Applied Materials: AI Boom or Peak Cycle?

Applied Materials (AMAT) achieved record revenue of $9.12 billion in fiscal Q3 2026, marking a 25% year-over-year increase. The company's non-GAAP gross margin expanded for the 13th consecutive quarter, reaching 50.4%, with its services division also showing significant revenue growth. Management has provided a strong forecast for fiscal Q4, projecting revenue around $10.25 billion, and anticipates another year of robust growth in 2027, supported by enhanced customer demand visibility.

The company is expanding its global footprint with a new $500 million Singapore campus. However, investor sentiment is tempered by concerns that the current AI spending boom may be nearing a peak. This worry is reflected in AMAT's forward P/E ratio of 39.66, which is substantially higher than its historical average and the industry average, suggesting that the stock is priced for significant future growth that must materialize to justify the premium.