Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $4.14 billion | up 29% year-over-year |
| Operating Margin | 46.1% | up 240 basis points sequentially |
| Non-GAAP Diluted EPS | $1.22 | above midpoint of guidance |
| Free Cash Flow | $1.34 billion | Not stated |
| Gross Margin | 62.7% | above midpoint of guidance |
Guidance and outlook
- December quarter revenue is expected to be $4.7 billion, plus or minus $200 million.
- December quarter gross margin is forecasted to be 62.5%, plus or minus 1 percentage point.
- December quarter operating expenses are forecasted to be approximately $710 million.
- December quarter non-GAAP diluted EPS is expected to be $1.44, plus or minus $0.11.
How management sounded
Positive (+7 on our -10 to +10 scale). Management reported record revenue, raised the wafer equipment market outlook for 2026, and expressed strong confidence in growth through 2027 driven by AI and advanced packaging. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
2027 Outlook
Asked: How does the company view the shape of 2027 and its ability to outgrow the market?
Answer: Management expects sequential growth for the next several quarters and believes the setup is favorable due to leading-edge investments and advanced packaging, with supply constraints easing.
Gross Margins
Asked: Can the company return to the 63% plus gross margin range in 2027?
Answer: Management expects improvement as they move through 2027, driven by manufacturing scale and pricing initiatives, despite ongoing memory cost headwinds.
DRAM Growth
Asked: Why is DRAM revenue growing so significantly?
Answer: Increased process control intensity in DRAM, driven by the need for higher yields in advanced devices and new greenfield fab projects, is driving demand.
Supply Chain
Asked: What is the status of supply chain constraints?
Answer: Management noted that while they have been supply-constrained all year, incremental supply is coming online, which informs their positive outlook for 2027.
What to watch before the next call
- The timing of customer fab readiness, as some customers have delayed equipment delivery due to facility construction timelines.
- The impact of memory cost headwinds on gross margins and the effectiveness of internal cost optimization initiatives.
- The actual pace of wafer equipment market growth in 2027 relative to the $200 billion expectation.
