AMAT
Applied Materials
Semiconductors
★ Quality 65/100Price today
$454.71
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What this business is made of
Where does the value come from?
5-year cycle
Money made year by year
This business has cycles — good years and bad years. That's why we don't use just the last year.
We use the average of those 5 years as the base for the math — not the good year, not the bad year. That way the value reflects what the company makes steadily.
The business
Sells the ovens where TSMC, Samsung, and Intel cook every chip.
Applied Materials makes the equipment that produces chips: deposition, etching, ion implantation, and inspection. It sells the machines to foundries like TSMC, Samsung, and Intel, then earns recurring revenue from service, parts, and software on the installed base. FY2025 revenue: $28.4B, with 49% gross margin.
It dominates critical process niches where a single mistake ruins an entire wafer, so customers don't switch suppliers lightly. The installed base generates recurring service revenue, and the accumulated know-how in materials physics is hard to copy. Even so, ASML controls advanced lithography, and Lam and Tokyo Electron fight for the rest: it's no monopoly.
Revenue history
From $25.8B to $29.8B in 4 years. The business grows steadily.
Where each $100 of sales goes
Revenue $28.4B · FY2025
Of every $100 in sales, $75 goes to costs and operations; $25 is left as net profit (25% margin).
Catalysts and risks
Spending on AI capacity: TSMC raised its 2025 capex toward ~$40B, and AMAT sells the tools.
Service business on the installed base grows double digits and smooths the cycle.
Transition to gate-all-around and HBM memory increases equipment intensity per wafer.
It's cyclical: a drop in foundry capex hits revenue fast.
China exposure (~30%+ of historical sales) under U.S. export restrictions.
Customer concentration: a few foundries decide a large share of demand.
Charlie's note
“At 13.4x you pay little for a business with a real moat, 49% gross margin, and recurring service on the installed base; the 5% growth is modest, but at that multiple they're not asking you to believe in miracles, just to be patient.”
Analysis · June 2026
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