Applied Material Falls Despite Posting Above-Average Q3 Results. Why, and What to Do With AMAT Stock Now.

Applied Materials (AMAT) stock experienced a drop of 5.12% in its trading session after reporting Q3 2026 results, despite surpassing Street estimates and delivering strong performance. The semiconductor equipment manufacturer, valued at a market cap of $402.7 billion, reported record revenues of $9.12 billion, a 25% increase from the previous year, driven by robust demand across foundry, DRAM, and flash memory segments.

Gross margins reached 50.3%, exceeding the previous quarter's 48.8%. Earnings per share (EPS) grew by 41% to $3.50, surpassing the consensus estimate of $3.40, and the company's guidance for Q4 EPS stood at $4.02, above the estimated $4.00. Cash from operating activities increased to $3.04 billion, with free cash flow climbing to $2.33 billion.

The company's cash balance stood at $7 billion, surpassing short-term debt levels of $1.3 billion. Despite elevated valuations, AMAT's forward price-to-earnings, price-to-sales, and price-to-cash flow ratios remain significantly higher than sector medians. Analysts rate the stock as a Strong Buy with a mean target price of $637.15, representing an 18.6% potential upside.

Key growth drivers include Applied Global Services (AGS) segment revenue growth and the expansion of advanced packaging capabilities through the acquisition of NEXX.