Morgan Stanley upgrades Applied Materials stock price target pre-earnings

There is a quiet confidence in Morgan Stanley's latest note on Applied Materials. Not the loud kind that makes bold promises. The measured kind that says, "We have seen this before, and we think we know how it ends."

The bank raised its price target on Applied Materials (AMAT) to $454 from $432, maintaining its overweight rating, ahead of the company's May 14 earnings report. The framing in the note is deliberate. Morgan Stanley called the January quarter print "a leap in the right direction." It is now calling the upcoming print "a second leap."

The 58-year-old is the second-largest supplier of semiconductor equipment in the world, based on revenue, behind Dutch company ASML. On May 5, it surged 4.97% to $410.82 and was trading up an additional 3% in premarket.

The stock is also up 60% year to date against the S&P 500's 6.04% gain, according to Yahoo Finance. The market is already pricing in strength, and Morgan Stanley thinks the print justifies even more.

"The need for higher performance and more energy-efficient chips is driving high growth rates for leading-edge logic, high bandwidth memory, and advanced packaging," said Applied Materials President and CEO Gary Dickerson in Q1FY26 commentary. "These are areas where Applied is the process equipment leader."

Morgan Stanley raised the AMAT stock price target to $454 ahead of May 14 earnings

Morgan Stanley's confidence rests on three specific expectations heading into the print, according to the firm's May 4 note.

1. July quarter guidance

Morgan Stanley expects Applied Materials (AMAT) to guide the July quarter to revenue of $8.4 billion or more, against the firm's own estimate of $8.5 billion and Street consensus of $8.1 billion. Peers Lam Research and Tokyo Electron have already set a high bar this earnings season. Morgan Stanley believes AMAT clears it.

2. Revision to full-year 2026 semiconductor systems growth outlook

The firm expects AMAT to raise its calendar year 2026 Semi Systems guidance from 20% growth to 25% or more. Peers have already revised their 2026 wafer fabrication equipment forecasts upward on strengthening demand, and AMAT is seen as well-positioned to execute on customer pull-ins.

3. Credible path toward 50% gross margins in near term and 52% in medium term

Morgan Stanley believes the market underestimates AMAT's ability to capture incremental customer value through expedited, power, and integrated solutions. That margin expansion story, if articulated clearly on May 14, could drive a further re-rating of the stock.

The $454 price target is based on a 28 times multiple applied to the firm's calendar year 2027 EPS estimate of $16.21, according to the note. That multiple sits at a discount to peers Lam Research and KLA to account for market share concerns in China, while still reflecting genuine long-term confidence in the DRAM and logic cycle.

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Applied Materials' Q1FY2026 results show AI infrastructure cycle is real

Before looking ahead to May 14, it is worth grounding the bull case in what Applied Materials has already delivered.

In its most recent fiscal quarter, Applied Materials (AMAT) reported:

• Revenue of $7.01 billion
• Non-GAAP EPS of $2.38, flat year over year, but against a tough comparison
• Semiconductor Systems achieved a record DRAM revenue of $5.1 billion, up 8% year over year
• Applied Global Services delivered record services revenue of $1.6 billion, up 15% year over year. Non-GAAP gross margin of 49.1%.
  
  Source: Applied Materials First Quarter Fiscal 2026 results

The DRAM record is the number Morgan Stanley is most focused on. The firm's quantitative analysis finds that being bullish on Applied Materials is equivalent to being bullish on DRAM and Micron. Morgan Stanley is explicitly bullish on both.

Applied Materials has the highest DRAM exposure among its semiconductor equipment peers, at 31% of calendar year 2026 revenue, according to the firm's note.

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As AI training and inference workloads drive insatiable demand for high-bandwidth memory, that exposure is a feature, not a liability.

Applied Materials (AMAT) also recently acquired NEXX, expanding its capabilities in AI packaging and reinforcing its position at the leading edge of the semiconductor manufacturing process.

What the broader semiconductor equipment cycle means for AMAT investors

Applied Materials is operating inside one of the strongest wafer fabrication equipment cycles in the industry's history. Morgan Stanley estimates 2027 WFE at $185 billion or more.

This figure is already well understood by the market, which is why semiconductor equipment stocks are trading at elevated multiples and why single-quarter beats are not automatically rewarded with immediate stock gains.

The debate has shifted, according to Morgan Stanley's note. The question is no longer whether AMAT can outperform the 2026 wafer fabrication equipment market. The question is by how many percentage points it can outperform.

AMAT also increased its quarterly dividend by 15% to $0.53 per share, payable on June 11, 2026, to shareholders of record as of May 21, 2026. That's a modest but consistent signal of financial discipline alongside the growth story.

The one-year return on AMAT stands at 168%, against the S&P 500's 28.47%, according to Yahoo Finance.

For a stock that was already priced for strength, another beat and raise on May 14 would be the second consecutive signal that Applied Materials is not just keeping pace with the AI infrastructure boom. It is already part of it and helping define it.

Related: BofA revamps Applied Materials stock price target after CEO message

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This story was originally published May 6, 2026 at 4:03 PM.