Applied Materials Inc. (NASDAQ:AMAT)

The analysis of the financial data reveals several notable trends in the company's performance over the observed periods.

Net operating profit after taxes (NOPAT)

The NOPAT shows a consistent upward trajectory from 2019 to 2022, increasing from 2,934 million US dollars to a peak of 6,900 million US dollars. However, after this peak, NOPAT experiences a decline over the next two years, reducing to 6,533 million in 2023 and further to 6,363 million in 2024. This indicates strong growth initially, followed by a reduction in operating profitability.

Cost of capital

The cost of capital remains relatively stable throughout the periods, fluctuating slightly between 18.9% and 20.02%. The highest cost of capital occurs in 2023 at 20.02%, after which it marginally decreases to 19.92% in 2024. This stability suggests a consistent risk and financing cost environment for the company.

Invested capital

Invested capital shows a continual increase during the periods analyzed, starting at 10,129 million US dollars in 2019 and rising progressively to 22,135 million US dollars by 2024. The most significant jumps occur between 2022 and 2024, indicating increased investment in assets or expansion activities.

Economic profit

Economic profit trends upward from 1,020 million US dollars in 2019 to a peak of 3,966 million in 2022, followed by a marked decline to 2,974 million in 2023, and further down to 1,953 million in 2024. This pattern corresponds with the changes in NOPAT but shows a sharper decline post-peak, reflecting the impact of increased invested capital and stable cost of capital on economic profitability.

Overall, the company exhibited strong growth in profitability and economic profit up to 2022, supported by rising invested capital. However, despite increased investments, profitability indicators such as NOPAT and economic profit have declined since 2022, suggesting challenges in maintaining returns on the expanded capital base. The stable cost of capital indicates that this decline is not due to rising financing costs but may be related to operational or market factors influencing profit generation efficiency.

The financial data reveals a general upward trend in the company's profitability over the years under review.

Net Income

Net income has shown consistent growth from 2019 through 2024. Starting at 2,706 million US dollars in 2019, it increased steadily each year to reach 7,177 million US dollars in 2024. This represents a more than doubling of net income over the six-year period, indicating strong financial performance and effective management of expenses relative to revenue.

Net Operating Profit After Taxes (NOPAT)

NOPAT also exhibited growth from 2019 through 2022, increasing from 2,934 million US dollars to 6,900 million US dollars, which reflects improvements in operating efficiency and tax management. However, there is a slight downward trend observed in the last two years, decreasing to 6,533 million in 2023 and further to 6,363 million in 2024. This suggests a potential reduction in operational efficiency or changes in tax impacts during the most recent period.

Comparing net income and NOPAT trends, it is evident that while net income maintains a robust growth path, NOPAT has begun to stabilize and slightly decline. This may indicate increased financial activities or non-operating gains contributing to net income, or possible changes in operational conditions needing further investigation.

Provision for Income Taxes

The provision for income taxes shows a general upward trend over the six-year period. Starting at $563 million in 2019, it slightly decreased to $547 million in 2020 but then increased substantially to $883 million in 2021. This upward trajectory continued with provisions of $1,074 million in 2022. A decrease occurred in 2023, with the provision falling to $860 million, followed by a rebound to $975 million in 2024. These fluctuations suggest variability in taxable income or changes in tax rates or regulations impacting the tax provision.

Cash Operating Taxes

Cash operating taxes show a consistent and pronounced increase throughout the period. Beginning at $563 million in 2019, cash taxes slightly decreased to $530 million in 2020 but then rose steadily each subsequent year: $868 million in 2021, $920 million in 2022, followed by a more marked increase to $1,215 million in 2023, and reaching $1,606 million in 2024. This substantial increase in cash taxes paid indicates growing tax liabilities settled in cash, which may reflect higher taxable income or changes in tax payment schedules and cash flow management.

Comparative Analysis

The provision for income taxes and cash operating taxes follow somewhat similar trends with both increasing from 2020 onwards, though the cash taxes show a more aggressive increase from 2022 to 2024. Notably, cash operating taxes exceeded the provision for income taxes from 2023 onwards, implying potential timing differences between accrued tax expenses and actual tax payments or adjustments such as payment of prior year liabilities or changes in deferred tax balances.

The financial data reveals several notable trends over the six-year period. Total reported debt and leases increased steadily from 5,464 million US dollars in 2019 to 6,605 million US dollars in 2024. This represents a moderate but consistent growth in the company's financial obligations, suggesting an ongoing strategy involving increased leverage or financing through debt instruments.

Stockholders’ equity exhibited significant growth, rising from 8,214 million US dollars in 2019 to 19,001 million US dollars in 2024. This increase reflects a strengthening equity base, which may be attributed to retained earnings, new equity issuances, or asset revaluation. The growth in equity outpaces the growth in reported debt, indicating an overall improvement in the company’s financial position from an equity perspective.

Invested capital also demonstrated a rising trend, growing from 10,129 million US dollars in 2019 to 22,135 million US dollars in 2024. This metric encompasses both equity and debt financing, and its increase corresponds with the observed growth in both debt and equity. The substantial growth in invested capital suggests increased investment in company assets, potentially aimed at supporting expansion or enhancing operational capacity.

Overall, the data indicates a company that is incrementally increasing its financial leverage while simultaneously enhancing its equity base and investing more capital into the business. This balanced growth in debt and equity, coupled with the substantial rise in invested capital, may imply strategic investments geared toward long-term growth objectives.

Economic Profit

The economic profit demonstrates a generally increasing trend from 2019 through 2022, rising from 1,020 million USD in 2019 to a peak of 3,966 million USD in 2022. Following this peak, economic profit declines notably in 2023 and 2024 to 2,974 million USD and 1,953 million USD, respectively, indicating some challenges or reduced profitability in the most recent years.

Invested Capital

Invested capital shows consistent growth over the entire period, increasing steadily from 10,129 million USD in 2019 to 22,135 million USD in 2024. This suggests a continuous commitment to investment and expansion of the asset base or operational capacity throughout these years.

Economic Spread Ratio

The economic spread ratio, which reflects the return generated over the cost of capital, initially increases from 10.07% in 2019 to a high of 26.64% in 2022. After this peak, there is a marked decline in the following years to 16.73% in 2023 and further down to 8.82% in 2024. This pattern indicates that while profitability and returns on invested capital improved through 2022, they have diminished significantly in recent years, possibly signaling increased costs, declining margins, or heightened competition.

Economic Profit

The economic profit exhibited a notable increase from 2019 to 2022, peaking at 3,966 million US dollars. Following this peak, there was a decline observed over the subsequent years, dropping to 2,974 million in 2023 and further to 1,953 million in 2024. This indicates a strong growth period initially, followed by a significant reduction in economic profit in the later years.

Net Revenue

Net revenue displayed a consistent upward trend throughout the entire period. Starting at 14,608 million US dollars in 2019, it steadily increased every year, reaching 27,176 million in 2024. This reflects ongoing growth in sales or operational scale over the six-year span without any indication of decline or plateau.

Economic Profit Margin

The economic profit margin followed a similar pattern to economic profit, increasing from approximately 6.98% in 2019 to a peak of 15.38% in 2022. Afterward, the margin decreased noticeably to 11.22% in 2023 and further declined to 7.19% in 2024. The peak margin in 2022 suggests improved profitability efficiency during that period, which subsequently diminished despite continued revenue growth.