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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 July 30, 2023
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) 
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)

(408727-5555
(Registrant’s telephone number, including area code)
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 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 30, 2023: 836,533,852



Table of Contents
APPLIED MATERIALS, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 30, 2023
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:



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 EndedNine Months Ended
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
(Unaudited)
Net sales$6,425 $6,520 $19,794 $19,036 
Cost of products sold3,449 3,514 10,579 10,144 
Gross profit2,976 3,006 9,215 8,892 
Operating expenses:
Research, development and engineering767 705 2,313 2,045 
Marketing and selling193 180 584 520 
General and administrative214 197 635 537 
Severance and related charges   (4)
Total operating expenses1,174 1,082 3,532 3,098 
Income from operations1,802 1,924 5,683 5,794 
Interest expense60 56 180 171 
Interest and other income (expense), net64 (7)41 27 
Income before income taxes1,806 1,861 5,544 5,650 
Provision for income taxes246 255 692 716 
Net income$1,560 $1,606 $4,852 $4,934 
Earnings per share:
Basic$1.86 $1.86 $5.76 $5.63 
Diluted$1.85 $1.85 $5.73 $5.59 
Weighted average number of shares:
Basic838 864 842 877 
Diluted843 869 846 883 
See accompanying Notes to Consolidated Condensed Financial Statements.
3

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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Three Months EndedNine Months Ended
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
(Unaudited)
Net income$1,560 $1,606 $4,852 $4,934 
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on available-for-sale investments(3)3 25 (45)
Change in unrealized net loss on derivative instruments15 13 (46)46 
Other comprehensive income (loss), net of tax12 16 (21)1 
Comprehensive income$1,572 $1,622 $4,831 $4,935 
See accompanying Notes to Consolidated Condensed Financial Statements.
4

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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
July 30,
2023
October 30,
2022
 
ASSETS
Current assets:
Cash and cash equivalents$6,025 $1,995 
Short-term investments510 586 
Accounts receivable, net5,230 6,068 
Inventories5,809 5,932 
Other current assets1,305 1,344 
Total current assets18,879 15,925 
Long-term investments2,177 1,980 
Property, plant and equipment, net2,604 2,307 
Goodwill3,732 3,700 
Purchased technology and other intangible assets, net305 339 
Deferred income taxes and other assets2,713 2,475 
Total assets$30,410 $26,726 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt$199 $ 
Accounts payable and accrued expenses4,528 4,237 
Contract liabilities3,497 3,142 
Total current liabilities8,224 7,379 
Long-term debt5,460 5,457 
Income taxes payable818 964 
Other liabilities815 732 
Total liabilities15,317 14,532 
Stockholders’ equity:
Common stock8 8 
Additional paid-in capital8,914 8,593 
Retained earnings41,988 37,892 
Treasury stock(35,594)(34,097)
Accumulated other comprehensive loss(223)(202)
Total stockholders’ equity15,093 12,194 
Total liabilities and stockholders’ equity$30,410 $26,726 
Amounts as of July 30, 2023 are unaudited. Amounts as of October 30, 2022 are derived from the October 30, 2022 audited consolidated financial statements.
See accompanying Notes to Consolidated Condensed Financial Statements.
5

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APPLIED MATERIALS, INC
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended July 30, 2023SharesAmountSharesAmount
(Unaudited)
Balance as of April 30, 2023840 $8 $8,811 $40,696 1,182 $(35,151)$(235)$14,129 
Net income— — — 1,560 — — — 1,560 
Other comprehensive income (loss), net of tax— — — — — — 12 12 
Dividends declared ($0.32 per common share)
— — — (268)— — — (268)
Share-based compensation— — 114 — — — — 114 
Net issuance under stock plans— — (11)— — — — (11)
Common stock repurchases(4)— — — 4 (443)— (443)
Balance as of July 30, 2023836 $8 $8,914 $41,988 1,186 $(35,594)$(223)$15,093 

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Nine Months Ended July 30, 2023SharesAmountSharesAmount
(Unaudited)
Balance as of October 30, 2022844 $8 $8,593 $37,892 1,173 $(34,097)$(202)$12,194 
Net income— — — 4,852 — — — 4,852 
Other comprehensive income (loss), net of tax— — — — — — (21)(21)
Dividends declared ($0.90 per common share)
— — — (756)— — — (756)
Share-based compensation— — 375 — — — — 375 
Net issuance under stock plans5 — (54)— — — — (54)
Common stock repurchases(13)— — — 13 (1,497)— (1,497)
Balance as of July 30, 2023836 $8 $8,914 $41,988 1,186 $(35,594)$(223)$15,093 

6

Table of Contents
APPLIED MATERIALS, INC
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(In millions)

Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Three Months Ended July 31, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of May 1, 2022869 $9 $8,306 $35,137 1,146 $(31,598)$(275)$11,579 
Net income— — — 1,606 — — — 1,606 
Other comprehensive income (loss), net of tax— — — — — — 16 16 
Dividends declared ($0.26 per common share)
— — — (223)— — — (223)
Share-based compensation— — 95 — — — — 95 
Net issuance under stock plans1 — (3)— — — — (3)
Common stock repurchases(10)— — — 10 (1,000)— (1,000)
Balance as of July 31, 2022860 $9 $8,398 $36,520 1,156 $(32,598)$(259)$12,070 


Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive
Income (Loss)
Total
Nine Months Ended July 31, 2022SharesAmountSharesAmount
(Unaudited)
Balance as of October 31, 2021892 $9 $8,247 $32,246 1,119 $(27,995)$(260)$12,247 
Net income— — — 4,934 — — — 4,934 
Other comprehensive income (loss), net of tax— — — — — — 1 1 
Dividends declared ($0.76 per common share)
— — — (660)— — — (660)
Share-based compensation— — 314 — — — — 314 
Net issuance under stock plans5 — (163)— — — — (163)
Common stock repurchases(37)— — — 37 (4,603)— (4,603)
Balance as of July 31, 2022860 $9 $8,398 $36,520 1,156 $(32,598)$(259)$12,070 

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 30, 2023July 31, 2022
(Unaudited)
Cash flows from operating activities:
Net income$4,852 $4,934 
Adjustments required to reconcile net income to cash provided by operating activities:
Depreciation and amortization385 321 
Severance and related charges (4)
Share-based compensation375 314 
Deferred income taxes(174)(209)
Other189 14 
Changes in operating assets and liabilities:
Accounts receivable838 3 
Inventories123 (1,164)
Other current and non-current assets27 (19)
Accounts payable and accrued expenses(441)195 
Contract liabilities355 725 
Income taxes payable545 (597)
Other liabilities71 29 
Cash provided by operating activities7,145 4,542 
Cash flows from investing activities:
Capital expenditures(797)(564)
Cash paid for acquisitions, net of cash acquired(25)(441)
Proceeds from sales and maturities of investments971 1,013 
Purchases of investments(1,195)(1,175)
Cash used in investing activities(1,046)(1,167)
Cash flows from financing activities:
Proceeds from commercial paper892  
Repayments of commercial paper(700) 
Proceeds from common stock issuances 111 96 
Common stock repurchases(1,489)(4,603)
Tax withholding payments for vested equity awards(165)(259)
Payments of dividends to stockholders(707)(650)
Repayments of principal on finance leases(8) 
Cash used in financing activities(2,066)(5,416)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents4,033 (2,041)
Cash, cash equivalents and restricted cash equivalents — beginning of period2,100 5,101 
Cash, cash equivalents and restricted cash equivalents — end of period$6,133 $3,060 
Reconciliation of cash, cash equivalents and restricted cash equivalents
Cash and cash equivalents$6,025 $2,956 
Restricted cash equivalents included in deferred income taxes and other assets108 104 
Total cash, cash equivalents and restricted cash equivalents$6,133 $3,060 
Supplemental cash flow information:
Cash payments for income taxes$418 $1,623 
Cash refunds from income taxes$51 $133 
Cash payments for interest$137 $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
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 30, 2022 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 30, 2022 (2022 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 30, 2023 are not necessarily indicative of future operating results. Our fiscal year ends on the last Sunday in October of each year. Fiscal 2023 and 2022 contain 52 weeks each and the first nine months of fiscal 2023 and 2022 each contained 39 weeks.
Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
Disclosures by Business Entities about Government Assistance. In November 2021, the Financial Accounting Standards Board (FASB) issued an accounting standard update which requires annual disclosures related to certain government assistance received by business entities (Topic 832) including (1) the types of assistance, (2) the entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. This authoritative guidance is effective for us in our fiscal 2023 Form 10-K. The adoption of this authoritative guidance is not expected to have a significant impact to our financial results and only impacts the disclosures in our notes to consolidated 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 currently evaluating the effect of this new guidance on our consolidated condensed financial statements.
Contract Assets and Contract Liabilities from Revenue Contracts with Customers in a Business Combination. In October 2021, the 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. This authoritative guidance will be effective for us in the first quarter of fiscal 2024, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated condensed financial statements.

9


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

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 EndedNine Months Ended
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
 (In millions, except per share amounts)
Numerator:
Net income $1,560 $1,606 $4,852 $4,934 
Denominator:
Weighted average common shares outstanding838 864 842 877 
Effect of weighted dilutive restricted stock units and employee stock purchase plan shares5 5 4 6 
Denominator for diluted earnings per share843 869 846 883 
Basic earnings per share$1.86 $1.86 $5.76 $5.63 
Diluted earnings per share$1.85 $1.85 $5.73 $5.59 
Potentially weighted dilutive securities 3 2 2 
Potentially weighted dilutive securities attributable to outstanding restricted stock units are excluded from the calculation of diluted earnings per share 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:
 
July 30, 2023CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,397 $— $— $1,397 
Cash equivalents:
Money market funds*
3,525 — — 3,525 
Commercial paper, corporate bonds and medium-term notes1,103 — — 1,103 
Total Cash equivalents4,628 — — 4,628 
Total Cash and Cash equivalents$6,025 $— $— $6,025 
Short-term and long-term investments:
Bank certificates of deposit and time deposits$9 $ $ $9 
U.S. Treasury and agency securities411  9 402 
Non-U.S. government securities**
6   6 
Municipal securities438  11 427 
Commercial paper, corporate bonds and medium-term notes591  12 579 
Asset-backed and mortgage-backed securities448  14 434 
Total fixed income securities1,903  46 1,857 
Publicly traded equity securities79 51 13 117 
Equity investments in privately held companies660 78 25 713 
Total equity investments739 129 38 830 
Total short-term and long-term investments$2,642 $129 $84 $2,687 
Total Cash, Cash equivalents and Investments$8,667 $129 $84 $8,712 
_________________________
*Excludes 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 30, 2022CostGross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
 (In millions)
Cash$1,199 $— $— $1,199 
Cash equivalents:
Money market funds*
660 — — 660 
U.S. Treasury and agency securities4 — — 4 
Municipal securities13 — — 13 
Commercial paper, corporate bonds and medium-term notes119 — — 119 
Total Cash equivalents796 — — 796 
Total Cash and Cash equivalents$1,995 $— $— $1,995 
Short-term and long-term investments:
Bank certificates of deposit$7 $ $ $7 
U.S. Treasury and agency securities435  13 422 
Non-U.S. government securities**
7  1 6 
Municipal securities389  16 373 
Commercial paper, corporate bonds and medium-term notes595  21 574 
Asset-backed and mortgage-backed securities432  19 413 
Total fixed income securities1,865  70 1,795 
Publicly traded equity securities85 63 26 122 
Equity investments in privately held companies567 86 4 649 
Total equity investments652 149 30 771 
Total short-term and long-term investments$2,517 $149 $100 $2,566 
Total Cash, Cash equivalents and Investments$4,512 $149 $100 $4,561 
 _________________________
*Excludes restricted cash equivalents invested in money market funds related to deferred compensation plans.
**Includes Canadian provincial government debt.
 
Maturities of Investments
The following table summarizes the contractual maturities of our investments as of July 30, 2023:
 
CostEstimated
Fair Value
 (In millions)
Due in one year or less$488 $482 
Due after one through five years964 938 
Due after five years3 3 
No single maturity date*1,187 1,264 
Total$2,642 $2,687 
 _________________________
*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 nine months ended July 30, 2023 and July 31, 2022 gross realized gains and losses on our fixed income portfolio were not material.
As of July 30, 2023 and October 30, 2022, 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 30, 2023 and July 31, 2022, 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 30, 2023 and July 31, 2022 were as follows:
Three Months EndedNine Months Ended
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
 (In millions)
Publicly traded equity securities
Unrealized gain $12 $3 $31 $21 
Unrealized loss(1)(23)(28)(33)
Realized gain on sales and dividends4 3 5 5 
Realized loss on sales  (2) 
Equity investments in privately held companies
Unrealized gain1 7 13 32 
Unrealized loss(18)(5)(29)(5)
Realized gain on sales and dividends2  7 2 
Realized loss on sales and impairments(2)(2)(119)(6)
Total gain (loss) on equity investments, net$(2)$(17)$(122)$16 
Impairment losses on equity investments in privately held companies, included in the above table, were not material during the three months ended July 30, 2023 and were $119 million during the nine months ended July 30, 2023. Impairment losses on equity investments were not material during the three and nine months ended July 31, 2022. These impairment losses are included in interest and other income (expense), net in the Consolidated Condensed Statement of Operations.
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 July 30, 2023, 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:
 
 July 30, 2023October 30, 2022
 Level 1Level 2TotalLevel 1Level 2Total
 (In millions)
Assets:
Available-for-sale debt security investments
Money market funds*$3,633 $ $3,633 $765 $ $765 
Bank certificates of deposit and time deposits 9 9  7 7 
U.S. Treasury and agency securities353 49 402 404 22 426 
Non-U.S. government securities 6 6  6 6 
Municipal securities 427 427  386 386 
Commercial paper, corporate bonds and medium-term notes 1,682 1,682  693 693 
Asset-backed and mortgage-backed securities 434 434  413 413 
Total available-for-sale debt security investments$3,986 $2,607 $6,593 $1,169 $1,527 $2,696 
Equity investments with readily determinable values
Publicly traded equity securities$117 $ $117 $122 $ $122 
Total equity investments with readily determinable values$117 $ $117 $122 $ $122 
Total$4,103 $2,607 $6,710 $1,291 $1,527 $2,818 
 _________________________
*Amounts as of July 30, 2023 and October 30, 2022 include $108 million and $105 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 July 30, 2023 or October 30, 2022.
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 is 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 months ended July 30, 2023 and were $119 million during the nine months ended July 30, 2023. Impairment losses on equity investments in privately held companies were not material during the three and nine months ended July 31, 2022. 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 July 30, 2023, the aggregate principal amount of long-term senior unsecured notes was $5.5 billion and the estimated fair value was $5.1 billion. As of October 30, 2022, the aggregate principal amount of long-term senior unsecured notes was $5.5 billion and the estimated fair value was $4.8 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 July 30, 2023 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 immediately 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 30, 2023 and July 31, 2022.
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 30, 2023 and October 30, 2022, the total outstanding notional amounts of foreign exchange contracts were $1.8 billion and $2.1 billion, respectively. The fair values of foreign exchange derivative instruments as of July 30, 2023 and October 30, 2022 were not material.
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 EndedNine Months Ended
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
(In millions)
Derivatives in Cash Flow Hedging Relationships:
Foreign exchange contracts$15 $35 $(32)$94 
Total$15 $35 $(32)$94 
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
July 30, 2023July 31, 2022
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$6,425 $8 $ $6,520 $32 $ 
Cost of products sold$3,449   $3,514 (4) 
Research, development and engineering$767 (5) $705 (4) 
Marketing and selling$193 (1) $180 (1) 
General and administrative$214 (1) $197 (1) 
Interest Rate Contracts:
Interest expense$60 (4) $56 (4) 
$(3)$ $18 $ 

Nine Months Ended
July 30, 2023July 31, 2022
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$19,794 $47 $ $19,036 $59 $ 
Cost of products sold$10,579 2  $10,144 (7) 
Research, development and engineering$2,313 (8) $2,045 (4)(1)
Marketing and selling$584 (1) $520 (2) 
General and administrative$635 (2) $537 (1) 
Interest Rate Contracts:
Interest expense$180 (10) $171 (10) 
$28 $ $35 $(1)
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 EndedNine Months Ended
Location of Gain or
(Loss) Recognized
in Consolidated Condensed Statement of Operations
July 30,
2023
July 31,
2022
July 30,
2023
July 31,
2022
 (In millions)
Derivatives Not Designated as Hedging Instruments
Foreign exchange contractsInterest and other income, net$11 $21 $(25)$41 
Total return swaps - deferred compensationCost of products sold2  3 (2)
Total return swaps - deferred compensationOperating expenses15  29 (19)
Total return swaps - deferred compensationInterest and other income, net(4)(1)(8)(1)
Total$24 $20 $(1)$19 

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 30, 2023.
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.

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 $90 million and $619 million of account receivables during the three and nine months ended July 30, 2023, respectively. We sold $251 million and $821 million of account receivables during the three and nine months ended July 31, 2022, respectively. We did not discount letters of credit issued by customers or discount promissory notes during the nine months ended July 30, 2023 and July 31, 2022. 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.
Accounts receivable are presented net of allowance for credit losses of $29 million as of July 30, 2023 and as of October 30, 2022. 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 30, 2023, we continue to closely monitor customer liquidity and industry and economic conditions, which may result in changes