Can Applied Materials Stock Jump 50%

For questions about this article or underlying research, email [email protected].

An easily overlooked business is part of the case for Applied Materials (AMAT) stock, though too small by itself to drive a 50% jump: the services it sells for chipmaking tools already working in customers' fabs. A rise of that size is not new for this stock, which managed one within the year in 9 of the last 10 calendar years. You probably still view Applied as a tool maker that swings with chip spending, and the shares lost 34.7% in the month to November 6, 2026. That view misses the services side of the business. So how big has Applied's services business become?

Services Bring In About A Fifth Of Applied's Sales

In fiscal Q3 2026, Applied Global Services, the company's services business, brought in a record $1.8 billion. That equaled about a fifth of Applied's $9.12 billion in revenue and marked a 22% increase from a year earlier. Management expects services to grow more than 20% in calendar 2026.

The business sells subscriptions and parts for the tools working in customers' fabs. More than 37 thousand chambers in the field connect to Applied's AIx software, which uses AI to monitor and diagnose them. Management said these services are delivering yield improvements for customers.

Applied Still Earns Most Of Its Sales From Tools

Services remain too small a part of Applied to steady the stock on their own. In fiscal Q3 2026, the tool business, which Applied calls semiconductor systems, generated a record $7 billion of the company's $9.12 billion.

That matters because the stock fell far harder than the market during the two worst of five recent market shocks for Applied. The shares lost 53% in the 2022 inflation shock, against 24% for the S&P 500 ETF. In the 2024 yen shock, from July to August 2024, Applied dropped 30%, while the S&P 500 ETF lost 7.8%.

Services add a second source of growth. Management expects services to grow at a mid-teens rate each year over the long term, a rate it called sustainable. At an October 13, 2026 investor presentation, Applied said it expects to gain more than two percentage points of chip equipment market share by 2030 while increasing service revenue. For fiscal Q4 2026, however, management guided tool sales up 62% from a year earlier, against 22% for services, so it expects most of the quarter's growth to come from tools.

Part Of Applied's Services Growth Came From Parts Orders

Management said the services growth in fiscal Q3 2026 reflected both subscription services growth and high transactional parts demand. Unlike a subscription, parts are bought order by order, so this growth rate mixes revenue that renews with revenue Applied has to win again.

That matters for what you pay. Applied trades at 28.5 times its trailing earnings, against 21.8 for the S&P 500. If services growth slows, that premium rests mostly on the tool business.

Services growth is holding above 20% so far, but services remain the smaller part of Applied. Guided at about $1.84 billion against about $7.9 billion for tools, services revenue is the number to watch when Applied reports fiscal Q4 2026 results in November 2026.

Beyond AMAT: A Systematic Way To Invest

Before you decide on AMAT, consider a better choice. Since its September 2020 launch, the Trefis High Quality (HQ) Portfolio has returned 105%, ahead of a benchmark that combines the S&P 500, S&P MidCap and Russell 2000, without betting on one stock.

See The HQ Portfolio

Spot an error or want more like this? Tell us in 10 seconds.