Applied Materials Inc. (NASDAQ:AMAT)

Debt Ratios

The debt to equity ratio shows a consistent downward trend from 0.65 in late 2019 to 0.33 by late 2024, indicating a gradual reduction in reliance on debt relative to equity financing. When including operating lease liabilities, this ratio follows a similar declining pattern, moving from 0.65 to 0.35 in the same period, suggesting the company is managing its lease-related obligations alongside traditional debt effectively.

The debt to capital ratio mirrors this trend, decreasing from 0.39 to 0.25 over the analyzed years, pointing to a strengthening capital structure with lower debt proportions. Including operating lease liabilities, the ratio remains slightly higher but decreases consistently from 0.39 to 0.26.

Debt to assets ratios also demonstrate a firm reduction in debt relative to total assets, falling from 0.28 to 0.18 without operating leases considered, and from 0.28 to 0.19 when including these liabilities. This reflects improved asset coverage and potentially a stronger asset base or reduced total debt.

Financial Leverage

The financial leverage ratio shows a declining trend from 2.32 in 2019 to 1.81 in 2024, which suggests decreasing reliance on borrowed funds to finance the company's assets, contributing to potentially lower financial risk.

Interest and Fixed Charge Coverage

Interest coverage ratios indicate marked improvement, rising from 14.79 in 2019 to between 33.42 and 34 by 2024. This significant increase indicates the company's enhanced ability to meet interest expenses from its earnings, reflecting improved profitability or reduced interest expenses.

Fixed charge coverage ratios also show a positive trajectory, increasing from 12.35 in 2019 to 34 in 2024, with some fluctuations. This improvement demonstrates a stronger capability to cover fixed financial obligations, including lease payments and debt interest.

Summary

Overall, the trends point to a continuous strengthening of the financial position over the period, with reduced leverage and improved coverage ratios. The company appears to have strategically managed its debt levels, including lease obligations, leading to enhanced financial stability and risk management. Increased interest and fixed charge coverage ratios further reinforce the company's improved earnings capacity relative to its financial liabilities.

Total Debt

The total debt showed a gradual increase over the six-year period under review. Starting at $5,313 million in 2019, it fluctuated slightly but maintained an upward trajectory, reaching $6,259 million by 2024. This represents an overall increase of approximately 17.7%, indicating a moderate rise in the company's borrowing levels.

Stockholders’ Equity

Stockholders’ equity experienced substantial growth during the same period. Beginning at $8,214 million in 2019, it increased steadily each year, with a notable acceleration after 2022. By 2024, equity stood at $19,001 million, more than doubling the initial figure. This significant increase suggests strong retained earnings, capital inflows, or asset revaluations, contributing positively to the company’s net worth.

Debt to Equity Ratio

The debt to equity ratio displayed a consistent decline from 0.65 in 2019 to 0.33 in 2024. This trend reflects a decreasing reliance on debt financing relative to shareholders' equity. The marked reduction in this ratio points to an improving financial structure, implying enhanced solvency and possibly a lower financial risk profile as equity growth has outpaced debt increases.

Total Debt (including operating lease liability)

Over the six-year period from 2019 to 2024, total debt exhibited a gradual increase. Starting at $5,313 million in 2019, the debt levels rose to $6,605 million by 2024. This represents an approximate 24% increase in total debt over the period. The growth in debt was steady with no significant spikes or declines, indicating a controlled and planned approach to leveraging.

Stockholders' Equity

Stockholders’ equity showed a significant upward trend over the same period. Beginning at $8,214 million in 2019, equity increased consistently each year, reaching $19,001 million in 2024. This marks an increase of approximately 131%, more than doubling the equity base. The most notable increments occurred between 2022 and 2023, and continuing strongly into 2024, suggesting robust growth in retained earnings or additional equity infusion.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio declined steadily from 0.65 in 2019 to 0.35 in 2024. This trend reflects a strengthening equity position relative to debt levels. Despite the modest increase in total debt, equity growth was significantly stronger, resulting in improved solvency and lower financial leverage risk. The declining ratio suggests a more conservative capital structure, enhancing financial stability over time.

Overall Analysis

The data reveals a strategic financial posture characterized by moderate increases in total debt combined with substantial enhancements in equity. Consequently, the company’s leverage has diminished as reflected in the falling debt to equity ratio. This pattern supports an improved balance sheet strength, potentially providing greater capacity for future borrowing or investment. The sustained equity growth also signals healthy profitability or shareholder support. There are no indications of financial distress or imbalance in the provided figures.

The financial data over the six-year period reveals several notable trends regarding the company's debt and capital structure.

Total Debt

Total debt increased gradually from $5,313 million in 2019 to $6,259 million in 2024. The rise was steady but modest over the years, indicating a controlled expansion in borrowing.

Total Capital

Total capital showed a significant upward trajectory, growing from $13,527 million in 2019 to $25,260 million in 2024. The growth in capital outpaced the increase in total debt, particularly noticeable from 2022 onwards where capital surged by approximately 25% annually.

Debt to Capital Ratio

The debt to capital ratio decreased consistently from 0.39 in 2019 to 0.25 in 2024. This downward trend suggests an improving capital structure with a lower proportion of debt relative to total capital, reflecting a strengthening balance sheet and potentially reduced financial risk.

Overall, the data indicates the company has been increasing its overall capital base substantially while maintaining a relatively stable and slightly increased absolute debt level. The decreasing debt-to-capital ratio implies an emphasis on equity or other forms of capital growth, resulting in a more conservative leverage position over time.

The financial data reveals notable trends in the company's capital structure over the observed periods.

Total Debt (including operating lease liability)

The total debt shows a consistent upward trajectory across the years. It increased from $5,313 million in 2019 to $6,605 million in 2024, indicating a gradual rise in leverage or financing obtained through debt instruments.

Total Capital (including operating lease liability)

Total capital also presents a steady growth pattern, rising from $13,527 million in 2019 to $25,606 million in 2024. This suggests expansion in the overall financial base, potentially through retained earnings, equity issuance, or additional debt financing.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio demonstrates a decreasing trend over the period. Starting at 0.39 in 2019, it fell to 0.26 by 2024. This decline indicates that despite the rising total debt, the company's total capital is increasing at a faster pace, leading to a lower proportion of debt in the capital structure.

Overall, the data suggests that the company is expanding its financial base significantly, with debt increases being outpaced by total capital growth. This results in a strengthening equity position relative to debt, which can imply a more conservative leverage profile and potentially enhanced financial stability over the timeframe analyzed.

Total Debt

The total debt exhibited a gradual increase over the analyzed periods. Starting from approximately $5.3 billion in late 2019, it rose steadily to reach about $6.3 billion by late 2024. This represents an overall growth in debt levels, with a notable surge occurring in the most recent year, where the debt increased by nearly $600 million.

Total Assets

Total assets expanded consistently and significantly across the years. From roughly $19 billion in 2019, total assets grew to over $34 billion by 2024. This progression indicates robust asset accumulation, with the most substantial increases appearing in the years after 2021, reflecting an aggressive growth or investment strategy.

Debt to Assets Ratio

The debt to assets ratio showed a clear downward trend throughout the time span. Starting at 0.28 in 2019, it steadily declined to 0.18 by 2023 and remained stable at that level in 2024. This decrease suggests an improving financial structure with a lower proportion of debt relative to the company's asset base, indicating enhanced solvency or a more conservative financial leverage approach despite the rising absolute debt.

Total Debt (Including Operating Lease Liability)

The total debt exhibited a steady increase over the examined periods, rising from US$5,313 million in 2019 to US$6,605 million in 2024. This represents a consistent upward trajectory, indicating a gradual increase in the company's leverage or financing through debt instruments over the six-year span.

Total Assets

Total assets grew significantly from US$19,024 million in 2019 to US$34,409 million in 2024. This growth reflects an expansion in the company's asset base, suggesting potential investments, acquisitions, or operational growth. The increase appears relatively linear and sustained throughout the periods.

Debt to Assets Ratio (Including Operating Lease Liability)

The debt to assets ratio decreased consistently from 0.28 in 2019 to 0.19 in 2024. Despite the increase in absolute debt levels, this ratio indicates that total assets grew at a faster pace than total debt, improving the company's leverage position. The declining ratio signals enhanced financial stability and a potentially lower risk profile regarding debt relative to the asset base.

Total assets

Total assets have shown a consistent upward trend over the six-year period under review. Starting at $19,024 million in 2019, total assets increased steadily each year, reaching $34,409 million in 2024. This represents a substantial growth of approximately 81% over the period, indicating progressive expansion and accumulation of resources within the organization.

Stockholders’ equity

Stockholders’ equity also demonstrated a steady increase from $8,214 million in 2019 to $19,001 million in 2024. This growth reflects an increase of approximately 131% over the six years, outpacing the growth in total assets. The increase suggests improved retained earnings, successful equity financing, or a combination of both, contributing to a stronger equity base.

Financial leverage

The financial leverage ratio, defined as the ratio of total assets to stockholders’ equity, declined from 2.32 in 2019 to 1.81 in 2024. This downward trend indicates a reduction in the company's reliance on debt financing relative to equity. The decline suggests an improvement in financial stability as the company appears to be funding a greater proportion of its assets through equity rather than debt, potentially decreasing financial risk over time.

Earnings Before Interest and Tax (EBIT)

EBIT showed a consistent upward trend over the six-year period. Starting at 3,506 million US dollars in 2019, it increased steadily each year, reaching 8,399 million US dollars in 2024. This represents a significant growth, more than doubling over the timeframe. The year-on-year increments suggest strong operational performance and increasing profitability prior to interest and tax expenses.

Interest Expense

Interest expense remained relatively stable throughout the years, fluctuating slightly around the 230 to 250 million US dollar range. It started at 237 million US dollars in 2019, experienced small decreases and increases over the period, and ended at 247 million US dollars in 2024. This indicates stable borrowing costs or debt levels without major swings.

Interest Coverage Ratio

The interest coverage ratio demonstrated a marked improvement, increasing significantly from 14.79 in 2019 to 34.00 in 2024. This reflects the company's enhanced ability to meet its interest obligations from operating earnings. The ratio nearly doubled from 14.79 to over 29 by 2021 and continued to increase, suggesting stronger financial health and lower risk related to debt servicing.

Earnings before Fixed Charges and Tax

The earnings before fixed charges and tax display a strong upward trend over the periods analyzed. Starting from 3,557 million US dollars in 2019, there is a consistent increase each year, reaching 8,399 million US dollars by 2024. This represents more than a twofold increase over six years, indicating robust growth in operating profitability.

Fixed Charges

Fixed charges show a generally modest increase from 288 million US dollars in 2019 to a peak of 340 million in 2023, before decreasing to 247 million in 2024. The fluctuation toward the end of the period suggests a reduction in fixed financial obligations or interest expenses, which could positively impact net earnings and financial flexibility.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio demonstrates a marked improvement over the period, rising from 12.35 in 2019 to 34 in 2024. This ratio measures the ability to cover fixed financial obligations with earnings before fixed charges and tax. A higher coverage ratio indicates enhanced capacity to meet fixed charges. The substantial growth in this ratio aligns with the strong increase in earnings and the slight decline in fixed charges in the final year, suggesting improved financial health and reduced credit risk.

Overall Trends and Insights

The data reflect a healthy financial progression characterized by rising earnings before fixed charges and tax, stable to diminishing fixed charges toward the end of the observation period, and significantly improved fixed charge coverage. The increasing coverage ratio indicates enhanced earnings quality and suggests an increased buffer against fixed financial obligations. The decline in fixed charges in the final year may be indicative of strategic financial management or refinancing that has lessened the interest burden. Taken together, these trends suggest that the company has become more financially robust and better positioned to service its fixed costs over time.