Applied Materials Drops 6% Despite Beat-and-Raise Quarter as JPMorgan and Goldman Sachs Cut Price Targets; KLA Falls 6%, Lam Research Retreats 5%

Strong results aren’t enough to lift Applied Materials (NASDAQ:AMAT | AMAT Price Prediction) as Wall Street cuts what it’ll pay for chip equipment stocks. Applied Materials stock trades at $358.54, down 6%. The company posted record quarterly results after the close on November 12 and guided above expectations for its next quarter.

Applied Materials stock is down 19% over the past month. At least 10 firms cut their price targets on November 13, though every one of them kept a Buy-equivalent rating on Applied Materials. Needham’s $470 target, the lowest of the new numbers, still sits above the November 12 close of $380.95.

Record Quarter Meets a Wave of Price Target Cuts

Applied Materials reported Q4 FY2026 revenue of $10.41 billion, up 53.1% year over year, along with adjusted earnings per share (EPS) of $4.16. Both figures topped Wall Street’s expectations, giving the company its sixth consecutive EPS beat. Adjusted gross margin expanded to 50.6% from 48.1%.

For Q1 FY2027, Applied Materials guided revenue to $11.1 billion, plus or minus $500 million, with adjusted EPS of $4.35. CEO Gary Dickerson spoke. He said “AI continues to fuel strong incremental demand for semiconductors and Applied has built the most-enabling portfolio to advance the AI-computing roadmap.”

JPMorgan, Goldman Sachs, Bank of America, UBS, Wells Fargo and Jefferies were among the firms lowering their targets on Applied Materials. Most firms attributed the cuts to valuation compression. Compression spread across chip equipment stocks, and JPMorgan called that compression “severe.” Wells Fargo stated elevated expectations required a bigger beat-and-raise from the company.

How Lam Research and KLA Stack Up Against Applied Materials

Lam Research (NASDAQ:LRCX) stock is at $222.72, down 5%. October 21 brought Lam Research’s latest results, with record September-quarter revenue of $8.22 billion.

KLA (NASDAQ:KLAC) stock is at $148.08, down 6%. This points to sector-wide pressure weighing on the group. Process control specialist KLA last reported on October 28, posting revenue of $4.14 billion that rose 28.9% year over year.

The valuation compression analysts noted applies to the whole equipment group, and with the sector trading as a unit, the beat at Applied Materials isn’t pulling the stock away from Lam Research and KLA.

Applied Materials Sells the Broadest Toolkit in Chip Equipment

Applied Materials runs the widest wafer fab equipment (WFE) platform of the three, covering deposition, etch, chemical mechanical planarization, ion implant and process diagnostics. On top of tools, the company earns recurring service and spares revenue through Applied Global Services and sells display equipment, and that breadth lets Applied Materials capture spending across most steps of chipmaking.

Lam Research concentrates on deposition and etch for memory and advanced logic, tying its success closely to memory and leading-edge capacity builds. KLA dominates process control, inspection and metrology, selling the tools chipmakers use to find defects and measure wafers. Compared with those two focused franchises, Applied Materials offers the most diversified exposure in the group.

Valuation Worries Versus an Accelerating Spending Cycle

Applied Materials faces its next test: whether the accelerating chip equipment spending outlook can outrun the Street’s valuation worries. Goldman Sachs and UBS still expect the company to gain market share as equipment spending picks up into 2027 and 2028, offering bulls some backing. Management at Applied Materials expects WFE demand to rise more than 30% in 2027 (we studied what the early signals of the next monster chip winner looked like and put them in a free playbook here).

The bears can point to the valuation correction and the risks Applied Materials noted itself, including export controls, tariffs and a concentrated customer base. During fiscal 2026, the company disclosed a $253 million settlement with the U.S. Bureau of Industry and Security. CFO Brice Hill also noted, “Our Q1 number would be slightly higher if everything were perfectly available.”

Watch for further price target revisions as more firms digest Applied Materials’ guidance. The debate over chip equipment valuations could keep the group volatile in the near term.

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