Applied Materials Inc. (NASDAQ:AMAT)

Current Income Tax Expense

The current income tax expense exhibited a generally increasing trend from 479 million US dollars in late October 2020 to a peak of 1,653 million US dollars by late October 2024. This represents more than a threefold increase over this five-year period. However, in the final reported period ending in October 2025, there was a notable decline to 1,120 million US dollars, indicating a significant reduction after the peak the previous year.

Deferred Income Tax Expense

Deferred income tax expenses showed considerable volatility during the period. Starting at 68 million US dollars in 2020, there was a slight decrease to 60 million in 2021, followed by a marked increase to 195 million in 2022. This positive expense reversed sharply in the subsequent years, with deferred taxes recorded as negative 358 million and negative 678 million in 2023 and 2024 respectively, suggesting releases or reversals of deferred tax liabilities or recognition of deferred tax assets. In an abrupt shift, the figure turned positive again in 2025, rising sharply to 1,153 million US dollars.

Provision for Income Taxes

The total provision for income taxes, combining both current and deferred components, generally increased over the period from 547 million US dollars in 2020 to a high of 1,074 million in 2022. This was followed by a decline to 860 million in 2023, a modest recovery to 975 million in 2024, and a significant jump to 2,273 million in 2025. The fluctuations reflect the combined impact of rising current tax expenses and volatile deferred tax movements.

Overall Insights

The analysis indicates that current income taxes have increased substantially over the five-year span, reflecting stronger taxable income or changes in tax rates or rules. Deferred tax expenses have been less stable, experiencing periods of both expense recognition and large reversals; the negative figures in 2023 and 2024 suggest the realization of deferred tax assets or adjustments reducing tax burdens in those years. The sharp increase of deferred taxes in 2025 may indicate new temporary differences or reassessments of deferred tax items. The overall tax provision trend aligns closely with current tax expense increases, but with considerable influence from deferred tax volatility, underscoring the dynamic nature of tax accounting for the entity during this period.

The data indicates a consistent statutory U.S. federal income tax rate of 21% throughout the analyzed periods. However, the effective income tax rate fluctuates significantly, reflecting the influence of various factors.

Effect of foreign operations taxed at various rates

This effect consistently reduces the effective tax rate, ranging from -5.9% to -8.2%, indicating a significant beneficial impact of foreign tax jurisdictions on the company's overall tax expense. Despite some variation, this negative contribution remains a substantial factor in lowering the effective tax rate.

Changes in prior years’ unrecognized tax benefits

Fluctuations in this category show minor effects, with both positive and negative percentages close to zero, indicating relatively stable resolved uncertainties related to past tax positions. Some years exhibit a slight negative adjustment, particularly in 2022 (-0.9%), suggesting adjustments or write-offs in those periods.

Resolutions of prior years’ income tax filings

This component consistently contributes a small negative adjustment to the effective tax rate, mostly between -0.1% and -1%, reflecting minor tax benefits from the resolution of prior years’ issues. An anomalous increase to 0.2% in 2025 suggests a change leading to a slight increase in tax expense from these resolutions.

Research and other tax credits

Research and tax credits provide a steady reduction in the effective tax rate, generally around -1% to -1.6%, demonstrating the company's continuous utilization of credits related to innovation and other qualifying activities.

Remeasurement of deferred tax assets in Singapore

This factor appears only in the last period, contributing a substantial 7.1% increase to the effective tax rate, indicating a significant change in deferred tax asset valuation in the Singapore jurisdiction during 2025, adding to the overall tax burden.

Valuation allowance on corporate alternative minimum tax credits

This is another notable factor exclusive to 2025, adding 4.4% to the effective tax rate, suggesting a reassessment that increased the tax expense related to alternative minimum tax credits.

Other

These adjustments remain minor and variable, with small positive and negative values reflecting miscellaneous impacts on the effective tax rate without a clear directional trend.

Effective Income Tax Rate

The effective income tax rate shows variability, hovering around 11%-14% for most periods but increasing sharply to 24.5% in 2025. This spike is mainly attributable to the combined effects of remeasurement of deferred tax assets and valuation allowances emerging in that year, overshadowing the previously consistent benefits from foreign operations and tax credits.

Overall, the analysis reveals that the company's effective tax rate is substantially influenced by foreign operations and the utilization of research and other tax credits, which generally reduce its tax burden. However, recent period developments involving deferred tax asset remeasurements and valuation allowances have significantly increased the effective tax rate, indicating potential challenges in tax planning or changing tax environments in specific jurisdictions.

Corporate Alternative Minimum Tax

This liability appeared only in the last two years, registering values of $410 million and $407 million, indicating a new or previously unreported tax obligation.

Capitalized R&D Expenses

There is a clear upward trend in capitalized research and development expenditures, increasing from $83 million in 2023 to $295 million in 2025, suggesting a stronger emphasis on innovation and investment in intangible assets.

Allowance for Doubtful Accounts

This item remained relatively stable and low, fluctuating slightly between $3 million and $5 million, indicating consistent credit risk management.

Inventory Reserves and Basis Difference

The inventory reserves showed gradual growth from $119 million in 2020 to $145 million in 2025, reflecting incremental adjustments for inventory valuation or obsolescence considerations.

Installation and Warranty Reserves

These reserves reveal notable volatility, nearly doubling from $35 million in 2023 to $70 million in 2024 before decreasing to $42 million in 2025, indicating fluctuating expectations for future warranty and installation costs.

Intangible Assets

Intangible assets decreased from $1,355 million in 2020 to $225 million in 2025, showing a significant decline possibly due to amortization, impairment, or disposals over time.

Accrued Liabilities

Accrued liabilities showed minor fluctuations, declining sharply to $19 million in 2023 before increasing again to $29 million in 2025, evidencing variability in short-term obligations.

Deferred Revenue

Deferred revenue rose sharply to $82 million in 2022, then declined to $61 million by 2025, reflecting changes in advance payments received from customers.

Tax Credits

Tax credits displayed consistent growth from $326 million in 2020 to $677 million in 2025, indicating increasing benefits from tax incentive programs.

Deferred Compensation

Marked increases occurred from $125 million in 2022 to $265 million in 2025, pointing to growing liabilities related to compensation arrangements such as stock options or bonus plans.

Share-based Compensation

The share-based compensation increased steadily until 2023, peaking at $50 million, and then receded to $34 million by 2025, reflecting changes in employee remuneration incentives.

Property, Plant and Equipment

Reported values started from 2023 onward with increases from $9 million up to $192 million by 2025, showing significant recent investments in fixed assets.

Lease Liability

Lease liabilities generally increased from $55 million in 2020 to $104 million in 2025, albeit with some volatility, corresponding to long-term lease obligations under accounting standards.

Other

The 'Other' category declined from $96 million in 2020 to $50 million in 2025, indicating a reduction in miscellaneous liabilities or assets.

Gross Deferred Tax Assets

Values fluctuated but showed an overall increase from $2,185 million in 2020 to a peak of $3,050 million in 2024 before dipping slightly, suggesting variable expectations of future tax benefits.

Valuation Allowance

The valuation allowance increased negatively from -$314 million in 2020 to -$1,049 million in 2025, indicating increased skepticism regarding the realizability of certain deferred tax assets.

Deferred Tax Assets

Net deferred tax assets declined from $1,871 million in 2020 to $1,480 million in 2025, despite some fluctuations, reflecting changes after allowances for valuation.

Property, Plant and Equipment (Negative)

This category showed increases in negative values from -$76 million to -$111 million in 2022 and absent thereafter, possibly representing accumulated depreciation or disposals.

Right of Use Assets

This asset grew in negative terms from -$54 million to -$105 million by 2025, correlating with lease accounting adjustments and reflecting obligations and rights under lease contracts.

Undistributed Foreign Earnings

Undistributed foreign earnings remained consistently negative and relatively stable between -$23 million and -$39 million, denoting retained earnings held offshore without local distribution.

Investments

Investment values were recorded only in 2025 with a notable negative figure of -$133 million, indicating a significant write-down or increased liability related to investments.

Deferred Tax Liabilities

Deferred tax liabilities varied significantly, showing a decrease from -$169 million in 2020 to -$99 million in 2024 before increasing again to -$264 million in 2025, reflecting changing deferred tax obligations.

Net Deferred Tax Assets (Liabilities)

Net deferred tax assets decreased overall from $1,702 million in 2020 to $1,216 million in 2025, with notable fluctuations, indicating variability in the company's net deferred tax position.

The analysis of the deferred tax assets and liabilities over the periods under review highlights several noteworthy trends.

Non-current deferred tax assets

These assets exhibit considerable fluctuation during the analyzed years. Starting at $1,711 million in 2020, the value decreases to $1,623 million in 2021 and further declines to $1,395 million in 2022. In 2023, there is a notable recovery to $1,729 million, followed by a substantial increase to $2,393 million in 2024. However, the latest data for 2025 shows a marked reduction to $1,233 million. This volatile pattern suggests variability in timing differences and potential changes in tax positions or asset valuations.

Non-current deferred tax liabilities

The liabilities remain relatively low in magnitude compared to deferred tax assets but also demonstrate variability. The value starts at $9 million in 2020, slightly decreases to $8 million in 2021, then rises sharply to $51 million in 2022. It then drops back to $10 million in 2023, followed by a minor increase to $11 million in 2024 and a further increase to $17 million in 2025. This inconsistency might reflect adjustments in deferred tax on timing differences relating to liabilities or changes in tax rates or carryforwards.

Overall, the deferred tax assets and liabilities show variability rather than a steady trend, indicating that the company experiences fluctuations in its deferred tax positions, which could result from operational changes, varying profitability, tax planning strategies, or shifts in applicable tax regulations. The significant swings in non-current deferred tax assets, particularly the sharp increase in 2024 followed by a decrease in 2025, warrant further examination to understand the underlying causes. The relatively low and fluctuating deferred tax liabilities suggest minor but variable obligations over the periods assessed.

The financial data reveals several noteworthy trends over the periods observed. Total assets, both reported and adjusted, display consistent growth, indicating an expansion in the company's asset base. Reported total assets increased from approximately $22.4 billion to $36.3 billion, while adjusted total assets rose from around $20.6 billion to $35.1 billion. This steady increase suggests ongoing investment or acquisition activities contributing to a larger scale of operations.

Liabilities, in both reported and adjusted terms, also rose but at a comparatively moderate pace. Reported total liabilities grew from roughly $11.8 billion to $15.9 billion, and adjusted total liabilities followed a similar trend, increasing from about $11.8 billion to $15.9 billion. The relatively smaller increase in liabilities compared to assets suggests improvements in the company's solvency and leverage ratios over time.

Stockholders' equity demonstrates a robust upward trend, with reported equity increasing from approximately $10.6 billion to $20.4 billion, and adjusted equity rising from about $8.9 billion to $19.2 billion. This growth reflects accumulated retained earnings and possibly other equity injections, strengthening the company’s net worth. Notably, the adjusted equity values remain lower than reported equity throughout the periods, pointing to the impact of income tax adjustments on shareholders’ interests.

Net income figures exhibit fluctuations within an overall upward trajectory. Reported net income rose from nearly $3.6 billion to about $7.0 billion, peaking before a slight decline in the final period. Adjusted net income increases from approximately $3.7 billion to $8.2 billion, with a dip in the middle periods before a significant rise in the latest period. The divergence between reported and adjusted net incomes suggests the influence of deferred income tax adjustments on profitability, with adjusted net income showing more variability but ending at a higher level than reported net income.

Overall, the company shows consistent asset and equity growth, moderate liability increases, and improving profitability when considering tax adjustments. This profile suggests strengthening financial stability and enhanced earning capacity, with deferred tax considerations having a noticeable effect on reported profitability and equity measures.

The analysis of the financial performance metrics reveals several noteworthy trends over the reported periods.

Net Profit Margin

The reported net profit margin shows an overall increase from 21.04% in 2020 to a peak of 26.41% in 2024, followed by a decline to 24.67% in 2025. The adjusted net profit margin is generally higher than the reported figures, exhibiting a rise from 21.43% in 2020 to 28.73% in 2025, despite some fluctuations, indicating improved profitability after adjustments.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios increase from 2020 through 2022, with reported turnover moving from 0.77 to 0.96 and adjusted from 0.83 to 1.02, suggesting more efficient use of assets. However, from 2023 onwards, these ratios decline, with reported turnover reducing to 0.78 and adjusted to 0.81 by 2025, implying a decrease in asset utilization efficiency over the recent years.

Financial Leverage

The reported financial leverage remains relatively stable around 2.11 to 2.19 between 2020 and 2022 but decreases significantly to 1.78 by 2025. The adjusted leverage is higher than reported throughout, starting at 2.33 and dropping to 1.83 in 2025. This downward trend indicates a gradual reduction in the company's reliance on debt or equity financing to amplify returns.

Return on Equity (ROE)

Reported ROE significantly increases from 34.21% in 2020 to a high of 53.51% in 2022, after which it declines to 34.28% by 2025. The adjusted ROE exhibits a similar pattern but at consistently higher levels, peaking at 61.94% in 2022 and ending at 42.46% in 2025. Despite the decline after the peak, ROE remains strong overall, although adjusted figures suggest better profitability post-adjustment.

Return on Assets (ROA)

Reported ROA improves steadily from 16.19% in 2020 to 24.41% in 2022, before decreasing to 19.28% in 2025. Adjusted ROA follows a similar trend but shows higher values, reaching 26.53% at its peak in 2022, with a slight rebound to 23.24% in 2025 after a dip. This pattern indicates effective asset utilization and profitability, particularly when considering adjusted returns that may exclude non-recurring tax effects.

In summary, the company experienced notable growth in profitability and efficiency metrics up to 2022, followed by a general decline or stabilization through 2025. Adjusted figures consistently outperform reported metrics, highlighting the positive impact of adjustments related to income tax considerations. The reduction in financial leverage suggests a strategic shift towards lower risk financing, while the fluctuations in asset turnover and profitability ratios point to changes in operational performance and resource utilization in recent periods.

The financial data reveals a generally positive trajectory in both reported and adjusted net income over the analyzed periods, with some fluctuations in profitability margins that warrant closer examination.

Net Income Trends

Reported net income demonstrates a steady increase from 3,619 million US dollars in 2020 to a peak of 7,177 million US dollars in 2024, before experiencing a slight decline to 6,998 million US dollars in 2025. Adjusted net income follows a similar upward pattern, rising from 3,687 million to 8,151 million US dollars over the same time frame, with a notable dip in 2023 and 2024 to approximately 6,498-6,499 million before rebounding strongly in 2025.

Profit Margin Analysis

The reported net profit margin trends upwards from 21.04% in 2020 to a high of 26.41% in 2024, although it falls back to 24.67% in 2025. The adjusted net profit margin presents a somewhat different pattern, increasing from 21.43% in 2020 to 26.06% in 2022, but then declining to 23.91% by 2024, followed by a substantial increase to 28.73% in 2025, the highest margin reported during the entire period.

Comparative Insights

The adjusted net income and margin figures, which reflect the effects of deferred income tax adjustments, generally outperform the reported figures, especially in the most recent period where adjusted net income significantly surpasses reported income despite reported net income's slight downturn. The divergence in 2025 suggests the company benefited from favorable deferred tax adjustments or other non-recurring tax-related benefits that boosted adjusted profitability beyond what is reflected in reported results.

Overall Interpretation

Over the six-year span, the company exhibits strong growth in net income alongside generally high profitability margins above 20%, indicating efficient cost management and robust operational performance. The fluctuations in adjusted profit margins highlight the impact of tax-related adjustments on financial outcomes, underscoring the importance of considering both reported and adjusted figures for a true assessment of underlying profitability trends.

The analysis of the financial data over the six-year period reveals several notable trends and patterns regarding the asset base and turnover efficiency.

Total Assets (Reported and Adjusted)

Both reported and adjusted total assets exhibit a clear upward trend throughout the period. Reported total assets increased from approximately 22.35 billion US dollars in 2020 to about 36.30 billion US dollars in 2025. Similarly, adjusted total assets rose from around 20.64 billion US dollars in 2020 to 35.07 billion US dollars in 2025. This steady growth indicates consistent expansion or accumulation of asset resources.

The difference between reported and adjusted total assets remains relatively stable across the years, suggesting that the adjustments related to income taxes do not lead to substantial variance in the total asset figures reported.

Total Asset Turnover (Reported and Adjusted)

The reported total asset turnover ratio initially increased from 0.77 in 2020 to a peak of 0.96 in 2022, indicating an improvement in the efficiency with which assets were utilized to generate sales. However, this ratio declined thereafter, dropping to 0.78 by 2025. The rise and subsequent decline illustrate that asset utilization efficiency improved first but became less effective in the later years.

The adjusted total asset turnover ratio follows a similar pattern but consistently remains slightly higher than the reported ratio throughout the timeline. It rose from 0.83 in 2020 to a peak of 1.02 in 2022, then decreased to 0.81 in 2025. This indicates that when accounting for deferred income taxes adjustments, the company's assets were managed more efficiently than the raw reported figures indicate, though the efficiency declined after the peak year.

Overall, the company shows sustained asset growth coupled with an initial improvement in asset efficiency, peaking in 2022, followed by a gradual decline through 2025. The adjusted figures suggest slightly better asset turnover efficiency than reported figures, reflecting the impact of tax-related adjustments on operational performance metrics.

Total Assets

The reported total assets exhibited consistent growth over the period from 2020 to 2025, increasing from $22,353 million to $36,299 million. Similarly, the adjusted total assets showed a parallel upward trend, rising from $20,642 million to $35,066 million. This indicates a steady expansion of the asset base when accounting for deferred income tax adjustments.

Stockholders’ Equity

Reported stockholders' equity also experienced growth throughout the timeframe, rising from $10,578 million in 2020 to $20,415 million in 2025. The adjusted stockholders' equity followed a similar pattern, increasing from $8,876 million to $19,199 million. The adjustment narrows the equity base but maintains the growth trajectory, indicating strengthening shareholder value after accounting for deferred taxes.

Financial Leverage

The reported financial leverage ratio remained relatively stable in the early years at around 2.11, increasing slightly to 2.19 in 2022, then demonstrating a meaningful decline to 1.78 by 2025. Adjusted financial leverage, which accounts for adjustments related to income tax effects, similarly stabilized near 2.3 initially, then declined more sharply to 1.83 toward the end of the period. This reduction in leverage suggests an improvement in capital structure, with equity growth outpacing debt or liabilities growth when considering deferred tax adjustments.

Overall Trends and Insights

The data reflects a company that is expanding its asset base steadily while strengthening its equity position. Adjusted figures consistently present a slightly more conservative financial position due to the impact of deferred income taxes, but both reported and adjusted figures show encouraging growth in equity. The declining trend in financial leverage ratios over the recent years points to reduced reliance on debt financing relative to equity, enhancing financial stability. Such trends may suggest improved creditworthiness and a more robust capital structure in the latest periods analyzed.

The financial data reveals several notable trends over the examined periods, emphasizing the company's profitability, equity position, and return on equity (ROE) from both reported and adjusted perspectives.

Net Income Trends

Reported net income shows a consistent upward trajectory from 2020 to 2024, increasing from 3,619 million US dollars to 7,177 million US dollars, followed by a slight decrease to 6,998 million US dollars in 2025. Adjusted net income similarly rises during the earlier years, peaking at 6,720 million in 2022 before experiencing a dip in 2023 and 2024 around 6,499 million, then significantly increasing to 8,151 million in 2025. The divergence in 2025 highlights a substantial adjustment effect on net income.

Stockholders’ Equity Dynamics

Reported stockholders' equity has grown steadily over the period, starting from 10,578 million US dollars in 2020 and reaching 20,415 million in 2025. Adjusted stockholders' equity follows a similar upward trend, increasing from 8,876 million to 19,199 million within the same timeframe. The reported figures consistently exceed the adjusted values, suggesting that the adjustments subtract from equity, possibly reflecting deferred tax impacts or other accounting adjustments.

Return on Equity (ROE) Patterns

Reported ROE experiences an initial increase from 34.21% in 2020 to a peak of 53.51% in 2022, followed by a gradual decline to 34.28% by 2025. Adjusted ROE displays a similar pattern, with higher peaks (reaching 61.94% in 2022) and a less pronounced decrease afterward, ending at 42.46% in 2025. The higher adjusted ROE percentages indicate that when accounting for adjustments, the company's efficiency in generating returns from equity is consistently better than reported figures suggest.

Overall, the data indicates strong growth in profitability and equity, with performance peaking around 2022. Subsequent periods show some plateauing and slight declines in reported figures, while adjusted metrics highlight notable variations, particularly in net income and ROE. The adjustments, likely related to deferred income tax considerations, meaningfully impact the presentation of the company's financial efficiency and strength over time.

The financial performance and position exhibit variance over the examined periods, highlighting trends in profitability, asset base, and efficiency measures when adjusted for deferred income tax considerations.

Net Income Trends

Reported net income demonstrated consistent growth from 3619 million USD in 2020 to a peak of 7177 million USD in 2024, followed by a slight decrease to 6998 million USD in 2025. Adjusted net income, which accounts for deferred tax impacts, similarly rose from 3687 million USD in 2020 to 6720 million USD in 2022, experienced a decline in 2023 and 2024 where it plateaued at approximately 6499 million USD, and then notably increased to 8151 million USD in 2025. This pattern suggests that while reported earnings followed a steadier upward trajectory with a minor setback at the end, adjusted earnings faced more volatility but ultimately surpassed reported figures in the latest period.

Asset Base Developments

The reported total assets steadily increased from 22353 million USD in 2020 to 36299 million USD in 2025, reflecting ongoing asset accumulation or valuation increases. Adjusted total assets, accounting for tax-related adjustments, showed a parallel growth from 20642 million USD to 35066 million USD over the same interval. The consistent asset growth across both reported and adjusted figures indicates expansion in the company's resources or investments, with adjusted assets slightly lower, evidencing the impact of deferred tax adjustments.

Return on Assets (ROA) Analysis

Reported ROA demonstrated a strong rise from 16.19% in 2020 to an apex of 24.41% in 2022, before declining gradually to 19.28% in 2025. Adjusted ROA followed a similar upward trend, peaking at 26.53% in 2022, then dropping to 20.3% in 2024, but rebounding to 23.24% in 2025. This behavior signifies robust profitability relative to asset levels early on, with some easing in efficiency or profitability in subsequent years. The adjusted ROA generally exceeds the reported figure except in 2023 and 2024, which may imply differential impacts from deferred taxes affecting operational results and asset valuation.

In summary, the data reflects a company experiencing asset growth and sustained profitability with some fluctuations influenced by adjustments for deferred income taxes. Notably, the adjusted net income and ROA illustrate sharper variability yet culminate in superior results relative to reported figures in the most recent year, underscoring the importance of tax adjustments in assessing the underlying financial health and performance.