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# Applied Materials: The Headline Beat Was Real — the Cash Flow Margin Fell by a Third
- URL: https://www.altamiraequity.com/amat-q4-fy2026-earnings-recap/
- Published: 2026-11-13T18:14:06.000Z
- Updated: 2026-11-13T18:14:06.000Z
- Description: Applied Materials beat on both lines for the ninth straight graded quarter — adjusted EPS of 4.16 against a 4.06 estimate, revenue of $10.41B against a $10.30B bar. Underneath, free cash flow was flat in dollars year over year even as revenue grew 53.07%, and the free-cash-flow margin fell 1,042 bas
- Author: Altamira Capital
- Tags: Research, Earnings, Technology, AMAT, #qc-review

*Adjusted EPS $4.16 vs $4.06 expected (+2.46%) · revenue $10.41B vs $10.30B expected (+1.02%, +53.07% YoY) · operating income +98.19% YoY to $3,393.0M, margin 32.60% · free cash flow flat in dollars YoY at $2,043.0M, margin 19.63%, −1,042 bp YoY · stock −3.58% the day of the print, before the numbers posted*

### The story in 30 seconds

- Applied Materials beat both the revenue and adjusted-EPS estimates for its fourth fiscal quarter — revenue of $10.41B against a $10.30B bar (+1.02%) and adjusted EPS of 4.16 against 4.06 (+2.46%) — a grade-B quarter that extends the pack's eight-straight A/B streak to nine.
- The headline growth was real: revenue grew 53.07% year over year and operating income grew 98.19%. Free cash flow did not follow — at $2,043.0M it was exactly flat in dollars versus the same quarter a year ago, so the free-cash-flow margin fell 1,042 basis points to 19.63%.
- The open question is whether that is a timing gap between income and cash (the company still converted 75.17% of net income to free cash flow) or the start of a heavier capital or working-capital bill; the next print is the first place it will show.

A reader skimming the headline sees a ninth straight beat-and-grow quarter from the company at the center of the semiconductor-capital-equipment cycle: revenue up more than 50% year over year, operating income nearly doubling, both estimates cleared. All of that is accurate. It is also not the whole quarter. Revenue growing 53.07% while free cash flow grew 0.00% in dollar terms is an unusual combination for a company whose gross margin also expanded (+243 basis points year over year) — it means the dollars generated by the extra revenue were consumed somewhere between the income statement and the cash-flow statement before they reached the free-cash-flow line. The stock's 3.58% decline on the day carries no information about this, either way: Applied Materials reports after the close, so that move happened during the session before the print existed, not in response to it.

Applied Materials sells the wafer-fabrication tools and services that make advanced chips possible — a business whose results move with the capital-spending cycle of its semiconductor-manufacturer customers rather than with any single product cycle. The fourth fiscal quarter is the clearest recent example of that cycle's upswing on the income statement and the first recent quarter where the cash-flow statement did not keep pace with it.

In this post: (1) the quarter against the beat streak and a print-day move that isn't a reaction to the print; (2) where the revenue dollar went, and why free cash flow didn't move; (3) five readings on what the numbers say; (4) the five-year record against this one quarter; (5) the honest counterweight — including a wide gap between the site's three published fair-value models — and the Key Issue for the next print.

### At a glance — Q4 FY2026

- Revenue: $10.41B vs $10.30B expected · +1.02% surprise · +53.07% YoY · +14.20% QoQ
- Adjusted EPS: 4.16 vs 4.06 expected · +2.46% surprise · GAAP diluted EPS 3.40, +42.86% YoY
- Guidance: NOT STATED — the earnings-call transcript is not in the dataset; no guidance class is assigned and none is invented here
- Reaction: NOT STATED — this print posted after today's close, so no next-session close exists yet in the dataset. Today's −3.58% move (close 380.95, day range 376.14–397.20) happened before the numbers were out and is not a reading on the print
- Margins: gross 50.45% (+243 bp YoY, +13 bp QoQ) · operating 32.60% (+742 bp YoY, −114 bp QoQ) · net 26.11% (−179 bp YoY, −173 bp QoQ)
- Cash generation: operating cash flow $2,828.0M · capital expenditure −$785.0M · free cash flow $2,043.0M · 19.63% of revenue, −1,042 bp YoY and −594 bp QoQ · free cash flow to net income 75.17% · the dollar amount is unchanged from the $2,043.0M posted the same quarter a year ago
- Share count and capital return: diluted shares 799,000,000, +0.13% YoY and roughly flat sequentially (−0.1%) · dividends paid −$365.0M · buybacks −$851.0M
- Balance sheet: cash & short-term investments $9,339.0M · total debt $6,532.0M · net debt −$707.0M (net cash) · shareholders' equity $26.11B · inventory $6,889.0M

The quarter in one line: the business grew faster than the Street's bar on both lines for a ninth straight graded quarter, and the one line that did not grow at all was the one the cash eventually has to show up in.

![Applied Materials: revenue rises from $6,800M to $10,409M year over year while free cash flow stays at $2,043M, and quarterly free-cash-flow margin falls to 19.63%](https://www.altamiraequity.com/content/images/2026/11/amat-q4-fy2026-recap-cash-1.png)

Revenue grew 53.07% year over year, from $6,800.0M to $10,409.0M, while free cash flow stayed at $2,043.0M, so the free-cash-flow margin fell 1,042 basis points to 19.63%. Source: FMP quarterly income and cash-flow statements.

### Q4 FY2026 flow — where the revenue dollar went

![Applied Materials Q4 FY2026 income flow: a revenue dollar loses roughly 50 cents to cost of revenue before tax and cash conversion take their share. Source: company filings via FMP.](https://www.altamiraequity.com/content/images/2026/11/AMAT-2026-11-12-income_flow.png)

Applied Materials Q4 FY2026 income flow: a revenue dollar loses roughly 50 cents to cost of revenue before tax and cash conversion take their share. Source: company filings via FMP.

- Revenue: $10,409.0M (100.00%)
- Cost of revenue: $5,158.0M (49.55%)
- Gross profit: $5,251.0M (50.45%)
- Operating expenses: $1,858.0M (17.85%) — R&D $1,129.0M (10.85%), SG&A $468.0M (4.50%), other $261.0M (2.51%)
- Operating income: $3,393.0M (32.60%), +98.19% YoY
- Pre-tax income: $3,077.0M (29.56%)
- Income tax: $359.0M (3.45%)
- Net income: $2,718.0M (26.11%)
- Free cash flow: $2,043.0M (19.63%)

The swing item is below the income statement entirely: operating cash flow of $2,828.0M funded $785.0M of capital expenditure to produce the $2,043.0M of free cash flow — the same dollar figure, almost to the cent, as the free cash flow posted in the same quarter a year ago, when revenue was $6,800.0M, a third lower than this quarter's $10,409.0M. Net income of $2,718.0M, up 43.28% year over year, did not have a matching move in the cash line.

### What to make of this print

Five readings, each a finding plus what it means.

1. **The top line and the operating-income line both cleared the bar by more than the usual margin.** Revenue of $10.41B beat the $10.30B estimate by 1.02% and grew 53.07% year over year; operating income of $3,393.0M grew 98.19% year over year, nearly doubling, and the operating margin of 32.60% is 742 basis points above the year-ago quarter. This is the part of the quarter that is not in question.
2. **Free cash flow did not move at all in dollar terms.** $2,043.0M of free cash flow this quarter is the same figure, to the decimal shown in the dataset, as the $2,043.0M posted in the year-ago quarter — a 0.00% year-over-year change against 53.07% revenue growth. The free-cash-flow margin fell to 19.63%, down 1,042 basis points year over year and 594 basis points from the quarter before.
3. **Quality of earnings: net income grew, cash did not follow it.** Net income of $2,718.0M grew 43.28% year over year and GAAP diluted EPS of 3.40 grew 42.86%, both roughly in line with the operating-income growth. Free cash flow converted only 75.17% of that net income this quarter — the gap between an income statement that is accelerating and a cash-flow statement that is not is the single fact this print adds to the record.
4. **The balance sheet absorbed the gap without strain.** Net debt of −$707.0M (a net-cash position) and shareholders' equity of $26.11B gave the company room to pay $365.0M of dividends and spend $851.0M on buybacks in the same quarter the free-cash-flow margin fell — capital return did not have to be cut to make room for weaker cash conversion.
5. **The share count barely moved.** Diluted shares of 799,000,000 were up 0.13% year over year and essentially flat sequentially, despite the $851.0M of buybacks — a scale at which buybacks are maintaining the share count rather than visibly shrinking it.

Takeaway: a quarter where the income statement grew faster than the Street's bar on both lines for a ninth straight graded quarter, and the cash-flow statement, for the first time in this run, did not grow at all.

### The long view — FY2021 to FY2026

![Applied Materials, FY2021–FY2026: revenue, operating margin, free-cash-flow margin and ROIC. Source: FMP annual statements and key metrics.](https://www.altamiraequity.com/content/images/2026/11/AMAT-2026-11-12-long_view.png)

Applied Materials, FY2021–FY2026: revenue, operating margin, free-cash-flow margin and ROIC. Source: FMP annual statements and key metrics.

- **Revenue growth.** $23.06B in FY2021 to $34.45B in FY2026, an 8.35% compound annual rate — steady expansion without a down year in the six-year window.
- **Operating margin.** 29.87% in FY2021 to 32.19% in FY2026, 232 basis points of expansion over five years, reached unevenly (FY2022 30.20%, FY2023 28.86%, FY2024 28.95%, FY2025 29.22%) before this year's jump.
- **Cash.** Free-cash-flow margin moved from 20.70% in FY2021 to 17.98% in FY2026 — the second-lowest of the six years shown, just above FY2022's 17.89% — even as operating margin improved; free cash flow compounded at only 5.35% a year, far below the 8.35% revenue rate and the 14.54% EPS rate.
- **ROIC.** 30.64% in FY2021 to 27.60% in FY2026 — lower than five years ago despite the margin and EPS gains, and the one return metric in the four lenses that has not kept pace with the growth.

### The honest counterweight

Three cells argue for caution before calling the beat-and-grow streak the whole story.

- **The published fair-value models disagree sharply with each other.** The KPI Scorecard's November 12 edition carries three published fair values for Applied Materials: Morningstar at $520.00 (a 24.02% margin of safety against the 380.95 close) against an in-house DCF of $175.53 and an FMP DCF of $151.21 — both far below the close. Fair value is stated as published; the gap between the models is itself the thing to watch, not a tiebreaker in either direction.
- **The stock is deep below its own trend lines.** Close 380.95 sits 13.27% below the 50-day average (439.22) and 14.66% below the 200-day average (446.39), and is 47.31% below its 52-week high of 723.00, even after a 65.11% gain over the trailing twelve months. The three- and one-month returns are −24.89% and −14.71%.
- **The KPI Scorecard calls the technical picture mixed, not confirming.** The November 12 edition scores Applied Materials at a fundamental composite of 67.2 (quality 82.3, health 93.1, moat 81.4, but growth only 37.7) against a technical score of just 31.9, for a blended total of 56.6, tier 4, state MIXED, rank 181 — the fundamentals this print just supported are not yet matched by the trend reading.

### The Key Issue

Whether the 0.00% year-over-year growth in free cash flow — against 53.07% revenue growth and 43.28% net-income growth — is a one-quarter timing gap between income and cash, or the start of a heavier cash bill (working capital, capital expenditure, or something the filed summary does not itemize). The transcript, not in this dataset, would likely say; the next print will show it directly, against this quarter's 19.63% free-cash-flow margin and the FY2026 full-year figure of 17.98%.

### Thesis verdict: Intact Grade B

Revenue +53.07%, operating income +98.19%, a ninth straight graded beat, and a net-cash balance sheet that funded dividends and buybacks without strain — the capital-equipment-cycle upswing this print was supposed to show, showed. Free cash flow's flat year-over-year dollar figure, against that much income growth, is a real counterweight and the named Key Issue for the next print, but it is one cell against a quarter that cleared its bar on every other line, which is why the verdict sits at Intact rather than Strained.

### Sources

- FMP /stable/earnings (actuals vs consensus, earnings ledger match for the 2026-11-12 print) and /historical/earning\_calendar/AMAT (report timing) — pulled November 12, 2026.
- FMP /historical-price-full/AMAT (daily closes; moving averages, ranges and the day's price move computed from them) — pulled November 12, 2026.
- FMP /income-statement, /cash-flow-statement, /balance-sheet-statement (quarterly, filed through the Q4 FY2026 statements of October 25, 2026, filed November 12, 2026) and the annual statements plus /key-metrics for FY2021–FY2026 — pulled November 12, 2026.
- FMP /analyst-estimates and /key-metrics-ttm/AMAT — pulled November 12, 2026.
- Altamira KPI Scorecard, edition 2026-11-12 (kpi-scorecard-2026-11-12.json): composite, pillar and technical scores, tier, state and fair-value cells as published.
- Guidance, segment detail and management commentary: NOT STATED — the earnings-call transcript is not in the dataset for this edition. The print's next-session market reaction: NOT STATED — not yet in the dataset as of this edition.

Research for information only — not investment advice; see Disclosures.

### On the data pages

- [AMAT company page](https://www.altamiraequity.com/company-amat/) — the filed figures, margins, cash flow and the print history, from SEC EDGAR.
- [AMAT vs LRCX, head to head](https://www.altamiraequity.com/compare/#AMAT-vs-LRCX) — the two on the same scorecard cells (default pair partner).
- [Verdict ledger](https://www.altamiraequity.com/verdicts/) — every public call, on the record.
- [Earnings schedule](https://www.altamiraequity.com/earnings/) — who reports next, and how every print this season graded.