Applied Materials Q1 2026 Free Cash Flow Hit $1.04 Billion, So Why Is the Stock Sliding

"We expect to grow our semiconductor equipment business over 20 percent this calendar year. DRAM now accounts for 34% of Semiconductor Systems revenue, up from 27% a year ago, all free cash flow surged 91% year over year to $1.04 billion."

"Bears have pointed to the stock's significant run, even as revenue fell 2.1% year over year in the most recent quarter, with skepticism that the valuation is justified by current fundamentals. China accounts for 30% of total revenue, a persistent geopolitical risk."

"Operating income fell about 30% year over year despite the EPS beat, with net income boosted by items outside core operations. Applied Materials paid a $253 million settlement with the U.S. Commerce Department over export controls compliance."

Applied Materials, a semiconductor equipment supplier, has declined 11% from recent highs to $328, with retail sentiment cooling to neutral levels. February earnings showed non-GAAP EPS of $2.38 beating consensus, and CEO guidance projects 20% semiconductor equipment business growth. DRAM revenue increased to 34% of Semiconductor Systems revenue, and free cash flow surged 91% year-over-year. However, bears highlight concerning fundamentals: revenue fell 2.1% year-over-year, operating income dropped 30% despite EPS beat, China represents 30% of revenue creating geopolitical risk, and the company faced a $253 million Commerce Department settlement. Wall Street remains bullish with 28 of 37 analysts rating Buy or Strong Buy and $411 price target, while retail investors maintain cautious neutral sentiment.

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