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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 April 28, 2024
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
logo.jpg
Applied Materials, Inc.
(Exact name of registrant as specified in its charter)
Delaware94-1655526
(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: (408727-5555

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $.01 per shareAMATThe 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 filerAccelerated filer Non-accelerated filerSmaller reporting companyEmerging 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 April 28, 2024: 827,974,828



APPLIED MATERIALS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 28, 2024
TABLE OF CONTENTS
 
  Page
PART I. FINANCIAL INFORMATION
Item 1:
Item 2:
Item 3:
Item 4:
PART II. OTHER INFORMATION
Item 1:
Item 1A:
Item 2:
Item 3:
Item 4:
Item 5:
Item 6:



PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
Three Months EndedSix Months Ended
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
(Unaudited)
Net revenue$6,646 $6,630 $13,353 $13,369 
Cost of products sold3,493 3,536 6,996 7,130 
Gross profit3,153 3,094 6,357 6,239 
Operating expenses:
Research, development and engineering785 775 1,539 1,546 
Marketing and selling209 194 416 391 
General and administrative247 214 523 421 
Total operating expenses1,241 1,183 2,478 2,358 
Income from operations1,912 1,911 3,879 3,881 
Interest expense59 61 118 120 
Interest and other income (expense), net141 (73)536 (23)
Income before income taxes1,994 1,777 4,297 3,738 
Provision for income taxes272 202 556 446 
Net income$1,722 $1,575 $3,741 $3,292 
Earnings per share:
Basic$2.08 $1.87 $4.50 $3.90 
Diluted$2.06 $1.86 $4.47 $3.88 
Weighted average number of shares:
Basic830 843 831 844 
Diluted836 847 837 848 
See accompanying Notes to Consolidated Condensed Financial Statements.
3


APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months EndedSix Months Ended
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
(Unaudited)
Net income$1,722 $1,575 $3,741 $3,292 
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale investments(9)5 18 28 
Change in unrealized net loss on derivative instruments3 (5)36 (61)
Change in defined and postretirement benefit plans  (9) 
Other comprehensive income (loss), net of tax(6) 45 (33)
Comprehensive income$1,716 $1,575 $3,786 $3,259 
See accompanying Notes to Consolidated Condensed Financial Statements.
4

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
April 28,
2024
October 29,
2023
 
ASSETS
Current assets:
Cash and cash equivalents$7,085 $6,132 
Short-term investments472 737 
Accounts receivable, net4,778 5,165 
Inventories5,691 5,725 
Other current assets1,239 1,388 
Total current assets19,265 19,147 
Long-term investments2,983 2,281 
Property, plant and equipment, net2,958 2,723 
Goodwill3,732 3,732 
Purchased technology and other intangible assets, net273 294 
Deferred income taxes and other assets2,738 2,552 
Total assets$31,949 $30,729 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt$99 $100 
Accounts payable and accrued expenses4,174 4,297 
Contract liabilities2,611 2,975 
Total current liabilities6,884 7,372 
Long-term debt5,463 5,461 
Income taxes payable656 833 
Other liabilities747 714 
Total liabilities13,750 14,380 
Stockholders’ equity:
Common stock8 8 
Additional paid-in capital9,321 9,131 
Retained earnings46,871 43,726 
Treasury stock(37,829)(36,299)
Accumulated other comprehensive loss(172)(217)
Total stockholders’ equity18,199 16,349 
Total liabilities and stockholders’ equity$31,949 $30,729 
Amounts as of April 28, 2024 are unaudited. Amounts as of October 29, 2023 are derived from the October 29, 2023 audited consolidated financial statements.
See accompanying Notes to Consolidated Condensed Financial Statements.
5

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

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended April 28, 2024SharesAmountSharesAmount
(Unaudited)
Balance as of January 28, 2024831 $8 $9,109 $45,480 1,196 $(37,002)$(166)$17,429 
Net income— — — 1,722 — — — 1,722 
Other comprehensive income (loss), net of tax— — — — — — (6)(6)
Dividends declared ($0.40 per common share)
— — — (331)— — — (331)
Share-based compensation— — 134 — — — — 134 
Net issuance under stock plans1 — 78 — — — — 78 
Common stock repurchases(4)— — — 4 (827)— (827)
Balance as of April 28, 2024828 $8 $9,321 $46,871 1,200 $(37,829)$(172)$18,199 

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Six Months Ended April 28, 2024SharesAmountSharesAmount
(Unaudited)
Balance as of October 29, 2023833 $8 $9,131 $43,726 1,191 $(36,299)$(217)$16,349 
Net income— — — 3,741 — — — 3,741 
Other comprehensive income (loss), net of tax— — — — — — 45 45 
Dividends declared ($0.72 per common share)
— — — (596)— — — (596)
Share-based compensation— — 304 — — — — 304 
Net issuance under stock plans4 — (114)— — — — (114)
Common stock repurchases(9)— — — 9 (1,530)— (1,530)
Balance as of April 28, 2024828 $8 $9,321 $46,871 1,200 $(37,829)$(172)$18,199 


























6

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(In millions, except per share amount)
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended April 30, 2023SharesAmountSharesAmount
(Unaudited)
Balance as of January 29, 2023845 $8 $8,605 $39,389 1,175 $(34,347)$(235)$13,420 
Net income— — — 1,575 — — — 1,575 
Dividends declared ($0.32 per common share)
— — — (268)— — — (268)
Share-based compensation— — 113 — — — — 113 
Net issuance under stock plans2 — 93 — — — — 93 
Common stock repurchases(7)— — — 7 (804)— (804)
Balance as of April 30, 2023840 $8 $8,811 $40,696 1,182 $(35,151)$(235)$14,129 


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Six Months Ended April 30, 2023SharesAmountSharesAmount
(Unaudited)
Balance as of October 30, 2022844 $8 $8,593 $37,892 1,173 $(34,097)$(202)$12,194 
Net income— — — 3,292 — — — 3,292 
Other comprehensive income (loss), net of tax— — — — — — (33)(33)
Dividends declared ($0.58 per common share)
— — — (488)— — — (488)
Share-based compensation— — 261 — — — — 261 
Net issuance under stock plans5 — (43)— — — — (43)
Common stock repurchases(9)— — — 9 (1,054)— (1,054)
Balance as of April 30, 2023840 $8 $8,811 $40,696 1,182 $(35,151)$(235)$14,129 

See accompanying Notes to Consolidated Condensed Financial Statements.


7

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
Six Months Ended
April 28, 2024April 30, 2023
(Unaudited)
Cash flows from operating activities:
Net income$3,741 $3,292 
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization187 249 
Share-based compensation304 261 
Deferred income taxes(206)(136)
Other(247)174 
Changes in operating assets and liabilities:
Accounts receivable387 552 
Inventories34 (8)
Other current and non-current assets152 113 
Accounts payable and accrued expenses(255)(613)
Contract liabilities(364)231 
Income taxes payable(17)396 
Other liabilities1 51 
Cash provided by operating activities3,717 4,562 
Cash flows from investing activities:
Capital expenditures(486)(542)
Cash paid for acquisitions, net of cash acquired (18)
Proceeds from sales and maturities of investments1,113 669 
Purchases of investments(1,223)(730)
Cash used in investing activities(596)(621)
Cash flows from financing activities:
Proceeds from issuance of commercial paper200 595 
Repayments of commercial paper(200)(400)
Proceeds from common stock issuances 119 111 
Common stock repurchases(1,520)(1,050)
Tax withholding payments for vested equity awards(233)(154)
Payments of dividends to stockholders(532)(439)
Repayments of principal on finance leases(13)(9)
Cash used in financing activities(2,179)(1,346)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents942 2,595 
Cash, cash equivalents and restricted cash equivalents — beginning of period6,233 2,100 
Cash, cash equivalents and restricted cash equivalents — end of period$7,175 $4,695 
Reconciliation of cash, cash equivalents and restricted cash equivalents
Cash and cash equivalents$7,085 $4,588 
Restricted cash equivalents included in deferred income taxes and other assets90 107 
Total cash, cash equivalents and restricted cash equivalents$7,175 $4,695 
Supplemental cash flow information:
Cash payments for income taxes$606 $221 
Cash refunds from income taxes$5 $51 
Cash payments for interest$102 $102 
See accompanying Notes to Consolidated Condensed Financial Statements.
8

APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1    Basis of Presentation
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 29, 2023 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 29, 2023 (2023 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 six months ended April 28, 2024 are not necessarily indicative of future operating results. Our fiscal year ends on the last Sunday in October of each year. Fiscal 2024 and 2023 contain 52 weeks each and the first six months of fiscal 2024 and 2023 each contained 26 weeks.
Certain prior-year amounts have been reclassified to conform to current-year presentation.
Use of Estimates
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. On an ongoing basis, we evaluate our estimates, including those related to standalone selling price (SSP) related to revenue recognition, accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property, plant and equipment, fair values of share-based awards, warranty, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. In connection with our periodic review of estimated useful lives of the property, plant, and equipment effective as of the beginning of fiscal 2024, we have increased the estimated useful lives of certain assets. The updated estimated useful lives for financial reporting purposes are as follows: buildings and improvements, 3 to 30 years with certain buildings and improvements’ useful lives increased by 5 years; demonstration and manufacturing equipment increased to between 5 to 8 years. The estimated useful lives for the remaining asset categories remained unchanged from fiscal 2023.
The change in accounting estimate is being applied on a prospective basis to the assets on our balance sheet as of October 29, 2023, as well as to subsequent asset purchases. Based on the net carrying amounts of assets in use as of the end of fiscal 2023, the impact of this change was a reduction of $30 million and $67 million in depreciation expense during the three and six months ended April 28, 2024, respectively, and an increase of $0.03 and $0.06 in both basic and diluted earnings per share for the three and six months ended April 28, 2024, respectively.
Recent Accounting Pronouncements
Accounting Standards Adopted
Contract Assets and Contract Liabilities from Revenue Contracts with Customers in a Business Combination. In October 2021, the Financial Accounting Standards Board (FASB) issued an accounting standard update to improve the accounting for contract assets and contract liabilities from revenue contracts with customers in a business combination (Topic 805). This amendment improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. We adopted this authoritative guidance in the first quarter of fiscal 2024 and the impact of the adoption depends on the facts and circumstances of future acquisitions.
9


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


Accounting Standards Not Yet Adopted
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 new 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, with early adoption permitted. We are evaluating the effect of this new guidance on our consolidated condensed financial statements.
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. In June 2022, the 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. This authoritative guidance will be effective for us in the first quarter of fiscal 2025, with early adoption permitted. We are evaluating the effect of this new guidance 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 employee 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 EndedSix Months Ended
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
 (In millions, except per share amounts)
Numerator:
Net income $1,722 $1,575 $3,741 $3,292 
Denominator:
Weighted average common shares outstanding830 843 831 844 
Effect of weighted dilutive restricted stock units and employee stock purchase plan shares6 4 6 4 
Denominator for diluted earnings per share836 847 837 848 
Basic earnings per share$2.08 $1.87 $4.50 $3.90 
Diluted earnings per share$2.06 $1.86 $4.47 $3.88 
Potentially weighted dilutive securities 2  2 
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.
10


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:
 
April 28, 2024CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,359 $— $— $1,359 
Cash equivalents:
Money market funds*
1,420 — — 1,420 
Bank certificates of deposit and time deposits42 — — 42 
U.S. Treasury and agency securities1,993 — — 1,993 
Municipal securities44 — — 44 
Commercial paper, corporate bonds and medium-term notes2,227 — — 2,227 
Total cash equivalents5,726 — — 5,726 
Total cash and cash equivalents$7,085 $— $— $7,085 
Short-term and long-term investments:
Bank certificates of deposit and time deposits$19 $ $ $19 
U.S. Treasury and agency securities401  5 396 
Non-U.S. government securities**
6   6 
Municipal securities443  7 436 
Commercial paper, corporate bonds and medium-term notes764 1 7 758 
Asset-backed and mortgage-backed securities573 1 10 564 
Total fixed income securities2,206 2 29 2,179 
Publicly traded equity securities543 447 3 987 
Equity investments in privately held companies231 74 16 289 
Total equity investments774 521 19 1,276 
Total short-term and long-term investments$2,980 $523 $48 $3,455 
Total cash, cash equivalents and investments$10,065 $523 $48 $10,540 
_________________________
*Excludes $90 million of restricted cash equivalents invested in money market funds related to deferred compensation plans.
**Includes Canadian provincial government debt.
11


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


October 29, 2023CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,417 $— $— $1,417 
Cash equivalents:
Money market funds*
3,260 — — 3,260 
Municipal securities26 — — 26 
Commercial paper, corporate bonds and medium-term notes1,429 — — 1,429 
Total cash equivalents4,715 — — 4,715 
Total cash and cash equivalents$6,132 $— $— $6,132 
Short-term and long-term investments:
Bank certificates of deposit and time deposits$18 $ $ $18 
U.S. Treasury and agency securities381  7 374 
Non-U.S. government securities**
7  1 6 
Municipal securities438  11 427 
Commercial paper, corporate bonds and medium-term notes760  12 748 
Asset-backed and mortgage-backed securities502  15 487 
Total fixed income securities2,106  46 2,060 
Publicly traded equity securities543 171 16 698 
Equity investments in privately held companies192 78 10 260 
Total equity investments735 249 26 958 
Total short-term and long-term investments$2,841 $249 $72 $3,018 
Total cash, cash equivalents and investments$8,973 $249 $72 $9,150 
 _________________________
*Excludes $101 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 April 28, 2024 and April 30, 2023, interest income from our cash, cash equivalents and fixed income securities was $118 million and $61 million, respectively.
During the six months ended April 28, 2024 and April 30, 2023, interest income from our cash, cash equivalents and fixed income securities was $221 million and $92 million, respectively.

Maturities of Investments
The following table summarizes the contractual maturities of our investments as of April 28, 2024:
 
CostEstimated
Fair Value
 (In millions)
Due in one year or less$460 $456 
Due after one through five years1,169 1,155 
Due after five years4 4 
No single maturity date*1,347 1,840 
Total$2,980 $3,455 
 _________________________
*Securities with no single maturity date include publicly traded and privately held equity securities and asset-backed and mortgage-backed securities.

12


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


Gains and Losses on Investments
During the three and six months ended April 28, 2024 and April 30, 2023 gross realized gains and losses on our fixed income portfolio were not material.
As of April 28, 2024 and October 29, 2023, 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 six months ended April 28, 2024 and April 30, 2023, 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 six months ended April 28, 2024 and April 30, 2023 were as follows:
Three Months EndedSix Months Ended
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
 (In millions)
Publicly traded equity securities
Unrealized gain $25 $1 $312 $19 
Unrealized loss(1)(11)(3)(27)
Realized gain on sales and dividends2 1 2 1 
Realized loss on sales or impairment (1)(1)(2)
Equity investments in privately held companies
Unrealized gain 8 1 12 
Unrealized loss(4)(9)(10)(11)
Realized gain on sales and dividends1  3 5 
Realized loss on sales or impairment (117) (117)
Total gain (loss) on equity investments, net$23 $(128)$304 $(120)

13


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


Note 4       Fair Value Measurements
Our financial assets are measured and recorded at fair value on a recurring basis, except for equity investments in privately held companies. These equity investments are generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred. Our nonfinancial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
Fair Value Hierarchy
We use the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
 
Level 1 — Quoted prices in active markets for identical assets or liabilities;
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Our investments consist primarily of debt securities that are classified as available-for-sale and recorded at their fair values. In determining the fair value of investments, we use pricing information from pricing services that value securities based on quoted market prices and models that utilize observable market inputs. In the event a fair value estimate is unavailable from a pricing service, we generally obtain non-binding price quotes from brokers. In addition, to validate pricing information obtained from pricing services, we periodically perform supplemental analysis on a sample of securities. We review any significant unanticipated differences identified through this analysis to determine the appropriate fair value. As of April 28, 2024, substantially all of our available-for-sale, short-term and long-term investments were recognized at fair value that was determined based upon observable inputs or quoted prices.
Our equity investments with readily determinable values consist of publicly traded equity securities. These investments are measured at fair value using quoted prices for identical assets in an active market and the changes in fair value of these equity investments are recognized in the consolidated statements of operations.
Investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments.


14


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


Assets Measured at Fair Value on a Recurring Basis
Financial assets (excluding cash balances) measured at fair value on a recurring basis are summarized below:
 
 April 28, 2024October 29, 2023
 Level 1Level 2TotalLevel 1Level 2Total
 (In millions)
Assets:
Available-for-sale debt security investments
Money market funds*$1,510 $ $1,510 $3,361 $ $3,361 
Bank certificates of deposit and time deposits 61 61  18 18 
U.S. Treasury and agency securities2,365 24 2,389 331 43 374 
Non-U.S. government securities 6 6  6 6 
Municipal securities 480 480  453 453 
Commercial paper, corporate bonds and medium-term notes 2,985 2,985  2,177 2,177 
Asset-backed and mortgage-backed securities 564 564  487 487 
Total available-for-sale debt security investments$3,875 $4,120 $7,995 $3,692 $3,184 $6,876 
Equity investments with readily determinable values
Publicly traded equity securities$987 $ $987 $698 $ $698 
Total equity investments with readily determinable values$987 $ $987 $698 $ $698 
Total$4,862 $4,120 $8,982 $4,390 $3,184 $7,574 
_________________________
*Amounts as of April 28, 2024 and October 29, 2023 include $90 million and $101 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.
We did not have any financial assets measured at fair value on a recurring basis within Level 3 fair value measurements as of April 28, 2024 or October 29, 2023.
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 were not material during the three and six months ended April 28, 2024 and were $117 million during the three and six months ended April 30, 2023. These impairment losses are included in interest and other income (expense), net in the Consolidated Condensed Statement of Operations.
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 April 28, 2024, the aggregate principal amount of long-term senior unsecured notes was $5.5 billion and the estimated fair value was $4.9 billion. As of October 29, 2023, the aggregate principal amount of long-term senior unsecured notes was $5.5 billion and the estimated fair value was $4.7 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 10 of the Notes to the Consolidated Condensed Financial Statements for further detail of existing debt.
15


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 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 April 28, 2024 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 six months ended April 28, 2024 and April 30, 2023.
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 April 28, 2024 and October 29, 2023, the total outstanding notional amounts of foreign exchange contracts were $1.8 billion and $1.7 billion. The fair values of foreign exchange derivative instruments as of April 28, 2024 and October 29, 2023 were not material.
We are also exposed to interest rate risk associated with our potential future borrowings. During the six months ended April 28, 2024, we entered into a series of interest rate contracts to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt. These instruments were designated as cash flow hedges at inception and will be settled upon the issuance of debt.
The gain (loss) on derivatives in cash flow hedging relationships recognized in AOCI for derivatives designated as hedging instruments for the indicated periods were as follows:
Three Months EndedSix Months Ended
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
(In millions)
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts$(6)$2 $28 $(47)
Interest rate contracts15  20  
Total$9 $2 $48 $(47)
16


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


The effects of derivative instruments and hedging activities on the Consolidated Condensed Statements of Operations were as follows:
Three Months Ended
April 28, 2024April 30, 2023
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships
Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are RecordedAmount of Gain or (Loss)
Reclassified
from AOCI into
Consolidated Condensed Statement of Operations
Amount of Gain (Loss) Excluded from Effectiveness Testing
Recognized in
Consolidated Condensed Statement of Operations
Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are RecordedAmount of Gain or (Loss)
Reclassified
from AOCI into
Consolidated Condensed Statement of Operations
Amount of Gain (Loss) Excluded from Effectiveness Testing
Recognized in
Consolidated Condensed Statement of Operations
(In millions)
Foreign Exchange Contracts:
Net revenue$6,646 $9 $(1)$6,630 $14 $ 
Research, development and engineering$785 (1) $775 (3) 
Marketing and selling$209 (1) $194   
General and administrative$247   $214 (1) 
Interest Rate Contracts:
Interest expense$59 (3) $61 (3) 
$4 $(1)$7 $ 

Six Months Ended
April 28, 2024April 30, 2023
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships
Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are RecordedAmount of Gain or (Loss)
Reclassified
from AOCI into
Consolidated Condensed Statement of Operations
Amount of Gain (Loss) Excluded from Effectiveness Testing
Recognized in
Consolidated Condensed Statement of Operations
Total Amount Presented in the Consolidated Condensed Statement of Operations in which the Effects of Cash Flow Hedges are RecordedAmount of Gain or (Loss)
Reclassified
from AOCI into
Consolidated Condensed Statement of Operations
Amount of Gain (Loss) Excluded from Effectiveness Testing
Recognized in
Consolidated Condensed Statement of Operations
(In millions)
Foreign Exchange Contracts:
Net sales$13,353 $14 $(1)$13,369 $39 $ 
Cost of products sold$6,996 (1) $7,130 2  
Research, development and engineering$1,539 (4) $1,546 (3) 
Marketing and selling$416 (1) $391   
General and administrative$523   $421 (1) 
Interest Rate Contracts:
Interest expense$118 (6) $120 (6) 
$2 $(1)$31 $ 
17


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


  Amount of Gain or (Loss) 
Recognized in Consolidated Condensed Statement of Operations
Three Months EndedSix Months Ended
Location of Gain or
(Loss) Recognized
in Consolidated Condensed Statement of Operations
April 28,
2024
April 30,
2023
April 28,
2024
April 30,
2023
 (In millions)
Derivatives Not Designated as Hedging Instruments