Applied Materials Inc. (NASDAQ:AMAT)

The financial ratios and periods presented demonstrate several notable trends related to operational efficiency and working capital management over the examined years.

Inventory Turnover

The inventory turnover ratio fluctuated, initially increasing from 2.44 to 2.82, then declining to 2.33 before recovering towards 2.63 and 2.46 in the later years. This suggests a variable rate of inventory management effectiveness, with periodic slowdowns in inventory movement.

Receivables Turnover

This ratio showed a downward trend from 5.81 to 4.25, followed by a recovery to 5.47. The initial decrease indicates slower collection of receivables, which improved in recent periods, reflecting enhanced credit management or collection processes.

Payables Turnover

Payables turnover demonstrated a general decline from 8.46 to 7.36, despite peaking at 9.56. The reduced turnover in the most recent year suggests the company may be taking longer to settle its payables, possibly to conserve cash or negotiate better payment terms.

Working Capital Turnover

Increasing from 1.93 to a peak of 3.02, working capital turnover indicates improved efficiency in utilizing working capital initially. However, a subsequent decline to around 2.20 suggests some reduction in this efficiency in the latest years.

Average Inventory Processing Period

The inventory processing period decreased from 150 days to 129 days, then increased to 157 days before stabilizing near 140-150 days. This aligns with the inventory turnover trend, indicating fluctuating inventory holding durations.

Average Receivable Collection Period

This measure lengthened significantly from 63 to 86 days, followed by improvement to 67 days. This reflects initial challenges in receivables collection that were later addressed, reducing the collection duration.

Operating Cycle

The operating cycle varied between 207 and 243 days, with a peak in the middle years. This metric correlates with changes in inventory and receivable periods, reflecting the time between inventory acquisition and cash receipt.

Average Payables Payment Period

The payment period to suppliers gradually increased from 43 to 50 days, apart from a dip around 38 days. The increase indicates a tendency to extend payables, which could improve liquidity but may affect supplier relationships.

Cash Conversion Cycle

The cash conversion cycle fluctuated between 163 and 197 days, showing an overall pattern of lengthening and then shortening. The latest figures suggest improved cash flow management through quicker conversion of resources into cash.

Overall, the data indicate that the company experienced variability in its operational efficiency and working capital management over the years. Improvements in receivable collections and inventory processing in recent periods contrast with longer payment periods to suppliers. The cash conversion cycle’s reduction in the final years suggests enhanced liquidity management despite earlier challenges.

Cost of Products Sold

The cost of products sold shows a consistent upward trend over the observed periods. Starting at 9,510 million USD in late 2020, it rises steadily each year, reaching 14,560 million USD by late 2025. This increase reflects higher production or procurement costs or potentially increased sales volume over time.

Inventories

Inventory levels fluctuate throughout the periods. Initial inventory was 3,904 million USD in late 2020, increasing to a peak of 5,932 million USD in late 2022. Following this peak, there is a slight decline to 5,421 million USD by late 2024, with a subsequent rise again to 5,915 million USD in late 2025. These variations suggest adjustments in inventory management, possibly in response to demand forecasts or supply chain conditions.

Inventory Turnover Ratio

The inventory turnover ratio indicates some variability without a clear consistent trend. It begins at 2.44 in 2020, increases to 2.82 in 2021, then declines to 2.33 in 2022. From there, it recovers modestly to 2.47 in 2023 and peaks again at 2.63 in 2024 before decreasing to 2.46 in 2025. This pattern implies fluctuating efficiency in inventory utilization, possibly correlating with changes in inventory levels and sales performance.

The financial data reveals several key trends over the analyzed periods. There is a consistent upward trend in net revenue, which shows steady growth year over year. From an initial amount of 17,202 million USD, net revenue increased significantly to 28,368 million USD by the latest period. This indicates robust sales growth and expanding business operations over time.

Accounts receivable, net, also display a general upward movement. Starting at 2,963 million USD, the figure rose sharply to 6,068 million USD before experiencing a slight decline in subsequent periods, stabilizing around 5,200 million USD. This fluctuation suggests some variability in credit sales or collection patterns, possibly reflecting changes in customer payment behavior or credit terms.

The receivables turnover ratio reflects the efficiency of collecting receivables and converting them into cash. It decreased from 5.81 to a low of 4.25 but recovered in later years to 5.47. The initial decline indicates a slower collection cycle, whereas the recovery signals an improvement in credit management and faster collection of outstanding receivables in recent years.

Net Revenue

Demonstrates continuous growth, highlighting increasing sales performance and market expansion.

Accounts Receivable, Net

Rises notably until a peak, then slightly declines and stabilizes, suggesting changes in credit policies or customer payment behavior.

Receivables Turnover Ratio

Decreases initially but improves later, indicating a period of reduced collection efficiency followed by enhanced receivables management.

Cost of Products Sold

The cost of products sold exhibited a consistent increasing trend from 2020 to 2025. Beginning at $9,510 million in 2020, it rose steadily each year, reaching $14,560 million by 2025. This reflects a notable growth in the scale or expense associated with production over the six-year period.

Accounts Payable

Accounts payable increased generally over the years, starting at $1,124 million in 2020 and reaching $1,978 million in 2025. However, the pattern shows some fluctuation, with a decrease observed in 2023 to $1,478 million after increasing steadily through 2022. The amount rose again in subsequent years, indicating variability in the company’s short-term liabilities management.

Payables Turnover Ratio

The payables turnover ratio displayed fluctuations over the six-year span. It slightly decreased from 8.46 in 2020 to 7.86 in 2022, then rose sharply to 9.56 in 2023. In the following years, it decreased again to 7.36 in 2025. The ratio’s variability suggests changes in the company's efficiency in managing its payment cycles to suppliers, with some years reflecting faster payments and others slower.

Overall Insights

The increasing cost of products sold combined with the rising accounts payable suggests expanding operations and potentially higher procurement or production costs. The fluctuating payables turnover ratio indicates inconsistent payment patterns to suppliers, which could be influenced by changing negotiation terms, cash flow management practices, or external economic conditions. Monitoring the efficiency of payables management may assist in maintaining supplier relationships and optimizing working capital.

Working Capital

The working capital shows a generally increasing trend over the period. Starting at 8,910 million US dollars, it rose to 12,882 million US dollars by the end of the last period. Notably, there was a slight decrease in the year ending October 30, 2022, before the figures resumed an upward trajectory through to October 26, 2025.

Net Revenue

Net revenue demonstrates a consistent upward trend throughout the periods analyzed. It increased from 17,202 million US dollars to 28,368 million US dollars over six years. The most significant growth appears between the years ending October 25, 2020, and October 31, 2021, with continued but slightly moderated growth in subsequent periods.

Working Capital Turnover

The working capital turnover ratio exhibits some variability across the time periods. It initially rises from 1.93 to a peak of 3.02 by October 30, 2022, indicating improved efficiency in using working capital to generate revenue. However, after this peak, the ratio declines to 2.25 and stabilizes around 2.13 to 2.20 in the final years. This decline suggests a relative decrease in how efficiently working capital is being utilized despite rising net revenue and working capital.

Insights

The data reveals that while the company has generally increased its working capital and net revenue over time, the efficiency of working capital usage as measured by turnover has diminished after reaching a high point in 2022. The increase in working capital alongside increasing revenue could suggest a strategic decision to hold more short-term assets or manage liabilities differently. The decrease in turnover ratio may warrant further analysis to determine the underlying operational or financial causes. Overall, the financial health as indicated by growth in revenue and working capital appears positive, although the slight reduction in turnover efficiency might be an area for improvement.

The analysis of inventory turnover and average inventory processing period over the six-year span reveals notable fluctuations in the company's inventory management efficiency.

Inventory Turnover

The inventory turnover ratio exhibits variability, starting at 2.44 in 2020, peaking at 2.82 in 2021, then decreasing to 2.33 in 2022. Following this decline, a recovery trend is observed with the ratio increasing to 2.47 in 2023 and further to 2.63 in 2024, before a slight reduction to 2.46 in 2025. This pattern indicates periods of both improved and diminished efficiency in converting inventory into sales, with the highest efficiency occurring in 2021 and 2024, and the lowest in 2022.

Average Inventory Processing Period (Number of Days)

The average inventory processing period inversely mirrors the inventory turnover ratio, consistent with theoretical expectations. It decreased from 150 days in 2020 to 129 days in 2021, correlating with the peak in turnover ratio that year. Subsequently, it increased to 157 days in 2022, corresponding to the lowest turnover ratio, suggesting a slower inventory cycle. The period then improved moderately in 2023 to 148 days, improved further to 139 days in 2024, and increased slightly again to 148 days in 2025. This indicates intermittent fluctuations in how quickly inventory is processed, with the fastest inventory processing occurring in 2021 and 2024.

In summary, the data reflects alternating periods of enhanced and diminished inventory management efficiency. The company experienced its most efficient inventory turnover in 2021 and 2024, aligning with the lowest inventory processing times. Conversely, 2022 marked a year of decreased turnover efficiency and prolonged inventory holding. These trends suggest a need for continuous focus on optimizing inventory levels to balance turnover and processing periods effectively.

The analysis of the ratio metrics over the period from 2020 to 2025 reveals trends examining the efficiency of receivables management.

Receivables Turnover Ratio

The receivables turnover ratio initially declined from 5.81 in 2020 to 4.25 in 2022, indicating a reduction in the frequency with which the company collected its receivables. This suggests a slowdown in cash collections or possibly more extended credit terms over this period. However, from 2023 onward, there is a noticeable improvement, with the ratio rising steadily to 5.47 by 2025. This increase suggests enhanced efficiency in receivables collection and tighter credit control in recent years.

Average Receivable Collection Period

The average collection period follows an inverse pattern relative to the turnover ratio. It increased significantly from 63 days in 2020 to a peak of 86 days in 2022, indicating that it took longer on average to collect receivables during this time frame, which may have impacted liquidity. Subsequent years show a consistent reduction in days, falling to 67 days by 2025. This decline correlates with the increase in turnover ratio and implies the company has improved its collection processes, reducing the time cash is tied up in receivables.

Overall, after a period of weakening receivable turnover and extended collection periods through 2022, the company has successfully reversed this trend by improving cash collection efficiency and reducing receivable days outstanding through to 2025. These developments may positively influence the company's working capital management and liquidity position.

The financial data reveals several noteworthy trends related to the company's inventory management, receivable collections, and overall operating cycle over the six-year period analyzed.

Average Inventory Processing Period

The average inventory processing period shows fluctuations over the years, starting at 150 days in 2020 and decreasing to a low of 129 days in 2021. It then increased significantly to 157 days in 2022 before experiencing some reduction and variability, ending at 148 days in 2025. This indicates challenges in maintaining a consistent inventory turnover speed, with periods of slower inventory movement affecting operational efficiency.

Average Receivable Collection Period

The average receivable collection period displays an increasing trend from 63 days in 2020 to a peak of 86 days in 2022, suggesting that the company faced elongated collection times, potentially impacting cash flow. After 2022, there is a steady improvement, with the collection period decreasing to 67 days by 2025. This suggests enhanced receivables management and possibly improved credit control practices in recent years.

Operating Cycle

The operating cycle, reflecting the sum of inventory processing and receivables collection periods, initially declines from 213 days in 2020 to 207 days in 2021, indicating a slight improvement in operational efficiency. However, it then rises sharply to 243 days in 2022, mirroring the trends in inventory and receivables periods. Thereafter, the operating cycle improves, decreasing to 209 days in 2024 before slightly rising again to 215 days in 2025. This pattern suggests some volatility in the company's working capital cycle, with a general effort toward stabilization after the peak in 2022.

Overall, the data highlights a period of instability in operational efficiency around 2022, characterized by longer inventory and receivable cycles, followed by gradual improvements in subsequent years. These variations may indicate responses to market conditions, internal process adjustments, or changes in credit policies. Continuous monitoring and targeted management of inventory and receivables seem critical for sustaining working capital effectiveness.

Payables Turnover

The payables turnover ratio shows a fluctuating trend over the observed periods. Initially, the ratio decreased slightly from 8.46 to 7.86 between 2020 and 2022, suggesting a slower rate of paying off suppliers during this interval. Subsequently, a significant increase occurred in 2023, reaching 9.56, indicating a faster payment cycle. However, this improvement was partially reversed with a decline to 7.36 by 2025, the lowest point in the series, suggesting a return to slower payments towards the end of the period.

Average Payables Payment Period

The average payables payment period experienced a generally increasing trend from 43 days in 2020 to a peak of 46 days in 2022, aligning inversely with the payables turnover ratio pattern. This increase indicates that the company took longer to settle its payables during this period. A marked improvement followed in 2023 with the payment period reducing to 38 days, consistent with the higher turnover ratio that year. The payment period then slightly increased again to 50 days by 2025, representing the longest duration in the data set, and suggesting that the company's payment practices slowed down considerably in the final year measured.

Summary of Trends and Insights

The company's payables management exhibits variability, with periods of both acceleration and deceleration in payables settlement. The inverse relationship between payables turnover and average payment days is evident; when turnover rises, the payment period shortens and vice versa. The data indicates efforts to improve payment velocity around 2023, but these were not sustained through 2025. The recent lengthening of the payment period may reflect changes in liquidity management, supplier negotiation, or operational adjustments. Continuous monitoring of these ratios is advisable to maintain an optimal balance between cash flow flexibility and supplier relationships.

The analysis of the financial efficiency metrics over the six-year period reveals several important trends in working capital management.

Average Inventory Processing Period

The number of days required to process inventory fluctuated throughout the period. It decreased from 150 days in 2020 to 129 days in 2021, indicating improved inventory turnover initially. However, it rose again to 157 days in 2022, before gradually declining to 139 days in 2024 and slightly increasing to 148 days in 2025. Overall, inventory management exhibited some volatility but remained near the initial levels by the end of the period.

Average Receivable Collection Period

The receivable collection period showed an upward trend from 63 days in 2020 to a peak of 86 days in 2022, suggesting slower collections and possibly less efficient credit management during this time. Subsequently, it improved incrementally, reducing to 67 days in 2025, which reflects better collection efficiency in the later years.

Average Payables Payment Period

The payables payment period remained relatively stable in the early years, ranging from 43 to 46 days between 2020 and 2022. It then declined to 38 days in 2023, indicating faster payments. However, in the final two years, it increased to 40 days and significantly to 50 days in 2025, possibly signaling extended payment terms or more conservative cash outflows.

Cash Conversion Cycle

The cash conversion cycle generally followed a fluctuating pattern. It declined slightly from 170 days in 2020 to 163 days in 2021, but then increased markedly to 197 days in 2022, reflecting an elongation of the overall working capital cycle. Improvements were seen afterward, reducing the cycle to 165 days by 2025, signifying enhanced working capital efficiency compared to the peak in 2022 but still slightly better than in 2020.

In summary, the company experienced variability in its working capital parameters over the analyzed years. Initial improvements in inventory turnover and collection efficiency were offset by a temporary increase in inventory days and slower receivables in 2022. The payables period lengthened significantly by 2025, which could impact supplier relationships or indicate strategic cash management. The cash conversion cycle mirrored these trends, highlighting periods of both strain and recovery in operational liquidity management.