year growth. Non-GAAP gross margin reached 50%, up 80 basis points year over year, and we are guiding to 50.1% for next quarter. Non-GAAP operating margin expanded to 32.1%, an increase of 140 basis points year over year. Non-GAAP earnings per share were a record $2.86, up 20% year over year.
Semiconductor Systems revenue was $5.97 billion, up 16% sequentially and 10% year over year. DRAM revenue was $1.7 billion, up 18% year over year, with noted share in wiring, patterning, and peripheral logic steps. Applied Global Services revenue was $1.67 billion, growing 17% year over year due to higher fab utilizations and advanced service demand. Other revenue was $280 million, matching internal expectations.
Cash from operations was $845 million, with $635 million of capital expenditures resulting in $210 million of free cash flow. We returned $765 million to shareholders, with $365 million in dividends and $400 million in share repurchases. Our quarterly dividend was increased by 15%, meeting the company's goal to double the dividend per share. China accounted for 24% of Semiconductor Systems plus Applied Global Services revenue.
Looking to our third-quarter outlook, we expect revenue of $8.95 billion, plus or minus $500 million, representing nearly 23% growth year over year. We expect non-GAAP EPS of $3.36, plus or minus $0.20, up nearly 36% year over year. We anticipate $6.9 billion from Semiconductor Systems, $1.75 billion from Applied Global Services, and $300 million from other sources.
We now expect our semiconductor equipment business to grow more than 30% in 2026. Advanced packaging is forecast to grow over 50% in calendar 2026. Applied Global Services now expects sustainable annual growth in the mid-teens and higher for this year. Leading-edge foundry logic, DRAM, and advanced packaging are projected to drive more than 80% of wafer fab equipment spending growth in 2026, with a similar outlook for 2027. EPIC Center founding and recent partners announced include TSMC, Micron, Samsung, SK Hynix, ASU, RPI, Stanford, and Advantest.
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*Transcript compiled from Motley Fool earnings call transcript (published May 15, 2026) and investing.com transcript. ~4,500 words.*