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QS Research · Michael Burry's Scion Capital analyst template · 2006

APPLIED MATERIALS INC /DE (AMAT)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: SHORT

Conviction medium · base case -34% · downside -62% · upside +17%

Our base case uses the FY2020–FY2025 average net income of $6.18B, not the TTM $9.27B, because AMAT is cyclical and current earnings are near a high. At the peer-low 33x multiple, normalized earnings power is $204B, 34% below the $309.88B market cap; even the upside case on TTM earnings at 39x is only $361B, 17% above. A trough year on FY2020 net income of $3.62B at 33x is $119B, a 62% loss, so risk/reward is sharply skewed to the downside. The normalized FCF valuation at the current 1.8% yield merely equates to the market price and provides no independent margin of safety, so the earnings-based normalization drives the short.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    Applied Materials makes semiconductor manufacturing equipment, services and software. In FY2025 it reports two segments: Semiconductor Systems (largest revenue contributor) and Applied Global Services (AGS); its display business sits in Corporate and Other, whereas FY2020 had a separate Display and Adjacent Markets segment. Backlog grew from $6.66B at FY2020 to $15.00B at FY2025, and revenue rose from $17.20B in FY2020 to $28.37B in FY2025.

  2. ✓ 2. Competitive advantage

    AMAT's competitive advantage is qualitative: management believes many products have strong competitive positions, supported by over 23,500 patents and a broad portfolio, but sources do not identify a durable brand, cost, network, switching-cost or license moat. FY2020-FY2025 financials show revenue, gross profit, operating income, net income and equity all growing, indicating scale and profitability, though no margin or return ratios are provided. Competition is substantial, ranging from small regional players to global diversified companies, with increasing domestic Chinese competition and export-control risks. Customer concentration and rapid technological change undermine durability.

  3. ✓ 3. 10-Q takeaways

    Q3 FY2026 (ended July 26, 2026) revenue rose 25% Y/Y to $9,115 million, with gross margin up 1.5 points to 50.3% and operating margin up 3.1 points to 33.7%; nine-month revenue rose 11% to $24,037 million. Semiconductor Systems and AGS both grew, while China revenue fell 2% and US/Europe surged. Cash and investments rose to $14.5 billion, with $1.2 billion spent on repurchases and $1.2 billion on dividends in 9M FY2026; risk factors emphasize cyclical/AI demand and export/tariff uncertainty.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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