Two Reasons To Rethink Applied Materials Stock Now
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Applied Materials (AMAT) stock has lost 26.8% over the past three months, while the S&P 500 gained 3.1%. Anyone holding the stock is asking whether the fall is a warning. The business itself is growing. Management reported record revenue for fiscal Q3 2026. Even after the fall, the stock still costs more than the market does. So what are buyers paying for at this price?
Buyers Pay A Premium For Applied Materials’ Profit Margins
At the October 20, 2026 close, Applied Materials traded at 34.7 times its earnings over the last twelve months, compared with 23.0 times for the S&P 500. Buyers get profit for that premium. The company kept 31.1% of its revenue as operating income over those twelve months, compared with 18.5% for the index.
Growth is the first reason for caution. Over the longer run, it has trailed the market, so the price depends on a recent pickup lasting. Averaged over the last three twelve-month periods, Applied Materials grew revenue 5.2% a year, below the 5.9% for the S&P 500. The last two quarters were much faster. Growth against the same quarter a year earlier rose from 11.4% in fiscal Q2 2026 to 24.8% in fiscal Q3. Buyers at this price appear to be betting that pace lasts.
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Can Applied Materials Ship What Customers Want In 2027?
Management expects clean room space to decide that. On the fiscal Q3 2026 call, management said the availability of clean room space will determine what Applied Materials and the rest of the industry can ship in 2027. Customers, though, have found new ways to work around the shortage of that space in 2026, and management said that has sharply raised their demand for tool deliveries.
Demand is the best case for owning the stock. On the same call, management said its largest customers now give it longer-term commitments and rolling 8-quarter forecasts. Management also said that most leading-edge logic and DRAM fabs are running at full capacity.
How Far Has Applied Materials Stock Fallen Before?
The stock has fallen further than the market during its worst shocks. In the 2022 inflation shock and Fed tightening, Applied Materials stock fell 53%, against 24% for the S&P 500. In the 2024 yen shock, it fell 30% while the index fell 7.8%. The 2025 US tariff shock was closer, with a 27% fall against 19%. In the two 2023 shocks, the stock fell less than the index.
That record is the second reason for caution. It means the size of a position matters as much as the choice to own the stock.
For the risk to be worth taking, Applied Materials needs revenue growth to stay near the 24.8% of fiscal Q3, far above its 5.2% longer-run average. Applied Materials is expected to report fiscal Q4 2026 results on or around November 12, 2026. Revenue against management’s guidance of $10.25 billion, plus or minus $500 million, is the number to watch in that report. A year earlier, fiscal Q4 revenue was $6.8 billion.
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