Applied Materials Inc. (NASDAQ:AMAT)

The analysis of the quarterly financial ratios and cycle periods reveals several discernible trends over the observed timeframe.

Inventory Turnover

The inventory turnover ratio demonstrates a gradual decline from early 2021 through late 2022, decreasing from approximately 2.55 to about 2.33. Following this period, a modest recovery is noted, with the ratio climbing back to the 2.5 to 2.6 range by early 2025, although it does not surpass the initial levels. This suggests a fluctuating efficiency in inventory management, with some easing in turnover speed more recently.

Receivables Turnover

The receivables turnover ratio exhibits a less stable pattern, with an initial decline from nearly 6.0 in early 2021 down to around 4.25 by late 2022. Subsequently, a gradual improvement occurs, rising again towards approximately 5.5 by early 2025. This pattern indicates slower collections during the middle periods, with a gradual tightening and improved collection efficiency in the most recent quarters.

Working Capital Turnover

Working capital turnover shows a growing trend through 2021 and into 2022, increasing from 1.86 to just over 3.0, indicating enhanced asset utilization during this period. Post-2022, the ratio declines somewhat, stabilizing around 2.1 to 2.4 through 2023 and 2024, and slightly decreasing towards early 2025. This suggests that after strong initial gains, the efficiency of working capital utilization decreased but remained better than at the beginning of the period.

Average Inventory Processing Period

The average inventory processing period initially shortens from 143 days to 129 days in late 2021, reflecting more rapid inventory turnover. However, this trend reverses substantially after early 2022, with days increasing up to approximately 157 in late 2022 and remaining relatively steady in the 140-150 day range through 2025. This lengthening implies slower inventory movement during the latter periods.

Average Receivable Collection Period

The average receivable collection period rises from 61 days in early 2021 to a peak of 86 days in late 2022, signaling a deterioration in collection speed. After this peak, a gradual improvement is noted, with collection periods declining back to the mid-60 day range by early 2025, indicating enhanced credit management and collections efficiency recently.

Operating Cycle

The operating cycle length shows fluctuations corresponding with changes in inventory and receivables periods. It originally decreases slightly to about 195 days but then extends to a high near 243 days in late 2022—indicating an overall lengthening of the cash conversion cycle. In subsequent periods, modest improvements reduce the cycle to approximately 215 days by early 2025, yet it remains elevated compared to early 2021 levels.

Overall, the company experienced challenges in asset turnover and collection efficiency particularly from mid-2021 through late 2022, as shown by decreasing turnover ratios and increasing processing and collection periods. More recent periods suggest a reversal of these trends with gradual improvements in turnover ratios and shorter collection periods, indicating a partial recovery in operational efficiency. Nonetheless, inventory turnover and operating cycle metrics suggest some ongoing caution regarding inventory management and cash flow conversion.

Cost of Products Sold

The cost of products sold exhibited a generally upward trend from January 2021 through October 2022, increasing from 2,813 million to a peak of 3,710 million. Subsequently, the values showed some fluctuation but remained relatively stable around the 3,500 to 3,700 million range through to October 2025. There was a slight decline observed in the final quarters, ending at 3,535 million in October 2025.

Inventories

Inventories consistently increased throughout the entire period. Starting at 3,925 million in January 2021, inventories nearly doubled by October 2025, reaching 5,915 million. Although some minor decreases occurred between consecutive quarters (notably between January and April 2024, and again between July and October 2024), the long-term direction remained upward, reflecting a steady accumulation of inventory assets.

Inventory Turnover Ratio

The inventory turnover ratio, which measures how efficiently inventories are managed relative to cost of goods sold, showed a declining trend from 2.55 in January 2021 to a low point around 2.32 in January 2023. After this trough, the ratio fluctuated modestly but generally improved, reaching approximately 2.63 by mid-2025. Towards the latter part of the examined period, the turnover ratio declined slightly again, ending at 2.46 in October 2025. This pattern suggests an initial decrease in inventory efficiency followed by partial recovery, but with some instability in recent periods.

Summary of Trends and Insights

The data indicates that while the cost of products sold increased initially, it plateaued with minor fluctuations thereafter. Inventories grew steadily over the entire timeframe, indicating either stockpiling or slower movements of inventory relative to sales. The initial decline and later partial recovery in the inventory turnover ratio reflect changing efficiency dynamics, potentially impacted by market demand, production planning, or supply chain factors. Overall, the company appears to be managing larger inventory levels with only moderate gains in turnover efficiency after a prolonged dip.

The analysis of the quarterly financial data reveals several notable trends in revenue, accounts receivable, and receivables turnover ratio over the observed periods.

Net Revenue

Net revenue displayed an overall upward trajectory between early 2021 and early 2025, starting at approximately 5,162 million US dollars and rising to a peak around 7,302 million US dollars in the third quarter of 2025. Despite this growth trend, some quarters experienced minor fluctuations with occasional declines. For example, there was a slight drop from 6,749 million US dollars in the fourth quarter of 2021 to 6,630 million US dollars in the second quarter of 2023, followed by renewed growth afterwards.

Accounts Receivable, Net

The accounts receivable balance also generally increased during the period, moving from 3,045 million US dollars initially to a high of around 6,187 million US dollars in the second quarter of 2025 before declining again toward the last reported quarter. The trajectory shows notable variability, including a significant jump between the third and fourth quarters of 2021 (from 3,822 to 4,953 million US dollars) and another increase in early 2025. The fluctuations suggest changing collection cycles or credit terms, impacting the cash conversion cycle.

Receivables Turnover Ratio

The receivables turnover ratio indicates how efficiently the company collects its outstanding receivables. This ratio generally declined from 5.98 in early 2021 to a low near 4.25 by the fourth quarter of 2022, signaling slower collection efforts or increasing receivables relative to sales during that phase. However, from late 2022 through 2025, the ratio exhibited a recovering pattern with fluctuations, reaching about 5.47 in the third quarter of 2025. This rebound suggests some improvement in credit management or a faster collection process in the latter periods.

In summary, net revenue increased steadily over the reported quarters, reflecting growth in business activity. Accounts receivable grew in tandem but with more pronounced volatility, impacting the receivables turnover ratio which showed a decrease followed by partial recovery. The observed trends imply that while revenue expanded, the company faced challenges managing the collection of sales proceeds at times, though there are signs of improved efficiency toward the end of the period analyzed.

Working Capital

The working capital exhibits some fluctuations over the observed periods. Starting at 9,765 million USD, it increased to peak at 12,381 million USD by April 28, 2024. Subsequently, there is a notable decline to 11,712 million USD by April 27, 2025, with a slight recovery to 12,882 million USD by October 26, 2025. The overall trend indicates periods of growth interspersed with contractions, suggesting variable management of short-term assets and liabilities.

Net Revenue

Net revenue shows an overall upward trend with cyclical fluctuations. Beginning at 5,162 million USD in January 2021, revenue increased to a high of approximately 7,302 million USD by July 27, 2025, before declining slightly to 6,800 million USD in the last period. The revenue growth is mostly steady with intermittent periods of modest decline, reflecting some volatility but a general positive trajectory over the observed timeline.

Working Capital Turnover

The working capital turnover ratio started at 1.86 in January 2021 and demonstrated a rising trend through October 2022, peaking at 3.02. After this peak, the ratio declined steadily to 2.0 by January 26, 2025, followed by minor oscillations ending at 2.2 in October 2025. The initial increase in this ratio indicates improved efficiency in using working capital to generate revenue, while the later decline suggests a reduction in this efficiency towards the end of the period under review.

Summary Insights

The data collectively indicates that while net revenue has generally grown, working capital levels have not maintained a consistent upward trend, reflecting potential volatility in short-term asset and liability management. The working capital turnover ratio's rise and subsequent fall signify a period of improved operating efficiency followed by a slowdown. These patterns could be indicative of changing operational conditions or strategic adjustments affecting liquidity and revenue generation efficiency over time.

Inventory Turnover Trend

The inventory turnover ratio exhibited a generally declining trend from early 2021 through late 2022, moving from a high of 2.82 down to 2.33. This decrease indicates a reduction in the frequency with which the company sold and replaced its inventory. However, starting in early 2023, this ratio showed some recovery, fluctuating between 2.32 and 2.63, suggesting a stabilization and slight improvement in inventory management efficiency. Despite this rebound, the figures do not return to the initial peak seen at the start of the period.

Average Inventory Processing Period Trend

The average inventory processing period, measured in days, moved inversely to the inventory turnover ratio. Initially, it declined from 143 days in early 2021 to a low of 129 days by late 2021, reflecting faster inventory turnover. However, from that point through late 2022, the period increased steadily to a peak of 157 days, indicating slower inventory processing and longer holding times. In 2023 and onward, this period slightly decreased and stabilized in the range of approximately 139 to 148 days, consistent with the observed stabilization in inventory turnover.

Summary and Insights

The data illustrate a cyclical pattern in inventory management efficiency over the five-year span. The initial improvement in turnover and reduction in processing days through 2021 suggests effective inventory control early in the period. The subsequent deterioration in these metrics through 2022 points to potential challenges in moving inventory, possibly due to market conditions or operational inefficiencies. The latter stabilization phase indicates that corrective measures may have been implemented to slow the decline and improve turnover rates. Overall, the company maintains moderate inventory turnover levels, with processing periods consistently ranging around five months on average, revealing an area to monitor for operational optimization.

Receivables Turnover Ratio

The receivables turnover ratio exhibits noticeable fluctuations over the evaluated period. Initially, the ratio decreases from 5.98 to 4.66 within the first four quarters, indicating a decline in the efficiency of collecting receivables. Following this, partial recovery is observed as the ratio rises back to approximately 5.64 by early 2024, suggesting some improvement in collection practices. However, subsequent quarters show a gradual downturn again, with the ratio falling to around 4.54 before ending with an uptick to 5.47 by the last quarter. Overall, the trend reflects variable collection efficiency with alternating phases of decline and recovery.

Average Receivable Collection Period (in days)

The average receivable collection period mirrors the inverse behavior of the receivables turnover ratio. It begins near 61 days and progressively lengthens to a peak of 86 days by late 2021, implying a slower collection process during that time. Afterward, it shortens again to near 65 days in early 2024, corresponding to the improvement in turnover ratio. Nevertheless, a subsequent increase in collection days occurs, rising back toward 80 days before improving modestly to 67 days at the end. This pattern suggests periods of delayed collections interspersed with phases of enhanced collection speed.

Insight Summary

The analysis indicates that the company's receivables management experienced periods of both strain and improvement over the span examined. The fluctuations in turnover ratio and collection period suggest intermittent challenges in receivable collections, potentially due to market, operational, or credit policy factors. Recent data points reveal signs of moderate recovery and better collection efficiency but also highlight the necessity for continued focus on maintaining consistent receivables turnover and minimizing collection days to optimize cash flow and working capital management.

The analysis of the financial periods reveals distinct trends in the management of inventory, receivables, and overall operating cycle over the examined quarters.

Average Inventory Processing Period

The number of days for inventory processing demonstrates a generally increasing trend from early 2021 through late 2025, starting at 143 days and rising to as high as 157 days in late 2022, before slightly declining and fluctuating around the mid-140s to high-140s range by the end of the period. This indicates a gradual lengthening in the time taken to convert inventory into sales or use, potentially reflecting adjustments in inventory management, supply chain dynamics, or product demand variations.

Average Receivable Collection Period

The receivable collection period shows more variability, with days outstanding increasing from 61 early in 2021 to a peak of 86 days in late 2022. Post this peak, there is a moderate decline with periods fluctuating mainly between the mid-60s to low 70s days toward the end of the dataset. This volatility suggests changes in credit policy, customer payment behavior, or collections efficiency that may have impacted cash inflows over time.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, exhibits a steady upward trend from 204 days at the start to a peak near 243 days in late 2022. Thereafter, although the cycle shortens somewhat, it remains elevated relative to the initial periods, ending around 215 days toward late 2025. This extended cycle implies the company is taking longer to turn its investments in inventory and receivables into cash, which may affect liquidity and working capital management.

Overall, the data indicate a lengthening operating cycle over the observed quarters, primarily driven by increased inventory processing times and prolonged receivable collections with some recovery in the later quarters. These trends warrant considerations for operational efficiency improvements and working capital strategies to optimize cash flow and financial stability.