Applied Materials Inc. (NASDAQ:AMAT)

The financial data reveals significant trends in profitability, capital investment, and efficiency over the observed periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrates a strong upward trajectory from 2020 to 2022, increasing from $3,885 million to $6,900 million. After peaking in 2022, there is a slight decline in 2023 and 2024, falling to $6,363 million, before rising sharply again to $8,205 million in 2025. This pattern suggests fluctuating profitability with a recovery and growth surge in the latest period.

Invested Capital

Invested capital has steadily increased each year, starting from $13,090 million in 2020 and rising to $20,121 million by 2025. The growth rate appears more accelerated after 2022, indicating ongoing investments in assets or business capacity expansion.

Return on Invested Capital (ROIC)

ROIC shows a peak in 2022 at 46.34%, reflecting highly efficient use of capital during this period. Following this peak, ROIC declines through 2023 and 2024 to 33.64%, signifying reduced capital efficiency possibly due to increased invested capital outpacing profit growth. However, a recovery to 40.78% in 2025 suggests an improvement in profitability relative to capital invested.

Overall, the company exhibits growth in invested capital accompanied by fluctuating but generally high profitability levels. The efficiency metric, ROIC, indicates an initial improvement, a period of decline, and a subsequent rebound, highlighting responsive operational adjustments or changing business conditions. These trends suggest a dynamic environment where capital investments are increasing and profitability is recovering after a temporary slowdown.

The financial data reveals several notable trends across the examined periods.

Operating Profit Margin (OPM)

The operating profit margin exhibits a generally positive trajectory, increasing from 25.67% in 2020 to a higher point of 32.79% projected for 2025. Although there is a slight dip between 2022 and 2023, the overall pattern indicates improving operational efficiency and cost management over the period.

Turnover of Capital (TO)

Turnover of capital shows an initial strengthening from 1.31 in 2020 to a peak of 1.73 in 2022, suggesting more effective utilization of capital at that time. However, from 2023 onward, there is a gradual decline toward 1.41 projected in 2025, indicating a potential decrease in asset utilization efficiency in the later years.

1 – Effective Cash Tax Rate (CTR)

This metric remains relatively stable around the high 80% range initially, with a small dip to 79.85% in 2024 before returning close to 88.22% in 2025. The fluctuations suggest some variability in tax impacts or structures, but overall, the rate remains consistently high, affecting cash flow considerations.

Return on Invested Capital (ROIC)

Return on invested capital shows a strong upward movement from 29.68% in 2020 to a peak of 46.34% in 2022. This is followed by a decline through 2024 to 33.64%, before rebounding to 40.78% in 2025. This trend points to periods of enhanced profitability and capital efficiency, with some volatility that may relate to changing market conditions or investment decisions.

In summary, the data reflect an overall strengthening in profitability and capital returns across the timeline, with some variations in capital turnover and tax-related cash impacts. These patterns suggest effective management of operating margins and invested capital, tempered by occasional shifts in asset efficiency and tax strategy outcomes.

Net Operating Profit Before Taxes (NOPBT)

There is a clear upward trend in net operating profit before taxes over the six-year period. Starting at 4,416 million US dollars in 2020, NOPBT increased significantly to 7,043 million in 2021, followed by incremental growth reaching 9,301 million by 2025. The most notable gains occurred between 2020 and 2021, with steady yet smaller increases in subsequent years, indicating consistent profitability improvement.

Net Revenue

Net revenue demonstrates continuous growth throughout the period, rising from 17,202 million US dollars in 2020 to 28,368 million in 2025. The annual increases are steady, reflecting expanding sales or service income. The growth rate appears moderate but sustained, trending upwards each year without significant volatility.

Operating Profit Margin (OPM)

The operating profit margin shows an overall positive trajectory, beginning at 25.67% in 2020 and peaking at 32.79% in 2025. The margin improved sharply from 2020 to 2021, then stabilized around 29-30% before rising again in the final recorded year. This trend signals enhanced operational efficiency and potentially favorable cost management or pricing strategies over time.

Summary

The financial data reveals a company experiencing steady growth in revenue and profitability. The rise in net operating profit before taxes is supported by consistent increases in net revenue and improving operating profit margins. The margin gains towards the end of the period suggest operational improvements that enhance profitability beyond mere revenue growth. Overall, the company's financial health appears robust with gradual enhancement in earnings quality.

Net Revenue

The net revenue exhibited a consistent upward trend over the observed periods. Starting from approximately $17.2 billion, it increased steadily each year, reaching around $28.4 billion in the latest period. This represents a substantial growth, indicating an ongoing expansion in sales or other revenue streams.

Invested Capital

Invested capital also grew continuously throughout the time frame, beginning at about $13.1 billion and increasing to just over $20.1 billion by the final period. The increase was steady though the rate of growth appears to have accelerated somewhat in the middle periods before maintaining a solid upward trajectory towards the end.

Turnover of Capital (TO)

The turnover of capital ratio, which measures the efficiency of capital use in generating revenue, showed some notable fluctuations. Initially, the ratio increased from 1.31 to a peak of 1.73 by the third period, suggesting improved efficiency in utilizing invested capital to generate revenue. However, from that peak, the ratio declined steadily to 1.41 in the last period. This declining trend may imply that although revenue continues to increase, invested capital is growing at a relatively faster pace, resulting in a reduction in capital turnover efficiency over recent years.

Overall Analysis

The data indicates a positive growth trajectory for both revenue and invested capital, reflecting expansion and continued investment. However, the efficiency metric, turnover of capital, signals a potential reduction in how effectively the invested capital is being converted into revenue. This pattern could warrant a closer examination of capital allocation and operational efficiency to ensure sustained profitability and optimal use of resources going forward.

Operating Profit and Tax Payments

The net operating profit before taxes (NOPBT) demonstrates a consistent upward trend across the analyzed periods. Starting from $4,416 million in 2020, the figure rises each year, reaching $9,301 million by 2025. This indicates growing operational profitability over the years.

Cash operating taxes generally follow the growth in operating profit, increasing from $530 million in 2020 to a peak of $1,606 million in 2024 before declining to $1,095 million in 2025. This pattern suggests that tax payments are correlated with profit, although a notable reduction in tax cash outflows in 2025 is observed despite the further increase in profits.

Effective Cash Tax Rate (CTR)

The effective cash tax rate fluctuates between approximately 11.7% and 20.2% during the period. The CTR remains relatively stable in the early years, mostly hovering around 12%, then rises to a peak of 20.15% in 2024, before declining back to 11.78% in 2025. This volatility in the tax rate could be attributed to changes in tax regulations, credits, or adjustments in taxable income.

Insights

Despite steady rise in pre-tax profits, the cash taxes paid do not increase uniformly, especially noting the decrease in 2025, which may point to enhanced tax efficiency or timing differences in tax payments. The variation in effective tax rates reinforces the possibility of strategic tax management or external factors impacting the tax liabilities. Overall, profitability has shown strong growth, while the tax management appears more dynamic and variable.