Applied Materials Drops 6% on Record Quarter as Analysts Cut Targets

Applied Materials fell 6% to $358.54 on November 13, hours after posting record quarterly results and guiding above expectations — because at least 10 Wall Street firms, including JPMorgan and Goldman Sachs, cut their price targets on the stock.

The company reported Q4 FY2026 revenue of $10.41 billion, up 53.1% year over year, and adjusted earnings per share of $4.16. Both figures beat Wall Street's expectations and delivered a sixth consecutive EPS beat. Adjusted gross margin expanded to 50.6% from 48.1%. None of that mattered to the share price, which is down 19% over the past month.

The dissonance is the story: record numbers, falling stock, and a valuation debate now gripping the entire chip equipment sector.

What did Applied Materials actually report?

The numbers were unambiguous. Revenue of $10.41 billion in the fiscal fourth quarter, up 53.1% year over year. Adjusted EPS of $4.16. Adjusted gross margin at 50.6%, up from 48.1%. It was the company's sixth straight EPS beat.

Guidance for Q1 FY2027 also cleared the bar: revenue of $11.1 billion, plus or minus $500 million, with adjusted EPS of $4.35.

CEO Gary Dickerson framed the results around AI demand. "AI continues to fuel strong incremental demand for semiconductors and Applied has built the most-enabling portfolio to advance the AI-computing roadmap," he said.

The takeaway: the fundamentals accelerated, and the market shrugged anyway.

Why did at least 10 firms cut their price targets?

On November 13, at least 10 firms lowered their targets on Applied Materials — JPMorgan, Goldman Sachs, Bank of America, UBS, Wells Fargo and Jefferies among them. Every single one kept a Buy-equivalent rating.

The cuts were about price, not the business. Most firms attributed them to valuation compression — the multiple investors will pay for a dollar of earnings — a compression JPMorgan called "severe" and which spread across chip equipment stocks broadly.

Wells Fargo put the mechanics bluntly: elevated expectations required a bigger beat-and-raise than Applied Materials delivered.

Notably, even the lowest of the new targets — Needham's $470 — still sits above the November 12 close of $380.95. Analysts are marking down what they will pay, not what they think the company is worth. The takeaway: this is a multiple correction, not a downgrade of the business.

How did Lam Research and KLA trade?

The pressure was sector-wide, confirming that the market now trades chip equipment names as a unit.

• Lam Research (NASDAQ:LRCX): $222.72, down 5%. The company last reported on October 21, posting record September-quarter revenue of $8.22 billion.
• KLA (NASDAQ:KLAC): $148.08, down 6%. The process control specialist last reported October 28, with revenue of $4.14 billion, up 28.9% year over year.

Applied Materials' beat pulled neither itself nor its peers higher. The valuation compression analysts flagged applies to the whole equipment group, and no single company's results are breaking the correlation. The takeaway: investors are repricing the sector, not differentiating within it.

What distinguishes the three companies?

Applied Materials runs the widest wafer fab equipment platform (the machines that make chips) of the three, spanning deposition, etch, chemical mechanical planarization, ion implant and process diagnostics. On top of tools, it earns recurring service and spares revenue through Applied Global Services and sells display equipment. That breadth lets it capture spending across most steps of chipmaking.

Lam Research concentrates on deposition and etch for memory and advanced logic, tying its fortunes closely to memory pricing and leading-edge capacity builds. KLA dominates process control — the inspection and metrology tools chipmakers use to find defects and measure wafers.

Of the three, Applied Materials offers the most diversified exposure. That diversification did not spare it from the sell-off; it rarely does when an entire sector's multiple compresses at once.

Can the spending cycle outrun the valuation worries?

The bulls have support. Goldman Sachs and UBS still expect Applied Materials to gain market share as equipment spending picks up into 2027 and 2028. Management itself expects wafer fab equipment demand to rise more than 30% in 2027.

The bears have their own evidence, and some of it comes from the company. Applied Materials flagged export controls, tariffs and a concentrated customer base as risks. During fiscal 2026, it disclosed a $253 million settlement with the U.S. Bureau of Industry and Security — a reminder that policy, not just demand, shapes this business.

Supply is also a constraint. CFO Brice Hill said: "Our Q1 number would be slightly higher if everything were perfectly available." A beat-and-raise quarter still left room on the table.

The takeaway: the demand story is intact; the question is what multiple it deserves.

What happens next?

More price target revisions are likely as additional firms digest the guidance. The debate over chip equipment valuations could keep the group volatile in the near term, with each successive earnings report serving as the next data point in the argument between a 30%-plus WFE spending forecast and a Street unwilling to pay last month's prices for it.