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GuruFocus has detected 5 Warning Signs with Applied Materials Inc \$AMAT.
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Applied Materials Inc (NAS:AMAT)
Gross Profit
\$5,040 Mil (TTM As of Jan. 2017)

Applied Materials Inc's gross profit for the three months ended in Jan. 2017 was \$1,445 Mil. Applied Materials Inc's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was \$5,040 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Applied Materials Inc's gross profit for the three months ended in Jan. 2017 was \$1,445 Mil. Applied Materials Inc's revenue for the three months ended in Jan. 2017 was \$3,278 Mil. Therefore, Applied Materials Inc's Gross Margin for the quarter that ended in Jan. 2017 was 44.08%.

Applied Materials Inc had a gross margin of 44.08% for the quarter that ended in Jan. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Applied Materials Inc was 46.15%. The lowest was 28.54%. And the median was 41.19%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Applied Materials Inc's Gross Profit for the fiscal year that ended in Oct. 2016 is calculated as

 Gross Profit (A: Oct. 2016 ) = Revenue - Cost of Goods Sold = 10825 - 6314 = 4,511

Applied Materials Inc's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

 Gross Profit (Q: Jan. 2017 ) = Revenue - Cost of Goods Sold = 3278 - 1833 = 1,445

Applied Materials Inc Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 1004 (Apr. 2016 ) + 1192 (Jul. 2016 ) + 1399 (Oct. 2016 ) + 1445 (Jan. 2017 ) = \$5,040 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Applied Materials Inc's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

 Gross Margin (Q: Jan. 2017 ) = Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 1,445 / 3278 = 44.08 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Applied Materials Inc had a gross margin of 44.08% for the quarter that ended in Jan. 2017 => Durable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Applied Materials Inc Annual Data

 Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Gross_Profit 4,492 3,443 1,431 3,715 4,360 3,313 2,991 3,843 3,952 4,511

Applied Materials Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Gross_Profit 959 959 1,016 1,018 959 916 1,004 1,192 1,399 1,445
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