07:12 AM EDT, 08/14/2026 (MT Newswires) -- Applied Materials ( AMAT ) fiscal fourth-quarter revenue outlook suggests slower full-year systems shipment growth than previously estimated, Morgan Stanley said in a client note Friday.

The brokerage was expecting the semiconductor-equipment manufacturer to issue a revenue guidance of $10.5 billion for the ongoing three-month period, putting it on track for a gain of more than 40% in system shipments.

However, Applied Materials ( AMAT ) said late Thursday that it anticipates revenue of $10.25 billion, plus or minus $500 million, for the fourth quarter, compared with the current FactSet-polled consensus of $9.96 billion. During a conference call with analysts, management indicated that its full-year outlook has strengthened since May, when it guided to shipment growth of greater than 30%.

Morgan Stanley believes the company's "outgrowth" versus the wafer fabrication equipment industry now appears to be narrower than expected and lowered its systems shipment growth estimates to 42% from 44%. The brokerage expects 37% to 40% growth for the wafer fabrication equipment industry.

"By no means is 42% systems shipment growth 'bad,' but we do think investors were looking for (Applied Materials ( AMAT )) to provide greater confidence in the magnitude and durability of that outgrowth," the brokerage said.

Applied Materials ( AMAT ) shares fell 5.6% in the most recent premarket activity, though the stock has more than doubled so far this year.

During the earnings call, Chief Financial Officer Brice Hill said the firm projects adjusted gross margin to be about 50.4% in the fourth quarter, up 230 basis points on a yearly basis, according to a FactSet transcript. The outlook suggests the metric will be flat sequentially, reflecting mix headwinds and increased employee hiring, according to Morgan Stanley.

Morgan Stanley maintained its equal weight rating on Applied Materials' ( AMAT ) stock and lowered the price target to $642 from $646.