Can Applied Materials justify its massive stock rally in its Q2 earnings

Applied Materials AMAT will report fiscal second-quarter earnings after markets close Thursday, with investors closely watching whether booming artificial intelligence-related semiconductor spending can continue offsetting slowing growth from China.

Shares of the semiconductor equipment maker have surged roughly 70% this year as investors bet the company will remain a major beneficiary of the global AI infrastructure buildout despite export restrictions and softer Chinese demand.

Wall Street analysts expect Applied Materials to report adjusted earnings of $2.68 per share on revenue of about $7.7 billion, representing year-over-year growth of 12% and 8%, respectively.

Semiconductor systems revenue is projected to rise 11% to roughly $5.8 billion.

Options traders are anticipating a move of about 7.6% in either direction following the results, according to TipRanks’ Options Tool.

Applied Materials' stock was up 1.81% at $444.66 at the time of writing.

AI-driven semiconductor demand boosts outlook

Applied Materials supplies manufacturing equipment used in critical semiconductor production processes, including advanced foundry, memory, and AI chip manufacturing.

The company’s customers include major chipmakers such as Taiwan Semiconductor Manufacturing Company and Micron Technology, both of which are expanding production capacity to meet growing AI demand.

Analysts say the ongoing buildout of AI infrastructure, including advanced graphics processors and high-bandwidth memory chips, continues to support stronger long-term spending trends across the semiconductor industry.

Stifel analyst Brian Chin raised his price target on Applied Materials to $500 from $450 ahead of earnings.

The analyst expects Applied Materials to report second-quarter revenue of $7.70 billion and adjusted earnings per share of $2.76, both slightly above Wall Street expectations.

Chin also said the company remains positioned for “more than 20%” semiconductor systems revenue growth in 2026, driven by strong advanced foundry and DRAM demand.

Other firms have also turned more bullish on the stock.

Lynx Equity raised its price target to $540 from $440, citing expectations for accelerating NAND memory and advanced logic chip investments through 2028.

Meanwhile, Citigroup analyst Atif Malik increased his Applied Materials target to $520 from $420 after raising forecasts for wafer fabrication equipment spending tied to AI-related data center expansion.

Malik projected wafer fabrication equipment spending could reach $145 billion in 2026 and $190 billion in 2027.

China headwinds remain a concern

Despite the strong AI-driven momentum, investors remain focused on slowing sales growth in China, which has historically been a major market for Applied Materials.

The company faces restrictions on exporting advanced semiconductor equipment to Chinese customers under US trade controls.

At the same time, analysts believe domestic Chinese competitors may be gaining ground in lower-end semiconductor equipment markets.

Applied Materials previously indicated Chinese sales growth could remain flat this year, though management expects stronger demand from Taiwan, South Korea, and the United States to offset some of that weakness.

The broader geopolitical backdrop has also remained in focus as trade tensions between Washington and Beijing continue alongside increased restrictions targeting advanced semiconductor technologies.

Technical momentum remains strong

Wall Street sentiment toward Applied Materials remains broadly positive ahead of earnings.

Analysts currently maintain a Strong Buy consensus rating on the stock, with 19 buy ratings issued over the past three months.

Technical indicators also continue to point to strong momentum.

Applied Materials shares are trading well above their 20-day, 50-day, and 200-day moving averages following a sustained rally that began accelerating after a “golden cross” technical pattern formed in July 2025.

Analysts noted that momentum indicators such as MACD remain positive, suggesting buyers continue to support the stock despite concerns about valuation and broader market volatility.