Analysis of Inventory
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Inventory Disclosure
Applied Materials Inc., balance sheet: inventory
US$ in millions
Based on: 10-K (reporting date: 2025-10-26), 10-K (reporting date: 2024-10-27), 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25).
The analysis of the annual inventory-related financial data reveals several important trends and shifts over the observed periods.
- Customer Service Spares
- The value shows a steady increase from 1270 million USD in 2020 to 1786 million USD in 2025. This indicates a consistent growth in investment in spare parts for customer service, which may reflect higher demand, expanded operations, or strategic stockpiling to enhance service levels.
- Raw Materials
- Raw materials experienced substantial growth, rising from 870 million USD in 2020 to 2007 million USD in 2025. A notable peak occurred in 2022 with 1807 million USD, followed by a slight dip in 2023 and 2024 before increasing again in 2025. This pattern suggests volatility in raw materials purchases or usage, potentially influenced by supply chain fluctuations or production adjustments.
- Work-in-Process Inventory
- Work-in-process inventory grew from 624 million USD in 2020 to a peak of 1029 million USD in 2022, followed by a decline to 879 million USD in 2024 and a modest recovery to 914 million USD in 2025. This trend may indicate changes in production efficiency or shifts in manufacturing throughput.
- Deferred Cost of Sales
- Data starts in 2022 with 704 million USD, then declines sharply to 217 million USD by 2024, with a slight increase to 229 million USD in 2025. Such a sharp decrease could suggest improvements in cost recognition or changes in sales practices.
- Evaluation Inventory
- Evaluation inventory appears from 2022 onward, growing steadily from 422 million USD to 474 million USD by 2025. This upward trend might reflect increased testing or quality assurance activities.
- Manufactured On-Hand Inventory
- Starting in 2022, this inventory category rises from 561 million USD to a peak of 650 million USD in 2023, then decreases to 444 million USD in 2024 before increasing slightly to 505 million USD in 2025. This fluctuation could be tied to production planning or demand forecasting accuracy.
- Finished Goods
- Finished goods inventory recorded from 2022 shows a declining trajectory from 1687 million USD in 2022 to 1120 million USD in 2024, then a small rebound to 1208 million USD in 2025. This decline possibly indicates improved sales performance or inventory management.
- Finished Goods (Legacy)
- This category is only reported for 2020 and 2021, showing a decrease from 1140 million USD to 1049 million USD, suggesting a phase-out or reclassification of legacy products.
- Total Inventories
- Total inventory values increased from 3904 million USD in 2020 to a peak of 5932 million USD in 2022, followed by a reduction to 5421 million USD in 2024 and an increase to 5915 million USD in 2025. The overall growth combined with periodic fluctuations suggests dynamic inventory management responsive to market conditions.
In summary, the data displays consistent growth in several inventory subcategories, notably customer service spares and raw materials. Fluctuations in work-in-process, deferred cost of sales, and finished goods inventories suggest adjustments in production and sales processes. The introduction and growth of evaluation and manufactured on-hand inventories indicate expanding operational complexity. The observed inventory trends reflect a combination of growth, strategic adaptation, and possibly efforts to optimize inventory levels in alignment with business objectives.