Applied Materials Inc. (NASDAQ:AMAT)

Return on Assets (ROA)

The Return on Assets demonstrated a generally upward trend from the first available data point in January 2020 through early 2022, increasing from approximately 14.22% to a peak of 26.54% in May 2022. Following this peak, ROA showed a gradual decline, stabilizing in the low 20% range between late 2022 and early 2024, and finally experiencing a slight decrease towards 19.97% by April 2025. This pattern indicates that asset efficiency improved markedly through 2021 into mid-2022, followed by a moderate reduction and stabilization in subsequent years.

Financial Leverage

Financial leverage ratios exhibited a declining trend over the entire observed period. Starting at approximately 2.31 in early 2019, the ratio decreased steadily to around 1.75 by mid-2025. This decline suggests a consistent reduction in the company's use of debt relative to equity, reflecting a possible strategic move towards lower financial risk and increased equity financing.

Return on Equity (ROE)

Return on Equity showed substantial growth from 32.94% in early 2020 to a peak of 58.35% in July 2022. After reaching this high, ROE declined consistently but remained robust, settling in the mid-30% range by mid-2025. The initial rise reflects strong profitability relative to shareholder equity, potentially enhanced by efficient asset use and favorable financial leverage. The subsequent decline, coinciding with reduced financial leverage, may indicate a move toward more conservative financial management or decreased profitability margins.

Overall Observations

The data suggest that the company experienced improvements in asset utilization and equity returns through mid-2022, alongside a deliberate reduction in financial leverage over time. The peak periods for both ROA and ROE coincide with higher leverage ratios, implying leverage magnified returns during those times. Following the peaks, a period of declining profitability ratios aligned with further reduction in leverage indicates a shift possibly aimed at risk mitigation. Although profitability measures decreased somewhat after their peaks, they remained at fairly strong levels, suggesting maintained operational effectiveness despite a more prudent financial structure.

Net Profit Margin

The net profit margin exhibits a generally positive trend from early 2020 through late 2024. Starting at approximately 18.52% in January 2020, the margin increases steadily, reaching a peak of 27.74% in October 2024. Following this peak, a slight decline occurs, with the margin dropping to around 23.88% by July 2025. This pattern demonstrates improved profitability over the bulk of the period, with a marginal reduction toward the end.

Asset Turnover

Asset turnover starts at 0.77 in January 2020 and shows a modest upward trajectory, peaking near 0.98 during mid-2022. After this high point, the ratio declines gradually, falling to around 0.79 by April 2025 before recovering slightly to approximately 0.84 in the latter months of 2025. The trend suggests increasing efficiency in asset utilization until mid-2022, followed by a period of reduced asset efficiency with minor recovery near the end of the timeframe.

Financial Leverage

Financial leverage trends downward overall, beginning at roughly 2.31 in early 2019 and steadily decreasing to approximately 1.75 by October 2025. This consistent reduction indicates a strategy of lowering leverage over time, which may reflect a conservative approach to financing or deleveraging initiatives. The decline is marked and relatively steady without significant fluctuations.

Return on Equity (ROE)

ROE shows a strong upward trend from early 2020, starting at about 32.94%, and rising to a peak of 58.35% in May 2022. After this peak, the ratio diminishes gradually but remains elevated, staying above 34% through mid-2025. The pattern suggests enhanced shareholder returns driven by improved profitability and operational efficiency, followed by a period of moderation, though ROE levels remain robust.

Tax Burden

The tax burden ratio begins at 0.83 in early 2020, showing a slight upward trend to a peak of 0.89 in early 2024, indicating relatively consistent effective tax rates. However, there is a declining trend towards the end of the observed period, dropping to 0.77 in the third quarter of 2025, suggesting either increased tax expenses or changes in tax strategy impacting net income.

Interest Burden

The interest burden ratio remains stable throughout the periods observed, consistently near 0.97 from late 2019 onward. This stability indicates minimal interest expense impact on earnings before taxes, reflecting effective management of interest costs or low debt levels relative to earnings.

EBIT Margin

The EBIT margin shows a steady increase from approximately 24% in early 2020 to a peak above 32% in early 2024, signaling improving operational profitability. While there are minor fluctuations, the general trend reflects enhanced operational efficiency or favorable revenue growth relative to operating expenses.

Asset Turnover

Asset turnover exhibits some volatility, starting at 0.77 in early 2020 and peaking around 0.98 by early 2022, suggesting improved efficiency in using assets to generate sales. However, from early 2022 onwards, it declines back to approximately 0.84 by late 2025, indicating a reduction in asset efficiency or slower sales growth relative to asset base expansion during this period.

Financial Leverage

Financial leverage shows a gradual downward trend from approximately 2.31 in early 2019 to about 1.75 in late 2025. This decrease denotes a reduction in the use of debt or liabilities relative to equity, which may signal a more conservative capital structure or repayment of debt over time.

Return on Equity (ROE)

ROE trends upward from around 33% in early 2020, reaching a peak of 58.35% in early 2022, demonstrating a strong increase in shareholder returns during this period. Following this peak, ROE declines steadily to approximately 35% by the third quarter of 2025. This reduction correlates with reduced financial leverage and a slight decrease in asset turnover, suggesting lower overall profitability or efficiency impacting equity returns.

Net Profit Margin

The net profit margin exhibited a generally upward trend from early 2019 through the first quarter of 2023. Starting around 18.5% in January 2020, it increased steadily, reaching a peak of approximately 27.7% in the fourth quarter of 2023. After this peak, the margin showed a slight decline, settling around 23.9% by mid-2025. This pattern indicates an improvement in profitability over the initial periods followed by a modest reduction in the most recent quarters.

Asset Turnover

Asset turnover maintained relatively stable levels throughout the observed period, fluctuating mostly between 0.7 and 0.95. A mild upward trend was evident until early 2022, peaking close to 0.98, followed by a gradual decrease to around 0.8 by early 2025. This suggests consistent but slightly declining efficiency in utilizing assets to generate sales in the recent years.

Return on Assets (ROA)

Return on Assets followed a growth trajectory similar to the net profit margin, rising from about 14.2% in early 2020 to a high of approximately 26.5% in mid-2022. Subsequently, ROA declined steadily, reaching near 20% by mid-2025. This trend reflects the combined influence of improvements in profitability and asset utilization efficiency until 2022, after which returns diminished moderately.

Tax Burden Trend

The tax burden ratio data, available from January 2020 onwards, shows a general increase from 0.83 in early 2020 to a peak of 0.89 by early 2024. This suggests a gradual rise in the proportion of earnings retained after taxes. However, there is a slight decline towards the most recent periods, reaching 0.77 by mid-2025, indicating some reduction in tax efficiency or increased tax expenses during that time.

Interest Burden Trend

The interest burden ratio remains consistently high and stable from 2020 through 2025, beginning at 0.93 and quickly stabilizing at 0.97 and maintaining that level. This stability implies the company has managed to keep its interest expenses low relative to earnings before interest and taxes, reflecting effective debt and interest management.

EBIT Margin Trend

The EBIT margin percentage exhibits a steady upward trend from 24% in early 2020 to a peak of over 32% in mid-2024, indicating improvements in operational profitability. There are minor fluctuations thereafter, with a slight decrease to around 30% in late 2024 and early 2025, but generally the margin remains substantially higher than at the start of the period, demonstrating operational efficiency gains.

Asset Turnover Ratio Trend

Asset turnover ratios display moderate variability over the period. After a dip to 0.71 mid-2019, it improves significantly to about 0.98 in early 2022, suggesting more effective utilization of assets to generate revenue. Yet, from 2022 onward, there is a gradual decline toward 0.79-0.84 in 2024 and 2025, indicating a slight decrease in the efficiency of asset use in generating sales over the later periods.

Return on Assets (ROA) Trend

ROA starts at approximately 14% in early 2020 and increases markedly to above 26% by mid-2022, reflecting strong profitability relative to asset base. Following this peak, a gradual downward trend occurs through 2024, with ROA declining to about 19-20%, representing a moderate erosion in overall asset returns. This suggests that despite strong earlier gains, profitability from asset use has slightly diminished in recent quarters.

Overall Observations

Collectively, the data indicates that the company improved its profitability and operational efficiency notably from 2020 through mid-2022, as seen in rising EBIT margins and ROA. The stable interest burden ratio throughout suggests sound financial management regarding debt costs. However, a slowing asset turnover alongside a slight decline in ROA and tax burden in the latest periods points to emerging challenges in maintaining the same level of operational effectiveness and tax efficiency seen earlier. The trends imply a need for attention to asset utilization and cost management to sustain profitability gains moving forward.

The analysis of the quarterly financial data reveals several notable trends in profitability and expense management over the reported periods.

Tax Burden

The tax burden ratio shows a general stability with modest fluctuations between 0.77 and 0.89 since early 2020. Starting around 0.83 in January 2020, the ratio peaks near 0.89 from late 2022 through early 2024, indicating a slightly higher effective tax rate in recent quarters. The trend suggests relative consistency in tax expenses relative to pre-tax income with a minor decreasing tendency towards mid-2025.

Interest Burden

This ratio exhibits a steady improvement over time, moving from approximately 0.93 in early 2020 to a consistent 0.97 by late 2020, maintaining this level through mid-2025. This reflects a decline in interest expenses relative to operating income, implying better management of financing costs or reduced debt service burden.

EBIT Margin

The operating profitability margin shows a clear upward trajectory starting at 24% in early 2020 and rising to a peak of above 32% in several quarters between 2021 and 2024. There is some volatility around these peaks, with minor dips observed in late 2022 and late 2024. Overall, the trend evidences ongoing improvements in operating efficiency or pricing power.

Net Profit Margin

Net profitability trends largely mirror those of EBIT margin, beginning near 18.5% in early 2020 and increasing steadily to surpass 27% during 2021 and 2022. There is a slight decline after the peak periods, notably dropping below 23% by mid-2025. Despite this, the margin remains significantly higher than the start of the period, showing enhanced bottom-line profitability.

In summary, the financial data indicate strengthened profitability driven by improved operating income margins and controlled interest expenses. The tax burden remains relatively stable with slight variations. Margins reached peak levels between 2021 and 2024, followed by modest declines in the latest reported periods, suggesting potential easing of conditions contributing to those gains but still maintaining robust profitability overall.