Applied Materials Raises the Bar With New 2030 Targets

This morning, Applied Materials (AMAT) hosted its investor breakfast at SEMICON West, and while the company is in its quiet period ahead of next month’s earnings report, it was anything but quiet.

Management shared new 2030 financial targets, a raised view on industry demand and a lot of color on pricing and supply. There were no orders, backlog or quarterly guidance figures, as near-term questions were pushed to the November earnings call.

Let’s review what Applied had to say and what it means for our position.

Demand

Per CEO Gary Dickerson, AI is driving both the global economy and the semiconductor industry, with leading-edge foundry logic, DRAM and advanced packaging the fastest-growing segments of wafer fab equipment. Applied says it is No. 1 in all three, and it expects them to account for roughly 75% of equipment spending growth through 2030. If there was any doubt, data centers have overtaken smartphones as the main driver of wafer starts in both leading-edge logic and DRAM.

What caught our attention is that Applied raised its wafer fab equipment forecast because of a significant increase in agentic AI compute demand in 2026. By Applied’s estimate, agentic AI consumes two to four times more wafers than generative AI. Leading-edge logic and DRAM fabs are running at 100% utilization, with NAND close behind, and Applied is tracking more than 100 fab projects worldwide, with more than 10 new ones added in each of the last two quarters.

Management also pushed back on memory “despeccing” concerns, arguing DRAM will stay constrained since new, less memory-intensive workloads add to demand rather than cannibalize it.

Pricing and Margins

As you know, we’ve been saying tight chip capacity would lead to higher chip equipment prices and better margins for Applied, and the industry reports we flagged yesterday that ASML (ASML) is looking to raise prices on replacement parts and new equipment pointed in that direction. Today, Digitimes reports Samsung (SSNLF) and SK Hynix (SKHY) accepted a 10% price hike from ASML.

Applied also confirmed the pricing environment. CFO Brice Hill said the company’s value-based pricing process hasn’t changed, but some of its solutions have become a lot more valuable and “the whole value in the market is rising.” He also said Applied is raising prices as part of its push toward higher margins. Here’s the thing: Per Dickerson, there are “not a lot of conversations on cost right now” with customers, who are focused on performance and yield. That suggests chip industry capacity remains tight, and bodes well for chip efforts by Marvell (MRVL) and Broadcom (AVGO) while Nvidia (NVDA) and Advanced Micro Devices (AMD) remain capacity constrained in the coming quarters.

That feeds into the new 2030 targets. Applied is aiming for a 54% non-GAAP gross margin by 2030, up from roughly 50% today, or about 100 basis points a year, though management cautioned it won’t be a smooth ride given the costs of a new factory, fuel and rare earths. The equipment business alone is already running above 55%. Applied also targets a 40% non-GAAP operating margin, with 200 to 300 basis points of that coming from using AI to automate corporate functions.

Other targets include more than 2 percentage points of market-share gains by 2030, services revenue above $12 billion with growth stepping up to a mid-teens annual rate, and display and photonics revenue above $2 billion. Applied remains committed to returning 80% to 100% of free cash flow to shareholders over time.

Supply Constraints

Management noted the biggest factor pacing growth isn’t demand, it’s cleanroom space, followed by the supply chain, energy and financing. Applied has raised its expectations of its more than 2,000 suppliers every quarter this year, asking for repeated double-digit sequential increases, and sees “no roadblocks, only pinch points.” To keep up, Applied is investing to double its lab and manufacturing capacity. In our view, that tells us this is a supply-constrained up-cycle, which tends to support pricing, but it also means growth could come in lumpier than the demand picture suggests.

AI Inside Applied

Inside its own walls, management shared that every Applied software developer now uses AI, with average productivity gains of 44%. More than 80% of employees use AI tools weekly, and token consumption rose 45-fold in a year. That’s exactly the kind of usage data we’ve been looking for.

What to Watch

Not everything was rosy. Trade restrictions have cut Applied’s access to the Chinese equipment market to roughly 70% from 100% in the early 2020s. Management says its share is up where it can compete. We’ll be listening for orders, backlog and near-term guidance on next month’s earnings call.

All in all, today’s update reinforces our view that Applied is one of the key enablers of the AI build-out, with pricing power and margin expansion still ahead.

As we noted yesterday, our eye has been on AMAT shares relative to their 50-day moving average near $489. With today’s trading, AMAT shares have fallen below that level, which means we now look for a positive test of that 50-day moving average in the next day or so, or we look to see if the shares stabilize near the 200-day moving ($436) like they did in mid-September.

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At the time of publication, TheStreet Pro was long AMAT, AMD, AVGO, MRVL, and NVDA.