Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Applied Materials Inc., economic profit calculation
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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 8,205 – 23.51% × 20,121 = 3,474
The financial trajectory indicates a consistent ability to generate economic profit, although the magnitude of value creation has fluctuated in response to operational performance and capital expansion.
- Net Operating Profit After Taxes (NOPAT)
- A substantial growth phase was observed between 2020 and 2022, with NOPAT increasing from 3,885 million to 6,900 million. This was followed by a period of moderate decline during 2023 and 2024, where figures dipped to 6,363 million. A significant recovery occurred in 2025, with NOPAT reaching a period high of 8,205 million.
- Invested Capital and Cost of Capital
- Invested capital exhibited a steady upward trend over the six-year period, growing from 13,090 million in 2020 to 20,121 million in 2025. This represents a consistent expansion of the asset base. Simultaneously, the cost of capital remained remarkably stable, fluctuating within a narrow range between 22.52% and 23.51%, indicating a consistent risk profile and funding cost environment.
- Economic Profit Trends
- Economic profit grew rapidly from 937 million in 2020 to a peak of 3,474 million in 2022. However, a downward trend emerged in 2023 and 2024, with economic profit falling to 1,962 million. This decline coincided with a period where invested capital continued to rise while NOPAT slightly contracted, suggesting a temporary decrease in capital efficiency. By 2025, economic profit returned to its previous peak of 3,474 million, demonstrating that the increased invested capital eventually yielded higher operational returns.
The analysis reveals that while the company has maintained a positive economic profit throughout the period, the efficiency of capital deployment experienced a trough between 2023 and 2024. The recovery in 2025 indicates that the expanded capital base is now effectively contributing to value creation above the required cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Applied Materials Inc., NOPAT calculation
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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in warranty reserves.
4 Addition of increase (decrease) in restructuring reserve.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 495 × 3.94% = 20
7 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 289 × 21.00% = 61
8 Addition of after taxes interest expense to net income.
9 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 406 × 21.00% = 85
10 Elimination of after taxes investment income.
- Net Income
- Net income exhibited a generally strong upward trajectory from 2020 to 2024, increasing from 3,619 million US dollars in 2020 to a peak of 7,177 million US dollars in 2024. This represents a significant growth, more than doubling the net income over this four-year span. However, in 2025, a slight decline is observed where net income decreased to 6,998 million US dollars, indicating a minor contraction after consistent annual gains.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrates a positive trend overall but with more variability compared to net income. It rose steadily from 3,885 million US dollars in 2020 to 6,900 million US dollars in 2022. Subsequently, there was a decrease in 2023 and 2024, with values of 6,533 million and 6,363 million US dollars respectively, suggesting some operational challenges or increased tax impacts during these years. In 2025, NOPAT sharply increased to 8,205 million US dollars, reaching the highest level in the examined period.
- Comparative Insights
- While both net income and NOPAT have grown over the long term, net income showed more consistent annual increases up to 2024 followed by a slight decrease, whereas NOPAT showed a dip in the middle years before a strong rebound in 2025. The sharp increase in NOPAT in the final year could indicate improved operational efficiency or tax benefits not reflected to the same degree in net income. The divergence in 2025 suggests potential differences in non-operating items, interest, or tax treatment affecting net income and operating profitability differently.
- Overall Summary
- Both profitability measures underscore an expanding profit base over the analyzed period, with net income nearly doubling and NOPAT more than doubling from 2020 to 2025. The trends reveal robust performance growth with a temporary moderation in operational profitability mid-period, followed by a strong operational recovery. The slight net income decline in the final year compared to NOPAT's peak requires further qualitative investigation but does not overshadow the overall positive performance trajectory.
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Cash Operating Taxes
Applied Materials Inc., cash operating taxes calculation
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 financial data reveals substantial fluctuations in the provision for income taxes and cash operating taxes over the six-year period. Both metrics exhibit upward trends overall, albeit with certain inconsistencies in year-to-year changes.
- Provision for Income Taxes
- The provision for income taxes amounts to $547 million in 2020 and increases significantly to $883 million in 2021, representing a rise of approximately 61%. This upward trend continues into 2022, reaching $1074 million. However, the value decreases to $860 million in 2023, indicating a notable reduction of around 20%. Subsequently, it rises again to $975 million in 2024 and peaks sharply at $2273 million in 2025, more than doubling from the previous year. This dramatic increase in 2025 suggests either substantially higher taxable income or changes in tax policies or accounting estimates affecting the tax provision.
- Cash Operating Taxes
- Cash operating taxes also show a general upward trajectory, starting at $530 million in 2020 and increasing steadily to $868 million in 2021 and $920 million in 2022. There is a pronounced increase to $1215 million in 2023, followed by a sharp rise to $1606 million in 2024. However, this trend reverses in 2025, with cash operating taxes decreasing to $1095 million. The decline in 2025 contrasts with the sharp increase in the provision for income taxes, which may imply timing differences, changes in tax payments structure, or adjustments related to deferred tax assets or liabilities.
Overall, the data points to increasing tax expenses and cash tax outflows over the analyzed period, with a notable divergence in the final year where the provision for income taxes rises substantially while cash operating taxes decline. This pattern may warrant further examination to understand underlying causes such as tax strategy changes, income fluctuations, or regulatory impacts.
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Invested Capital
Applied Materials Inc., invested capital calculation (financing approach)
US$ 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of warranty reserves.
5 Addition of restructuring reserve.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of available-for-sale investments.
The financial data reveals key trends in the company's capital structure and financial position over the examined periods. The analysis focuses on total reported debt and leases, stockholders’ equity, and invested capital, all expressed in millions of US dollars.
- Total reported debt & leases
- This metric has exhibited a steady upward trend across all periods. Beginning at 5,707 million in late 2020, it gradually increased each year, reaching 7,050 million by late 2025. The rate of increase suggests a consistent reliance on debt and lease obligations as part of financing, with a noticeable acceleration in the later years, especially between 2023 and 2025.
- Stockholders’ equity
- Stockholders’ equity has generally shown significant growth over the timeline. From 10,578 million in 2020, it increased modestly by 15.8% to 12,247 million in 2021 but slightly declined in 2022 to 12,194 million. After this dip, equity surged considerably to 16,349 million in 2023 and continued to rise, reaching 20,415 million by 2025. The sharp growth following 2022 may indicate increased profitability, retained earnings, or equity financing activities during that period.
- Invested capital
- Invested capital also shows a progressive increase, starting at 13,090 million in 2020 and growing to 20,121 million by 2025. The progression is generally smooth with the largest increments occurring in later years. This pattern aligns with the increases in both debt and equity, reflecting the overall expansion in the company’s capital base used for operations and growth.
Overall, the company demonstrates a pattern of expanding financial resources, both through increasing debt and growing equity. The balance between these components indicates a strategy of leveraging alongside strengthened equity, contributing to a larger invested capital base. The prominent rise in equity in recent years, paired with a steady increase in debt, points toward an improving financial position and potentially enhanced capability to fund strategic initiatives.
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Cost of Capital
Applied Materials Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 205,539) | 205,539) | ÷ | 212,334) | = | 0.97 | 0.97 | × | 24.19% | = | 23.41% | ||
| Debt and finance lease liabilities3 | 6,300) | 6,300) | ÷ | 212,334) | = | 0.03 | 0.03 | × | 3.94% × (1 – 21.00%) | = | 0.09% | ||
| Operating lease liability4 | 495) | 495) | ÷ | 212,334) | = | 0.00 | 0.00 | × | 3.94% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 212,334) | 1.00 | 23.51% | ||||||||||
Based on: 10-K (reporting date: 2025-10-26).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 137,797) | 137,797) | ÷ | 144,042) | = | 0.96 | 0.96 | × | 24.19% | = | 23.14% | ||
| Debt and finance lease liabilities3 | 5,899) | 5,899) | ÷ | 144,042) | = | 0.04 | 0.04 | × | 3.90% × (1 – 21.00%) | = | 0.13% | ||
| Operating lease liability4 | 346) | 346) | ÷ | 144,042) | = | 0.00 | 0.00 | × | 3.90% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 144,042) | 1.00 | 23.27% | ||||||||||
Based on: 10-K (reporting date: 2024-10-27).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 134,591) | 134,591) | ÷ | 139,829) | = | 0.96 | 0.96 | × | 24.19% | = | 23.28% | ||
| Debt and finance lease liabilities3 | 4,902) | 4,902) | ÷ | 139,829) | = | 0.04 | 0.04 | × | 3.80% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 336) | 336) | ÷ | 139,829) | = | 0.00 | 0.00 | × | 3.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 139,829) | 1.00 | 23.39% | ||||||||||
Based on: 10-K (reporting date: 2023-10-29).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 88,407) | 88,407) | ÷ | 93,579) | = | 0.94 | 0.94 | × | 24.19% | = | 22.85% | ||
| Debt and finance lease liabilities3 | 4,800) | 4,800) | ÷ | 93,579) | = | 0.05 | 0.05 | × | 3.75% × (1 – 21.00%) | = | 0.15% | ||
| Operating lease liability4 | 372) | 372) | ÷ | 93,579) | = | 0.00 | 0.00 | × | 2.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 93,579) | 1.00 | 23.01% | ||||||||||
Based on: 10-K (reporting date: 2022-10-30).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 129,856) | 129,856) | ÷ | 136,557) | = | 0.95 | 0.95 | × | 24.19% | = | 23.00% | ||
| Debt and finance lease liabilities3 | 6,400) | 6,400) | ÷ | 136,557) | = | 0.05 | 0.05 | × | 3.75% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 301) | 301) | ÷ | 136,557) | = | 0.00 | 0.00 | × | 1.70% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 136,557) | 1.00 | 23.14% | ||||||||||
Based on: 10-K (reporting date: 2021-10-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 80,737) | 80,737) | ÷ | 87,596) | = | 0.92 | 0.92 | × | 24.19% | = | 22.29% | ||
| Debt and finance lease liabilities3 | 6,600) | 6,600) | ÷ | 87,596) | = | 0.08 | 0.08 | × | 3.75% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 259) | 259) | ÷ | 87,596) | = | 0.00 | 0.00 | × | 1.80% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 87,596) | 1.00 | 22.52% | ||||||||||
Based on: 10-K (reporting date: 2020-10-25).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Applied Materials Inc., economic spread ratio calculation, comparison to benchmarks
| Oct 26, 2025 | Oct 27, 2024 | Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 3,474) | 1,962) | 2,375) | 3,474) | 2,769) | 937) | |
| Invested capital2 | 20,121) | 18,913) | 17,777) | 14,890) | 14,717) | 13,090) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 17.27% | 10.37% | 13.36% | 23.33% | 18.82% | 7.16% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Advanced Micro Devices Inc. | -21.11% | -27.37% | -28.80% | -28.42% | 28.16% | — | |
| Analog Devices Inc. | -12.03% | -14.15% | -10.06% | -11.43% | -14.67% | -9.61% | |
| Broadcom Inc. | -2.94% | -10.36% | 4.87% | 3.61% | -5.62% | -10.85% | |
| Intel Corp. | -18.62% | -29.96% | -19.83% | -13.05% | 3.54% | — | |
| KLA Corp. | 20.58% | 16.23% | 20.17% | 22.57% | 11.03% | — | |
| Lam Research Corp. | 12.15% | -2.98% | 2.38% | 17.40% | 12.74% | — | |
| Marvell Technology Inc. | -26.42% | -26.46% | -22.13% | -24.89% | -26.61% | — | |
| Micron Technology Inc. | -5.75% | -17.66% | -29.62% | -1.97% | -6.58% | -12.02% | |
| NVIDIA Corp. | 117.48% | 62.03% | -16.05% | 26.14% | 6.62% | — | |
| Qualcomm Inc. | 12.49% | 7.70% | 0.23% | 26.66% | 24.06% | 9.13% | |
| Texas Instruments Inc. | 2.39% | 2.70% | 12.32% | 32.90% | 31.54% | — | |
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,474 ÷ 20,121 = 17.27%
4 Click competitor name to see calculations.
The financial performance from October 2020 through October 2025 is characterized by a steady expansion of the capital base contrasted with significant volatility in economic profit and capital efficiency. While invested capital grew consistently over the six-year period, the ability to generate value above the cost of capital fluctuated, peaking in 2022 before experiencing a contraction and a subsequent recovery in 2025.
- Invested Capital Trends
- A consistent upward trajectory is observed in invested capital, which rose from 13,090 million USD in 2020 to 20,121 million USD by 2025. This represents a sustained increase in the total resources deployed in the business, reflecting continuous investment in assets or operations over the analyzed timeframe.
- Economic Profit Volatility
- Economic profit exhibited a non-linear trend, starting at 937 million USD in 2020 and climbing sharply to a peak of 3,474 million USD in 2022. A subsequent decline occurred over the next two years, with profit falling to 1,962 million USD by October 2024. However, a strong recovery is noted in 2025, with economic profit returning to the previous peak of 3,474 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the efficiency of value creation relative to invested capital, mirrored the volatility of economic profit. The ratio increased from 7.16% in 2020 to a maximum of 23.33% in 2022, indicating a period of high capital efficiency. This was followed by a contraction to 10.37% in 2024. By 2025, the ratio recovered to 17.27%.
- Correlation Between Capital and Value Creation
- An analysis of the relationship between invested capital and the economic spread ratio reveals that the 2025 recovery in economic profit was achieved on a significantly larger capital base than in 2022. Consequently, although the economic profit in 2025 matched the 2022 level of 3,474 million USD, the economic spread ratio in 2025 (17.27%) remained lower than the 2022 peak (23.33%), as the increased invested capital diluted the percentage of spread.
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Economic Profit Margin
Applied Materials Inc., economic profit margin calculation, comparison to benchmarks
| Oct 26, 2025 | Oct 27, 2024 | Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | 3,474) | 1,962) | 2,375) | 3,474) | 2,769) | 937) | |
| Net revenue | 28,368) | 27,176) | 26,517) | 25,785) | 23,063) | 17,202) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 12.25% | 7.22% | 8.96% | 13.47% | 12.01% | 5.45% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Advanced Micro Devices Inc. | -37.61% | -61.81% | -73.50% | -70.47% | 10.61% | — | |
| Analog Devices Inc. | -45.93% | -65.34% | -36.13% | -42.83% | -94.24% | -31.23% | |
| Broadcom Inc. | -6.91% | -28.32% | 8.52% | 6.76% | -13.24% | -29.94% | |
| Intel Corp. | -41.07% | -52.08% | -33.68% | -18.36% | 3.97% | — | |
| KLA Corp. | 15.74% | 13.93% | 16.02% | 19.08% | 10.87% | — | |
| Lam Research Corp. | 10.15% | -3.02% | 2.09% | 12.85% | 10.28% | — | |
| Marvell Technology Inc. | -81.64% | -91.49% | -74.77% | -111.07% | -81.68% | — | |
| Micron Technology Inc. | -9.41% | -37.51% | -101.90% | -3.38% | -11.01% | -23.72% | |
| NVIDIA Corp. | 42.55% | 31.32% | -12.70% | 17.52% | 5.17% | — | |
| Qualcomm Inc. | 8.83% | 6.10% | 0.20% | 17.76% | 14.49% | 6.89% | |
| Texas Instruments Inc. | 3.86% | 4.52% | 15.89% | 28.85% | 28.21% | — | |
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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × 3,474 ÷ 28,368 = 12.25%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of significant growth and volatility in economic profit, contrasted by a consistent upward trajectory in net revenue. While the scale of operations expanded steadily over the six-year period, the efficiency of generating economic profit fluctuated, peaking in 2022 and 2025.
- Net Revenue Trend
- A continuous increase in net revenue is observed, rising from 17,202 million US dollars in 2020 to 28,368 million US dollars by 2025. This represents a steady expansion of the top line without any annual contractions during the analyzed period.
- Economic Profit Performance
- Economic profit experienced a sharp increase between 2020 and 2022, climbing from 937 million US dollars to a peak of 3,474 million US dollars. This was followed by a two-year decline, reaching a low of 1,962 million US dollars in 2024, before recovering fully to 3,474 million US dollars in 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. After an initial surge from 5.45% in 2020 to a peak of 13.47% in 2022, the margin contracted to 8.96% in 2023 and further to 7.22% in 2024. A significant recovery is noted in 2025, with the margin returning to 12.25%.
- Correlation Between Revenue and Value Creation
- The data indicates a decoupling between revenue growth and economic profit efficiency during the 2023-2024 period. Despite continuing revenue gains, the economic profit margin declined, suggesting a temporary increase in the cost of capital or a reduction in operating efficiency. However, the 2025 results demonstrate a restoration of high-value creation efficiency relative to the expanded revenue base.
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