Applied Materials, Inc.

Welcome to the Applied Materials third quarter of fiscal 2026 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. I would now like to turn the call over to Mike Sullivan, Corporate Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining today's call. With me are Gary Dickerson, our President and CEO, and Brice Hill, our Chief Financial Officer. Before we begin, I'd like to remind you that today's call includes forward-looking statements which are subject to risks and uncertainties that could cause our actual results to differ. Information concerning these risks and uncertainties is discussed in our most recent Form 10-Q and other filings with the SEC. Today's call also includes non-GAAP financial measures. Reconciliations to GAAP measures can be found in today's earnings press release and in our quarterly earnings materials, which are available on our website at ir.appliedmaterials.com. In addition, any comments regarding calendar 2026 refer to Q2 of this fiscal year through Q1 of fiscal 2027, which will be a 14-week quarter. Next, I'd like to remind you about our two special events during Semicon West. On Monday afternoon, October 12th, we'll host an unveiling of the new Epic Center in Silicon Valley, California. And on Tuesday morning, October 13th, we hope you'll join Gary, Brice, and our business unit leaders for our Investor Breakfast presentation at the Yerba Buena Center in San Francisco. You can join us in person or on a live webcast. And with that introduction, I'd now like to turn the call over to Gary Dickerson.

Thank you, Mike. In our third fiscal quarter of 2026, Applied Materials delivered another set of record-breaking results, including the highest quarter-on-quarter revenue growth in the company's history. The rapid global build out of AI infrastructure combined with applied leadership positions in the most enabling and highest value technologies for AI computing provide the company with an exceptionally strong foundation for multi-year revenue and profit growth. As 2026 has progressed, customers have found new ways to address clean room space constraints and significantly increase their demand for tool deliveries. In the past three months, We have, again, made upward revisions to our revenue growth forecast for the year, and we are confident we will grow faster than the overall market. As AI computing drives unprecedented demand for semiconductors, there is a large gap between demand and supply for advanced chips. To ensure our supply chain and field teams can support their ramps, our largest customers are giving us longer-term commitments and Rowling Eight Quarter Forecasts. This increased demand visibility gives us high confidence that 2027 will be another strong growth year for applied materials. As customers move quickly to bring new fab capacity online while simultaneously optimizing yield and output of their existing production facilities, We also see strong incremental demand for our advanced service solutions. In my prepared remarks, I will share my views on how AI is resizing and reshaping the semiconductor industry and its ability to realize the value of advanced technology. I will describe the increasing value applied to delivering to our customers by accelerating their technology roadmaps optimizing existing production capacity and helping ramp new fabs faster. And I'll provide a brief update on our EPIC strategy as we prepare to start operations in our new EPIC Center in Silicon Valley. As I have said before, I strongly believe that AI is the biggest and most consequential technology inflection of our lifetimes. While we are still in the early innings of deployment, AI is reshaping the global economy and becoming fundamental to the relative competitiveness of companies. What I am seeing at Applied Materials is a great case study in AI's real-world impact. Our investments in AI are on track to deliver compelling returns by accelerating our revenue growth and operating profit margins. In R&D and Services, we're using AI to create highly differentiated products, significantly speed up product development timelines, and create valuable new service solutions for customers. In operations, supply chain, and our corporate functions, AI is helping us ramp faster, drive meaningful improvements in productivity, and scale our revenue significantly faster than our headcount. Beyond applied, we see similar trends playing out across a wide variety of industries. As the performance and cost of AI computing improves, many new applications will become technically viable and economically attractive. These expansive opportunities for value creation are fueling an intense global competition for AI leadership, which can be described as two concurrent races. The first race is for technology leadership. AI data center returns are determined by the number of tokens generated per second and the total cost of ownership, which is dominated by energy consumption. Improvements in token per second per watt are primarily driven by innovations in semiconductor devices and systems. This can be seen in the value the semiconductor and semiconductor equipment industries are generating from their most advanced technologies. The second race is for capacity as demand for advanced semiconductors to support AI infrastructure scaling far exceeds supply. As a result, chip makers are intensely focused on increasing output and yields of their existing factories while rapidly building new ones. For Apply, the technology race and the capacity race are fueling new opportunities to create and capture value. In the race for technology leadership, leading-edge foundry logic, DRAM, and advanced packaging have the greatest impact on AI computing performance, power efficiency, and cost. Together, we expect these areas to represent around 80% of wafer fab equipment growth in 2026 and 2027. These three areas are also where Applied has strong leadership positions, where we identified key AI inflections early, and where we've shifted our investments to build an innovative pipeline of next-generation solutions. In the past quarter alone, we have announced six new products, including our Centura Prime epitaxy system designed specifically for high-performance DRAM, Producer Avila that enables higher performance and higher layer count high bandwidth memory, Nakoda VMAX, our next generation plating system, and Optiquad CMP for advanced packaging, and two new eBeam systems also for advanced packaging that expand on our eBeam leadership in the front end. Advanced packaging is one of the most important areas for AI compute innovation and we see very strong multi-year growth for Applied. Applied is the overall leader in this market with strong positions in high bandwidth memory and 3D chiplet stacking and we now expect our overall packaging revenues to grow more than 70% in calendar 2026. We're also well positioned for future packaging inflections as the industry moves to new architectures and larger size panel formats. We have built a broad portfolio of next-generation technologies for panel, including digital lithography, deposition, etch, and e-beam review. In the global race to add semiconductor manufacturing capacity, our customers' ability to increase yield and output in their existing production fabs is incredibly valuable. This creates expanded opportunities for Applied to deliver new innovations in three key areas, services, process diagnostics and control, and new products that increase wafer output per area of fab space. Our advanced service solutions enable customers to better optimize performance of their high volume manufacturing operations. We already have more than 37,000 chambers in the field connected to our proprietary AIX software capabilities and use AI-powered monitoring, diagnostics and predictive analytics. Our advanced services are delivering yield improvements for customers and helping us drive higher growth rates in applied global services. We now expect AGS to grow more than 20% in calendar 2026 and to deliver a sustainable long-term annual growth rate in the mid-teens. Our metrology and inspection product portfolio is also enabling customers to accelerate fab yields and output improvements. The most advanced logic and DRAM devices require more E-beam steps that can provide sub-nanometer resolution for high aspect ratio structures. Applied has unique E-beam technology and is the leader in this growing market. In parallel, we are introducing new optical inspection products which enable us to increase application share in these markets as well. As a result, we expect to grow our process diagnostics and control business more than 50% in calendar 2026, and we have a strong pipeline of new products that will fuel growth in 2027 and beyond. Finally, we're developing a new portfolio of output innovation products that increase the wafers that can be processed per square foot of clean room space. One example is our new Epitaxy system for DRAM that not only increases device performance, but also uses 20% less clean room space than our earlier products. We have multiple output innovation products in qualification at customer sites that will provide significant increases in output per unit area. With incredibly strong customer pull for next generation technology and unprecedented demand for semiconductor manufacturing capacity, the value of time to market has never been greater. Our epic strategy is designed to increase innovation and commercialization velocity by creating earlier and deeper engagements with our customers and partners and co-locating key innovators. For chip makers, Epic provides much earlier access to Applied's new product innovations that are at the foundation of future AI compute architectures. The output from Epic will be more mature technology that can deliver high yields faster in volume manufacturing. For Applied, Epic co-innovation programs will enable us to be designed in to new chip and packaging architecture inflections increased R&D productivity and value sharing, and provide better multi-node visibility to guide our investments and resource allocation. Since our last earnings call, we announced that Broadcom will join Epic as an innovation partner to accelerate development of advanced chip packaging technologies for next-generation AI systems. We also signed Epic partnership agreements with Screen and UC Berkeley. This brings our total number of announced EPIC engagements to 11, spanning system companies, leading chip makers, top research universities, and innovation partners. The centerpiece of our EPIC platform is our brand new EPIC Center in Silicon Valley. We will move the first R&D tool into the clean room next week, and we are on track to start operations in the coming months. Before I hand over to Brice, let me briefly summarize. Demand for advanced semiconductors and semiconductor equipment continues to strengthen, and as customers find new ways to address clean room space constraints, we see higher demand for 2026 tool deliveries. With support from our supply chain, we have again increased our expectations for 2026 revenue, and we are confident We will grow faster than the overall market this calendar year. In the race for AI technology leadership, leading-edge foundry logic, DRAM, and advanced packaging have the greatest impact on AI computing performance, power efficiency, and cost. These are areas where Applied has strong leadership positions and an innovative pipeline of next-generation solutions, supporting strong revenue and margin growth in 2027 and beyond. And we're working closely with our customers to optimize yield outputs and fab ramp times with valuable new innovations in services, process diagnostics and control, and output innovation products. Brice, over to you.