The semiconductor market is facing a supply crisis in 2021, and Applied Materials (AMAT 1.35%) is all set to make the most of it, as the company's latest quarterly results indicate. The supplier of semiconductor fabrication equipment and services handsomely beat Wall Street's fiscal 2021 first-quarter expectations.

This wasn't surprising, as Applied Materials was riding on solid tailwinds going into the quarterly report, the biggest being a global shortage of chips that could trigger increased capital expenditures by chipmakers this year. The favorable business conditions have sent Applied Materials stock soaring in 2021, and the company's outlook indicates that it is primed for more upside.

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Applied Materials is just getting started

Applied Materials' fiscal first-quarter revenue increased 24% year over year to $5.16 billion, while adjusted earnings jumped 42% to $1.39 per share. Analysts would have settled for $1.28 in earnings per share on $4.97 billion in revenue, but the company was able to clear those benchmarks by growing at a faster pace than the broader market.

The semiconductor systems business that produced nearly 69% of the company's total revenue last quarter recorded 26% year-over-year growth. And now, Applied Materials expects 50% year-over-year growth in this segment in the fiscal second quarter on the back of favorable market dynamics. In fact, Applied Materials management believes that it can "again grow faster than the market for the year as a whole."

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Applied Materials points toward several catalysts that will drive such impressive growth. For instance, data center spending is anticipated to jump 15% in 2021. Meanwhile, semiconductor usage by the supply-strapped automotive market is also expected to increase more than 15%. Fifth-generation-network-enabled (5G) smartphones are also driving double-digit percentage growth in silicon usage. The company expects all these factors to lead to higher capital spending in the semiconductor space, as CEO Gary Dickerson pointed out on the latest earnings conference call:

In foundry/logic, leading-edge investments are very strong and have been well articulated by our customers. On top of that, our ICAPS business -- that serves the IoT communications, auto, power and sensor markets -- is expected to grow even faster and is on track to exceed $3 billion of revenue for the fiscal year. And then, 2020 was a strong recovery year, with spending up more than 30%. And in 2021, we expect customers to invest at modestly higher levels.

Similarly, Applied Materials' DRAM (dynamic random access memory) and the NAND flash segments within the semiconductor systems business are also expected to take advantage of higher spending:

In DRAM, supply demand fundamentals look more favorable than NAND. And as a result, we still expect DRAM investments to outgrow NAND this year. All of this adds up to a very strong demand environment for wafer fab equipment and we believe this strength is sustainable well beyond 2021.

There is a shortage of memory chips in the market after the COVID-19 pandemic disrupted supply chains last year, which opens up the possibility of higher capacity investments by memory manufacturers. More importantly, Applied Materials management believes that the company is in the early stages of a semiconductor investment cycle that may last beyond a decade. Third-party estimates also indicate that we may be at the beginning of a long investment cycle in semiconductor manufacturing equipment, with spending expected to grow from $59.6 billion in 2019 to $76.1 billion in 2022.

It isn't too late to buy the stock just yet

Applied Materials trades at 29 times trailing earnings despite its impressive rally in recent months. Though that may seem a tad expensive compared to its five-year average multiple of nearly 18, investors shouldn't forget that this is a high-growth company.

Applied Materials anticipates $5.39 billion in revenue this quarter at the midpoint of its guidance range, which would be a jump of 36% over the prior-year period. The guidance is way beyond Wall Street's expectations of $4.96 billion. It also indicates that Applied Materials is stepping on the gas, as the fiscal second-quarter growth is going to be a big improvement over the previous one.

The company has guided for adjusted earnings of $1.50 per share -- a big jump over the year-ago period's figure of $0.89. What's more, Applied Materials is expected to maintain an annual earnings growth rate of 16% over the next five years, according to a compilation of analyst estimates. All of this indicates that Applied Materials could continue to remain a top growth stock over the long run, and investors who haven't jumped onto this bandwagon yet can still do so given its reasonable valuation.