Applied Materials Bets Big on Chip Tools and a $12 Billion Service Business
Applied Materials, one of the world’s largest suppliers of machines used to make computer chips, used October 14 to sketch out where it wants to be by the end of the decade. The US company said it expects its service revenue to grow more than 20 percent in 2026 and to pass 12 billion US dollars by 2030. That would make the after-sales side of the business, which covers maintenance, spare parts and upgrades for tools already installed in chip factories, a far larger slice of the whole.
The headline target was market share. Applied Materials said it aims to lift its share of the wafer fab equipment market by more than two percentage points between 2025 and 2030. Wafer fab equipment, often shortened to WFE, is the machinery that etches, deposits and inspects the microscopic layers that become transistors and wiring on a silicon wafer. It is one of the most capital-intensive corners of the global technology supply chain, and the companies that dominate it are watched closely by investors as a proxy for how much chipmakers plan to spend.
The company also pointed to a narrower product line: its electron beam equipment portfolio is expected to reach 2 billion dollars of revenue in 2026. E-beam tools are used to inspect and measure patterns on wafers at extremely small scales, a job that grows harder as chips shrink.
On profitability, Applied Materials set out goals of a 54 percent non-GAAP gross margin and a 40 percent operating margin by 2030. Non-GAAP figures strip out certain one-off and accounting items, and companies often use them to show what they see as the underlying trend. Hitting those levels would require steady improvements in mix and cost control over several years, not a single good quarter.
Cash returns got their own line. The company said it intends to distribute between 80 and 100 percent of its free cash flow to shareholders through 2030. Free cash flow is the money left after running the business and paying for the plants and equipment needed to keep it going. Promising nearly all of it back is a strong signal to investors, and it also implies management does not expect to need large outside funding for its plans.
To support those plans, Applied Materials said it will more than double its research laboratories and manufacturing capacity by 2030. Expanding capacity is a long, expensive process, and it is also a statement about expected demand: you do not build fabs for tools you think nobody will buy.
The backdrop is a semiconductor industry that has swung hard between boom and bust in recent years, driven first by pandemic-era demand and then by the rush to build data centers for artificial intelligence. Chipmakers’ spending plans rise and fall with that cycle, and equipment suppliers feel it first. By tying its targets to 2030 rather than the next quarter, Applied Materials is asking investors to judge it on a longer arc.
For readers outside the industry, the simplest way to read the announcement is this: the company that sells the machines also wants to sell the servicing, and it wants both to be bigger and more profitable within five years. Whether it gets there will depend on decisions made in boardrooms from Taipei to Seoul to Arizona about how many new chip factories the world actually needs.