10-Q – 2025-08-21 – amat-20250727.htm

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form  10-Q
(Mark One)

☑      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 2025
or

☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                 
Commission File Number 000-06920

Applied Materials, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-1655526
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3050 Bowers Avenue , P.O. Box 58039 , Santa Clara , California 95052-8039
(Address of principal executive offices) (Zip Code )

Registrant’s telephone number, including area code: ( 408 )  727-5555

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share AMAT The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes    ☑          No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes    ☑          No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer  ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐          No   ☑
Number of shares outstanding of the issuer’s common stock as of July 27, 2025: 796,642,427

Table of Contents

APPLIED MATERIALS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 27, 2025
TABLE OF CONTENTS
 
    Page
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited)
3

Consolidated Condensed Statements of Operations for the Three an d Nine Months Ended July 27, 2025 and July 28, 2024
3

C onsolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended July 27, 2025 and July 28, 2024
4

Consolidated Condensed Balance Sheets as of July 27, 2025 and October 27, 20 24
5

Consolidated Condensed Statements of Stockholders’ Equity for the Three and Nine Months Ended Jul y 27, 2025 and July 28, 2024
6

Consolidated Condensed Statements of Cash Flows for the Nine Months Ended July 27, 2025 and July 28, 2024
8

Notes to Consolidated Condensed Financial Statements
9

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
27

Item 3: Quantitative and Qualitative Disclosures About Market Risk
39

Item 4: Controls and Procedures
40

PART II. OTHER INFORMATION
Item 1: Legal Proceedings
41

Item 1A: Risk Factors
42

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
57

Item 3: Default Upon Senior Securities
57

Item 4: Mine Safety Disclosures
57

Item 5: Other Information
57

Item 6: Exhibits
58

Signatures
59

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

(Unaudited)
Net revenue $ 7,302   $ 6,778   $ 21,568   $ 20,131  
Cost of products sold 3,740   3,573   11,025   10,569  
Gross profit 3,562   3,205   10,543   9,562  
Operating expenses:
Research, development and engineering 901   836   2,653   2,375  
Marketing and selling 224   205   646   621  
General and administrative 204   222   667   745  

Total operating expenses 1,329   1,263   3,966   3,741  
Income from operations 2,233   1,942   6,577   5,821  

Interest expense 66   63   198   181  
Interest and other income (expense), net 396   81   625   617  
Income before income taxes 2,563   1,960   7,004   6,257  
Provision for income taxes 784   255   1,903   811  
Net income $ 1,779   $ 1,705   $ 5,101   $ 5,446  
Earnings per share:
Basic $ 2.23   $ 2.06   $ 6.32   $ 6.57  
Diluted $ 2.22   $ 2.05   $ 6.29   $ 6.52  
Weighted average number of shares:
Basic 798   826   807   829  
Diluted 802   833   811   835  

See accompanying Notes to Consolidated Condensed Financial Statements.
3

Table of Contents

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

(Unaudited)
Net income $ 1,779   $ 1,705   $ 5,101   $ 5,446  
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale investments 2   18   7   36  

Change in unrealized net loss on derivative instruments 40   8   59   44  
Change in defined and postretirement benefit plans —   —   —   ( 9 )

Other comprehensive income (loss), net of tax 42   26   66   71  
Comprehensive income $ 1,821   $ 1,731   $ 5,167   $ 5,517  

See accompanying Notes to Consolidated Condensed Financial Statements.
4

Table of Contents

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
July 27,
2025 October 27,
2024

 
ASSETS
Current assets:
Cash and cash equivalents $ 5,384   $ 8,022  
Short-term investments 1,630   1,449  
Accounts receivable, net 5,772   5,234  
Inventories 5,807   5,421  
Other current assets 1,125   1,094  
Total current assets 19,718   21,220  
Long-term investments 4,133   2,787  
Property, plant and equipment, net 4,124   3,339  
Goodwill 3,748   3,732  
Purchased technology and other intangible assets, net 238   249  
Deferred income taxes and other assets 2,250   3,082  
Total assets $ 34,211   $ 34,409  

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt $ 799   $ 799  
Accounts payable and accrued expenses 4,614   4,820  
Contract liabilities 2,470   2,849  
Total current liabilities 7,883   8,468  
Long-term debt 5,463   5,460  
Income taxes payable 330   670  
Other liabilities 1,031   810  
Total liabilities 14,707   15,408  
Stockholders’ equity:

Common stock 8   8  
Additional paid-in capital 10,090   9,660  
Retained earnings 53,694   49,651  
Treasury stock ( 44,186 ) ( 40,150 )
Accumulated other comprehensive loss ( 102 ) ( 168 )
Total stockholders’ equity 19,504   19,001  
Total liabilities and stockholders’ equity $ 34,211   $ 34,409  

Amounts as of July 27, 2025 are unaudited. Amounts as of October 27, 2024 are derived from the October 27, 2024 audited consolidated financial statements.
See accompanying Notes to Consolidated Condensed Financial Statements.
5

Table of Contents

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share amounts)

Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Total
Three Months Ended July 27, 2025 Shares Amount Shares Amount

(Unaudited)
Balance as of April 27, 2025 802   $ 8   $ 9,966   $ 52,280   1,230   $ ( 43,149 ) $ ( 144 ) $ 18,961  

Net income —  —  —  1,779   —  —  —  1,779  
Other comprehensive income (loss), net of tax —  —  —  —  —  —  42   42  
Dividends declared ($ 0.46 per common share)
—  —  —  ( 365 ) —  —  —  ( 365 )
Share-based compensation —  —  158   —  —  —  —  158  

Net issuance under stock plans 1   —  ( 34 ) —  —  —  —  ( 34 )
Common stock repurchases ( 6 ) —  —  —  6   ( 1,037 ) —  ( 1,037 )
Balance as of July 27, 2025 797   $ 8   $ 10,090   $ 53,694   1,236   $ ( 44,186 ) $ ( 102 ) $ 19,504  

Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Total
Nine Months Ended July 27, 2025 Shares Amount Shares Amount

(Unaudited)
Balance as of October 27, 2024 818   $ 8   $ 9,660   $ 49,651   1,211   $ ( 40,150 ) $ ( 168 ) $ 19,001  

Net income —  —  —  5,101   —  —  —  5,101  
Other comprehensive income (loss), net of tax —  —  —  —  —  —  66   66  
Dividends declared ($ 1.32 per common share)
—  —  —  ( 1,058 ) —  —  —  ( 1,058 )
Share-based compensation —  —  512   —  —  —  —  512  

Net issuance under stock plans 4   —  ( 82 ) —  —  —  —  ( 82 )
Common stock repurchases ( 25 ) —  —  —  25   ( 4,036 ) —  ( 4,036 )
Balance as of July 27, 2025 797   $ 8   $ 10,090   $ 53,694   1,236   $ ( 44,186 ) $ ( 102 ) $ 19,504  

6

Table of Contents

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(In millions, except per share amounts)

Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Total
Three Months Ended July 28, 2024 Shares Amount Shares Amount

(Unaudited)
Balance as of April 28, 2024 828   $ 8   $ 9,321   $ 46,871   1,200   $ ( 37,829 ) $ ( 172 ) $ 18,199  

Net income —  —  —  1,705   —  —  —  1,705  
Other comprehensive income (loss), net of tax —  —  —  —  —  —  26   26  
Dividends declared ($ 0.40 per common share)
—  —  —  ( 329 ) —  —  —  ( 329 )
Share-based compensation —  —  132   —  —  —  —  132  

Net issuance under stock plans —  —  ( 25 ) —  —  —  —  ( 25 )
Common stock repurchases ( 4 ) —  —  —  4   ( 868 ) —  ( 868 )
Balance as of July 28, 2024 824   $ 8   $ 9,428   $ 48,247   1,204   $ ( 38,697 ) $ ( 146 ) $ 18,840  

Common Stock Additional
Paid-In
Capital Retained
Earnings Treasury Stock Accumulated
Other
Comprehensive
Income (Loss) Total
Nine Months Ended July 28, 2024 Shares Amount Shares Amount

(Unaudited)
Balance as of October 29, 2023 833   $ 8   $ 9,131   $ 43,726   1,191   $ ( 36,299 ) $ ( 217 ) $ 16,349  

Net income —  —  —  5,446   —  —  —  5,446  
Other comprehensive income (loss), net of tax —  —  —  —  —  —  71   71  
Dividends declared ($ 1.12 per common share)
—  —  —  ( 925 ) —  —  —  ( 925 )
Share-based compensation —  —  436   —  —  —  —  436  
Net issuance under stock plans 4   —  ( 139 ) —  —  —  —  ( 139 )
Common stock repurchases ( 13 ) —  —  —  13   ( 2,398 ) —  ( 2,398 )
Balance as of July 28, 2024 824   $ 8   $ 9,428   $ 48,247   1,204   $ ( 38,697 ) $ ( 146 ) $ 18,840  

See accompanying Notes to Consolidated Condensed Financial Statements.

7

Table of Contents

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
( In millions)
Nine Months Ended
July 27, 2025 July 28, 2024

(Unaudited)
Cash flows from operating activities:
Net income $ 5,101   $ 5,446  
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization 321   282  

Share-based compensation 512   436  

Deferred income taxes 952   ( 385 )
Other ( 298 ) ( 199 )
Changes in operating assets and liabilities:
Accounts receivable ( 538 ) 195  
Inventories ( 386 ) 157  
Other current and non-current assets ( 36 ) 353  

Accounts payable and accrued expenses 135   ( 20 )
Contract liabilities ( 379 ) ( 233 )
Income taxes payable ( 297 ) 46  
Other liabilities 43   24  
Cash provided by operating activities 5,130   6,102  
Cash flows from investing activities:
Capital expenditures ( 1,475 ) ( 783 )
Cash paid for acquisitions, net of cash acquired ( 29 ) —  
Proceeds from asset sale 33   —  

Proceeds from sales and maturities of investments 3,937   1,495  
Purchases of investments ( 5,109 ) ( 1,968 )

Cash used in investing activities ( 2,643 ) ( 1,256 )
Cash flows from financing activities:
Debt borrowings, net of issuance costs —   694  

Proceeds from issuance of commercial paper 400   300  
Repayments of commercial paper ( 400 ) ( 300 )
Proceeds from common stock issuances 129   119  
Common stock repurchases ( 4,044 ) ( 2,381 )

Tax withholding payments for vested equity awards ( 210 ) ( 258 )
Payments of dividends to stockholders ( 1,019 ) ( 863 )
Payments of debt issuance costs ( 2 ) —  
Repayments of principal on finance leases —   ( 12 )
Cash used in financing activities ( 5,146 ) ( 2,701 )

Increase (decrease) in cash, cash equivalents and restricted cash equivalents ( 2,659 ) 2,145  
Cash, cash equivalents and restricted cash equivalents — beginning of period 8,113   6,233  
Cash, cash equivalents and restricted cash equivalents — end of period $ 5,454   $ 8,378  

Reconciliation of cash, cash equivalents and restricted cash equivalents
Cash and cash equivalents $ 5,384   $ 8,288  
Restricted cash equivalents included in deferred income taxes and other assets 70   90  
Total cash, cash equivalents and restricted cash equivalents $ 5,454   $ 8,378  

Supplemental cash flow information:
Cash payments for income taxes $ 1,269   $ 819  
Cash refunds from income taxes $ 79   $ 7  
Cash payments for interest $ 171   $ 137  
See accompanying Notes to Consolidated Condensed Financial Statements.
8

Table of Contents
APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1     Basis of Presentation and Recently Adopted Accounting Standards
Basis of Presentation
In the opinion of our management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (we, us, and our) included herein have been prepared on a basis consistent with the October 27, 2024 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly state the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 27, 2024 (2024 Form 10-K).
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our results of operations for the three and nine months ended July 27, 2025 are not necessarily indicative of future operating results. Our fiscal year ends on the last Sunday in October of each year. Fiscal 2025 and 2024 contain 52 weeks each and the first nine months of fiscal 2025 and 2024 each contained 39 weeks.
Recently Adopted Accounting Standards
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. In June 2022, the Financial Accounting Standards Board (FASB) issued an accounting standard update which clarifies how the fair value of equity securities subject to contractual sale restrictions is determined (Topic 820). The amendment clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires certain qualitative and quantitative disclosures related to equity securities subject to contractual sale restrictions. We adopted this authoritative guidance in the first quarter of fiscal 2025. The adoption of this guidance did not have a significant impact on our consolidated condensed financial statements.

Note 2       Earnings Per Share
Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of restricted stock units and employees’ stock purchase plan shares) outstanding during the period. Our net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to our non-complex capital structure.
 
Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

  (In millions, except per share amounts)
Numerator:
Net income $ 1,779   $ 1,705   $ 5,101   $ 5,446  
Denominator:
Weighted average common shares outstanding 798   826   807   829  
Effect of weighted dilutive restricted stock units and employees’ stock purchase plan shares
4   7   4   6  
Denominator for diluted earnings per share 802   833   811   835  
Basic earnings per share $ 2.23   $ 2.06   $ 6.32   $ 6.57  
Diluted earnings per share $ 2.22   $ 2.05   $ 6.29   $ 6.52  
Potentially weighted dilutive securities —   —   —   —  

Excluded from the calculation of diluted earnings per share are securities attributable to outstanding restricted stock units where the combined exercise price and average unamortized fair value are greater than the average market price of our common stock, and therefore their inclusion would be anti-dilutive.
9

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 3       Cash, Cash Equivalents and Investments
Summary of Cash, Cash Equivalents and Investments
The following tables summarize our cash, cash equivalents and investments by security type:
 
July 27, 2025 Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value

  (In millions)
Cash $ 1,437   $ —  $ —  $ 1,437  
Cash equivalents:
Money market funds *
924   —  —  924  
Bank certificates of deposit and time deposits 60   —  —  60  
U.S. Treasury and agency securities 1,114   —  —  1,114  

Municipal securities 34   —  —  34  
Commercial paper, corporate bonds and medium-term notes 1,815   —  —  1,815  

Total cash equivalents 3,947   —  —  3,947  
Total cash and cash equivalents $ 5,384   $ —  $ —  $ 5,384  
Short-term and long-term investments:
Bank certificates of deposit and time deposits $ 6   $ —   $ —   $ 6  
U.S. Treasury and agency securities 1,578   1   —   1,579  
Non-U.S. government securities **
5   —   —   5  
Municipal securities 465   3   1   467  
Commercial paper, corporate bonds and medium-term notes 831   4   1   834  
Asset-backed and mortgage-backed securities 623   2   2   623  
Total fixed income securities 3,508   10   4   3,514  
Publicly traded equity securities 1,438   467   2   1,903  
Equity investments in privately held companies 315   69   38   346  
Total equity investments 1,753   536   40   2,249  
Total short-term and long-term investments $ 5,261   $ 546   $ 44   $ 5,763  
Total cash, cash equivalents and investments $ 10,645   $ 546   $ 44   $ 11,147  

_________________________
*Excludes $ 70  million of restricted cash equivalents invested in money market funds related to deferred compensation plans.
**Includes Canadian provincial government debt.
10

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

October 27, 2024 Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value

  (In millions)
Cash $ 1,313   $ —  $ —  $ 1,313  
Cash equivalents:
Money market funds *
3,421   —  —  3,421  
Bank certificates of deposit and time deposits 90   —  —  90  
U.S. Treasury and agency securities 1,394   —  —  1,394  

Municipal securities 19   —  —  19  
Commercial paper, corporate bonds and medium-term notes 1,785   —  —  1,785  
Total cash equivalents 6,709   —  —  6,709  
Total cash and cash equivalents $ 8,022   $ —  $ —  $ 8,022  
Short-term and long-term investments:
Bank certificates of deposit and time deposits $ 13   $ —   $ —   $ 13  
U.S. Treasury and agency securities 1,306   —   2   1,304  
Non-U.S. government securities **
5   —   —   5  
Municipal securities 441   2   2   441  
Commercial paper, corporate bonds and medium-term notes 803   4   2   805  
Asset-backed and mortgage-backed securities 656   3   5   654  
Total fixed income securities 3,224   9   11   3,222  
Publicly traded equity securities 543   185   5   723  
Equity investments in privately held companies 255   58   22   291  
Total equity investments 798   243   27   1,014  
Total short-term and long-term investments $ 4,022   $ 252   $ 38   $ 4,236  
Total cash, cash equivalents and investments $ 12,044   $ 252   $ 38   $ 12,258  

 _________________________
*Excludes $ 91  million of restricted cash equivalents invested in money market funds related to deferred compensation plans.
**Includes Canadian provincial government debt.
 
During the three months ended July 27, 2025 and July 28, 2024, interest income from our cash, cash equivalents and fixed income securities was $ 92 million and $ 124 million, respectively.
During the nine months ended July 27, 2025 and July 28, 2024, interest income from our cash, cash equivalents and fixed income securities was $ 309 million and $ 345 million, respectively.
Maturities of Investments
The following table summarizes the contractual maturities of our investments as of July 27, 2025:
 
Cost Estimated
Fair Value

  (In millions)
Due in one year or less $ 1,565   $ 1,564  
Due after one through five years 1,317   1,324  
Due after five years 3   3  
No single maturity date* 2,376   2,872  
Total $ 5,261   $ 5,763  

 _________________________
*Securities with no single maturity date include publicly traded and privately held equity securities and asset-backed and mortgage-backed securities.

11

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Gains and Losses on Investments
During the three and nine months ended July 27, 2025 and July 28, 2024 gross realized gains and losses on our fixed income portfolio were not material.
As of July 27, 2025 and October 27, 2024, gross unrealized losses related to our fixed income portfolio were not material. We regularly review our fixed income portfolio to identify and evaluate investments that have indications of possible impairment from credit losses or other factors. Factors considered in determining whether an unrealized loss is considered to be a credit loss include: the significance of the decline in value compared to the cost basis; the financial condition, credit quality and near-term prospects of the investee; and whether it is more likely than not that we will be required to sell the security prior to recovery. Credit losses related to available-for-sale debt securities are recorded as an allowance for credit losses through interest and other income (expense), net. Any additional changes in fair value that are not related to credit losses are recognized in accumulated other comprehensive income (loss) (AOCI). During the three and nine months ended July 27, 2025 and July 28, 2024, we did not recognize material credit losses and the ending allowance for credit losses was not material to our fixed income portfolio.
The components of gain (loss) on equity investments for the three and nine months ended July 27, 2025 and July 28, 2024 were as follows:

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

  (In millions)
Publicly traded equity securities
Unrealized gain $ 311   $ 6   $ 424   $ 318  
Unrealized loss —   ( 30 ) ( 139 ) ( 33 )
Realized gain on sales and dividends 5   3   30   5  
Realized loss on sales or impairment —   —   —   ( 1 )
Equity investments in privately held companies
Unrealized gain 9   1   16   2  
Unrealized loss ( 6 ) ( 2 ) ( 13 ) ( 12 )
Realized gain on sales and dividends 1   —   8   3  
Realized loss on sales or impairment ( 22 ) ( 19 ) ( 27 ) ( 19 )
Total gain (loss) on equity investments, net $ 298   $ ( 41 ) $ 299   $ 263  

12

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 4        Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
The following table presents our fair value hierarchy for our financial assets (excluding cash balances) measured at fair value on a recurring basis:
 
  July 27, 2025 October 27, 2024
  Level 1 Level 2 Total Level 1 Level 2 Total

  (In millions)
Assets:
Available-for-sale debt security investments
Money market funds* $ 994   $ —   $ 994   $ 3,512   $ —   $ 3,512  
Bank certificates of deposit and time deposits —   66   66   —   103   103  
U.S. Treasury and agency securities 2,500   193   2,693   2,684   14   2,698  
Non-U.S. government securities —   5   5   —   5   5  
Municipal securities —   501   501   —   460   460  
Commercial paper, corporate bonds and medium-term notes —   2,649   2,649   —   2,590   2,590  
Asset-backed and mortgage-backed securities —   623   623   —   654   654  
Total available-for-sale debt security investments $ 3,494   $ 4,037   $ 7,531   $ 6,196   $ 3,826   $ 10,022  
Equity investments with readily determinable values

Publicly traded equity securities $ 1,903   $ —   $ 1,903   $ 723   $ —   $ 723  
Total equity investments with readily determinable values $ 1,903   $ —   $ 1,903   $ 723   $ —   $ 723  
Total $ 5,397   $ 4,037   $ 9,434   $ 6,919   $ 3,826   $ 10,745  

_________________________
*Amounts as of July 27, 2025 and October 27, 2024 include $ 70 million and $ 91 million, respectively, invested in money market funds related to deferred compensation plans. Due to restrictions on the distribution of these funds, they are classified as restricted cash equivalents and are included in deferred income taxes and other assets in the Consolidated Condensed Balance Sheets.
As of July 27, 2025 and October 27, 2024, available-for-sale, short-term and long-term investments not recognized at fair value based upon observable inputs or quoted prices were not material.
We did not have any financial assets measured at fair value on a recurring basis within Level 3 fair value measurements as of July 27, 2025 or October 27, 2024.
Assets and Liabilities without Readily Determinable Values Measured on a Non-recurring Basis
Our equity investments without readily determinable values consist of equity investments in privately held companies. We elected the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes on a prospective basis for certain equity investments without readily determinable fair values and are required to account for any subsequent observable changes in fair value within the statements of operations. These investments are classified as Level 3 within the fair value hierarchy and periodically assessed for impairment when an event or circumstance indicates that a decline in value may have occurred. Impairment losses on equity investments in privately held companies are included in interest and other income (expense), net in the Consolidated Condensed Statement of Operations and were no t material during the three and nine months ended July 27, 2025 and July 28, 2024.
Other
The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash equivalents, accounts receivable, commercial paper notes, and accounts payable and accrued expenses, approximate fair value due to their short maturities. As of July 27, 2025, the aggregate principal amount of long-term senior unsecured notes was $ 5.5 billion and the estimated fair value was $ 5.0 billion. As of October 27, 2024, the aggregate principal amount of long-term senior unsecured notes was $ 5.5 billion and the estimated fair value was $ 5.1 billion. The estimated fair value of long-term senior unsecured notes is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. See Note 9 of the Notes to the Consolidated Condensed Financial Statements for further detail of existing debt.
13

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 5        Derivative Instruments and Hedging Activities
Derivative Financial Instruments
We conduct business in a number of foreign countries, with certain transactions denominated in local currencies, such as the Japanese yen, Israeli shekel, euro and Taiwanese dollar. We use derivative financial instruments, such as foreign currency forward and option contracts, to hedge certain forecasted foreign currency denominated transactions expected to occur typically within the next 24 months. The purpose of our foreign currency management is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated revenues, costs and eventual cash flows. The terms of currency instruments used for hedging purposes are generally consistent with the timing of the transactions being hedged.
We do not use derivative financial instruments for trading or speculative purposes. Derivative instruments and hedging activities, including foreign exchange and interest rate contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge accounting treatment are recognized currently in earnings. All of our derivative financial instruments are recorded at their fair value in other current assets or in accounts payable and accrued expenses.  
Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and foreign exchange derivatives are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income (loss) (AOCI) in stockholders’ equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to foreign exchange derivative instruments included in AOCI as of July 27, 2025 is expected to be reclassified into earnings within 12 months. Changes in fair value caused by changes in time value of option contracts designated as cash flow hedges are excluded from the assessment of effectiveness. The initial value of this excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in the financial statement line item to which the hedge relates. If the transaction being hedged is probable not to occur, we recognize the gain or loss on the associated financial instrument in the consolidated condensed statement of operations. The amount recognized due to discontinuance of cash flow hedges that were probable of not occurring by the end of the originally specified time period was not significant for the three and nine months ended July 27, 2025 and July 28, 2024.
Foreign currency forward contracts are generally used to hedge certain foreign currency denominated assets or liabilities. Accordingly, changes in the fair value of these hedges are recorded in earnings to offset the changes in the fair value of the assets or liabilities being hedged.
As of July 27, 2025 and October 27, 2024, the total outstanding notional amounts of foreign exchange contracts were $ 2.1  billion and $ 2.0  billion, respectively. The fair values of foreign exchange derivative instruments as of July 27, 2025 and October 27, 2024 were not material.
The gain (loss) on derivatives in cash flow hedging relationships recognized in AOCI for derivatives designated as hedging instruments were not material for the three and nine months ended July 27, 2025 and July 28, 2024.
The effects of derivative instruments, both those designated as cash flow hedges and those that are not designated, on the Consolidated Condensed Statements of Operations were not material for the three and nine months ended July 27, 2025 and July 28, 2024.
Credit Risk Contingent Features
If our credit rating were to fall below investment grade, we would be in violation of credit risk contingent provisions of the derivative instruments discussed above, and certain counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was immaterial as of July 27, 2025.
Entering into derivative contracts with banks exposes us to credit-related losses in the event of the banks’ nonperformance. However, our exposure is not considered significant.

14

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 6       Accounts Receivable, Net
We have agreements with various financial institutions to sell accounts receivable and discount promissory notes from selected customers. We sell our accounts receivable generally without recourse. From time to time, we also discount letters of credit issued by customers through various financial institutions. The discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements.
We sold $ 215 million and $ 324 million of account receivables during the three and nine months ended July 27, 2025, respectively. We sold $ 131 million and $ 395 million of account receivables during the three and nine months ended July 28, 2024, respectively. We did no t discount letters of credit issued by customers or discount promissory notes during the three and nine months ended July 27, 2025 and July 28, 2024. Financing charges on the sale of receivables and discounting of letters of credit are included in interest expense in the accompanying Consolidated Condensed Statements of Operations and were not material for all periods presented.
We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. This allowance is based on historical experience, credit evaluations, specific customer collection history and any customer-specific issues we have identified. Changes in circumstances, such as an unexpected material adverse change in a major customer’s ability to meet its financial obligation to us or its payment trends, may require us to further adjust our estimates of the recoverability of amounts due to us. Bad debt expense and any reversals are recorded in marketing and selling expenses in the Consolidated Condensed Statement of Operations.
The balances of allowance for credit losses were not material as of July 27, 2025 and October 27, 2024, and the changes in allowance for credit losses were not material for the three and nine months ended July 27, 2025 and July 28, 2024.
We sell our products principally to manufacturers within the semiconductor and display industries. While we believe that our allowance for credit losses is adequate and represents our best estimate as of July 27, 2025, we continue to closely monitor customer liquidity and industry and economic conditions, which may result in changes to our estimates.

Note 7       Contract Balances and Performance Obligations
Contract Assets and Liabilities
Contract assets primarily result from receivables for goods transferred to customers where payment is conditional upon technical sign off and not just the passage of time. Contract liabilities consist of unsatisfied performance obligations related to advance payments received and billings in excess of revenue recognized. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
Contract assets are generally classified as current and are included in Other Current Assets in the Consolidated Condensed Balance Sheets. Contract liabilities are classified as current or non-current based on the timing of when performance obligations will be satisfied and associated revenue is expected to be recognized.
Contract balances at the end of each reporting period were as follows:

July 27, 2025 October 27, 2024
(In millions)

Contract assets $ 306   $ 269  
Contract liabilities $ 2,470   $ 2,849  

The increase in contract assets during the nine months ended July 27, 2025 was primarily due to an increase in unsatisfied performance obligations related to goods transferred to customers where payment was conditional upon technical sign off.
During the nine months ended July 27, 2025, we recognized revenue of approximately $ 2.2 billion related to contract liabilities at October 27, 2024. Contract liabilities decreased during the nine months ended July 27, 2025 due to revenue recognized related to contract liabilities at October 27, 2024, partially offset by new billings for products and services for which there were unsatisfied performance obligations to customers and revenue had not yet been recognized as of July 27, 2025.
There were no credit losses recognized on our accounts receivables and contract assets during both the nine months ended July 27, 2025 and July 28, 2024.
15

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Performance Obligations
As of July 27, 2025, the amount of remaining unsatisfied performance obligations on contracts, primarily consisting of written purchase orders received from customers, with an original estimated duration of one year or more was approximately $ 2.0 billion, of which approximately 50 % is expected to be recognized within 12 months and the remainder is expected to be recognized within the following 24 months thereafter.
We have elected the available practical expedient to exclude the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Note 8       Balance Sheet Detail
 
July 27,
2025 October 27,
2024

  (In millions)
Inventories
Customer service spares $ 1,761   $ 1,742  
Raw materials 2,002   1,680  
Work-in-process 925   879  
Finished goods
Deferred cost of sales 197   217  
Evaluation inventory 520   459  
Manufactured on-hand inventory 402   444  
Total finished goods 1,119   1,120  
Total inventories $ 5,807   $ 5,421  

 
July 27,
2025 October 27,
2024

  (In millions)
Other Current Assets

Prepaid income taxes and income taxes receivable $ 56   $ 120  
Prepaid expenses and other 1,069   974  
$ 1,125   $ 1,094  

Useful Life July 27,
2025 October 27,
2024

  (In years) (In millions)
Property, Plant and Equipment, Net
Land and improvements $ 537   $ 492  
Buildings and improvements 3 - 30
2,662   2,359  
Demonstration and manufacturing equipment 5 - 8
2,766   2,578  
Furniture, fixtures and other equipment 3 - 5
830   782  
Construction in progress 1,316   898  
Gross property, plant and equipment 8,111   7,109  
Accumulated depreciation ( 3,987 ) ( 3,770 )
$ 4,124   $ 3,339  

16

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

July 27,
2025 October 27,
2024

  (In millions)
Deferred Income Taxes and Other Assets
Non-current deferred income taxes $ 1,288   $ 2,393  
Operating lease right-of-use assets 519   375  

Income tax receivables and other assets 443   314  
$ 2,250   $ 3,082  

July 27,
2025 October 27,
2024

  (In millions)
Accounts Payable and Accrued Expenses
Accounts payable $ 1,769   $ 1,570  

Compensation and employee benefits 1,109   1,188  

Warranty 363   364  
Dividends payable 366   327  
Income taxes payable 157   535  

Operating lease liabilities, current 88   87  

Other 762   749  
$ 4,614   $ 4,820  

 
 
July 27,
2025 October 27,
2024

  (In millions)
Other Liabilities

Defined and postretirement benefit plans $ 152   $ 142  
Operating lease liabilities, non-current 412   259  

Other 467   409  
$ 1,031   $ 810  

Government Assistance
Capital expenditure related incentives reduced gross property, plant and equipment, net by $ 907 million as of July 27, 2025. Contra-depreciation expense was not material during the three and nine months ended July 27, 2025. Operating incentives recognized as a reduction to research, development and engineering expense were $ 6 million and $ 24 million in the three and nine months ended July 27, 2025, respectively. Capital expenditure related incentives reduced our income taxes payable by $ 463 million as of July 27, 2025, of which $ 309 million is in accounts payable and accrued expenses and $ 154 million is in deferred income taxes and other assets , in our Consolidated Condensed Balance Sheets.
17

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 9       Borrowing Facilities and Debt
Revolving Credit Facilities
In February 2025, we entered into a $ 2.0  billion committed unsecured revolving credit agreement (Revolving Credit Agreement) with a group of banks. The Revolving Credit Agreement includes a provision under which we may request an increase in the amount of the facility of up to $ 500  million for a total commitment of no more than $ 2.5  billion, subject to the receipt of commitments from one or more lenders for any such increase and other customary conditions. The Revolving Credit Agreement is scheduled to expire in February 2030, unless extended as permitted under the Revolving Credit Agreement. The Revolving Credit Agreement provides for borrowings that bear interest for each advance at one of two rates selected by us, plus an applicable margin, which varies according to our public debt credit ratings. The Revolving Credit Agreement replaced the prior $ 1.5  billion credit agreement, which was scheduled to expire in February 2026.
No amounts were outstanding under the Revolving Credit Agreement as of July 27, 2025 or under the prior revolving credit agreement as of October 27, 2024.
In addition, we have revolving credit facilities with Japanese banks pursuant to which we may borrow up to approximately $ 55 million in aggregate at any time. Our ability to borrow under these facilities is subject to bank approval at the time of the borrowing request, and any advances will be at rates indexed to the banks’ prime reference rate denominated in Japanese yen. As of July 27, 2025 and October 27, 2024, no amounts were outstanding under these revolving credit facilities.
Short-term Commercial Paper
We have a short-term commercial paper program under which we may issue unsecured commercial paper notes. In June 2025, we increased the total amount of commercial paper notes we may issue under the program from $ 1.5  billion to $ 2.0  billion. The proceeds from the issuances of commercial paper are used for general corporate purposes. As of July 27, 2025, we had commercial paper notes outstanding with an aggregate principal amount of $ 100 million, which were recorded as short-term debt with a weighted-average interest rate of 4.31 % and maturities of 77 days, and as of October 27, 2024, we had $ 100 million of commercial paper notes outstanding and recorded as short-term debt with a weighted-average interest rate of 5.06 % and maturities of 63 days.
Senior Unsecured Notes
Debt outstanding as of July 27, 2025 and October 27, 2024 was as follows:  

Principal Amount
July 27,
2025 October 27,
2024 Effective
Interest Rate Interest
Pay Dates

  (In millions)    
Current portion of long-term debt:
3.900 % Senior Notes Due 2025
$ 700   $ 700   3.944 % April 1, October 1

Total current portion of long-term debt $ 700   $ 700  
Long-term debt:

3.300 % Senior Notes Due 2027
$ 1,200   $ 1,200   3.342 % April 1, October 1
4.800 % Senior Notes Due 2029
700   700   4.844 % June 15, December 15
1.750 % Senior Notes Due 2030
750   750   1.792 % June 1, December 1
5.100 % Senior Notes Due 2035
500   500   5.127 % April 1, October 1
5.850 % Senior Notes Due 2041
600   600   5.879 % June 15, December 15
4.350 % Senior Notes Due 2047
1,000   1,000   4.361 % April 1, October 1
2.750 % Senior Notes Due 2050
750   750   2.773 % June 1, December 1
5,500   5,500  
Total unamortized discount ( 10 ) ( 10 )
Total unamortized debt issuance costs
( 27 ) ( 30 )

Total long-term debt $ 5,463   $ 5,460  

18

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 10       Stockholders’ Equity, Comprehensive Income and Share-Based Compensation
Accumulated Other Comprehensive Income (Loss)
Changes in the components of accumulated other comprehensive income (loss) (AOCI), net of tax, were as follows:
 
Unrealized Gain (Loss) on Investments, Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges Defined and Postretirement Benefit Plans Cumulative Translation Adjustments Total

(in millions)
Balance as of October 27, 2024
$ ( 7 ) $ ( 87 ) $ ( 87 ) $ 13   $ ( 168 )

Other comprehensive income (loss) before reclassifications 7   57   —   —   64  
   Amounts reclassified out of AOCI —   2   —   —   2  
Other comprehensive income (loss), net of tax 7   59   —   —   66  
Balance as of July 27, 2025 $ —   $ ( 28 ) $ ( 87 ) $ 13   $ ( 102 )

Unrealized Gain (Loss) on Investments, Net Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges Defined and Postretirement Benefit Plans Cumulative Translation Adjustments Total

(in millions)
Balance as of October 29, 2023
$ ( 50 ) $ ( 118 ) $ ( 62 ) $ 13   $ ( 217 )

Other comprehensive income (loss) before reclassifications 27   44   —   —   71  
Amounts reclassified out of AOCI 9   —   ( 9 ) —   —  
Other comprehensive income (loss), net of tax 36   44   ( 9 ) —   71  
Balance as of July 28, 2024 $ ( 14 ) $ ( 74 ) $ ( 71 ) $ 13   $ ( 146 )

The tax effects on net income of amounts reclassified from AOCI for the three and nine months ended July 27, 2025 and July 28, 2024 were not material.
Stock Repurchase Program
In March 2025, our Board of Directors approved a common stock repurchase program authorizing $ 10.0  billion in repurchases, which supplemented the previously existing $ 10.0  billion authorization from March 2023. As of July 27, 2025, approximately $ 14.8 billion remained available for future stock repurchases under the repurchase program.
19

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

The following table summarizes our stock repurchases, including and excluding excise tax, for the three and nine months ended July 27, 2025 and July 28, 2024:

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

  (in millions, except per share amount)
Shares of common stock repurchased 6   4   25   13  
Cost of stock repurchased (including excise tax) *
$ 1,038   $ 868   $ 4,037   $ 2,398  
Average price paid per share (including excise tax) *
$ 164.47   $ 222.82   $ 160.95   $ 189.90  
Cost of stock repurchased (excluding excise tax) $ 1,028   $ 861   $ 4,003   $ 2,381  
Average price paid per share (excluding excise tax) $ 162.97   $ 221.27   $ 159.60   $ 188.60  

(*) Stock repurchase amounts include the 1% surcharge on stock repurchases under the Inflation Reduction Act’s excise tax. This excise tax is recorded in equity and reduces the amount available under the repurchase program, as applicable.
We record treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid in capital. If we reissue treasury stock at an amount below our acquisition cost and additional paid in capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings.
Dividends
In June 2025, March 2025 and December 2024, our Board of Directors declared quarterly cash dividends in the amount of $ 0.46 , $ 0.46 and $ 0.40 per share, respectively. The dividend declared in June 2025 is payable in September 2025. Dividends paid during the nine months ended July 27, 2025 and July 28, 2024 totaled $ 1.0 billion and $ 863 million, respectively. We currently anticipate that cash dividends will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interests of our stockholders.
Share-Based Compensation
We have a stockholder-approved equity plan, the Employee Stock Incentive Plan (ESIP), which permits grants to employees of share-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units and performance units. In addition, the plan provides for the automatic grant of restricted stock units to non-employee directors and permits the grant of share-based awards to non-employee directors and consultants. Share-based awards made under the plan may be subject to accelerated vesting under certain circumstances, including in the event of a change in control. In addition, we have an Omnibus Employees’ Stock Purchase Plan (ESPP), which enables eligible employees to purchase our common stock.
During the three and nine months ended July 27, 2025 and July 28, 2024, we recognized share-based compensation expense related to equity awards and ESPP shares. The effect of share-based compensation on the results of operations was as follows: 

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

  (In millions)
Cost of products sold $ 40   $ 33   $ 118   $ 98  
Research, development and engineering 65   53   196   163  
Marketing and selling 21   17   63   53  
General and administrative 32   29   135   122  

Total share-based compensation $ 158   $ 132   $ 512   $ 436  

20

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

The cost associated with share-based awards is typically recognized over the awards’ service period for the entire award on a straight-line basis, adjusting for estimated forfeitures. However, in the case of share-based awards granted to certain members of senior management that allow for partial accelerated vesting in the event of a qualifying retirement based on age and years of service, the compensation expense is recognized once the individual meets the conditions for a qualifying retirement. We calculate estimated forfeiture rate on an annual basis, based on historical forfeiture activities. The cost associated with performance-based equity awards, which include performance and/or market goals, is recognized for each tranche over the service period. The cost of the portion of performance-based equity awards subject to performance goals is recognized based on an assessment of the likelihood that the applicable performance goals will be achieved, and the cost of the portion of performance-based equity awards subject to market goals is recognized based on the assumption of 100 % achievement of the goal.
As of July 27, 2025, we had $ 1.1 billion in total unrecognized compensation expense, net of estimated forfeitures, related to grants of share-based awards under the ESIP and shares issued under the ESPP, which will be recognized over a weighted average period of 2.6 years. As of July 27, 2025, there were 17 million shares available for grant of share-based awards under the ESIP, and an additional 9 million shares available for issuance under the ESPP.

Restricted Stock Units, Restricted Stock, Performance Share Units and Performance Units
A summary of the changes in restricted stock units, restricted stock, performance share units and performance units outstanding under our equity compensation plans during the nine months ended July 27, 2025 is presented below:

Shares Weighted Average
Grant Date Fair Value

  (In millions, except per share amounts)
Outstanding as of October 27, 2024
10   $ 129.31  
Granted 4   $ 166.59  
Vested ( 4 ) $ 127.02  
Canceled —   $ 137.99  
Outstanding as of July 27, 2025
10   $ 145.58  

As of July 27, 2025, 0.8 million additional performance-based awards could be earned based upon achievement of certain levels of specified performance and/or market goals.
A summary of the weighted-average grant date fair value per share of the granted restricted stock units, restricted stock, performance share units and performance units and total fair value vested awards for indicated periods is presented below:

Nine Months Ended
July 27,
2025 July 28,
2024
(In millions, except per share amounts)
Weighted average grant date fair value per share of awards granted $ 166.59   $ 148.07  
Total fair value of vested awards $ 522   $ 468  

During the first quarter of fiscal 2025, certain members of senior management were granted both awards subject solely to time-based vesting requirements and awards that are subject to the achievement of certain levels of specific performance and market goals, in addition to time-based vesting requirements (Performance-Based Awards). These Performance-Based Awards are subject to the achievement of targeted levels of non-GAAP economic profit and targeted levels of total shareholder return (TSR) relative to the TSR of the companies in the Standard & Poor’s 500 Index. Each of these two metrics will be weighted 50 % and will be measured over a three-year period.
The number of Performance-Based Awards that may vest in full after three years ranges from 0 % to 200 % of the target amount. The awards become eligible to vest only if the goals are achieved and will vest only if the grantee remains employed by us through each applicable vesting date, subject to a qualifying retirement based on age and years of service. The awards provide for a partial vesting based on actual performance at the conclusion of the three-year performance period in the event of a qualifying retirement.
21

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Omnibus Employees ’ Stock Purchase Plan
Under the ESPP, substantially all employees may purchase our common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of our common stock at the beginning or end of each 6-month purchase period, subject to certain limits. Our purchasing cycles begin in March and September of each of fiscal year. We issued a total of 1  million shares in each of the nine months ended July 27, 2025 and July 28, 2024. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Underlying assumptions used in the model are outlined in the following table:

Nine Months Ended
July 27,
2025 July 28,
2024

Dividend yield 1.21 % 0.76 %
Expected volatility 42.3 % 35.6 %
Risk-free interest rate 4.27 % 5.27 %
Expected life (in years) 0.5 0.5
Weighted average estimated fair value $ 41.47 $ 53.98

Note 11     Income Taxes
Our provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates and other income tax incentives. It is also affected by events that vary from period to period, such as changes in income tax laws and the resolution of prior years’ income tax filings.
Our effective tax rates for the third quarter of fiscal 2025 and 2024 were 30.6 percent and 13.0 percent, respectively. The effective tax rate for the third quarter of fiscal 2025 was higher than the same period in the prior fiscal year, primarily due to the recognition of a $ 410  million valuation allowance against deferred tax assets related to corporate alternative minimum tax (CAMT) credits. These credits are not expected to be realized as a result of changes in the timing of future tax deductions, following the enactment of the One Big Beautiful Bill Act during the quarter. No prudent and feasible tax-planning strategies are currently available. The amount of the valuation allowance may be adjusted in future quarters if estimates of future taxable income change.
Our effective tax rates for the first nine months of fiscal 2025 and 2024 were 27.2 percent and 13.0 percent, respectively. The effective tax rate for the first nine months of fiscal 2025 was higher than the same period in the prior fiscal year, primarily due to a remeasurement of deferred tax assets resulting from new tax incentive agreements in Singapore and due to the recognition of a valuation allowance related to our CAMT credits, as described above.
22

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 12       Guarantees, Commitments and Contingencies     
Guarantees
In the ordinary course of business, we provide standby letters of credit or other guarantee instruments to third parties as required for certain transactions initiated by either us or our subsidiaries. As of July 27, 2025, the maximum potential amount of future payments that we could be required to make under these guarantee agreements was approximately $ 376 million. We have not recorded any liability in connection with these guarantee agreements beyond that required to appropriately account for the underlying transaction being guaranteed. We do not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these guarantee agreements.
We also have agreements with various banks to facilitate subsidiary banking operations worldwide, including overdraft arrangements, issuance of bank guarantees, and letters of credit. As of July 27, 2025, we have provided parent guarantees to banks for approximately $ 294 million to cover these arrangements.
Legal Matters
From time to time, we receive notification from third parties, including customers and suppliers, seeking indemnification, litigation support, payment of money or other actions by us in connection with claims made against them. In addition, from time to time, we receive notification from third parties claiming that we may be or are infringing or misusing their intellectual property or other rights. We also are subject to various legal proceedings, government investigations or inquiries, and claims, both asserted and unasserted, that arise in the ordinary course of business. These matters are subject to uncertainties, and we cannot predict the outcome of these matters, or governmental inquiries or proceedings that may occur. Although the outcome of the above-described matters, claims and proceedings cannot be predicted with certainty, we do not believe at this time that any of the above-described matters will have a material effect on our consolidated financial condition or results of operations.
Since 2022, we have received multiple subpoenas from government authorities requesting information relating to certain China customer shipments and export controls compliance, including from the U.S. Department of Justice, the U.S. Commerce Department Bureau of Industry and Security, and the U.S. Securities and Exchange Commission. We also have received subpoenas from the U.S. Department of Justice requesting information related to certain federal award applications and information submitted to the federal government. We are cooperating fully with the U.S. government in these matters. We have continued to receive related subpoenas, as well as requests for information, and may in the future receive additional related subpoenas and requests for information from such or other government authorities. Any such matters are subject to uncertainties, and we cannot predict the outcome, nor reasonably estimate a range of loss or penalties, if any, relating to these matters.
23

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Note 13       Industry Segment Operations
Our three reportable segments are: Semiconductor Systems, Applied Global Services (AGS), and Display. As defined under the accounting literature, our chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. Segment information is presented based upon our management organization structure as of July 27, 2025 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to our reportable segments.
The Semiconductor Systems reportable segment includes semiconductor capital equipment to enable materials engineering steps including etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, advanced wafer packaging, and ion implantation.
The AGS segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, 200mm and other equipment and factory automation software for semiconductor, display and other products.
The Display segment includes products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), equipment upgrades and other display technologies for TVs, monitors, laptops, personal computers, smart phones, other consumer-oriented devices and solar energy cells.
Each operating segment is separately managed and has separate financial results that are reviewed by our chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating income is determined based upon internal performance measures used by our chief operating decision-maker. The chief operating decision-maker does not evaluate operating segments using total asset information.
We derive the segment results directly from our internal management reporting system. The accounting policies we use to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics including net revenue and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments.
The Corporate and Other category includes revenues and costs of products not included in our reportable segments, as well as certain operating expenses that are not allocated to our reportable segments and are managed separately at the corporate level. These operating expenses include costs related to certain management, finance, legal, human resources, and research, development and engineering functions provided at the corporate level; and unabsorbed information technology and occupancy. In addition, we do not allocate to our reportable segments severance, asset impairment and any associated charges related to restructuring actions, unless these actions pertain to a specific reportable segment. Segment operating income also excludes interest income/expense and other financial charges and income taxes. Management does not consider the unallocated costs in measuring the performance of the reportable segments.
24

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Net revenue and operating income (loss) for each reportable segment were as follows:

Three Months Ended Nine Months Ended
Net Revenue Operating
Income (Loss) Net Revenue Operating
Income (Loss)

  (In millions)
July 27, 2025:

Semiconductor Systems $ 5,427   $ 1,966   $ 16,038   $ 5,852  
Applied Global Services 1,600   445   4,760   1,338  
Display 263   62   705   144  
Corporate and Other 12   ( 240 ) 65   ( 757 )
Total $ 7,302   $ 2,233   $ 21,568   $ 6,577  
July 28, 2024:

Semiconductor Systems $ 4,924   $ 1,712   $ 14,734   $ 5,157  
Applied Global Services 1,580   467   4,586   1,320  
Display 251   16   674   46  
Corporate and Other 23   ( 253 ) 137   ( 702 )
Total $ 6,778   $ 1,942   $ 20,131   $ 5,821  

Semiconductor Systems and Display revenues are recognized at a point in time. AGS revenue is recognized at a point in time for tangible goods such as spare parts and equipment, and over time for service agreements. The majority of revenue recognized over time is recognized within 12 months of the contract inception.
Two customers accounted for approximately 19 % and 15 %, respectively, of our net revenue for the nine months ended July 27, 2025. No other customer accounted for greater than 10% of our net revenue for the nine months ended July 27, 2025.
Details of goodwill by reportable segment as of July 27, 2025 and October 27, 2024 were as follows:
 
  July 27,
2025 October 27,
2024

  (In millions)
Goodwill by reportable segment
Semiconductor Systems $ 2,476   $ 2,460  
Applied Global Services 1,032   1,032  
Display 199   199  
Corporate and Other 41   41  
$ 3,748   $ 3,732  

From time to time, we acquire companies related to our existing or new markets. During the first nine months of fiscal 2025, goodwill increased primarily due to the preliminary purchase accounting for an acquisition, net of adjustments, which was not material to our results of operations or to our balance sheet.
25

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)

Net revenue by geographic region, determined by the location of customers’ facilities to which products were shipped and services were performed, was as follows:

Three Months Ended Nine Months Ended
  July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except percentages)
China $ 2,548   35   % $ 2,153   32   % 18   % $ 6,565   30   % $ 7,981   40   % ( 18 ) %
Korea 1,160   16   % 1,102   16   % 5   % 4,389   20   % 3,321   16   % 32   %
Taiwan 1,843   25   % 1,148   17   % 61   % 5,023   23   % 2,726   14   % 84   %
Japan 713   10   % 555   8   % 28   % 1,825   9   % 1,573   8   % 16   %
Southeast Asia 195   3   % 428   6   % ( 54 ) % 616   3   % 827   4   % ( 26 ) %
Asia Pacific 6,459   89   % 5,386   79   % 20   % 18,418   85   % 16,428   82   % 12   %
United States 683   9   % 1,053   16   % ( 35 ) % 2,408   11   % 2,665   13   % ( 10 ) %
Europe 160   2   % 339   5   % ( 53 ) % 742   4   % 1,038   5   % ( 29 ) %
Total $ 7,302   100   % $ 6,778   100   % 8   % $ 21,568   100   % $ 20,131   100   % 7   %

Net revenue for Semiconductor Systems by market for the periods presented were as follows:

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024
Foundry, logic and other 69   % 72   % 67   % 66   %
Dynamic random-access memory (DRAM) 22   % 24   % 26   % 30   %
Flash memory (NAND) 9   % 4   % 7   % 4   %

100   % 100   % 100   % 100   %

The reconciling items included in Corporate and Other were as follows:  

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024

  (In millions)
Unallocated net revenue $ 12   $ 23   $ 65   $ 137  
Unallocated cost of products sold and expenses ( 252 ) ( 276 ) ( 822 ) ( 839 )

Total $ ( 240 ) $ ( 253 ) $ ( 757 ) $ ( 702 )

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Table of Contents

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis is provided in addition to the accompanying consolidated condensed financial statements and notes, and for a full understanding of our results of operations and financial condition should be read in conjunction with the consolidated condensed financial statements and notes included in this Form 10-Q and the financial statements and notes for the fiscal year ended October 27, 2024 contained in our Form 10-K filed on December 13, 2024.
This report contains forward-looking statements that involve a number of risks and uncertainties. Examples of forward-looking statements include those regarding our future financial or operating results, customer demand and spending, end-user demand, our and market and industry trends and outlooks, cash flows and cash deployment strategies, declaration of dividends, share repurchases, business strategies and priorities, costs and cost controls, products, competitive positions, management’s plans and objectives for future operations, research and development, acquisitions, investments and divestitures, growth opportunities, restructuring and severance activities, backlog, working capital, liquidity, investment portfolio and policies, taxes, supply chain, manufacturing, properties, legal matters, claims and proceedings, and other statements that are not historical facts, as well as their underlying assumptions. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “potential” and “continue,” the negative of these terms, or other comparable terminology. All forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in Part II, Item 1A, “Risk Factors,” below and elsewhere in this report. These and many other factors could affect our future financial condition and operating results and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by us or on our behalf. Forward-looking statements are based on management’s estimates, projections and expectations as of the date hereof, and we undertake no obligation to revise or update any such statements.

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Overview
We provide equipment, services and software to the semiconductor, display, and related industries. Our customers include manufacturers of semiconductor wafers and chips, liquid crystal and organic light-emitting diode (OLED) displays, and other electronic devices. Our customers’ products are used in a wide variety of products such as personal computing devices, mobile phones, artificial intelligence (AI) and data center servers, automobiles, connected devices, industrial applications and consumer electronics. Each of our segments is subject to variable industry conditions, as demand for equipment and services can change depending on supply and demand for chips, display technologies and other electronic devices, as well as other factors, such as global economic, political and market conditions, and the nature and timing of technological advances in fabrication processes.
Our strategic priorities include developing products that help solve customers’ challenges at technology inflections, growing our service business, and expanding our served market opportunities in the semiconductor and display industries. Our long-term growth strategy requires continued development of new materials engineering capabilities, including products and platforms that enable expansion into new and adjacent markets. Our significant investments in research, development and engineering (RD&E) are intended to enable us to deliver new products and technologies before the emergence of strong demand, allowing customers to incorporate these products into their manufacturing plans during early-stage technology selection. We collaborate closely with our global customers to design systems and processes to meet their technical and production requirements.
Our future operating results depend to a considerable extent on our ability to maintain a competitive advantage in the equipment and service products we provide. Development cycles depend on whether the product is an enhancement of an existing product, which typically has a shorter development cycle, or a new product, which typically has a longer development cycle. Most of our existing products resulted from internal development activities and innovations involving new technologies, materials and processes. In certain instances, we acquire technologies, either in existing or new product areas, to complement our existing technology capabilities and to reduce time to market. Product development and manufacturing activities occur primarily in the United States, Europe, Israel, and Asia. Our portfolio of equipment and service products are highly technical and are sold primarily through a direct sales force.
We believe that it is critical to make substantial investments in RD&E to assure the availability of innovative technology that meets the current and projected requirements of our customers’ most advanced designs. We have and continue to invest in RD&E in order to continue to offer new products and technologies.
We operate in three reportable segments: Semiconductor Systems, Applied Global Services® (AGS), and Display. A summary of financial information for each reportable segment is found in Note 13 of Notes to Consolidated Condensed Financial Statements. A discussion of factors that could affect our operations is set forth under “Risk Factors” in Part II, Item 1A, which is incorporated herein by reference.
Our results are driven primarily by customer spending on capital equipment and services to support key technology transitions or to increase production volume in response to worldwide demand for semiconductors and displays.
The Semiconductor Systems segment is comprised primarily of capital equipment used to fabricate semiconductor chips. Spending by semiconductor customers, which include companies that operate in the foundry, logic, memory, and other semiconductor chip markets, is driven by demand for products such as smartphones, mobile devices, personal computers, servers for artificial intelligence (AI) and data centers, automobiles, clean energy, storage, and other products, and the nature and timing of technological advances in fabrication processes. The growth of data and emerging end-market drivers such as AI, the internet of things, 5G networks, electric and autonomous vehicles and augmented and virtual reality are also creating the next wave of growth for the industry. As a result, products within the Semiconductor Systems segment are subject to significant changes in customer requirements, including transitions to smaller dimensions, increasingly complex chip architectures, new materials and an increasing number of applications. Spending can also depend on customer facility readiness and timeline for installation of capital equipment at customer sites. Development efforts are focused on solving customers’ key technical challenges in patterning, transistor, interconnect, process control, and packaging performance.
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The AGS segment provides services, spares and factory automation software to customer fabrication plants globally to help customers optimize performance of our large, global installed base of semiconductor, display and other equipment. The AGS segment also includes 200mm and other equipment, which is shipped to many customers globally that serve the non-leading-edge end markets. Demand for AGS’ service and spares is driven by our large and growing installed base of manufacturing systems, and customers’ needs to shorten ramp times, improve system performance, and optimize factory output and operating costs. Industry conditions that affect AGS’ sales of spares and services are primarily characterized by changes in semiconductor manufacturers’ wafer starts and utilization rates, growth of the installed base of equipment and growing service intensity of newer tools. Our strategy is to continue to shift the AGS’ service and spares business to a subscription agreement model, improving customer factory performance and optimizing operating costs, and providing us a more predictable revenue stream.
The Display segment encompasses products for manufacturing liquid crystal and OLED displays, and other display technologies for TVs, monitors, laptops, personal computers (PC), tablets, smart phones, other consumer-oriented devices, equipment upgrades and solar energy cells. The segment is focused on expanding its presence through technologically-differentiated equipment and products that provide customers with improved performance and yields. Display segment growth depends primarily on consumer demand for increasingly larger and more advanced TVs and high-resolution displays for mobile devices and information technology (IT) products, including laptops, monitors and tablets, as well as new form factors, including thin, light, curved and flexible displays, and new applications such as augmented and virtual reality. The timing of customer investment in manufacturing equipment is also affected by the timing of next-generation process development and of capacity expansion to meet end-market demand.
The Corporate and Other category includes revenues and costs of product not included in our reportable segments, as well as certain operating expenses that are not allocated to our reportable segments and are managed separately at the corporate level. These operating expenses include costs for certain management, finance, legal, human resources, and RD&E functions performed at the corporate level; and unabsorbed information technology and occupancy. In addition, we do not allocate to our reportable segments severance, asset impairment and any associated charges related to restructuring actions, unless these actions pertain to a specific reportable segment.
The United States government has implemented export regulations for U.S. semiconductor technology sold or provided to customers in China, which have limited our ability to provide certain products and services to customers in China, over the past several years. The U.S. government continues to issue new export licensing requirements, and additional updates and other requirements that have had the effect of further limiting our ability to provide certain products and services to customers outside the U.S., including in China. Also, the United States has recently announced changes to its trade policy, including increased tariffs on imports. These actions have caused substantial uncertainty and have resulted in retaliatory measures, including new tariffs on U.S. goods imposed by China and other countries. Some of these actions have been followed by announcements of limited exemptions and temporary pauses. For a description of these risks, see the risk factors entitled “Business and Industry Risks - Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products and services relative to local and global competitors” and “Business and Industry Risks - We are exposed to risks and uncertainty related to recent changes in trade policies, and increased tariffs and trade disputes” in Part II, Item 1A, “Risk Factors.”
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Results of Operations
Fiscal 2025 and 2024 each contain 52 weeks and the first nine months of fiscal 2025 and 2024 each contained 39 weeks.
The following table presents certain significant measurements for the periods presented:
 
  Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except per share amounts and percentages)

Net revenue $ 7,302  $ 6,778  $ 524  $ 21,568  $ 20,131  $ 1,437 

Gross margin 48.8  % 47.3  % 1.5 points 48.9  % 47.5  % 1.4 points
Operating income $ 2,233  $ 1,942  $ 291  $ 6,577  $ 5,821  $ 756 
Operating margin 30.6  % 28.7  % 1.9 points 30.5  % 28.9  % 1.6 points
Net income $ 1,779  $ 1,705  $ 74  $ 5,101  $ 5,446  $ (345)
Earnings per diluted share $ 2.22  $ 2.05  $ 0.17  $ 6.29  $ 6.52  $ (0.23)

Net revenue by segment for the periods presented were as follows:

Three Months Ended Nine Months Ended
  July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except percentages)
Semiconductor Systems $ 5,427  74  % $ 4,924  73  % 10  % $ 16,038  75  % $ 14,734  73  % 9  %
Applied Global Services 1,600  22  % 1,580  23  % 1  % 4,760  22  % 4,586  23  % 4  %
Display 263  4  % 251  4  % 5  % 705  3  % 674  3  % 5  %
Corporate and Other 12  —  % 23  —  % (48) % 65  —  % 137  1  % (53) %
Total $ 7,302  100  % $ 6,778  100  % 8  % $ 21,568  100  % $ 20,131  100  % 7  %

Net revenue for Semiconductor Systems by market for the periods presented were as follows:

Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 July 27,
2025 July 28,
2024
Foundry, logic and other 69  % 72  % 67  % 66  %
Dynamic random-access memory (DRAM) 22  % 24  % 26  % 30  %
Flash memory (NAND) 9  % 4  % 7  % 4  %

100  % 100  % 100  % 100  %

Net revenue in the three and nine months ended July 27, 2025 increased as compared to the same periods in the prior year. Gross margin in the three months ended July 27, 2025 increased compared to the same period in the prior year, primarily driven by higher net revenue, favorable changes in customer and product mix, and an increase in average selling prices. Gross margin in the nine months ended July 27, 2025 increased compared to the same period in the prior year, primarily driven by higher net revenue, favorable changes in customer and product mix, an increase in average selling prices, and lower material and manufacturing costs.
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The Semiconductor Systems segment continued to represent the largest contributor of net revenue. Semiconductor Systems net revenue increased for the three and nine months ended July 27, 2025 compared to the same periods in the prior year as customers continued to make strategic investments in new capacity and new technology transitions. Foundry and logic customers’ spending increased for the three and nine months ended July 27, 2025, compared to the same periods in the prior year driven primarily by higher customer investments in leading-edge manufacturing technologies. Memory customers’ spending in the three and nine months ended July 27, 2025 was higher compared to the same periods in the prior year primarily due to increased customer investments in NAND fabrication equipment upgrades. The increase in memory customers’ investments in NAND in the first nine months of fiscal 2025 compared to the same period in the prior year was partially offset by decreased investments in DRAM technology transitions.
Our AGS net revenue in the three and nine months ended July 27, 2025 increased compared to the same periods in the prior year primarily due to an increase in net revenue associated with long-term service agreements and customer spending on spares, partially offset by lower customer spending on 200mm equipment.
Our Display net revenue increased in the three and nine months ended July 27, 2025 compared to the same periods in the prior year primarily due to higher customer investments in display fabrication equipment for TVs and IT products including laptops, monitors and tablets, partially offset by lower customer investments in display fabrication equipment for mobile devices.
Net revenue by geographic region, determined by the location of customers’ facilities to which products were shipped and services were performed, was as follows:

Three Months Ended Nine Months Ended
  July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except percentages)
China $ 2,548  35  % $ 2,153  32  % 18  % $ 6,565  30  % $ 7,981  40  % (18) %
Korea 1,160  16  % 1,102  16  % 5  % 4,389  20  % 3,321  16  % 32  %
Taiwan 1,843  25  % 1,148  17  % 61  % 5,023  23  % 2,726  14  % 84  %
Japan 713  10  % 555  8  % 28  % 1,825  9  % 1,573  8  % 16  %
Southeast Asia 195  3  % 428  6  % (54) % 616  3  % 827  4  % (26) %
Asia Pacific 6,459  89  % 5,386  79  % 20  % 18,418  85  % 16,428  82  % 12  %
United States 683  9  % 1,053  16  % (35) % 2,408  11  % 2,665  13  % (10) %
Europe 160  2  % 339  5  % (53) % 742  4  % 1,038  5  % (29) %
Total $ 7,302  100  % $ 6,778  100  % 8  % $ 21,568  100  % $ 20,131  100  % 7  %

Net revenue increased from customers in Korea in the three and nine months ended July 27, 2025 compared to the same periods in the prior year primarily due to investments in semiconductor equipment partially offset by lower customer spending in display fabrication equipment.
Net revenue increased from customers in China in the three months ended July 27, 2025 compared to the same period in the prior year primarily due to higher investments in semiconductor equipment and display fabrication equipment.
Net revenue decreased from customers in China in the nine months ended July 27, 2025 compared to the same period in the prior year primarily due to lower investments in semiconductor equipment, partially offset by higher customer spending on spares and services and display fabrication equipment.
Net revenue decreased from customers in the United States and Southeast Asia in the three and nine months ended July 27, 2025 compared to the same periods in the prior year primarily due to decreased investments in semiconductor equipment and decreases in investments in 200mm equipment.
The changes in net revenue from customers in all other regions in the three and nine months ended July 27, 2025 compared to the same periods in the prior year primarily reflected changes in investment in semiconductor equipment and spending on services.
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Operating Expenses
Operating expenses for the periods presented were as follows:

  Three Months Ended Nine Months Ended
  July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions)
Research, development and engineering (RD&E) $ 901  $ 836  $ 65  $ 2,653  $ 2,375  $ 278 
Marketing and selling $ 224  $ 205  $ 19  $ 646  $ 621  $ 25 
General and administrative (G&A) $ 204  $ 222  $ (18) $ 667  $ 745  $ (78)

RD&E expenses for the three and nine months ended July 27, 2025 increased compared to the same periods in the prior year primarily due to additional headcount to support our ongoing investments in product development initiatives and higher depreciation expenses, consistent with our growth strategy. We continued to prioritize RD&E investments in technical capabilities and critical RD&E programs in current and new markets.
Marketing and selling expenses for the three and nine months ended July 27, 2025 increased compared to the same periods in the prior year primarily due to higher employee related expenses.
G&A expenses in the three and nine months ended July 27, 2025 decreased compared to the same periods in the prior year primarily due to lower spending on professional services.
Interest Expense and Interest and Other Income (expense), net
Interest expense and interest and other income (expense), net for the periods presented were as follows:

  Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions)
Interest expense $ 66  $ 63  $ 3  $ 198  $ 181  $ 17 
Interest and other income (expense), net $ 396  $ 81  $ 315  $ 625  $ 617  $ 8 

Interest expense incurred was primarily associated with issued senior unsecured notes. Interest expense in the three months ended July 27, 2025 remained relatively flat compared to the same period in the prior year. Interest expense in the nine months ended July 27, 2025 increased as a result of the issuance of senior unsecured notes in June 2024, compared to the same period in the prior year.
Interest and other income (expense), net in the three months ended July 27, 2025 increased compared to the same period in the prior year, primarily driven by higher net gain on equity investments, partially offset by lower interest income driven by lower cash balances and a decrease in market rates. Interest and other income (expense), net in the nine months ended July 27, 2025 increased slightly compared to the same period in the prior year, primarily driven by a gain on asset sale during the second quarter of fiscal 2025, partially offset by lower interest income driven by lower cash balances and a decrease in market rates.
Income Taxes
Provision for income taxes and effective tax rates for the periods presented were as follows: 

  Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except percentages)
Provision for income taxes $ 784  $ 255  $ 529  $ 1,903  $ 811  $ 1,092 
Effective income tax rate 30.6  % 13.0  % 17.6 points 27.2  % 13.0  % 14.2 points

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Our provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates and other income tax incentives. It is also affected by events that vary from period to period, such as changes in income tax laws and the resolution of prior years’ income tax filings.
Our effective tax rates for the third quarter of fiscal 2025 and 2024 were 30.6 percent and 13.0 percent, respectively. The effective tax rate for the third quarter of fiscal 2025 was higher than the same period in the prior fiscal year, primarily due to the recognition of a $410 million valuation allowance against deferred tax assets related to corporate alternative minimum tax (CAMT) credits. These credits are not expected to be realized as a result of changes in the timing of future tax deductions, following the enactment of the One Big Beautiful Bill Act during the quarter. No prudent and feasible tax-planning strategies are currently available. The amount of the valuation allowance may be adjusted in future quarters if estimates of future taxable income change.
Our effective tax rates for the first nine months of fiscal 2025 and 2024 were 27.2 percent and 13.0 percent, respectively. The effective tax rate for the first nine months of fiscal 2025 was higher than the same period in the prior fiscal year, primarily due to a remeasurement of deferred tax assets resulting from new tax incentive agreements in Singapore and due to the recognition of a valuation allowance related to our CAMT credits, as described above.

Segment Operating Income (Loss)
Operating income (loss) by segment for the periods presented were as follows: 

  Three Months Ended Nine Months Ended
July 27,
2025 July 28,
2024 Change July 27,
2025 July 28,
2024 Change

  (In millions, except percentages and ratios)
Operating income (loss)
   Semiconductor Systems $ 1,966  $ 1,712  $ 254  15  % $ 5,852  $ 5,157  $ 695  13  %
   Applied Global Services 445  467  (22) (5) % 1,338  1,320  18  1  %
   Display 62  16  46  288  % 144  46  98  213  %
   Corporate and Other (240) (253) 13  (5) % (757) (702) (55) 8  %
     Total $ 2,233  $ 1,942  $ 291  $ 6,577  $ 5,821  $ 756 
Operating margin
   Semiconductor Systems 36.2  % 34.8  % 1.4 points 36.5  % 35.0  % 1.5 points
   Applied Global Services 27.8  % 29.6  % (1.8) points 28.1  % 28.8  % (0.7) points
   Display 23.6  % 6.4  % 17.2 points 20.4  % 6.8  % 13.6 points

Semiconductor System’s operating margin for the three months ended July 27, 2025 increased compared to the same period in the prior year primarily driven by higher net revenue, favorable changes in customer and product mix, and an increase in average selling prices, partially offset by increased RD&E expenses. Semiconductor System’s operating margin for the nine months ended July 27, 2025 increased compared to the same period in the prior year primarily driven by higher net revenue, favorable changes in customer and product mix, lower material and manufacturing costs, and an increase in average selling prices, partially offset by increased RD&E expenses.
AGS’ operating margin for the three and nine months ended July 27, 2025 decreased compared to the same periods in the prior year primarily due to a decrease in 200mm equipment net revenue, and higher excess and obsolete inventory charges, partially offset by higher net revenue from services and spares.
Display’s operating margin for the three and nine months ended July 27, 2025 increased compared to the same periods in the prior year primarily due to the increase in Display net revenue and favorable product mix.
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Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
Measurement of Credit Losses for Accounts Receivable and Contract Assets . In July 2025, the Financial Accounting Standards Board (FASB) issued an accounting standard update to provide a practical expedient that simplifies the calculation of expected credit losses (Topic 326). The practical expedient allows an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset, therefore, an entity will no longer need to develop reasonable and supportable forecasts of future economic conditions. This authoritative guidance will be effective for us beginning with our interim and annual reporting for fiscal year 2027, with early adoption permitted. We are evaluating the effect of this guidance on our consolidated financial statements.
Disaggregation of Income Statements Expenses . In November 2024, the FASB issued an accounting standard update to improve income statement expenses disclosures (Subtopic 220-40). The standard requires more detailed information related to the types of expenses, including (among other items) the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each interim and annual income statement’s expense caption, as applicable. This authoritative guidance can be applied prospectively or retrospectively and will be effective for us in fiscal 2028 for annual periods and in the first quarter of fiscal 2029 for interim periods, with early adoption permitted. We are evaluating the effect of this guidance on our consolidated financial statements and related disclosures.
Improvements to Income Tax Disclosures . In December 2023, the FASB issued an accounting standard update to improve income tax disclosures (Topic 740). The standard prescribes specific categories for the components of the effective tax rate reconciliation, requires disclosure of income taxes paid by jurisdiction, and modifies other income tax-related disclosures. This authoritative guidance will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted. We are evaluating the effect of this guidance on our consolidated financial statements and related disclosures.
Improvements to Reportable Segment Disclosures . In November 2023, the FASB issued an accounting standard update to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses (Topic 280). The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (CODM) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and contains other disclosure requirements. This authoritative guidance will be effective for us in fiscal 2025 for annual periods and in the first quarter of fiscal 2026 for interim periods and the adoption is expected to expand the disclosures in our notes to the consolidated financial statements.
Accounting Standards Adopted
For a description of recently adopted accounting standards, including the date of adoption and the effect, if any, on our consolidated financial statements, see Note 1 “Basis of Presentation and Recently Adopted Accounting Standards , ” of the Notes to Consolidated Condensed Financial Statements.
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Financial Condition, Liquidity and Capital Resources
Our cash, cash equivalents and investments consisted of the following:
 
July 27,
2025 October 27,
2024

  (In millions)
Cash and cash equivalents $ 5,384  $ 8,022 
Short-term investments 1,630  1,449 
Long-term investments 4,133  2,787 
Total cash, cash-equivalents and investments $ 11,147  $ 12,258 

Sources and Uses of Cash
A summary of cash provided by (used in) operating, investing, and financing activities was as follows:
 
Nine Months Ended
July 27, 2025 July 28, 2024

  (In millions)
Cash provided by operating activities $ 5,130  $ 6,102 
Cash used in investing activities $ (2,643) $ (1,256)
Cash used in financing activities $ (5,146) $ (2,701)

Operating Activities
Cash from operating activities for the nine months ended July 27, 2025 was $5.1 billion, which reflects net income adjusted for the effect of non-cash charges and changes in working capital components. Significant non-cash charges included depreciation, amortization, gain or loss on investments or asset sale, share-based compensation and deferred income taxes. Cash provided by operating activities decreased in the first nine months of fiscal 2025 compared to the same period in the prior year primarily due to lower collections of customer receivable balances, higher payments for income taxes and higher vendor payments.
We have agreements with various financial institutions to sell accounts receivable and discount promissory notes from selected customers. We sell our accounts receivable generally without recourse. From time to time, we also discount letters of credit issued by customers through various financial institutions. The discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements. We sold $324 million and $395 million of account receivables during the nine months ended July 27, 2025 and July 28, 2024, respectively. We did not discount letters of credit issued by customers or discount promissory notes during the nine months ended July 27, 2025 and July 28, 2024, respectively.
Our working capital was $11.8 billion as of July 27, 2025 and $12.8 billion as of October 27, 2024.
Days sales outstanding of our accounts receivable at July 27, 2025 and July 28, 2024 were 72 days and 67 days, respectively. Days sales outstanding varies due to the timing of shipments and payment terms. The increase in days sales outstanding was primarily due to higher accounts receivable balance as a result of the timing of customer payments, and unfavorable revenue linearity.
Investing Activities
We used $2.6 billion of cash in investing activities during the nine months ended July 27, 2025. Capital expenditures totaled $1.5 billion, purchases of investments, net of proceeds from sales and maturities of investments, were $1.2 billion, net proceeds from asset sale were $33 million, and net cash paid for acquisition was $29 million, during the nine months ended July 27, 2025.
Our investment portfolio consists principally of investment grade money market mutual funds, U.S. Treasury and agency securities, municipal bonds, corporate bonds and mortgage-backed and asset-backed securities, as well as equity securities. We regularly monitor the credit risk in our investment portfolio and take appropriate measures, which may include the sale of certain securities, to manage such risks prudently in accordance with our investment policies.
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Financing Activities
We used $5.1 billion of cash in financing activities during the nine months ended July 27, 2025, consisting primarily of cash used for repurchases of common stock of $4.0 billion, cash dividends paid to stockholders totaling $1.0 billion, and tax withholding payments for vested equity awards of $210 million, partially offset by proceeds received from common stock issuances of $129 million under our employee’ stock purchase plan.
We currently anticipate that cash dividends will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interests of our stockholders.
In March 2025, our Board of Directors approved a common stock repurchase program authorizing $10.0 billion in repurchases, which supplemented the previously existing $10.0 billion authorization from March 2023. As of July 27, 2025, approximately $14.8 billion remained available for future stock repurchases under the repurchase program.
We have credit facilities for unsecured borrowings in various currencies of up to $2.1 billion, of which $2.0 billion is comprised of a committed revolving credit agreement (Revolving Credit Agreement) with a group of banks. The Revolving Credit Agreement is scheduled to expire in February 2030, unless extended as permitted under the Revolving Credit Agreement. The Revolving Credit Agreement includes financial and other covenants with which we were in compliance as of July 27, 2025. No amounts were outstanding under the Revolving Credit Agreement as of July 27, 2025 or under the prior revolving credit agreement as of October 27, 2024. See Note 9, Borrowing Facilities and Debt, of the Notes to the Consolidated Condensed Financial Statements for further discussion related to our Revolving Credit Agreement and other credit facilities.
We have a short-term commercial paper program under which we may from time to time issue unsecured commercial paper notes. In June 2025, we increased the total amount of commercial paper notes we may issue under the program from $1.5 billion to $2.0 billion. The proceeds from the issuances of commercial paper are used for general corporate purposes. As of July 27, 2025, we had commercial paper notes outstanding with an aggregate principal amount of $100 million.
We had senior unsecured notes in the aggregate principal amount of $6.2 billion outstanding as of July 27, 2025. See Note 9 of the Notes to the Consolidated Condensed Financial Statements for additional discussion of existing debt.
We may seek to refinance our existing debt and may incur additional indebtedness depending on our capital requirements, general corporate purposes and the availability of financing.
In the ordinary course of business, we provide standby letters of credit or other guarantee instruments to third parties as required for certain transactions initiated by either us or our subsidiaries. We also have agreements with various banks to facilitate subsidiary banking operations worldwide, including overdraft arrangements, issuance of bank guarantees, and letters of credit. See Note 12 of the Notes to the Consolidated Condensed Financial Statements for additional discussion related to our guarantee agreements and arrangements.
Others
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (Tax Act). The Tax Act requires a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries. The transition tax expense is payable in installments over eight years, with eight percent due in each of the first five years starting with fiscal 2018. As of July 27, 2025, we have one remaining payment of $255 million, payable in February of 2026.
On August 9, 2022, the U.S. government enacted the U.S. CHIPS and Science Act (CHIPS Act). The CHIPS Act creates a 25% investment tax credit for certain investments in domestic semiconductor manufacturing. The credit is provided for qualifying property, which is placed in service after December 31, 2022, for which construction begins before January 1, 2027, and is treated as a government grant recognized against property, plant and equipment and a reduction of income taxes payable. We recognize this investment tax credit when there is reasonable assurance that we will qualify for the credit and the benefit will be received. As of July 27, 2025, our current income taxes payable was reduced by $309 million and future income taxes payable will be reduced by $154 million, both of which are due to the investment tax credit.
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On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA). The OBBBA includes a broad range of tax reform provisions including extending and modifying certain key Tax Act provisions and expanding certain Chips Act incentives. These changes include full expensing of domestic research costs, immediate expensing of qualifying property and increasing the investment tax credit for certain investments in domestic semiconductor manufacturing from 25% to 35%. Key tax provisions of the OBBBA are designed to accelerate tax deductions but that may have a detrimental impact on our ability to use certain tax credits. The use of certain tax credits may not be economically viable if it requires electing to forgo significant tax deductions. Most of the provisions are effective beginning in fiscal years 2026 or 2027, with immediate expensing of qualifying property being effective in fiscal 2025. We will continue to evaluate the full impact of these legislative changes as more guidance becomes available.
Various countries where we do business have enacted or plan to enact new tax laws to implement the global minimum tax regimes based on the Organization for Economic Cooperation and Development Base Erosion and Profit Shifting Project, and where enacted, the rules began to be effective in fiscal 2025. The impact of the currently enacted legislation is not expected to be material to our fiscal 2025 financial results. We continue to monitor developments and evaluate impacts, if any, of these rules on our results of operations and cash flows. The adoption and effective dates of these rules vary by country and could increase tax complexity and uncertainty and may adversely affect our provision for income taxes, in future years.
We have been granted additional conditional reduced tax rates in Singapore that expire beginning in fiscal 2030.
Although cash requirements will fluctuate based on the timing and extent of factors such as those discussed above, our management believes that cash generated from operations, together with the liquidity provided by existing cash balances and borrowing capability, will be sufficient to satisfy our liquidity requirements for the next 12 months. For further details regarding our operating, investing and financing activities, see the Consolidated Condensed Statements of Cash Flows in this report.
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Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within our control and will not be known for prolonged periods of time. These uncertainties include those discussed in Part II, Item 1A, “Risk Factors.”
Management believes that the following is a critical accounting estimate:

Income Taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. The calculation of our provision for income taxes and effective tax rate involves significant judgment in estimating the impact of uncertainties in the application of complex and evolving tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations and financial condition. We recognize a current tax liability for the estimated amount of income taxes payable on tax returns for the current fiscal year. Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the book and tax bases of assets and liabilities. Deferred tax assets are also recognized for net operating loss and tax credit carryovers. Deferred tax assets and liabilities are adjusted to reflect the effects of enacted changes in tax rates, laws and status, including changes in tax incentives. We record a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all, of the assets will not be realized. In making this assessment, we weigh all available positive and negative evidence, including expected future taxable income, existing taxable temporary differences, carryback potential and prudent and feasible tax-planning strategies.
The acceleration of tax deductions for U.S. tax purposes, under the One Big Beautiful Bill Act, limits our ability to use our corporate minimum tax credits. As a result, we have recorded a full valuation allowance against this deferred tax asset. We reviewed potential tax-planning strategies to accelerate income recognition within a reasonable time, but none were prudent and feasible. We will continue to evaluate new strategies as additional One Big Beautiful Bill Act guidance is issued.
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Item 3:       Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, including fluctuations in interest rate and foreign currency exchange rates. For information about our exposure to market risks as of October 27, 2024, see Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended October 27, 2024.
Interest Rate Risk
Available-for-sale Debt Securities - The market value of our investments in available-for-sale securities was approximately $3.5 billion at July 27, 2025. An immediate hypothetical 100 basis point increase in interest rates would result in a decrease in the fair value of investments as of July 27, 2025 of approximately $37 million.
Debt - At July 27, 2025, the aggregate principal of long-term senior unsecured notes issued by us was $5.5 billion with an estimated fair value of $5.0 billion. A hypothetical decrease in interest rates of 100 basis points would result in an increase in the fair value of our long-term senior notes issuances of approximately $389 million at July 27, 2025. From time to time we use interest rate swaps or rate lock agreements to mitigate the potential impact of changes in benchmark interest rates on interest expense and cash flows.
Foreign Currency Risk
Certain of our operations are conducted in foreign currencies, such as Japanese yen, Israeli shekel, euro and Taiwanese dollar. Hedges are used to reduce, but not eliminate, the impact of foreign currency exchange rate movements on the consolidated balance sheet, statement of operations, and statement of cash flows.
We use primarily foreign currency forward contracts to offset the impact of foreign exchange movements on non-U.S. dollar denominated monetary assets and liabilities. The foreign exchange gains and losses on the assets and liabilities are recorded in interest and other income (expense), net and are offset by the gains and losses on the hedges.
We use foreign currency forward and option contracts to hedge a portion of anticipated non-U.S. dollar denominated revenues and expenses expected to occur within the next 24 months. Gains and losses on these hedging contracts generally mitigate the effect of currency movements on our net revenue, cost of products sold, and operating expenses. A hypothetical 10% adverse change in foreign currency exchange rates relative to the U.S. Dollar would result in a decrease in the fair value of these hedging contracts of $181 million at July 27, 2025.
We do not use foreign currency forward or option contracts for trading or speculative purposes.
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Item 4.     Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in ensuring that information required to be disclosed was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the third quarter of fiscal 2025, there were no changes in the internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
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PART II. OTHER INFORMATION

Item 1.       Legal Proceedings
The information set forth under “Legal Matters” in Note 12 in Notes to Consolidated Condensed Financial Statements is incorporated herein by reference. See also “Risk Factors – Legal, Compliance, and Other Risks – We are exposed to risks related to legal proceedings, claims and investigations.” in Part II, Item 1A, “Risk Factors.”
 
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Item 1A:       Risk Factors
The risk factors set forth below include any material changes to, and supersede the description of, the risk factors disclosed in Part II, Item 1A of our most recent Form 10-Q. These factors could materially and adversely affect our business, financial condition or results of operations and cause reputational harm, and should be carefully considered in evaluating our business, in addition to other information presented elsewhere in this report.
Business and Industry Risks
The industries we serve can be volatile and difficult to predict.
We are a supplier to the global semiconductor and display and related industries, which historically have been cyclical and are subject to volatility in customer demand. Factors that impact demand for our products and services include technology inflections and advances in fabrication processes, new and emerging technologies and market drivers, such as demand for high-bandwidth memory and other forms of advanced packaging and technologies related to artificial intelligence and data center computing, production capacity relative to demand for semiconductor chips and electronic devices, end-user demand, the timing of customers’ investment in new or expanded fabrication plants, customers’ capacity utilization, production volumes, access to affordable capital, business and consumer buying patterns and general economic and political conditions. Artificial intelligence is evolving rapidly and the expected timing and amount of investments related to artificial intelligence can change significantly. As a result, it is difficult to accurately forecast demand for our products related to artificial intelligence. Changes in demand can affect the timing and amounts of customer investments in technology and manufacturing equipment and can significantly impact our operating results. The amount and mix of our customers’ capital equipment spending between different products and technologies can also significantly impact our operating results.
To meet rapidly changing demand, we must accurately forecast demand and effectively manage our resources, investments, production capacity, supply chain, workforce, inventory, and other components of our business. We may incur unexpected or additional costs to align our business operations with changes in demand. If we do not effectively manage these challenges, our business performance and operating results may be adversely impacted. Even with effective allocation of resources and management of costs, our gross and operating margins, cash flows and earnings may be adversely impacted during periods of changing demand.
We are exposed to risks associated with an uncertain global economy.
Uncertain or adverse economic and business conditions, including uncertainties and volatility in the financial markets, national debt, fiscal or monetary concerns, inflation and changes in interest rates, bank failures, tariffs and trade policies, and economic recession, could materially and adversely impact our operating results. Markets for our products and services depend largely on demand for semiconductor chips and electronic devices. Uncertain or adverse economic and business conditions have caused, and may in the future cause, our customers to delay, cancel or refrain from purchasing our equipment or services, which could negatively impact demand for our products and services, reduce our backlog, increase our inventory, and materially and adversely impact our operating results. Uncertain or adverse economic and business conditions may also cause customers to scale back operations, exit businesses, merge with other manufacturers, or file for bankruptcy protection, which can reduce our revenue and result in additional inventory or bad debt expense. These conditions may also lead to consolidation or strategic alliances among other equipment manufacturers, which could adversely affect our ability to compete effectively.
Volatility in demand for semiconductor chips and electronic devices have in the past caused, and may in the future cause, a shortage of parts and materials needed to manufacture our products. Such shortages, and shipment delays due to transportation capacity and interruptions may adversely impact our suppliers’ ability to meet our requirements. Accelerated digital transformation may further increase demand and exacerbate shortages and strain our manufacturing capacity, which may adversely impact our ability to meet customer demand and have an adverse impact on our revenues, operating results and financial condition.
Uncertain economic and industry conditions and supply chain challenges make it more difficult to accurately forecast operating and financial results and make business and investment decisions. If we do not appropriately manage our business operations it could have a material and adverse impact on our business performance and financial condition. We may be required to implement additional cost reduction efforts, including restructuring activities, which may adversely impact our ability to capitalize on opportunities. Even during periods of economic uncertainty or lower demand, we must continue to invest in research and development and maintain a global business infrastructure to compete effectively and support our customers, which can have a negative impact on our operating results.
We maintain an investment portfolio that is subject to general credit, liquidity, market and interest rate risks. The risks to our investment portfolio may be exacerbated if financial market conditions deteriorate due to rising inflation, rising interest rates, bank failures or economic recession and the value and liquidity of the investment portfolio and returns on pension assets
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could be negatively impacted and lead to impairment charges. We also maintain cash balances in various bank accounts globally to fund normal operations. If any of these financial institutions become insolvent, it could limit our ability to access cash in the affected accounts, which could affect our ability to manage our operations.
We are exposed to the risks of operating a global business.
We have product development, engineering, manufacturing, sales and other operations distributed throughout many countries, and some of our business activities are concentrated in certain geographic areas. In the three-month period ended July 27, 2025, approximately 91% of our net revenue was to customers in regions outside the United States. As a result of the global nature of our operations, our business performance and results of operations may be adversely affected by a number of factors, including:
• uncertain or adverse global economic, political and business conditions and demand;
• global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, and international trade disputes, including new and changing export regulations, and their impact on our ability to export products and provide services to customers;
• positions taken by the United States, Chinese and other governmental agencies regarding national, commercial or security issues posed by the development, sale or export of certain products, technologies and raw materials, including critical materials and critical minerals;
• political instability, social unrest, terrorism, acts of war or other geopolitical turmoil, such as the conflict in the Middle East, in locations where we have operations, suppliers or sales, or that may influence the value chain of the industries we serve;
• cybersecurity incidents;
• political and social attitudes, laws, rules, regulations and policies within countries, including in China, the United States, and countries in Europe and Asia, that favor domestic companies over non-domestic companies, including efforts to promote the development and growth of local competitors and reduce dependence on foreign semiconductor equipment and manufacturing capabilities through policies and financial incentives;
• efforts to influence us to conduct more or less of our operations and sourcing in a particular country;
• different and changing local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of laws and regulations;
• ineffective or inadequate legal protection of intellectual property rights in certain countries;
• interruptions to our or our suppliers’ supply chain;
• the availability of raw materials, including critical materials and critical minerals, and increases and volatility of commodity, energy and shipping costs;
• delays or restrictions on personnel travel and in shipping materials or products;
• geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements;
• challenges in hiring and integrating workers in different countries, and in effectively managing a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues;
• the ability to develop relationships with local customers, suppliers and governments;
• fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, Israeli shekel, euro, Taiwanese dollar, Singapore dollar, Chinese yuan or Korean won;
• the need to provide technical support in different locations around the world;
• performance of geographically diverse third-party providers, including certain engineering, software development, manufacturing, information technology and other functions;
• service interruptions from utilities, transportation, data hosting or telecommunications providers;
• impacts of regional or global health epidemics and natural disasters and extreme and chronic weather events on our operations and those of our customers and suppliers, which may be exacerbated by climate change;
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• the increasing need for a mobile workforce and travel to different regions; and
• uncertainties with respect to economic growth rates in various countries, including for the manufacture and sale of semiconductors and displays in the developing economies of certain countries.
Global trade issues and changes in and uncertainties with respect to trade policies and export regulations, including import and export license requirements, trade sanctions, tariffs and international trade disputes, have adversely impacted and could further adversely impact our business and operations, and reduce the competitiveness of our products and services relative to local and global competitors.
A majority of our products and services are delivered to customers in jurisdictions outside of the United States, including China, Taiwan and Korea. We also purchase a significant portion of equipment and supplies from suppliers outside of the United States. There is inherent risk, based on the complex relationships among the United States and the countries in which we conduct our business, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that affect the semiconductor industry. The United States and other countries have imposed and may continue to impose new trade restrictions and export regulations, have levied tariffs and taxes on certain goods, and could significantly increase or impose new tariffs on a broad array of goods. Trade restrictions and export regulations, or increased or new tariffs and additional taxes, including any retaliatory measures, can negatively impact end-user demand and customer investment in semiconductor equipment, increase our supply chain complexity and our manufacturing costs, decrease margins, reduce the competitiveness of our products, or restrict our ability to sell products, provide services or purchase necessary equipment and supplies, any or all of which could have a material and adverse effect on our business, results of operations, or financial condition.
For example, certain international sales depend on our ability to obtain export licenses, and our inability to obtain such licenses has limited and could further limit our markets and negatively impact our business. Over the past several years, the U.S. government announced additional export regulations for U.S. semiconductor technology sold in China, including wafer fabrication equipment and related parts and services, with disparate impact on companies in different jurisdictions, which have limited the market for certain of our products and services, adversely impacted our revenues, and increased our exposure to foreign and Chinese domestic competition. The U.S. Department of Commerce expanded export license requirements for U.S. companies that sell certain products or provide certain services to entities in China whose actions or functions are intended to support military end uses, eliminated certain export license exceptions for exports of certain items to China, added certain Chinese companies to its “Entity List,” making those companies subject to additional licensing requirements, and expanded licensing requirements for exports to China of items for use in the development or production of integrated circuits and certain technologies. These regulations require us to obtain additional export licenses to supply certain of our products or provide services to certain customers in China. Obtaining export licenses may be difficult and time-consuming, and there is no assurance we will be issued licenses on a timely basis or at all. Our inability to obtain such licenses could limit our sales in China, may cause us to be displaced by foreign and Chinese domestic companies and adversely affect our results of operations. The implementation and interpretation of these complex rules and other regulatory actions taken by the U.S. government are uncertain and evolving and may make it more challenging for us to manage our operations and forecast our operating results. The U.S. and other governments may promulgate new or additional export licensing or other requirements that have the effect of further limiting our ability to provide certain products and services to customers outside the U.S., including China. The U.S. government may also revise or expand existing requirements or issue guidance clarifying the scope and application of these requirements, which could change the impact of these rules on our business and manufacturing operations. The U.S. government may also continue to add customers to its “Entity List” or promulgate additional restrictions, or take measures that could disrupt our product shipments or the provision of services to certain customers. These and other potential future regulatory changes could materially and adversely affect our business, results of operations or financial condition.
As a global business with customers, suppliers and operations in many countries around the world, from time to time we may receive inquiries from government authorities about transactions between us and certain foreign entities. For example, since 2022, we have received multiple subpoenas from government authorities requesting information relating to certain China customer shipments and export controls compliance, including from the U.S. Department of Justice, the U.S. Commerce Department Bureau of Industry and Security, and the U.S. Securities and Exchange Commission. We are cooperating fully with the U.S. government in these matters. We have continued to receive related subpoenas, as well as requests for information, and may in the future receive additional related subpoenas and requests for information from such or other government authorities. Any such inquiries are subject to uncertainties, and we cannot predict the outcome of these inquiries, or any other governmental inquires or proceedings that may occur. Any violation or alleged violation of law or regulations could result in significant legal costs or in legal proceedings in which we or our employees could be subjected to fines and penalties and could result in restrictions on our business and damage to our global brand and reputation, and could have a material and adverse impact on our business operations, financial condition and results of operations.
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Furthermore, government authorities may take retaliatory actions, impose conditions that require the use of local suppliers or partnerships with local companies, require the license or other transfer of sensitive data or intellectual property, or engage in other efforts to promote local businesses and local competitors, which could have a material and adverse impact on our business. Many of these challenges are present in China and Korea, markets that represent a significant portion of our business.
We are exposed to risks and uncertainty related to recent changes in trade policies, and increased tariffs and trade disputes.
Our business, financial condition and results of operations may be adversely affected by uncertainty and changes in trade policies, including tariffs, and trade disputes between the United States and other countries. The United States has recently announced changes to its trade policy, including increased tariffs on imports. These actions have caused substantial uncertainty and have resulted in retaliatory measures, including new tariffs on U.S. goods imposed by China and other countries. Some of these actions have been followed by announcements of limited exemptions and temporary pauses.
A significant number of our customers and suppliers are located outside of the United States. Increases in tariffs increase our costs and can negatively impact our margins and reduce the competitiveness of our products due to the increase in the cost of importing materials, parts and components used in manufacturing our products. Tariffs can also increase supply chain complexity and may make it more difficult to purchase necessary equipment and supplies to manufacture our products. Increases in tariffs, including reciprocal and sector-based tariffs, also increase the cost to our customers of importing our products, which could harm customer demand for our products. Uncertainty or volatility with respect to tariffs and trade disputes may also make it difficult for us and our customers and suppliers to make and execute business and capital equipment investment plans; lead to global or regional inflation and economic recession, and reduce demand for semiconductor chips and electronic devices; cause our customers to delay or cancel orders or negatively impact our competitive position; impede our ability to purchase materials, including critical materials and critical minerals, and disrupt supply chain and logistics. We may take actions to mitigate the impact of increases in tariffs and changes in trade policies, but there can be no assurance that we will be successful, and any such actions could result in additional costs, manufacturing delays or other difficulties, as well as additional risks, and may not be effective. Any or all of these factors may have a material and adverse impact on our business, financial condition and results of operations.
We are exposed to risks associated with a highly concentrated customer base.
A relatively limited number of customers account for a substantial portion of our business. Our customer base is geographically concentrated, particularly in China, Taiwan and Korea. As a result, the actions of even a single customer have exposed and can further expose our business and operating results to greater volatility. Export regulations that apply to customers in certain countries, such as those in China, also have exposed and can further expose our business and operating results to greater volatility. The geographic concentration of our customer base could shift over time as a result of changes in technology and competitive landscape, as well as government policy and incentives to develop regional semiconductor industries. The mix and type of customers, and sales to any single customer, including as a result of changes in government policy, have varied and may vary significantly from quarter to quarter and from year to year, and have had, and may continue to have, a significant impact on our operating results. Our products are configured to customer specifications, and changing, rescheduling or canceling orders may result in significant, non-recoverable costs. If customers do not place orders, or they substantially reduce, delay or cancel orders, we may not be able to replace the business, which may have a material and adverse impact on our results of operations and financial condition. The concentration of our customer base increases our risks related to the financial condition of our customers, and the deterioration in financial condition of a single customer or the failure of a single customer to perform its obligations could have a material and adverse effect on our results of operations and cash flow. To the extent our customers experience liquidity constraints, we may incur bad debt expense, which may have a significant impact on our results of operations. Major customers may seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which may have a negative impact on our business, cash flow, revenue and gross margins.
Supply chain disruptions, manufacturing interruptions or delays, or the failure to accurately forecast customer demand, could affect our ability to meet customer demand, lead to higher costs, or result in excess or obsolete inventory.
Our business depends on our timely supply of products and services to meet the changing requirements of our customers, which depends in part on the timely delivery of parts, materials and services from suppliers and contract manufacturers. Volatility in demand for our products and worldwide demand for semiconductor chips and electronic devices can impact our suppliers’ ability to meet our demand requirements, and may from time to time result in a shortage of parts, materials and services needed to manufacture our products. Such shortages, as well as delays in and unpredictability of shipments due to transportation interruptions, may adversely impact our manufacturing operations and our ability to meet customer demand. Supply chain constraints may increase costs of logistics and parts for our products and may cause us to pass on increased costs
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to our customers, which may lead to reduced demand for our products and materially and adversely impact our operating results. Supply chain disruptions have in the past caused, and may from time to time cause, delays in our equipment production and delivery schedules, which can lead to our business performance becoming significantly dependent on quarter-end production and delivery schedules, and could have an adverse impact on our operating and financial results.
Cybersecurity incidents affecting our suppliers have caused, and may from time to time cause, difficulties and delays in our ability to obtain parts, materials and services needed to manufacture our products and provide services, and have adversely impacted, and may from time to time adversely impact, our manufacturing operations, our ability to meet customer demand, and our operating results. Failure to timely recover from such delays could materially and adversely affect our business, financial condition and results of operations, and may also cause our business and financial outlook to be inaccurate.
We may further experience supply chain disruptions, significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or services, increased costs, customer order cancellations or reduced demand for our products as a result of:
• global trade issues and changes in and uncertainties with respect to trade and export regulations, trade policies and sanctions, tariffs, international trade disputes, particularly those relating to exports of certain technologies to China, where a significant portion of our supply chain is located, and any retaliatory measures, that adversely impact us or our direct or sub-tier suppliers;
• political instability, social unrest, terrorism, acts of war or other geopolitical turmoil, such as the conflict in the Middle East, in locations where we or our customers or suppliers have manufacturing, research, engineering or other operations;
• the failure or inability to accurately forecast demand and obtain quality parts on a cost-effective basis;
• volatility in the availability and cost of parts, commodities, energy and shipping related to our products, including increased costs due to rising inflation or interest rates or other market conditions, as well as uncertainties arising from the imposition of tariffs and any retaliatory measures;
• difficulties or delays in obtaining required import or export licenses and approvals;
• shipment delays due to transportation interruptions or capacity constraints;
• a worldwide shortage of semiconductor components as a result of sharp increases in demand for semiconductor products in general;
• limited availability of critical materials and critical minerals and feasible alternatives to materials subject to existing or proposed regulations to limit their use (such as hydrofluorocarbons and per- and polyfluoroalkyl substances), which are found in parts, components, process chemicals and other materials supplied to us or used in the manufacturing or operations of our products; and
• impacts of natural disasters, extreme and chronic weather events (which may be exacerbated by climate change), regional or global health epidemics, or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or fires).
If a supplier fails to meet our requirements concerning quality, cost, intellectual property protection, socially-responsible and sustainable business practices, or other performance factors, or does not meet regulatory requirements applicable to our supply chain, we may transfer our business to alternative sources, which could result in manufacturing delays, additional costs or other difficulties, and impair our ability to protect, enforce and extract the full value of our intellectual property rights and the intellectual property rights of our customers and other third parties. These outcomes could have a material and adverse impact on our business and competitive position and subject us to legal proceedings and claims. If we are unable to meet our customers’ demand for a prolonged period due to our inability to obtain certain parts or components from suppliers on a timely basis or at all, our business, results of operations and customer relationships could be adversely impacted.
If we need to rapidly increase our business and manufacturing capacity to meet increases in demand or expedited shipment schedules, this may strain our manufacturing and supply chain operations, and negatively impact our working capital. If we are unable to accurately forecast demand for our products, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. If we purchase or commit to purchase inventory in anticipation of customer demand that does not materialize, or such inventory is rendered obsolete by the rapid pace of technological change, or if customers reduce, delay or cancel orders, we may incur excess or obsolete inventory charges.
We are exposed to various factors that impact the industries in which we operate.
The global semiconductor, display and related industries are characterized by factors that impact demand for and the profitability of our products and services and our operating results, including:
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