Earnings Preview | Applied Materials (AMAT.US) Q4 Results are Certain, the Real Focus is on the Missing 2027 Quantitative Guidance

Zhitong Finance APP reports that Applied Materials (AMAT.US) will release its fourth quarter and full-year results for fiscal year 2026 after the close of trading on Thursday, November 12, Eastern Time. This is an earnings report where the outcome is almost pre-written: sell-side consensus is anchored precisely at the midpoint of the guidance given by management three months ago. The real focus this week is not how much was earned in the fourth quarter, but how management describes 2027.

This is also the first core wafer fab equipment (WFE) company to announce results after chip stocks collectively plummeted on November 5. Its statements will be regarded as the first "order validation" in the AI capital expenditure narrative.

For the fourth quarter, sell-side consensus expects revenue of around $10.3 billion (an increase of 51% year-on-year), Non-GAAP earnings per share of $4.06 (an increase of 87% year-on-year), nearly matching the company's August guidance (revenue of $10.25 billion ± $500 million, EPS $4.02 ± $0.20). The company has exceeded EPS expectations for eight consecutive quarters (by an average of about 5%), but after the last earnings beat, the stock price still fell more than 5% the next day—markets are no longer paying for "meeting targets." The numbers themselves this quarter have limited information content; the true pricing variable is the guidance.

Analysts are focused on four key points:

1. FY27Q1 Guidance and 2027 Framework

Consensus expects next quarter's revenue of about $10.74 billion and EPS of $4.18. Management has repeatedly stressed that "2027 will be another strong growth year," based on customer-provided rolling demand forecasts for eight consecutive quarters. However, at the October Investor Day, they only offered a long-term 2030 target, skipping quantitative guidance for 2027, putting pressure on the stock. If this time there's still "more qualitative, less quantitative" disclosure, it may be interpreted as a signal of peaking demand. Note that FY27Q1 is a 14-week quarter, and concentrated expenses will mechanically affect comparability.

2. Can Gross Margin Resume Climbing

Non-GAAP gross margin has improved year-on-year for 13 consecutive quarters, but has stagnated quarter-on-quarter near 50.4%. Management attributes this to ramp-up costs (over 1,500 new hires this quarter) and a higher proportion of the display business, but has not provided a timeline for improvement—this is the most likely "red flag" to be pressed during the earnings call.

3. China Risk

China accounts for about 26% of semiconductor systems plus services revenue. Management expects growth throughout the year, but will not "quantify" potential new export controls. During policy-sensitive windows, any change in wording will be magnified in interpretation.

4. Structure and Supply

Advanced packaging growth rate has been raised to over 70% (driven by HBM and 3D Chiplet), and DRAM revenue is up 52% year-on-year—whether this can be sustained remains to be seen. Meanwhile, cleanroom space and the supply chain are hard constraints; "demand is not an issue, supply is," so revenue recognition carries cross-quarter deferral risks.

"Good Results, Stock Price Falls" Repeats

If FY27Q1 guidance is significantly above $10.7 billion and a quantitative growth framework for 2027 is provided, with gross margin also rising quarter-on-quarter, the report could restore valuation; if revenue lands in the lower half of guidance and the outlook for 2027 only reiterates "strong growth" without figures, it's likely the script of "good results, falling stock price" will repeat.

As of the close on November 6, the stock stood at $332.72, down about 55% from its July high, but still up about 30% year to date. It is worth noting that almost all of the recent decline has come from valuation compression—forward P/E has fallen from 49x at the end of June to about 21x (close to the five-year average), with earnings expectations not revised downward.