The deposition-etch-CMP leader opens a second growth track in HBM-stacking advanced packaging
Applied Materials does not make AI chips. It sells the tools that make them. Excluding lithography, it holds the broadest product line across deposition, etch, CMP and ion implant — the number-one pickaxe — and now a second track, the advanced-packaging tooling that underpins HBM stacking, is growing more than 50%. Execution is proven by the highest margins in 25 years, and the only question left is how far a market cap of roughly $490B has already bought that execution.
Fiscal Q2 2026 delivered a quarterly record $7.91B in revenue (+11% YoY) alongside a 50.0% non-GAAP gross margin, the highest in 25 years. Management raised its 2026 growth outlook for its own semiconductor equipment business from over 20% to over 30%, and said advanced packaging revenue grows more than 50%. A foundry-logic mix rising to 67% tied AI and leading-edge node demand directly to equipment revenue.
Tool power — Applied Materials (largest full line ex-lithography, HBM deposition leader) and Lam Research (#2 in etch/deposition, growing alongside). Complements — ASML (lithography monopoly, #1 in total WFE), KLA (process-control monopoly), Tokyo Electron (coater monopoly). Offsets — China at 27% of revenue with a $600-710M export-control headwind, equipment-cycle peak concerns, and expectations embedded in a ~36x forward P/E.
The tools that make chips are collectively called (Wafer Fab Equipment). , etch, cleaning, ion implant, inspection and lithography all belong to it. Whoever the chip company is, whatever chip they make, no chip emerges without passing through this equipment. It is the pickaxe of pickaxes.
Five companies divide this market. ASML holds a near-monopoly in lithography, so ASML is number one in total WFE revenue. But take lithography out, and the picture changes. In the combined space of deposition, etch, CMP, ion implant and inspection, Applied Materials holds the broadest product line and is number one. Lam Research is strong in etch and deposition, Tokyo Electron in coaters, KLA in inspection. Applied Materials contains nearly all of it inside one company.
Why does a broad product line matter? As nodes shrink, the number of process steps explodes. Making a single chip repeats deposition and etch hundreds of times. A company holding the full line captures multiple steps from a single customer fab — a wider revenue surface than any single-tool maker.
In our Lam Research report on etch and deposition intensity, we framed the structure as 'step count equals revenue.' Applied Materials takes that same structure across a wider surface — not just etch, but deposition and CMP too, all in one company.
Applied Materials is the largest full-line supplier of front-end equipment outside lithography. As nodes shrink, step counts rise, and that step count is this company's revenue surface.
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