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Item 1:	Business

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(1)

Mr. Dickerson, age 61, was named President of Applied in June 2012 and appointed Chief Executive Officer and a member of the Board of Directors in September 2013. Before joining Applied, he served as Chief Executive Officer and a director of Varian Semiconductor Equipment Associates, Inc. (Varian) from 2004 until its acquisition by Applied in November 2011. Prior to Varian, Mr. Dickerson served 18 years with KLA-Tencor Corporation (KLA-Tencor), a supplier of process control and yield management solutions for the semiconductor and related industries, where he held a variety of operations and product development roles, including President and Chief Operating Officer. Mr. Dickerson started his semiconductor career in manufacturing and engineering management at General Motors’ Delco Electronics Division and then AT&T Technologies.

(2)

Dr. Addiego, age 59, has been Senior Vice President, Engineering, Operations and Quality since June 2015. He served as Senior Vice President, Engineering from March 2014 to June 2015. He previously was with Applied from 1996 to 2005, leading various product groups as well as global organizations, including Global Operations, Facilities and Real Estate, Foundation Engineering, and Information Technology. From March 2011 to March 2014, Dr. Addiego was President and Chief Operating Officer of Ultra Clean Technology Corp., a public company listed on NASDAQ and a supplier of critical subsystems for the semiconductor capital equipment, medical device, energy, research, and flat panel industries. From February 2005 to March 2011, Dr. Addiego worked at Novellus Systems, Inc., a provider of advanced process equipment for the semiconductor industry, where he served as Executive Vice President of Corporate Global Operations responsible for Central Engineering, Facilities, Real Estate, Human Resources and Information Technology, and Chief Administrative Officer.

(3)

Mr. Durn, age 52, has been Senior Vice President and Chief Financial Officer of Applied since August 2017. Previously, Mr. Durn was Executive Vice President and Chief Financial Officer of NXP Semiconductors N.V., a semiconductor manufacturer (NXP), from December 2015 to August 2017. Mr. Durn served as Senior Vice President of Finance and Chief Financial Officer of Freescale Semiconductor, Inc., from June 2014 until its merger with NXP in December 2015. Prior to Freescale, Mr. Durn was Chief Financial Officer and Executive Vice President of Finance and Administration at GlobalFoundries, a semiconductor foundry, which he joined in December 2011.

(4)	Mr. Ghanayem, age 53, has been Senior Vice President, New Markets and Alliances Group of Applied since November 2017.  He has served in various senior management, product development and operational roles since joining Applied in 1989, including Group Vice President and General Manager of the Transistor and Interconnect Group.

(5)

Mr. Larkins, age 57, has been Senior Vice President, General Counsel of Applied since November 2012 and was Corporate Secretary from November 2012 to March 2018. Previously, Mr. Larkins was employed by Honeywell International Inc., a diversified global technology and manufacturing company, where he was Vice President, Corporate Secretary and Deputy General Counsel from 2002 until joining Applied.  Mr. Larkins served in various other positions at Honeywell (formerly AlliedSignal) after joining the company in 1997.

(6)

Dr. Nalamasu, age 60, has been Senior Vice President, Chief Technology Officer since June 2013, and President of Applied Ventures, LLC, Applied’s venture capital arm, since November 2013. He had served as Group Vice President, Chief Technology Officer from January 2012 to June 2013, and as Corporate Vice President, Chief Technology Officer from January 2011 to January 2012. Upon joining Applied in June 2006 until January 2011, Dr. Nalamasu was an Appointed Vice President of Research and served as Deputy Chief Technology Officer and General Manager for the Advanced Technologies Group. From 2002 to 2006, Dr. Nalamasu was a NYSTAR distinguished professor of Materials Science and Engineering at Rensselaer Polytechnic Institute, where he also served as Vice President of Research from 2005 to 2006. Prior to Rensselaer, Dr. Nalamasu served in several leadership roles at Bell Laboratories.

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(7)	Dr. Raja, age 56, has been Senior Vice President, Semiconductor Products Group of Applied since November 2017.  He previously served in various senior management, product development and operational roles since joining Applied in 1995, including Group Vice President and General Manager of the Patterning and Packaging Group.

(8)

Mr. Salehpour, age 57, has been Senior Vice President, Services, Display and Flexible Technology since September 2013. He previously served as Group Vice President, General Manager Energy and Environmental Solutions and Display Business Groups, since joining Applied in November 2012. Prior to Applied, Mr. Salehpour worked at KLA-Tencor for 16 years, where he served as a Senior Vice President and General Manager and worked for 10 years in senior management positions at Schlumberger Test Systems.

(9)

Mr. Read, age 52, has been Corporate Vice President, Corporate Controller and Chief Accounting Officer of Applied since joining the Company in September 2013. Prior to Applied, Mr. Read worked at Brocade Communications Systems, Inc., a provider of semiconductor and software-based network solutions, since October 2002, where he most recently served as Vice President, Corporate Controller. Prior to Brocade, Mr. Read worked at KPMG LLP, an audit, tax and advisory firm, from 1996 to 2002.

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Item 1A:	Risk Factors

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•	uncertain global economic and political business conditions and demands;

•	political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors;

•	global trade issues and changes in and uncertainties with respect to trade policies, including the ability to obtain required import and export licenses, trade sanctions, tariffs, and international trade disputes;

•	customer- or government-supported efforts to influence Applied to conduct more of its operations and sourcing in a particular country, such as Korea and China;

•	variations among, and changes in, 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 such laws and regulations;

•	ineffective or inadequate legal protection of intellectual property rights in certain countries;

•	positions taken by governmental agencies regarding possible national commercial and/or security issues posed by international business operations;

•	fluctuating raw material, commodity, energy and shipping costs;

•	delays or restrictions in shipping materials or finished products between countries;

•	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;

•	supply chain interruptions, and service interruptions from utilities, transportation, data hosting or telecommunications providers, or other events beyond our control;

•	a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues;

•	variations in 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, euro, Taiwanese dollar, Israeli shekel, Chinese yuan or Singapore dollar;

•	the need to provide sufficient levels of technical support in different locations around the world;

•	performance of third party providers of outsourced functions, including certain engineering, software development, manufacturing, information technology and other activities;

•	political instability, natural disasters, pandemics, social unrest, terrorism or acts of war in locations where Applied has operations, suppliers or sales, or that may influence the value chain of the industries that Applied serves;

•	challenges in hiring and integration of an increasing number of workers in new countries;

•	the increasing need for a mobile workforce to work in or 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.

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•	the nature, timing and degree of visibility of changes in end demand for electronic products, including those related to fluctuations in consumer buying patterns tied to seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for Applied’s products;

•	increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital;

•	trade, regulatory or tax policies impacting the timing of customers’ investment in new or expanded fabrication plants;

•	differences in growth rates among the semiconductor, display and other industries in which Applied operates;

•	the increasing importance of establishing, improving and maintaining strong relationships with customers;

•	the increasing cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology;

•	the need for customers to continually reduce the total cost of manufacturing system ownership;

•	the heightened importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability;

•	manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment;

•	the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers’ purchasing decisions;

•	requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment;

•	price and performance trends for semiconductor devices and displays, and the corresponding effect on demand for such products;

•	the increasing importance of the availability of spare parts to maximize the time that customers’ systems are available for production;

•	the increasing role for and complexity of software in Applied products; and

•	the increasing focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations.

•	the increasing frequency and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes;

•	the increasing cost of research and development due to many factors, including shrinking geometries, the use of new materials, new and more complex device structures, more applications and process steps, increasing chip design costs, and the increasing cost and complexity of integrated manufacturing processes;

•	the need to reduce product development time, despite the increasing difficulty of technical challenges;

•	the growing number of types and varieties of semiconductors and number of applications across multiple substrate sizes;

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•	the increasing cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller geometries to volume manufacturing, and the resulting impact on the rates of technology transition and investment in capital equipment;

•	challenges in generating organic growth given semiconductor manufacturers’ levels of capital expenditures and the allocation of capital investment to market segments that Applied does not serve, such as lithography, or segments where Applied’s products have lower relative market presence;

•	the importance of increasing market positions in segments with growing demand;

•	semiconductor manufacturer’s ability to reconfigure and re-use equipment, and the resulting effect on their need to purchase new equipment and services;

•	shorter cycle times between order placements by customers and product shipment require greater reliance on forecasting of customer investment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin;

•	competitive factors that make it difficult to enhance position, including challenges in securing development-tool-of-record (DTOR) and production-tool-of-record (PTOR) positions with customers;

•	consolidation in the semiconductor industry, including among semiconductor manufacturers and among manufacturing equipment suppliers;

•	shifts in sourcing strategies by computer and electronics companies that impact the equipment requirements of Applied’s foundry customers;

•	the concentration of new wafer starts in Korea and Taiwan, where Applied’s service penetration and service-revenue-per-wafer-start have been lower than in other regions;

•	investment in semiconductor manufacturing capabilities in China, which may be affected by changes in economic conditions and governmental policies in China; and

•	the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products.

•	the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS), flexible displays and metal oxide, and new touch panel films;

•	the increasing cost of research and development, and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes;

•	the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental policies in China;

•	the importance of increasing market positions in products and technologies with growing demand;

•	the rate of transition to larger substrate sizes for TVs and to new display technologies for TVs and mobile applications, and the resulting effect on capital intensity in the industry and on Applied’s product differentiation, gross margin and return on investment; and

•	the variability in demand for display manufacturing equipment, concentration of display manufacturer customers and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers.

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•	identify and address technology inflections, market changes, new applications, customer requirements and end-use demand;

•	develop new products and disruptive technologies, improve and develop new applications for existing products, and adapt products for use by customers in different applications and markets with varying technical requirements;

•	differentiate its products from those of competitors, meet customers’ performance specifications, appropriately price products, and achieve market acceptance;

•	maintain operating flexibility to enable responses to changing markets, applications, customers and customer requirements;

•	enhance its worldwide operations across its businesses to reduce cycle time, enable continuous quality improvement, reduce costs, and enhance design for manufacturability and serviceability;

•	focus on product development and sales and marketing strategies that address customers’ high value problems and strengthen customer relationships;

•	effectively allocate resources between its existing products and markets, the development of new products, and expanding into new and adjacent markets;

•	improve the productivity of capital invested in R&D activities;

•	accurately forecast demand, work with suppliers and meet production schedules for its products;

•	improve its manufacturing processes and achieve cost efficiencies across product offerings;

•	adapt to changes in value offered by companies in different parts of the supply chain;

•	qualify products for evaluation and volume manufacturing with its customers; and

•	implement changes in its design engineering methodology to reduce material costs and cycle time, increase commonality of platforms and types of parts used in different systems, and improve product life cycle management.

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•	diversion of management’s attention and disruption of ongoing businesses;

•	contractual restrictions on the conduct of Applied’s business during the pendency of a proposed transaction;

•	inability to complete proposed transactions due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee;

•	the failure to realize expected returns from acquired businesses;

•	requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and restrictions on the conduct of Applied’s existing business or the acquired business;

•	ineffective integration of operations, systems, technologies, products or employees, which can impact the ability to realize anticipated synergies or other benefits;

•	failure to commercialize technologies from acquired businesses or developed through strategic investments;

•	dependence on unfamiliar supply chains or relatively small supply partners;

•	inability to capitalize on characteristics of new markets that may be significantly different from Applied’s existing markets and where competitors may have stronger market positions and customer relationships;

•	failure to retain and motivate key employees of acquired businesses;

•	the potential impact of the announcement or consummation of a proposed transaction on relationships with third parties;

•	potential changes in Applied’s credit rating, which could adversely impact the Company’s access to and cost of capital;

•	reductions in cash balances or increases in debt obligations to finance activities associated with a transaction, which reduce the availability of cash flow for general corporate or other purposes, including share repurchases and dividends;

•	exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in regions where Applied has not historically conducted business;

•	challenges associated with managing new, more diverse and more widespread operations, projects and people;

•	inability to obtain and protect intellectual property rights in key technologies;

•	inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, cybersecurity, privacy policies and procedures, or environmental, health and safety, anti-corruption, human resource, or other policies or practices;

•	impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance of the segment;

•	the risk of litigation or claims associated with a proposed or completed transaction;

•	unknown, underestimated or undisclosed commitments or liabilities; and

•	the inappropriate scale of acquired entities’ critical resources or facilities for business needs.

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•	the need to devote additional resources to develop new products for, and operate in, new markets;

•	the need to develop new sales and technical marketing strategies, cultivate relationships with new customers and meet different customer service requirements;

•	differing rates of profitability and growth among multiple businesses;

•	Applied’s ability to anticipate demand, capitalize on opportunities, and avoid or minimize risks;

•	the complexity of managing multiple businesses with variations in production planning, execution, supply chain management and logistics;

•	the adoption of new business models, business processes and systems;

•	the complexity of entering into and effectively managing strategic alliances or partnering opportunities;

•	new materials, processes and technologies;

•	the need to attract, motivate and retain employees with skills and expertise in these new areas;

•	new and more diverse customers and suppliers, including some with limited operating histories, uncertain or limited funding, evolving business models or locations in regions where Applied does not have, or has limited, operations;

•	new or different competitors with potentially more financial or other resources, industry experience and established customer relationships;

•	entry into new industries and countries, with differing levels of government involvement, laws and regulations, and business, employment and safety practices;

•	third parties’ intellectual property rights; and

•	the need to comply with, or work to establish, industry standards and practices.

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•	the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis;

•	volatility in the availability and cost of materials;

•	difficulties or delays in obtaining required import or export approvals;

•	shipment delays due to transportation interruptions or capacity constraints;

•	information technology or infrastructure failures, including those of a third party supplier or service provider; and

•	natural disasters or other events beyond Applied’s control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war), particularly where it conducts manufacturing.

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Item 1B:	Unresolved Staff Comments

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Item 2:	Properties

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Item 3:	Legal Proceedings

Item 4:	Mine Safety Disclosures

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Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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Item 6:	Selected Financial Data

(1)	Each fiscal year ended on the last Sunday in October. Fiscal 2018, 2017, 2015, and 2014 each contained 52 weeks, and fiscal 2016 contained 53 weeks.

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Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations

•	Overview: a summary of Applied’s business and measurements

•	Results of Operations: a discussion of operating results

•	Segment Information: a discussion of segment operating results

•	Recent Accounting Pronouncements: a discussion of new accounting pronouncements and its impact to Applied’s consolidated financial statements

•	Financial Condition, Liquidity and Capital Resources: an analysis of cash flows, sources and uses of cash

•	Off-Balance Sheet Arrangements and Contractual Obligations

•	Critical Accounting Policies and Estimates: a discussion of critical accounting policies that require the exercise of judgments and estimates

•	Non-GAAP Adjusted Results: a presentation of results reconciling GAAP to non-GAAP adjusted measures

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1	Represents an estimate of a provisional tax amount for the transition tax liability associated with the deemed repatriation of accumulated foreign earnings as a result from the enactment of the Tax Cuts and Jobs Act into law on December 22, 2017.

2	Represents Applied’s agreements to purchase goods and services consisting of Applied’s outstanding purchase orders for goods and services.

3

Other long-term liabilities in the table do not include pension, post-retirement and deferred compensation plans due to the uncertainty in the timing of future payments. Applied evaluates the need to make contributions to its pension and post-retirement benefit plans after considering the funded status of the plans, movements in the discount rate, performance of the plan assets and related tax consequences. Payments to the plans would be dependent on these factors and could vary across a wide range of amounts and time periods. Payments for deferred compensation plans are dependent on activity by participants, making the timing of payments uncertain. Information on Applied’s pension, post-retirement benefit and deferred compensation plans is presented in Note 12, Employee Benefit Plans, of the consolidated financial statements.

4

Applied’s other long-term liabilities in the Consolidated Balance Sheets include deferred tax liabilities, gross unrecognized tax benefits and related gross interest and penalties. As of October 28, 2018, the gross liability for unrecognized tax benefits that was not expected to result in payment of cash within one year was $374 million. Interest and penalties related to uncertain tax positions that were not expected to result in payment of cash within one year of October 28, 2018 was $26 million. At this time, Applied is unable to make a reasonably reliable estimate of the timing of payments due to uncertainties in the timing of tax audit outcomes; therefore, such amounts are not included in the above contractual obligation table.

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Item 7A:	Quantitative and Qualitative Disclosures About Market Risk

Item 8:	Financial Statements and Supplementary Data

Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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Item 9A:	Controls and Procedures

Item 9B:	Other Information

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Item 10:	Directors, Executive Officers and Corporate Governance

Item 11:	Executive Compensation

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Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(1)	Includes only options, restricted stock units and performance shares outstanding under Applied’s equity compensation plans, as no stock warrants or other rights were outstanding as of October 28, 2018.

(2)	The weighted average exercise price calculation does not take into account any restricted stock units or performance shares.

(3)	Includes 13 million shares of Applied common stock available for future issuance under the Applied Materials, Inc. Employees’ Stock Purchase Plan. Of these 13 million shares, 1 million are subject to purchase during the purchase period in effect as of October 28, 2018.

(4)	Includes options to purchase 5 thousand shares of Applied common stock assumed through various mergers and acquisitions, after giving effect to the applicable exchange ratios. The assumed options had a weighted average exercise price of $7.27 per share. No further shares are available for issuance under the plans under which these assumed awards were granted.

(5)	Includes 4 million shares of Applied common stock available for future issuance under the Applied Materials, Inc. Stock Purchase Plan for Offshore Employees. Of these 4 million shares, 1 million are subject to purchase during the purchase period in effect as of October 28, 2018.

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Item 13:	Certain Relationships and Related Transactions, and Director Independence

Item 14:	Principal Accounting Fees and Services

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Item 15:	Exhibits, Financial Statement Schedules

Item 16:	Form 10-K Summary

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Note 1	Summary of Significant Accounting Policies

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•	Revenue related to the sale of equipment and spares will generally continue to be recognized at a point in time upon the transfer of control. Under this new guidance, the point of time at which revenue is recognized for certain of these products is expected to be earlier than under current revenue recognition guidance as there will be fewer constraints related to customer acceptance.

•	Revenue related to the sale of services will generally continue to be recognized over time as the services are performed.

•	Disclosures related to revenue recognition, including contract balances and revenue disaggregation, will be expanded.

•	Applied continues to evaluate the effect that this new guidance will have on the financial position and results of operations for fiscal 2018. However, for fiscal 2017, Applied expects an increase of our net sales between $140 million and $180 million, or approximately 1%.

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Note 2	Earnings Per Share

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Note 3	Cash, Cash Equivalents and Investments

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Note 4	Fair Value Measurements

•	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.

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Note 5	Derivative Instruments and Hedging Activities

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Note 6	Accounts Receivable, Net

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Note 7	Balance Sheet Detail

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Note 8	Business Combinations

Note 9	Goodwill, Purchased Technology and Other Intangible Assets

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Note 10	Borrowing Facilities and Debt

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Note 11	Stockholders’ Equity, Comprehensive Income and Share-Based Compensation

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Note 13	Income Taxes

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Note 14	Warranty, Guarantees, Commitments and Contingencies

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Note 15	Industry Segment Operations

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Note 16	Unaudited Quarterly Consolidated Financial Data

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