| 1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
| 2 | Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $53 million tax benefit on a GAAP basis for the six months ended April 29, 2018; this benefit is being recognized ratably over the fiscal year on a non-GAAP basis. |
| 3 | Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation. |
| 4 | Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes. |
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except per share amounts) | April 29,
2018 | April 30,
2017 | April 29,
2018 | April 30,
2017 | |||||||||||
| Non-GAAP Adjusted Earnings Per Diluted Share | |||||||||||||||
| Reported earnings per diluted share - GAAP basis | $ | 1.09 | $ | 0.76 | $ | 1.20 | $ | 1.40 | |||||||
| Certain items associated with acquisitions | 0.04 | 0.04 | 0.09 | 0.08 | |||||||||||
| Income tax effect of share-based compensation | 0.01 | — | (0.03 | ) | — | ||||||||||
| Income tax effect of changes in applicable U.S. tax laws | 0.07 | — | 1.02 | — | |||||||||||
| Resolution of prior years’ income tax filings and other tax items | 0.01 | (0.01 | ) | — | (0.02 | ) | |||||||||
| Non-GAAP adjusted earnings per diluted share | $ | 1.22 | $ | 0.79 | $ | 2.28 | $ | 1.46 | |||||||
| Weighted average number of diluted shares | 1,040 | 1,087 | 1,056 | 1,088 | |||||||||||
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except percentages) | April 29,
2018 | April 30,
2017 | April 29,
2018 | April 30,
2017 | |||||||||||
| Semiconductor Systems Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 1,071 | $ | 808 | $ | 2,066 | $ | 1,498 | |||||||
| Certain items associated with acquisitions1 | 46 | 46 | 92 | 92 | |||||||||||
| Non-GAAP adjusted operating income | $ | 1,117 | $ | 854 | $ | 2,158 | $ | 1,590 | |||||||
| Non-GAAP adjusted operating margin | 37.2 | % | 35.5 | % | 36.9 | % | 34.9 | % | |||||||
| AGS Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 278 | $ | 194 | $ | 532 | $ | 372 | |||||||
| Acquisition integration costs | — | 1 | 1 | 2 | |||||||||||
| Non-GAAP adjusted operating income | $ | 278 | $ | 195 | $ | 533 | $ | 374 | |||||||
| Non-GAAP adjusted operating margin | 29.5 | % | 26.9 | % | 29.2 | % | 26.7 | % | |||||||
| Display and Adjacent Markets Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 162 | $ | 84 | $ | 263 | $ | 199 | |||||||
| Certain items associated with acquisitions 1 | 3 | — | 6 | — | |||||||||||
| Acquisition integration costs | 1 | — | 1 | — | |||||||||||
| Non-GAAP adjusted operating income | $ | 166 | $ | 84 | $ | 270 | $ | 199 | |||||||
| Non-GAAP adjusted operating margin | 27.7 | % | 21.5 | % | 25.6 | % | 24.5 | % | |||||||
