Applied Materials Inc. (NASDAQ:AMAT)

Inventory Turnover

The inventory turnover ratio demonstrates a moderate level of stability with some fluctuations over the observed periods. After an initial increase from 2.37 to a peak of 2.82 in early 2021, the ratio declines gradually to around 2.32 by late 2022. Subsequently, it stabilizes with moderate increases reaching approximately 2.63 by mid-2024 before a slight decrease toward early 2025. This pattern suggests relatively consistent inventory management efficiency with occasional minor variations.

Receivables Turnover

The receivables turnover ratio shows more pronounced volatility. Values peak near 5.98 in early 2021 but experience a notable decline thereafter, dropping to the mid-4 range by early 2025. The decreasing trend may indicate a slower collection process or extending credit terms to customers over time. This decline signals a potential area for improved cash flow management.

Working Capital Turnover

The working capital turnover ratio initially declines from 2.54 to a low of approximately 1.86 in mid-2020, reflecting less efficient use of working capital. However, it reverses course afterward, climbing steadily to a peak near 3.02 by late 2022, before tapering off slightly to a level near 2.4 by early 2025. The improvement after mid-2020 implies enhanced operational efficiency in using working capital to generate sales, although recent moderation suggests stabilization.

Average Inventory Processing Period

The days inventory held started relatively high near 154 days in early 2019 and generally decreased to about 130 days in late 2021, indicating faster inventory turnover. From there, the period extended progressively, reaching approximately 157 days by the start of 2023. A mild reduction follows, with values around 142 to 144 days in 2024 to early 2025. The fluctuations reflect changes in inventory management or demand conditions over time.

Average Receivable Collection Period

The average collection period fluctuates notably throughout the timeframe. Starting near 63 days, it increases substantially to 78 days in the final quarter of 2020, then settles with values mostly between 65 and 86 days through 2023. A gradual upward trend is observed again toward early 2025, reaching close to 80 days. This pattern suggests occasional delays in customer payments and a potential deterioration in collection efficiency in recent years.

Operating Cycle

The operating cycle, representing the total time from inventory acquisition to cash collection, shows an overall increasing trend. Beginning around 217 days, it decreases slightly to approximately 195 days by late 2020, implying more efficient overall operations during that period. However, the cycle extends substantially afterward, exceeding 240 days in early 2023, before a modest decline around 210 days towards early 2025. This increase signals lengthening cash conversion periods, largely driven by inventory and receivables dynamics.

General Observations

The data collectively indicate that there was a period of enhanced operational efficiency and working capital management around 2020-2021, with improved inventory turnover and a shortened operating cycle. However, this improvement appears to moderate or reverse in subsequent years, as evidenced by declines in receivables turnover, lengthened collection and inventory processing periods, and an extended operating cycle. These trends may reflect shifts in market conditions, customer payment behavior, or internal operational challenges impacting liquidity and asset utilization.

The quarterly financial data reveals distinct patterns and trends in cost of products sold, inventories, and inventory turnover over the analyzed periods.

Cost of Products Sold

The cost of products sold displays an overall upward trajectory throughout the time span. Beginning at 2,088 million US dollars in early 2019, the figure shows steady increases with minor fluctuations. Notably, the cost surpasses 3,000 million US dollars starting from mid-2021, reaching a peak around 3,710 million by late 2024 before a modest decline toward the end of the dataset. This suggests increasing production expenses or sales growth affecting cost of goods sold.

Inventories

Inventories demonstrate a consistent growth pattern over the periods examined. From approximately 3,703 million US dollars in the first quarter of 2019, inventory levels incrementally rise, reaching a high point near 6,054 million by early 2023. Post this peak, a gradual decline is visible, with inventories falling back slightly to around 5,421 million by early 2025. This trend may indicate stock accumulation in response to demand forecasts or supply chain considerations, followed by efforts to reduce excess inventory.

Inventory Turnover

Inventory turnover ratios are available from mid-2019 onward and show relative stability with moderate fluctuations. The ratio initially improves from 2.37 to a peak of 2.82 by late 2021, indicating increased efficiency in managing inventory relative to cost of goods sold. Subsequently, turnover ratios slightly decrease and stabilize near 2.5 to 2.6 in the most recent periods. The overall pattern suggests steady inventory management performance with periods of optimization.

In summary, the financial data reflects rising production costs alongside increasing inventory levels through much of the timeframe, with efficiency in inventory utilization showing measured improvement before stabilizing. The interplay of these factors points toward dynamic operational scaling and responsive inventory management amid evolving market conditions.

Net Revenue

The net revenue exhibits a generally increasing trend from early 2019 through to the latest period in 2025. Starting around $3,753 million in January 2019, the revenue experienced a notable rise, peaking at $7,302 million in July 2025. Within this period, there were minor fluctuations, with occasional slight declines or plateaus, such as between Q4 2021 and Q2 2022. Despite these variations, the overall pattern indicates sustained growth over the six-year span.

Accounts Receivable, Net

The net accounts receivable balance shows more pronounced variability compared to revenue. Beginning at $2,444 million in early 2019, the figure increased substantially, reaching a maximum of $6,187 million by April 2025 before declining slightly later in 2025. There are intervals during which receivables surged significantly, notably between Q3 2021 and Q4 2022, coinciding with some periods of strong revenue growth. However, the rising accounts receivable may suggest increasing credit sales or slower collections at times.

Receivables Turnover Ratio

The receivables turnover ratio, available from mid-2019 onwards, fluctuates throughout the periods, ranging approximately between 4.25 and 5.98. This ratio generally decreases from around 5.8 in late 2019 to lower levels near 4.6–5.0 in the later years, indicating a modest decline in the efficiency of collecting receivables over time. The reduction suggests that the company may be taking longer to collect its outstanding invoices despite revenue growth.

Overall Analysis

The combined data reveal a company experiencing consistent revenue growth over the period, alongside rising accounts receivable balances. The declining trend in receivables turnover ratio suggests collection effectiveness has weakened slightly, potentially implying extended payment terms or challenges in receivables management. This pattern highlights the importance of monitoring working capital efficiency even amid strong sales performance.

Working Capital

The working capital values demonstrate a generally positive trajectory over the observed periods. Starting at 6,509 million USD in January 2019, the figure experienced some volatility but predominantly increased, reaching a peak above 13,000 million USD during late 2024. Notable fluctuations include a dip in early 2022 and again towards mid-2025 when the value declined slightly from its high. Overall, the trend indicates a strengthening liquidity position with a gradual accumulation of current assets over current liabilities through the quarters.

Net Revenue

Net revenue shows an upward trend through most of the timeline. The revenue started at approximately 3,753 million USD in the first quarter of 2019 and showed steady increases, with some unevenness, culminating near 7,300 million USD in early 2025. Despite occasional minor declines or stagnations, the overall progression points to sustained growth in sales or service income, suggesting improving market conditions or increased business volume over the period.

Working Capital Turnover Ratio

The working capital turnover ratio exhibits variability over the quarters but generally centers around a range of roughly 2 to 2.9. Initially appearing at 2.54 in mid-2019, the ratio declined to values near 1.86 by early 2021, indicating a decrease in revenue generated per unit of working capital. Subsequently, it recovered and showed peaks close to 3.02 in late 2021. The ratio then mostly decreased again towards the end of the observed period, settling between 2.0 and 2.4. This pattern suggests fluctuations in how efficiently the company uses its working capital to generate revenue, with periods of both higher and lower efficiency within the dataset timeframe.

Overall Analysis

The data illustrates a company experiencing steady revenue growth accompanied by an increasing working capital base. Nevertheless, the working capital turnover ratio's fluctuations imply that the efficiency of working capital utilization varies over time, without a clear long-term upward or downward trend. Periods of higher turnover ratio correspond to more effective use of working capital in generating sales, while lower ratios indicate a relative slowdown in such efficiency. The steady revenue increase paired with rising working capital may reflect strategic decisions to expand operational capacity and support greater sales volumes, albeit with some trade-offs in capital efficiency during certain periods.

Inventory Turnover Ratio

The inventory turnover ratio data begins in the first quarter of 2020 and continues through the second quarter of 2025, showing a measurable pattern over approximately five and a half years. Initially, the ratio starts around 2.37 and exhibits a gradual increase, peaking around early 2022 at approximately 2.82. Following this peak, the ratio experiences a decline through 2022 and stabilizes somewhat in 2023 with values consistently near 2.4 to 2.5. From late 2023 onwards, there is a slight upward trend again, culminating near 2.63 by mid-2025. This pattern indicates relatively steady inventory management with some cyclical fluctuations, possibly influenced by seasonal or market conditions.

Average Inventory Processing Period (Number of Days)

Corresponding inversely to the inventory turnover, the average inventory processing period begins at 154 days in early 2020 and displays a downward trend reaching the lowest levels of about 129 to 130 days by late 2021, indicating improved efficiency in inventory turnover during that period. After this low point, the processing period gradually increases through 2022 and early 2023, reaching around 157 days, suggesting slower inventory movement or higher stock levels. From mid-2023 onwards, the average days show a moderate declining trend again, settling near 139 to 144 days toward mid-2025. This fluctuation further substantiates the tendency of inventory efficiency to vary, with periods of heightened efficiency alternating with moderate slowdowns.

Overall Insight

The interplay between the inventory turnover ratio and the average inventory processing period follows expected inverse dynamics: when turnover ratio rises, processing period decreases, and vice versa. The data reflects phases of improved inventory efficiency, notably in 2021, followed by some moderation in subsequent periods. The trends suggest that inventory management remained generally consistent with minor cyclical variations rather than exhibiting sharp or erratic changes. Such patterns could be influenced by market demand cycles, supply chain adjustments, or internal operational improvements.

Receivables Turnover Ratio

The receivables turnover ratio showed relatively stable performance over the observed periods, fluctuating mostly between 4.5 and 6.0. Initially recorded values start from 5.77 in early 2020 and exhibit minor variations such as a peak near 5.98 in mid-2021, followed by a gradual decline to approximately 4.54 by the second quarter of 2025. This indicates a moderate reduction in the efficiency of credit collection over time, implying that the company is taking slightly longer to collect its receivables as the ratio decreases.

Average Receivable Collection Period

The average collection period demonstrates a generally increasing trend, moving from around 63 days at the start of 2020 to peaks of around 80 days in mid-2025. Notable increases appear sporadically, for example reaching highs of 86 days in early 2023 and remaining elevated near 79-80 days by mid-2025. This pattern aligns inversely with the receivables turnover ratio, reflecting a longer duration for collecting payments as time progresses, which may suggest potential challenges in receivables management or changes in credit terms.

Overall Trend and Implications

The combined analysis of both ratios indicates a gradual decline in receivables management efficiency, with receivables turnover slowing down and collection periods lengthening. This could impact liquidity if the trend continues, as the company might face delays in converting receivables into cash. Monitoring these metrics closely is essential to address any underlying causes, such as customer payment behaviors or credit policies, that may contribute to the elongation of the collection period.

Inventory Processing Period

The average inventory processing period data starts from the period ending January 26, 2020. Initially, it shows a slight decline from 154 days to a low of 129 days by October 31, 2021. Following this trough, the period increases progressively reaching a peak of 157 days in January and April 2023. Subsequently, the days stabilize slightly, fluctuating around 147 to 144 days in the later periods up to July 2025. Overall, the trend reflects an initial improvement in inventory turnover efficiency followed by a gradual lengthening of the processing period over time.

Receivable Collection Period

The average receivable collection period also begins in the first quarter of 2020 with 63 days. The data exhibits variability with an initial slight increase to 65 days in April 2020, followed by minor fluctuations until reaching a high of 78 days by October 31, 2021. Thereafter, the period dips and rises irregularly, peaking again at 86 days in January 2023. In the most recent quarters, the collection days oscillate between 65 and 80 days, showing no clear sustained improvement or deterioration. The pattern suggests inconsistent efficiency in collecting receivables with occasional increases in collection time.

Operating Cycle

The operating cycle, defined as the sum of inventory processing and receivable collection periods, starts at 217 days and shows a modest decrease to a low of 195 days in October 2021. After this period, the operating cycle demonstrates an upward trend with values climbing to a peak of 243 days in January 2023. Post-peak, a gradual decline occurs, and the cycle stabilizes around 209 to 222 days towards the end of the data range. This pattern indicates that improvements in overall operational efficiency were achieved up to late 2021 but encountered setbacks resulting in a lengthened operating cycle subsequently. The recent data suggest slight stabilization, albeit at a longer cycle duration than the trough of 2021.