Applied Materials Inc. (NASDAQ:AMAT)

The financial analysis over the examined periods reveals several notable trends and patterns. Net operating profit after taxes (NOPAT) exhibits an overall upward trajectory, increasing from $3,885 million in 2020 to $8,205 million in 2025. Despite some fluctuations, particularly a slight decline between 2022 and 2024, the long-term outlook shows substantial growth in profitability.

Cost of capital remains relatively stable throughout the periods, fluctuating marginally between 19.29% and 20.12%. This steadiness suggests consistent risk and capital structure conditions over time, with no significant increase in the cost environment that could impact value creation.

Invested capital increases steadily from $13,090 million in 2020 to $20,121 million in 2025. This gradual increase indicates expanded asset base or capital deployment likely aligned with growth or operational scaling.

Analysis of economic profit, defined as the net operating profit after taxes minus the cost of capital applied to invested capital, reveals a peak of $3,966 million in 2022, followed by a decline in 2023 and 2024, reaching $2,595 million, before rising again to $4,157 million in 2025. This pattern indicates that despite increasing invested capital and relatively stable cost of capital, the company's ability to generate returns above its capital costs has experienced volatility, although the improvement in the final period signals a potential return to stronger value creation.

In summary, the company demonstrates solid growth in operating profitability and invested capital over the period, with a consistent cost of capital. The fluctuations in economic profit highlight periods of varying efficiency in generating returns above capital costs, with a positive outlook as economic profit rises again in the final year under review.

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.

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.

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.

Economic Profit

The economic profit exhibits a fluctuating trend over the observed periods. Starting at 1,360 million US dollars, it sharply increased to 3,260 million in 2021 and further to 3,966 million in 2022. Subsequently, it declined to 2,974 million in 2023 and dropped further to 2,595 million in 2024. The latest figure in 2025 shows a notable recovery, rising significantly to 4,157 million US dollars.

Invested Capital

Invested capital demonstrates a steadily increasing trajectory throughout the timeline. From an initial amount of 13,090 million US dollars in 2020, it consistently rose year by year, reaching 20,121 million US dollars by 2025. This indicates ongoing capital investment or asset accumulation by the company.

Economic Spread Ratio

The economic spread ratio shows considerable variation during the analyzed years. It starts at 10.39% in 2020 and more than doubles to 22.15% in 2021, reaching a peak of 26.64% in 2022. Following this peak, the ratio declines to 16.73% in 2023 and further to 13.72% in 2024. In 2025, the ratio rebounds to 20.66%, suggesting improved economic profitability relative to the cost of capital.

Summary Insights

The company exhibits growth in invested capital, which suggests ongoing expansion or reinvestment. Economic profit, while generally positive, shows volatility, reflecting changes in profitability dynamics or operational efficiency. The economic spread ratio, which measures the profitability of invested capital, mirrors the trend in economic profit, peaking in 2022 before declining and recovering again in 2025. This pattern implies periods of varying return on invested capital, likely influenced by market conditions or internal strategic adjustments.

Net Revenue Trends

Net revenue has demonstrated a consistent upward trend over the observed periods. Starting at $17,202 million in 2020, it increased each year, reaching $28,368 million by 2025. This steady growth indicates an expanding sales base or improved market performance throughout the timeframe.

Economic Profit Trends

Economic profit exhibited variability despite the general increase in net revenue. It rose substantially from $1,360 million in 2020 to a peak of $3,966 million in 2022. However, it declined in the subsequent two years to $2,595 million in 2024, before increasing again to $4,157 million by 2025. This pattern suggests fluctuations in operational efficiency or cost management impacting overall profitability.

Economic Profit Margin Analysis

The economic profit margin mirrored the fluctuations seen in economic profit. It increased from 7.91% in 2020 to a peak of 15.38% in 2022, indicating improved profitability relative to revenue. Subsequently, it declined to 9.55% in 2024, signaling a reduction in profit efficiency. By 2025, it recovered to 14.65%, approaching previous peak levels. This variation suggests changes in cost structures, pricing strategies, or other factors influencing profit relative to revenue.

Overall Observations

The data reflects a generally positive growth in net revenue alongside fluctuating economic profit and margin profiles. The peak in both economic profit and margin in 2022 followed by mid-term declines and a strong recovery in 2025 may indicate cyclical challenges or strategic adjustments during the mid-period. The recovery phase observed in 2025 is indicative of improved profitability performance relative to revenue generation.