Shares of Applied Materials (NASDAQ: AMAT) have been on a tear this year and are approaching all-time highs last reached in late 2021. Investors have been drawn in by the company's winning strategy of steady growth even in a down year for the critical semiconductor-manufacturing equipment niche of the chip market. A big dividend increase announced earlier this year doesn't hurt either. 

However, there's another key reason to be optimistic about Applied's prospects. The company's recent earnings update is the latest sign that a nasty downturn in the semiconductor market (driven by falling consumer electronics sales after the pandemic, which led to excess inventory of some chips) is finally coming to an end. Here's what investors need to know.

Applied Materials Q3 fiscal 2023 (the three months ended in July 2023) looked pretty pedestrian. Revenue was $6.4 billion, down 1% from the year prior. Earnings per share (EPS) were flat from last year at $1.85, or down 2% year over year to $1.90 on an adjusted basis. 

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Source Fool.com