Applied Materials Inc. (NASDAQ:AMAT)

The analysis of the financial ratios and operational periods over the reported quarters reveals several noteworthy trends and patterns.

Inventory Turnover

The inventory turnover ratio exhibits an overall stable pattern with slight fluctuations. Starting at 2.37 in early 2020, it increased gradually to peak at 2.82 in late 2021, followed by a decline to 2.32 in late 2022. Subsequently, the ratio showed improvement again, reaching values above 2.5 in 2024 and slightly dipping to 2.58 at the start of 2025. This suggests a generally consistent ability to manage inventory efficiently over time, with some periods of slower turnover.

Receivables Turnover

Receivables turnover displays more variability and a downward trend in certain intervals. The ratio started around 5.77 in early 2020, fluctuated near 5.8-6.0 during most of 2020 and early 2021, but then dropped to 4.25 by late 2021, indicating slower collection of receivables during that period. Subsequent quarters show partial recovery with ratios mostly between 4.5 and 5.6, but recent quarters in 2024 and early 2025 reveal a weakening trend again with turnover ratios around 4.5-4.6, signaling a slowdown in receivables collection efficiency.

Working Capital Turnover

The working capital turnover ratio decreased from 2.54 in early 2020 to a low point of 1.86 in late 2020, reflecting reduced efficiency in utilizing working capital during that period. However, it recovered steadily into 2022, reaching a peak of 3.02, indicating improved management or operational activity. After early 2022, the ratio declined gradually to about 2.0–2.4 in 2024 and early 2025, marking a moderation in working capital utilization efficiency.

Average Inventory Processing Period

The average number of days to process inventory showed a moderate downward trend between early 2020 and late 2021, from around 154 days to a low of approximately 129 days, indicating faster inventory turnover. This was followed by an increase peaking near 157 to 158 days through 2022 and early 2023, implying slower inventory processing times. More recent periods demonstrate slight improvement with days declining to around 139-142 days in 2024 and early 2025.

Average Receivable Collection Period

The average receivable collection period fluctuated notably and showed an increasing trend over the full period analyzed. Initially around 63 days in early 2020, the period increased to approximately 78 days in late 2021, indicating slower collection of receivables. The interval peaked even higher to mid-80s days in early 2023 and remained elevated near 70 to 80 days throughout 2024 and early 2025, which confirms a softening in credit collection performance over time.

Operating Cycle

The operating cycle, calculated as the sum of inventory processing and receivable collection periods, followed a pattern aligned with its components. After hovering near 217-222 days early in the timeframe, it declined to around 195 days in late 2020, suggesting enhanced operational efficiency. A subsequent rise peaked at about 243 days in early 2023 showed a lengthening of the cycle, potentially due to slower inventory turnover and receivables collection. The cycle slightly improved to around 209-218 days in 2024 and early 2025, indicating partial recovery in operational throughput.

In summary, the operational efficiency indicators reveal that inventory management has been relatively consistent with some periods of improvement and slowing. Receivables turnover and collection periods denote a decline in collection efficiency with increasing days to collect outstanding amounts, which has lengthened the operating cycle at times. Working capital turnover has experienced fluctuations with a recovery peak followed by a moderate decline. Overall, the data suggests challenges in receivables management impacting liquidity, while inventory and working capital management show variable but less pronounced changes.

The cost of products sold demonstrates a general upward trend over the analyzed quarterly periods. Initially, values fluctuate around the 2000 million USD mark in early 2019, with seasonal rises and dips. From 2020 onward, there is a noticeable increase, peaking around 3700 million USD in late 2024, before slightly declining in early 2025. This pattern suggests growing production or sales volumes, with occasional short-term variability.

Inventories similarly show a rising trend throughout the period. Starting from approximately 3700 million USD in early 2019, inventory levels gradually increase, registering significant acceleration from mid-2021 onwards. By late 2024, inventory balances exceed 5600 million USD, indicating accumulation of stock or raw materials that may support increased production capacity or a strategic buildup in stock. Minor fluctuations occur but the overall movement is upward.

The inventory turnover ratio, available for part of the dataset, ranges primarily between 2.3 and 2.8. Early 2019 data is missing, but from mid-2019 forward, the ratio oscillates moderately. The ratio peaks near 2.8 in early 2021 but then trends slightly downward toward 2.4-2.5 in the subsequent quarters. Despite increases in both cost of products sold and inventories, the turnover ratio remains relatively stable, suggesting a consistent efficiency in managing inventory relative to sales cost over time.

Cost of products sold

Shows a steady growth trend with seasonal variability and a peak approaching late 2024, indicating rising production or sales levels.

Inventories

Exhibits a continuous increase, especially pronounced from 2021 onwards, implying inventory buildup possibly to support sales growth or production scaling.

Inventory turnover ratio

Maintains moderate stability between 2.3 and 2.8 across available quarters, reflecting consistent inventory management efficiency despite rising inventory and sales costs.

Net Revenue Trend

Net revenue demonstrates an overall increasing trajectory from January 2019 to April 2025. Starting at approximately 3,753 million USD in January 2019, revenues experienced some moderate fluctuations in early periods but generally increased, surpassing the 6,000 million USD mark by mid-2021. The peak observed is around 7,166 million USD in April 2025, indicating consistent growth over the evaluated period.

Accounts Receivable, Net Trend

Accounts receivable exhibit a gradual increase over time, with some volatility in the later periods. The balance rose from roughly 2,444 million USD in January 2019 to peaks exceeding 6,000 million USD in the early months of 2023 and beyond. Notable surges include a significant increase between the third quarter of 2021 and early 2023, peaking around 6,068 million USD and maintaining similar high levels through 2024. This trend suggests growing credit extended to customers alongside revenue growth.

Receivables Turnover Ratio Trend

The receivables turnover ratio fluctuates between approximately 4.25 and 5.98 times over the observed period. From values near 5.7 in 2019, the ratio showed a decreasing trend through 2020 and 2021, dropping as low as about 4.25 in early 2022. Midway through the timeline, the ratio exhibited some recovery, rising back toward 5.64 in early 2024 before slightly declining again toward approximately 4.54 by April 2025. These fluctuations indicate variability in the efficiency of collecting receivables relative to sales.

Overall Analysis

The concurrent increase in both net revenue and accounts receivable suggests the company has expanded its sales and extended more credit to customers over time. However, the downward trend in receivables turnover ratio in several intervals points to potentially slower collections or increasing receivables relative to sales, which may impact cash flow. Recent modest declines in the turnover ratio, despite growing revenue, might warrant closer monitoring of credit management and collections efficiency.

The analyzed financial data reveals significant trends in working capital, net revenue, and working capital turnover over multiple quarters.

Working Capital

Working capital showed a fluctuating trend throughout the observed periods. Starting at 6,509 million USD in early 2019, there was a general increase with some volatility. A notable rise occurred between the first quarter of 2020 and the end of 2020, reaching up to 8,910 million USD by October 2020. Afterward, working capital remained generally strong, peaking at 13,443 million USD by the fourth quarter of 2024 before slightly decreasing to about 11,712 million USD in the latest quarter of the data. This overall upward trend indicates an improvement in the company's short-term financial health, with the ability to cover liabilities increasing over time despite some fluctuations.

Net Revenue

Net revenue demonstrated a generally upward trajectory from approximately 3,753 million USD in the first quarter of 2019 to around 7,166 million USD by the first quarter of 2025. Some volatility is observed mid-series, particularly between 2019 and 2021, with occasional declines such as a dip after early 2021. However, following this period, revenue steadily increased, peaking in early 2025 before a slight decrease in the very last recorded quarter. The growth in net revenue over this prolonged period suggests positive business expansion or improved sales performance.

Working Capital Turnover

Working capital turnover ratios were only available from July 2019 onwards. The ratio started at 2.54 and experienced a decline to as low as 1.86 in early 2021, reflecting a slower conversion of working capital into revenue during that interval. After this trough, the turnover ratio improved significantly, reaching a peak of 3.02 in early 2023. Subsequent quarters showed a gradual decline back towards the 2.0 to 2.4 range towards the end of the data period. This pattern suggests an initial loss in efficiency followed by an enhanced ability to generate sales from working capital, eventually stabilizing at a moderate turnover level.

In summary, while working capital and net revenue have generally increased over the period, indicating stronger liquidity and sales growth, the working capital turnover ratio experienced more variability. The increase in working capital and revenue combined with the stabilization of turnover ratios suggests improving operational efficiency and financial management, although the recent moderate turnover levels hint at possible constraints or strategic changes in asset management.

Inventory Turnover Ratio

The inventory turnover ratio first appears in the data starting January 26, 2020, at 2.37. It then shows a generally increasing trend through to October 31, 2021, rising from 2.37 to a peak of 2.82. After this peak, the ratio experiences a mild decline to 2.6 by January 30, 2022, followed by a more pronounced decrease to 2.32 by October 30, 2022. Subsequently, the ratio recovers and stabilizes, fluctuating modestly in the range of approximately 2.4 to 2.6 across the quarters leading into 2024 and early 2025. The latest values indicate a slight upward trend, ending at 2.58 in April 27, 2025.

Average Inventory Processing Period (Number of Days)

The average inventory processing period begins at 154 days in January 26, 2020, then steadily decreases to a low of 130 days by October 31, 2021, reflecting an improved efficiency in inventory management. Following this period, the average days increase to a peak of 157 days on both July 31 and October 30, 2022. Thereafter, a gradual improvement is observed, with the processing period reducing to 139 days by April 28, 2024. A slight increase to 142 days is noted by April 27, 2025, suggesting some variability but generally improved inventory turnaround compared to the earlier period.

Overall Analysis

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident throughout the data. Periods of higher turnover ratios correspond with shorter inventory processing times, which indicates improved inventory efficiency. The fluctuation observed after late 2021 suggests challenges in maintaining consistent inventory management performance, though trends from early 2023 onward show stabilization and marginal improvement. These patterns may imply adapting operational strategies or market conditions impacting inventory flow. The data supports a focus on sustaining the recent efficiency gains while monitoring for factors that could cause variability in inventory processing.

The analysis of the receivables turnover and average receivable collection period over the observed quarters reveals notable fluctuations reflecting the company's changing efficiency in managing accounts receivable.

Receivables Turnover Ratio Trends

The receivables turnover ratio, starting from the first available data point, initially fluctuates around the range of approximately 5.6 to 5.9. This indicates a relatively stable efficiency in collecting receivables during the early periods. However, from the quarter ending January 31, 2021, a downward trend is observed, reaching a low near 4.25 by the quarter ending January 29, 2023, suggesting a decline in collection efficiency. A modest recovery occurs thereafter, raising the ratio back above 5.0 by October 29, 2023, followed by another gradual decrease towards the last data points around 4.5. Overall, the ratio demonstrates variability with periods of both declining and partial recovery in receivables collection performance.

Average Receivable Collection Period Trends

Corresponding to the movements in turnover, the average receivable collection period starts at about 63 days and remains near this level with some minor fluctuations through early quarters. From the quarter ending January 31, 2021, an increase is observed—peaking at 86 days by January 29, 2023—indicating customers take longer to pay on average during this period, consistent with the reduced turnover ratio. Following this peak, the collection period decreases modestly but then fluctuates between 65 and 80 days in later quarters, demonstrating some instability in collection timing.

Relationship Between Ratios

The inverse relationship typical between receivables turnover and average collection period is evident, where decreases in turnover coincide with increases in collection days, signaling slower collections and vice versa. The data indicates the company experienced a period during which accounts receivable collections became less efficient, potentially impacting cash flow and working capital management. The partial recovery periods suggest responsive management actions or external factors improving collection effectiveness temporarily before further challenges arise.

Average Inventory Processing Period

The average inventory processing period shows noticeable fluctuations over the analyzed quarters. Starting from 154 days, it remained relatively stable around the 150-day mark for several quarters. From early 2021, a decreasing trend is observed with the period reaching a low of 129 days in October 2021. Following this trough, the period gradually increased again, peaking at 157 days around mid-2023. In the most recent quarters, a slight decline is seen with values stabilizing near 139-142 days. This suggests a cycle of improved inventory turnover followed by a slowdown and recent stabilization.

Average Receivable Collection Period

The average receivable collection period exhibited some variability but generally fluctuated between 60 and 80 days. Early data points indicate a period of approximately 63-65 days. A sizeable increase to 78 days is noted around October 2021, followed by fluctuations in the 67 to 86-day range over the subsequent periods, with the highest value recorded in early 2023. Thereafter, the period declined slightly but remained elevated compared to earlier years, ending near 79-80 days by the latest quarter. The increase suggests a trend toward slower collections, potentially signaling extended credit terms or collection challenges.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, also exhibits variability consistent with the underlying components. Initial measurements were around 217 days, decreasing moderately to approximately 195 days in late 2021, indicating improved operational efficiency. However, the cycle lengthened thereafter, reaching a peak of 243 days in early 2023. Subsequent quarters showed a gradual reduction but remained above early period values, settling near 218-222 days most recently. This pattern reflects the combined effects of inventory and receivables management, suggesting some operational pressures affecting the overall cycle duration in recent years.