What the Company Does 🏭
Applied Materials (AMAT) is a major supplier of equipment, services, and software used to manufacture advanced semiconductor chips. It does not design or sell chips. Instead, it provides “picks-and-shovels” tools used inside chip factories (called fabs).
- Semiconductor manufacturing equipment: tools that build chips layer-by-layer on silicon wafers
- Process control & inspection: systems that measure and check chips during production to detect defects early
- Services & software: support, upgrades, spare parts, and optimization for customer fabs
Plain English: Applied Materials makes the machinery and support that chipmakers need to produce modern chips at scale.
Financial Highlights 📊
From FY2023 to FY2025, revenue and operating income increased steadily, showing solid core profitability. FY2025 net income was slightly lower than FY2024 even though operating income was higher, reflecting the impact of non-operating items and taxes.
- Revenue: $26,517m (FY2023) → $27,176m (FY2024) → $28,368m (FY2025)
- Operating income: $7,654m → $7,867m → $8,289m
- Net income: $6,856m → $7,177m → $6,998m
Plain English: The business generated strong operating profits each year, but the final “bottom line” can move because of items below operating income.
Key Risks ⚠️
Based on the company’s discussion, key risks relate to how semiconductor manufacturing works as a global, technology-driven, and highly regulated industry.
- Industry cycles: Customer spending on new tools can rise or fall quickly with semiconductor demand.
- Large-customer dependence: A small number of big customers can influence results if orders shift or are delayed.
- Technology execution: Tools must meet extremely precise requirements as chip manufacturing becomes more complex.
- Export controls & regulations: Government restrictions can limit where certain tools can be sold.
- Supply chain reliability: Component availability and quality issues can affect shipment timing and costs.
Plain English: Even a strong business can see swings in results if customers slow factory spending, regulations change, or complex products face delays.
MD&A Highlights 🧭
Management emphasizes steady demand for advanced semiconductor manufacturing equipment, continued investment in innovation, and disciplined execution. The company also highlights strong liquidity and ongoing capital returns to shareholders through dividends and stock repurchases.
- Innovation focus: sustained investment in R&D to support next-generation manufacturing needs
- Financial flexibility: emphasis on maintaining liquidity to operate through industry cycles
- Shareholder returns: dividends and buybacks supported by operating cash flow
Plain English: Management’s message is “keep investing in technology, stay disciplined on execution, and remain financially flexible through cycles.”
Takeaway 🎯
In this Applied Materials 10-K Analysis summary, the core picture is a profitable semiconductor equipment leader benefiting from increasingly complex chip manufacturing, while still exposed to industry cycles, large-customer order timing, global regulations, and supply chain constraints.
Income Statement Summary 💵
| (Unit: $m, EPS in $) | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Revenue | 26,517 | 27,176 | 28,368 |
| Cost of Goods Sold | 14,133 | 14,279 | 14,560 |
| Gross Profit | 12,384 | 12,897 | 13,808 |
| SG&A | 1,628 | 1,797 | 1,768 |
| Operating Income | 7,654 | 7,867 | 8,289 |
| Non-Operating Income/Expense | 300 | 532 | 1,251 |
| Interest Income/Expense | (238) | (247) | (269) |
| Income Before Tax | 7,716 | 8,152 | 9,271 |
| Income Tax | 860 | 975 | 2,273 |
| Net Income | 6,856 | 7,177 | 6,998 |
| EPS | 8.1 | 8.6 | 8.7 |
Plain English (Income Statement): Revenue increased each year from FY2023 to FY2025, while Operating Income also rose steadily—showing solid profitability at the core business level. Net Income dipped slightly in FY2025 versus FY2024, even though operating results improved, because items outside normal operations (and taxes) can meaningfully impact the bottom line in any given year.
Key Financial Ratios 📈
| Ratio | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| ROE (%) | 41.9 | 37.8 | 34.3 |
| ROA (%) | 22.3 | 20.9 | 19.3 |
| ROTC (%) | 34.9 | 31.1 | 30.7 |
| ROIC (%) | 43.1 | 40.2 | 31.7 |
| Gross Margin (%) | 46.7 | 47.5 | 48.7 |
| Operating Margin (%) | 28.9 | 28.9 | 29.2 |
| Pretax Margin (%) | 29.1 | 30.0 | 32.7 |
| Net Margin (%) | 25.9 | 26.4 | 24.7 |
| Debt-to-Equity Ratio (D/E) (%) | 34.0 | 32.9 | 32.1 |
| Net Debt / EBITDA (x) | (0.1) | (0.2) | (0.1) |
| Interest Coverage Ratio (x) | 32.2 | 31.9 | 30.8 |
| Current Ratio (%) | 259.7 | 250.6 | 261.0 |
| Quick Ratio (%) | 163.2 | 173.6 | 172.0 |
| Fixed Asset to Long-term Capital Ratio (%) | 12.5 | 13.7 | 17.1 |
Plain English (Ratios): Applied Materials showed very strong margins—Gross Margin improved to 48.7% in FY2025 and Operating Margin stayed near 29%. The company also had net cash (negative Net Debt / EBITDA), meaning cash exceeded total debt. Returns (ROE/ROA/ROIC) remained high overall, but declined in FY2025—partly because equity and assets grew, and partly because FY2025 had a much higher effective tax rate that reduced after-tax operating returns.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 Applied Materials (AMAT) 2025 10-K Analysis (Filed 2025) | Explained for Beginners