Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~

(Unaudited)

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Net income (loss) $ 71
$ (406 ) $ (18 ) $ (446 )
Other comprehensive income, net of tax:
Unrealized gains (losses) on available-for-sale securities:
Unrealized gains (losses) arising during the period —
1
—
—
Unrealized gains (losses) on cash flow hedges:
Unrealized gains arising during the period 5
—
11
4
Reclassification adjustment for (gains) losses realized and included in net income (loss) (3 ) (1 ) (4 ) 1
Total change in unrealized gains on cash flow hedges 2
(1 ) 7
5
Total other comprehensive income 2
—
7
5
Total comprehensive income (loss) $ 73
$ (406 ) $ (11 ) $ (441 )


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Net income		$	555	$	162
Other comprehensive loss, net of tax:
Net change in unrealized losses on cash flow hedges		(11)		(14)
Total comprehensive income		$	544	$	148

See accompanying ~~notes to condensed consolidated financial statements.~~notes.

Table of Contents

Advanced Micro Devices, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	March 27, 2021		December 26, 2020
	(In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,763	$	1,595
Short-term investments	1,353		695
Accounts receivable, net	2,178		2,066
Inventories	1,653		1,399
Receivables from related parties	7		10
Prepaid expenses and other current assets	243		378

Total current assets	7,197		6,143
Property and equipment, net	681		641
Operating lease right-of-use assets	241		208
Goodwill	289		289
Investment: equity method	65		63
Deferred tax assets	1,162		1,245
Other non-current assets	412		373
Total assets	$	10,047	$	8,962
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	949	$	468
Payables to related parties	40		78
Accrued liabilities	1,779		1,796
Other current liabilities	96		75
Total current liabilities	2,864		2,417
Long-term debt, net	313		330
Long-term operating lease liabilities	238		201
Other long-term liabilities	155		177
Contingencies (See Note 12)	0		0
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,221 and 1,217; shares outstanding: 1,215 and 1,211	12		12
Additional paid-in capital	10,658		10,544
Treasury stock, at cost (shares held: 6 and 6)	(141)		(131)
Accumulated deficit	(4,058)		(4,605)
Accumulated other comprehensive income	6		17
Total stockholders’ equity	6,477		5,837
Total liabilities and stockholders’ equity	$	10,047	$	8,962

September 30,
2017 December 31,
2016
(In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 879
$ 1,264
Accounts receivable, net 771
311
Inventories, net 794
751
Prepayment and other receivables - related parties 26
32
Prepaid expenses 72
63
Other current assets 157
109
Total current assets 2,699
2,530
Property, plant and equipment, net 236
164
Goodwill 289
289
Investment: equity method 57
59
Other assets 305
279
Total assets $ 3,586
$ 3,321
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt $ 70
$ —
Accounts payable 472
440
Payables to related parties 444
383
Accrued liabilities 460
391
Other current liabilities 73
69
Deferred income on shipments to distributors 72
63
Total current liabilities 1,591
1,346
Long-term debt, net 1,356
1,435
Other long-term liabilities 119
124
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; 1,500 shares authorized on September 30, 2017 and December 31, 2016; shares issued: 977 on September 30, 2017 and 949 shares on December 31, 2016; shares outstanding: 965 on September 30, 2017 and 935 shares on December 31, 2016 10
9
Additional paid-in capital 8,437
8,334
Treasury stock, at cost (12 shares on September 30, 2017 and 14 shares on December 31, 2016) (108 ) (119 )
Accumulated deficit (7,821 ) (7,803 )
Accumulated other comprehensive income (loss) 2
(5 )
Total stockholders’ equity 520
416
Total liabilities and stockholders’ equity $ 3,586
$ 3,321

See accompanying ~~notes to condensed consolidated financial statements.~~

notes.

Table of Contents

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended
September 30,
2017 September 24,
2016
(In millions)
Cash flows from operating activities:
Net loss $ (18 ) $ (446 )
Adjustments to reconcile net loss to net cash used in operating activities:
Net gain on sale of equity interests in ATMP JV —
(146 )
Depreciation and amortization 105
99
Provision for deferred income taxes —
11
Stock-based compensation expense 76
57
Non-cash interest expense 27
11
Loss on debt redemption 9
61
Fair value of warrant issued related to sixth amendment to the WSA —
240
Other 4
(4 )
Changes in operating assets and liabilities:
Accounts receivable (460 ) (107 )
Inventories (43 ) (94 )
Prepayment and other receivables - related parties 6
20
Prepaid expenses and other assets (82 ) (134 )
Payables to related parties 61
183
Accounts payable, accrued liabilities and other —
151
Net cash used in operating activities (315 ) (98 )
Cash flows from investing activities:
Net proceeds from sale of equity interests in ATMP JV —
346
Purchases of property, plant and equipment (69 ) (56 )
Purchases of available-for-sale securities (221 ) —
Proceeds from maturity of available-for-sale securities 221
—
Other (2 ) 3
Net cash provided by (used in) investing activities (71 ) 293
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs —
668
Proceeds from issuance of convertible senior notes, net of issuance costs —
681
Proceeds from issuance of common stock under stock-based compensation equity plans 15
12
Proceeds from (repayments of) borrowings, net 70
(230 )
Repayments of long-term debt (70 ) (848 )
Other (14 ) (5 )
Net cash provided by financing activities 1
278
Net increase (decrease) in cash and cash equivalents (385 ) 473
Cash and cash equivalents at beginning of period 1,264
785
Cash and cash equivalents at end of period $ 879
$ 1,258
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property, plant and equipment, accrued but not paid $ 53
$ —
Issuance of common stock to partially settle long-term debt $ 38
$ —
Non-cash additions of property, plant and equipment $ 8
$ —


	Three Months Ended
	March 27, 2021		March 28, 2020
	(In millions)
Cash flows from operating activities:
Net income	$	555	$	162
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	95		68
Stock-based compensation	85		59
Amortization of debt discount and issuance costs	2		4
Amortization of operating lease right-of-use assets	12		10
Loss on debt conversion	6		0
Loss on sale/disposal of property and equipment	8		18
Deferred income taxes	73		0
Impairment of investment	8		0
Other	(3)		3
Changes in operating assets and liabilities:
Accounts receivable, net	(112)		168
Inventories	(254)		(74)
Receivables from related parties	3		3
Prepaid expenses and other assets	33		(31)
Payables to related parties	(38)		(26)
Accounts payable	466		(369)
Accrued liabilities and other	(41)		(60)
Net cash provided by (used in) operating activities	898		(65)
Cash flows from investing activities:
Purchases of property and equipment	(66)		(55)
Purchases of short-term investments	(858)		(55)
Proceeds from maturity of short-term investments	200		37
Other	2		0
Net cash used in investing activities	(722)		(73)
Cash flows from financing activities:
Proceeds from sales of common stock through employee equity plans	2		3
Common stock repurchases for tax withholding on employee equity plans	(10)		(1)

Net cash provided by (used in) financing activities	(8)		2
Net increase (decrease) in cash, cash equivalents, and restricted cash	168		(136)
Cash, cash equivalents, and restricted cash at beginning of period	1,595		1,470
Cash, cash equivalents, and restricted cash at end of period	$	1,763	$	1,334
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	34	$	99
Issuance of common stock to settle convertible debt	$	24	$	0
Transfer of assets for acquisition of property and equipment	$	34	$	13
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities	$	58	$	25
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	1,763	$	1,330
Restricted cash included in Prepaid expenses and other current assets	0		4
Total cash, cash equivalents, and restricted cash	$	1,763	$	1,334

See accompanying ~~notes to condensed consolidated financial statements.~~notes.

Table of Contents

Advanced Micro Devices

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Capital stock:
Common stock
Balance, beginning of period		$	12	$	12



Balance, end of period		$	12	$	12
Additional paid-in capital
Balance, beginning of period		$	10,544	$	9,963
Common stock issued under employee equity plans		2		3
Stock-based compensation		85		59
Issuance of common stock to settle convertible debt		24		0
Issuance of common stock warrant		3		1

Balance, end of period		$	10,658	$	10,026
Treasury stock
Balance, beginning of period		$	(131)	$	(53)

Common stock repurchases for tax withholding on employee equity plans		(10)		(1)
Balance, end of period		$	(141)	$	(54)

Accumulated deficit:
Balance, beginning of period		$	(4,605)	$	(7,095)
Cumulative effect of adoption of accounting standard		(8)		0
Net income		555		162
Balance, end of period		$	(4,058)	$	(6,933)

Accumulated other comprehensive income (loss):
Balance, beginning of period		$	17	$	0
Other comprehensive loss		(11)		(14)
Balance, end of period		$	6	$	(14)

Total stockholders' equity		$	6,477	$	3,037

See accompanying notes.

Table of Contents

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – The Company

Advanced Micro Devices, Inc. is a global semiconductor company. References herein to AMD or the Company mean Advanced Micro Devices, Inc. and its consolidated subsidiaries. AMD’s products include x86 microprocessors (CPUs), accelerated processing units which integrate microprocessors and graphics (APUs), discrete graphics processing units (GPUs), semi-custom System-on-Chip (SOC) products and chipsets for the PC, gaming, datacenter and embedded markets. In addition, AMD provides development services and sells or licenses portions of its intellectual property portfolio.

NOTE 1.2 – Basis of Presentation and Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of ~~Advanced Micro Devices, Inc. and its subsidiaries (the Company or AMD)~~AMD have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the ~~quarter and nine~~three months ended ~~September 30, 2017~~March 27, 2021 shown in this report are not necessarily indicative of results to be expected for the full year ending December ~~30, 2017.~~25, 2021 or any other future period. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and ~~cash flows.~~stockholders’ equity. All such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December ~~31, 2016.~~26, 2020. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December. The ~~quarters and nine~~three months ended ~~September 30, 2017~~March 27, 2021 and ~~September 24, 2016~~March 28, 2020 each consisted of 13 ~~weeks and 39 weeks, respectively.~~weeks.

~~Principles of Consolidation.~~ ~~The condensed consolidated financial statements include~~Significant Accounting Policies. There have been no material changes to the Company’s ~~accounts and those~~significant accounting policies in Note 2 - Summary of ~~its wholly-owned subsidiaries. Upon consolidation, all significant inter-company accounts and transactions are eliminated.~~Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.

Recently Adopted Accounting Standards

~~Goodwill Impairment.~~ In ~~January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other~~: ~~Topic 350: Simplifying the Test for Goodwill Impairment~~ (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual and any interim impairment tests performed for periods beginning after December ~~15,~~ 2019, on a prospective basis, and earlier adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company elected to early adopt this accounting standard update in the third quarter of 2017 on a prospective basis. The Company does not expect the standard to have an impact on its consolidated financial statements. The Company expects the adoption of this update to simplify its annual goodwill impairment testing process, by eliminating the need to estimate the implied fair value of a reporting unit’s goodwill, if its respective carrying value exceeds fair value.

~~Stock Compensation.~~ ~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting~~ (ASU 2016-09), which is intended to simplify several aspects of the accounting for share-based payment award transactions. The Company adopted this guidance in the first quarter of 2017 and elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. In the first quarter of 2017, the Company recorded a $96 million cumulative-effect adjustment in accumulated deficit and an offsetting increase in deferred tax assets for previously unrecognized excess tax benefits that existed as of December 31, 2016. Since substantially all of the Company’s U.S. and foreign deferred tax assets, net of deferred tax liabilities, are subject to a valuation allowance and the realization of these assets is not more likely than not to be achieved, the Company recorded a $96 million valuation allowance against these deferred tax assets with an offsetting adjustment in accumulated deficit. The Company elected to report cash flows related to excess tax benefits as an operating activity on a prospective basis. The presentation requirement for cash flows related to employee taxes paid for withheld shares did not impact the statements of cash flows because such cash flows have historically been presented as a financing activity.

~~Investments. In March 2016, the FASB issued ASU No. 2016-07,~~ ~~Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting~~ (ASU 2016-07), which requires the equity method investor to add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment qualifies for equity method accounting. The Company adopted this guidance in the first quarter of 2017, and it did not have an impact on its consolidated financial statements.

~~Inventory.~~ ~~In July 2015,~~ the Financial Accounting Standards Board (FASB) issued ASU ~~No. 2015-11,~~ 2019-12, Income Taxes (Topic 740): Simplifying the ~~Measurement of Inventory~~ ~~(ASU 2015-11)~~Accounting for Income Taxes, which ~~requires entities~~simplifies various aspects of accounting for income taxes by removing certain exceptions to ~~measure inventory at~~ the ~~lower of cost or net realizable value. This ASU simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value test.~~general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this ~~guidance~~standard in the first quarter of ~~2017, and it did not have~~2021 using the modified retrospective adoption method through a cumulative-effect adjustment to accumulated deficit as of the beginning of the period. The adoption of this new standard resulted in the recognition of an ~~impact on its consolidated financial statements.~~$8 million deferred tax liability associated with book-tax differences in foreign equity method investments.

Recently Issued Accounting Standards

~~Derivatives and Hedging~~. In August ~~2017,~~2020, the FASB issued ASU ~~No. 2017-12,~~ 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging ~~(Topic 815), Targeted Improvements to~~—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for ~~Hedging Activities~~ ~~(ASU 2017-12), which amends~~Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies ~~existing~~the accounting for convertible instruments and the application of the derivatives scope exception for contracts in an entity’s own equity by eliminating some of the models that require separating embedded conversion features from convertible instruments. The guidance ~~in order to allow companies to more accurately present the economic effects of risk management activities~~also addresses how convertible instruments are accounted for in the ~~financial statements. ASU 2017-12~~diluted earnings per share calculation and enhances disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The standard is effective for fiscal years beginning after December 15, ~~2018, including interim periods therein~~2021, and can be adopted through either a modified retrospective method with ~~early adoption permitted.~~a cumulative effect adjustment to opening accumulated deficit or a full retrospective method. The Company is currently evaluating the impact of this new standard on its consolidated financial ~~statements, as well as its planned adoption date.~~statements.

Table of Contents

Although there are several other new accounting pronouncements issued ~~or proposed~~ by the FASB, ~~which the Company has adopted or will adopt, as applicable,~~ the Company does not believe any of these accounting pronouncements ~~has~~ had or will have a material impact on its consolidated financial ~~position or operating results.~~

~~Stock Compensation.In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation-Stock Compensation: Topic 718: Scope of Modification Accounting~~ (ASU 2017-09) to provide clarity and reduce both the (1) diversity in practice and (2) cost and complexity when changing the terms or conditions of share-based payment awards. Under ASU 2017-09, modification accounting is required to be applied unless all of the following are the same immediately before and after the change:

~~1. The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used).~~

~~2. The award’s vesting conditions.~~

~~3. The award’s classification as an equity or liability instrument.~~

ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 on a prospective basis, and early adoption is permitted. The Company has evaluated the impact of its pending adoption of ASU 2017-09 and does not expect that this guidance will have a significant impact on its financial statements.

~~Income Taxes. In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory~~ (ASU 2016-16), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This amends current GAAP which prohibits recognition of current and deferred income taxes for all types of intra-entity asset transfers until the asset has been sold to an outside party. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods therein with early adoption permitted. Upon adoption, the Company must apply a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of this new standard on its consolidated financial statements, as well as its planned adoption date.

~~Statement of Cash Flows. In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (ASU 2016-15), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted, provided that all of the amendments are adopted in the same period. The Company is currently evaluating the impact of its pending adoption of ASU 2016-15 on its consolidated financial statements.

~~Financial Instruments. In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments~~ (ASU 2016-13). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the timing of adoption and impact of ASU 2016-13 on its consolidated financial statements.

~~Leases.~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~ (ASU 2016-02), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Upon adoption, lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the impact of its pending adoption of ASU 2016-02 on its consolidated financial statements.

~~Financial Instruments.~~ ~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities~~ (ASU 2016-01), which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. The ASU also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized

losses on available-for-sale debt securities. Entities will have to assess the realizability of such deferred tax assets in combination with the entities' other deferred tax assets. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017 and for interim periods within that reporting period. The Company is currently evaluating the impact of its pending adoption of ASU 2016-01 on its consolidated financial statements.

~~Revenue Recognition.~~ ~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers: Topic 606~~ (ASU 2014-09), which creates a single source of revenue guidance under U.S. GAAP for all companies in all industries and replaces most existing revenue recognition guidance in U.S. GAAP. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has issued several amendments to the new standard, including clarification on accounting for licenses of intellectual property and identifying performance obligations.

The new standard is effective for annual reporting periods beginning after December 15, 2017. The new standard permits companies to early adopt the new standard, but not before annual reporting periods beginning after December 15, 2016. The Company will not early adopt the new standard and therefore the new standard will be effective for the Company in the first quarter of its fiscal 2018.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or prospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing additional disclosures comparing results to the previous rules in the year of adoption of the new standard (the modified retrospective method or the cumulative catchup method). The Company currently anticipates adopting the standard using the full retrospective method to restate each prior reporting period presented. The Company’s ability to adopt utilizing the full retrospective method is dependent upon system readiness and the completion of its analysis of information necessary to restate prior period financial statements and the Company is progressing toward the adoption of the standard in the first quarter of fiscal 2018. As part of this plan, the Company is implementing changes to its policies, procedures and controls.

The Company currently believes that the most significant impact relates to accelerated revenue recognition for sales to its distributors, whereby revenue is expected to be recognized upon the initial sale to the Company's distributors, instead of the current recognition upon resale by the distributors to the end customers. Additionally, the Company expects the timing and financial statement classification related to the accounting for some combined development and intellectual property licensing arrangements to change. Currently some of these arrangements result in both the reduction to research and development expenses and revenue recognition based on a fair value allocation of the consideration received. Some of these arrangements may result in the classification of the entire amount as revenue under the new revenue guidance. The Company currently expects other revenue streams to remain substantially unchanged.

NOTE ~~2. GLOBALFOUNDRIES~~3 – Supplemental Financial Statement Information

~~Wafer Supply Agreement.~~ ~~The Wafer Supply Agreement (WSA) governs the terms by which the Company purchases products manufactured by GLOBALFOUNDRIES Inc. (GF).~~Short-term Investments

~~Sixth Amendment to Wafer Supply Agreement~~. On August 30, 2016, the Company entered into a sixth amendment to the WSA (the WSA Sixth Amendment). The WSA Sixth Amendment modified certain terms of the WSA applicable to wafers for the Company’s microprocessor, graphics processor and semi-custom products for a five-year period from January 1, 2016 to December 31, 2020. The Company and GF also agreed to establish a comprehensive framework for technology collaboration for the 7nm technology node.

The WSA Sixth Amendment also provides the Company a limited waiver with rights to contract with another wafer foundry with respect to certain products in the 14nm and 7nm technology nodes and gives the Company greater flexibility in sourcing foundry services across its product portfolio. In consideration for these rights, the Company agreed to pay GF $100 million in installments starting in the fourth fiscal quarter of 2016 through the third fiscal quarter of 2017. During the third fiscal quarter of 2017, the Company paid GF $25 million and, as of September 30, 2017, the Company had paid GF $100 million in aggregate. Starting in 2017 and continuing through 2020, the Company also agreed to make quarterly payments to GF based on the volume of certain wafers purchased from another wafer foundry.

Further, for each calendar year during the term of the WSA Sixth Amendment, the Company and GF agreed to annual wafer purchase targets that increase from 2016 through 2020. If the Company does not meet the annual wafer purchase target for any calendar year, the Company will be required to pay to GF a portion of the difference between the Company’s actual wafer purchases and the wafer purchase target for that year. The annual targets were established based on the Company’s business and market

~~expectations and took into account the limited waiver it received for certain products. As of September 30, 2017, the Company expects to meet its 2017 wafer purchase target.~~

The Company and GF also agreed on fixed pricing for wafers purchased during 2016 and established a framework to agree on annual wafer pricing for the years 2017 to 2020. The Company and GF have agreed on pricing for wafer purchases for 2017.

The Company’s total purchases from GF related to wafer manufacturing, research and development activities and other for the quarters ended September 30, 2017 and September 24, 2016 were $331 million and $186 million, respectively. The Company’s total purchases from GF related to wafer manufacturing, research and development activities and other for the nine months ended September 30, 2017 and September 24, 2016 were $773 million and $479 million, respectively. Included in the total purchases for the quarter and nine months ended September 30, 2017 are amounts related to the volume of certain wafers purchased from another wafer foundry, as agreed to by the Company and GF under the WSA Sixth Amendment. As of September 30, 2017 and December 31, 2016, the amount of prepayment and other receivables related to GF was $20 million and $32 million, respectively, included in Prepayment and other receivables - related parties on the Company's condensed consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the amount of payable to GF was $270 million and $255 million, respectively, included in Payables to related parties on the Company's condensed consolidated balance sheets.

~~Warrant Agreement~~. Also on August 30, 2016, in consideration for the limited waiver and rights under the WSA Sixth Amendment, the Company entered into a warrant agreement (the Warrant Agreement) with West Coast Hitech L.P. (WCH), a wholly-owned subsidiary of Mubadala Development Company PJSC (Mubadala). Under the Warrant Agreement, WCH and its permitted assigns are entitled to purchase 75 million shares of the Company’s common stock (the Warrant Shares) at a purchase price of $5.98 per share. The warrant is exercisable in whole or in part until February 29, 2020. Notwithstanding the foregoing, the Warrant Agreement will only be exercisable to the extent that Mubadala does not beneficially own, either directly through any other entities directly and indirectly owned by Mubadala or its subsidiaries, an aggregate of more than 19.99% of the Company’s outstanding capital stock after any such exercise.

GF continues to be a related party of the Company because Mubadala and Mubadala Technology Investments LLC (Mubadala Tech, a party to the WSA) are affiliated with WCH, a significant stockholder of the Company. GF, WCH and Mubadala Tech are wholly-owned subsidiaries of Mubadala.

~~NOTE 3. Supplemental Balance Sheet Information~~


	March 27, 2021		December 26, 2020
	(In millions)
Commercial paper	$	1,003	$	295
Time deposits	350		400
Total short-term investments	$	1,353	$	695

Accounts Receivable, net

As of ~~September 30, 2017~~March 27, 2021 and December ~~31, 2016,~~26, 2020, Accounts receivable, net included unbilled accounts receivable of ~~$16~~$150 million and ~~$37~~$123 million, respectively. Unbilled ~~accounts receivable~~receivables primarily represent work completed on development services recognized as revenue but not yet invoiced to customers and semi-custom products under non-cancellable purchase orders that have no alternative use to the Company at contract inception, for which revenue has been recognized but not ~~billed as payments are deferred by customers until certain contractual milestones are met.~~yet invoiced to customers. All unbilled accounts receivable are expected to be billed and collected within ~~twelve~~12 months.

Inventories


	March 27, 2021		December 26, 2020
	(In millions)
Raw materials	$	89	$	93
Work in process	1,376		1,139
Finished goods	188		167
Total inventories	$	1,653	$	1,399

September 30,
2017 December 31,
2016
(In millions)
Raw materials $ 52
$ 11
Work in process 521
564
Finished goods 221
176
Total inventories, net $ 794
$ 751

Property ~~Plant~~ and Equipment, net


	March 27, 2021		December 26, 2020
	(In millions)
Leasehold improvements	$	211	$	208
Equipment	1,265		1,209
Construction in progress	180		136
Property and equipment, gross	1,656		1,553
Accumulated depreciation	(975)		(912)
Total property and equipment, net	$	681	$	641

Other Non-Current Assets


	March 27, 2021		December 26, 2020
	(In millions)
Software technology and licenses, net	$	203	$	229
Other	209		144
Total other non-current assets	$	412	$	373

September 30,
2017 December 31,
2016
(In millions)
Leasehold improvements $ 151
$ 148
Equipment 758
714
Construction in progress 69
19
Property, plant and equipment, gross 978
881
Accumulated depreciation and amortization (742 ) (717 )
Total property, plant and equipment, net $ 236
$ 164

~~The Company incurs costs for the fabrication~~Table of masks used by its foundry partners to manufacture its products. Beginning the first fiscal quarter of 2017, the Company capitalizes mask costs that are expected to be utilized in production manufacturing as the Company’s product development process has become more predictable and thus supports capitalization of the mask. The capitalized mask costs begin depreciating to Cost of Sales once the products go into production, on a straight-line basis over the estimated useful life of two years. Previously mask sets were expensed to research and development.Contents

~~Other Assets~~

September 30,
2017 December 31,
2016
(In millions)
Software technology and licenses, net $ 248
$ 232
Other 57
47
Total other assets $ 305
$ 279

Accrued Liabilities


	March 27, 2021		December 26, 2020
	(In millions)
Accrued compensation and benefits	$	334	$	513
Accrued marketing programs and advertising expenses	836		839
Other accrued and current liabilities	609		444
Total accrued liabilities	$	1,779	$	1,796

September 30,
2017 December 31,
2016
(In millions)
Accrued compensation and benefits $ 147
$ 116
Marketing programs and advertising expenses 124
102
Software technology and licenses payable 54
24
Other 135
149
Total accrued liabilities $ 460
$ 391
Revenue

Revenue allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) as of March 27, 2021 was $292 million, which may include amounts received from customers but not yet earned and amounts that will be invoiced and recognized as revenue in future periods associated with any combination of development services, IP licensing and product revenue. The Company expects to recognize $159 million of revenue allocated to remaining performance obligations in the next 12 months. The revenue allocated to remaining performance obligations does not include amounts which have an original expected duration of one year or less.

Revenue recognized over time associated with custom products and development services accounted for approximately 22% and 5% of the Company’s revenue for the three months ended March 27, 2021 and March 28, 2020, respectively.

NOTE 4.4 – Related Parties — Equity ~~Interest Purchase Agreement -~~ Joint Ventures

ATMP Joint ~~Venture~~Ventures

~~On April 29, 2016,~~The Company holds a 15% equity interest in 2 joint ventures (collectively, the Company and certain of its subsidiaries completed the sale of a majority of the equity interests in Suzhou TF-AMD Semiconductor Co., Ltd. (formerly, AMD Technologies (China) Co., Ltd.), and TF-AMD Microelectronics (Penang) Sdn. Bhd. (formerly, Advanced Micro Devices Export Sdn. Bhd.), toATMP JV) with affiliates of Tongfu Microelectronics Co., ~~Ltd. (formerly, Nantong Fujitsu Microelectronics Co., Ltd.) (TFME),~~Ltd, a Chinese joint stock company, to form two joint ventures (collectively, the ATMP JV). As a result of the sale, TFME’s affiliates own 85% of the equity interests in the ATMP JV while certain of the Company’s subsidiaries own the remaining 15%.company. The Company has no obligation to fund the ATMP JV.

The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV. As of September 30, 2017 and December 31, 2016, the carrying value of the Company's investment in the ATMP JV was approximately $57 million and $59 million, respectively. The ATMP JV is a related party of the Company.

The ATMP JV provides assembly, ~~test, mark~~testing, marking and packaging ~~(ATMP)~~ services to the Company. The Company ~~currently pays~~assists the ATMP JV ~~for~~in its management of certain raw material inventory. The purchases from and resales to the ATMP ~~services on a cost-plus basis.~~ JV of inventory under the Company’s inventory management program are reported within purchases and resales with the ATMP JV and do not impact the Company’s condensed consolidated statement of operations.

The ~~Company's total~~Company’s purchases from the ATMP JV during the three ~~and nine~~ months ended ~~September 30, 2017~~March 27, 2021 and March 28, 2020 amounted to ~~approximately $131~~$246 million and ~~$332 million, respectively. The Company's total purchases from the ATMP JV during the three and nine months ended September 24, 2016 amounted to approximately $107 million and $173~~$151 million, respectively. As of ~~September 30, 2017~~March 27, 2021 and December ~~31, 2016,~~26, 2020, the ~~amount~~amounts payable to the ATMP JV ~~was $174~~

were $40 million and ~~$128~~$78 million, respectively, and are included in Payables to related parties on the ~~Company's~~Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three months ended March 27, 2021 and March 28, 2020 amounted to $10 million and $7 million, respectively. As of March 27, 2021 and December 26, 2020, the Company’s receivables from the ATMP JV were $7 million and $10 million, respectively, and were included in Receivables from related parties on the Company’s condensed consolidated balance sheets.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 27, 2021, the Company recorded a gain of $2 million ~~and $7 million, respectively,~~ in Equity ~~loss~~income in investee on its condensed consolidated statements of ~~operations, which included certain expenses incurred by the Company on behalf of the ATMP JV.~~operations. During the three ~~and nine~~ months ended ~~September 24, 2016,~~March 28, 2020, the Company ~~recorded $5~~did not record any gain or loss in Equity income in investee. As of March 27, 2021 and December 26, 2020, the carrying value of the Company’s investment in the ATMP JV was $65 million and $8$63 million, ~~respectively,~~respectively.

THATIC Joint Ventures

The Company holds equity interests in ~~Equity loss in investee on its condensed consolidated statements of operations, which included certain expenses incurred by~~2 joint ventures (collectively, the ~~Company on behalf of the ATMP JV.~~

~~NOTE 5. Equity Joint Venture~~

~~In February 2016, the Company and Tianjin Haiguang Advanced~~THATIC JV) with Higon Information Technology ~~Investment~~ Co., Ltd. (THATIC), a third-party Chinese ~~entity (JV Partner), formed a joint venture comprised~~entity. As of ~~two separate legal entities, China JV1~~both March 27, 2021 and ~~China JV2 (collectively,~~December 26, 2020, the THATIC JV). The Company’s equity share in China JV1 and China JV2 is a majority and minority interest, respectively, funded by the Company’s contribution of certain of its patents. The JV Partner is responsible for the initial and on-going financingcarrying value of the ~~THATIC JV’s operations. The Company has no obligations to fund the THATIC JV.~~

The Company concluded the China JV1 and China JV2 are not operating joint ventures and are variable interest entities due to their reliance on on-going financing by JV Partner. The Company determined that it is not the primary beneficiary of either China JV1 or China JV2, as the Company does not have unilateral power to direct selling and marketing, manufacturing and product development activities related to the THATIC JV’s products. Accordingly, the Company will not consolidate either of these entities and therefore accounts for its investments in the THATIC JV under the equity method of accounting. The THATIC JV is a related party of the Company.investment was 0.

In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV, ~~for a total of approximately $293 million in license fee~~ payable over several years ~~contingent~~ upon achievement of certain milestones. The Company also ~~expects to receive~~receives a royalty based on the sales of the THATIC JV’s products ~~to be~~ developed on the basis of such Licensed IP. The Company will also provide certain engineering and technical support to the THATIC JV in connection with the product development. In March 2017, the Company entered into a development and intellectual property agreement with THATIC JV, and also expects to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such agreement. In addition, from time to time, the Company enters into certain agreements with the THATIC JV to provide other services primarily related to research and development.

The Company recognizes income related to the Licensed IP over the period commencing upon delivery of the first Licensed IP milestone through the date of the milestone that requires the Company’s continuing involvement in the product development process. Royalty payments will be recognized in income once earned. The Company classifies Licensed IP ~~income~~ and royalty income associated with the February 2016 agreement as ~~other~~Licensing gain within operating income. During

Table of Contents

the three ~~and nine~~ months ended ~~September 30, 2017,~~March 27, 2021, the Company recognized ~~zero and $52~~$4 million of licensing gain ~~associated with~~from royalty income under the ~~Licensed IP, respectively,~~agreement. As of both March 27, 2021 and ~~development and other services fees of $7 million and $17 million, respectively, as a credit to research and development expenses. During the three and nine months ended September 24, 2016,~~December 26, 2020, the Company ~~recognized $24 million~~had 0 receivables from the THATIC JV.

In June 2019, the Bureau of Industry and ~~$57 million licensing gain, respectively. No credits for development~~Security of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and ~~other services associated~~the THATIC JV. The Company is complying with ~~these agreements was recognized by~~U.S. law pertaining to the ~~Company during the three~~Entity List designation.

NOTE 5 – Debt and ~~nine months ended September 24, 2016. No royalty income was recognized by the Company during the three and nine months ended September 30, 2017 and September 24, 2016.~~Revolving Credit Facility

Debt

The Company’s total ~~exposure to losses through its investment in the THATIC JV is limited to the Company’s investment in the THATIC JV, which was zero~~debt as of ~~September 30, 2017. The Company’s share in the net losses~~March 27, 2021 and December 26, 2020 consisted of the THATIC JV for the three and nine months ended September 30, 2017 and September 24, 2016 was not material and is not recorded in the Company’s condensed consolidated statements of operations since the Company is not obligated to fund the THATIC JV’s losses in excess of the Company’s investment in the THATIC JV. The Company’s receivable from the THATIC JV for these agreements was $5 million and zero as of September 30, 2017 and December 31, 2016, respectively, included in Prepayment and other receivables - related parties on its condensed consolidated balance sheets. As of September 30, 2017, the total assets and liabilities of the THATIC JV were not material.

following:

~~NOTE 6. Debt and Secured Revolving Line of Credit~~

~~Debt~~


	March 27, 2021		December 26, 2020
	(In millions)
7.50% Senior Notes Due 2022 (7.50% Notes)	$	312	$	312
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	2		26

Total debt (principal amount)	314		338
Unamortized debt discount for 2.125% Notes	0		(7)

Unamortized debt issuance costs for 7.50% Notes	(1)		(1)


Total long-term debt (net)	$	313	$	330

2.125% Convertible Senior Notes Due 2026

OnIn September ~~14,~~ 2016, the Company issued ~~$700~~$805 million in aggregate principal amount of 2.125% Convertible Senior Notes due 2026 (2.125% Notes). The Company also granted an option to the underwriters to purchase an additional $105 million aggregate principal amount of the 2.125% Notes. On September 28, 2016, this option was exercised in full and the Company issued an additional $105 million aggregate principal amount of the 2.125% Notes.

2026. The 2.125% Notes are general unsecured senior obligations of the ~~Company and will mature on September 1, 2026, unless earlier repurchased or converted. Interest is payable in arrears on~~Company.

During the three months ended March ~~1 and September 1~~27, 2021, holders of ~~each year beginning on March 1, 2017. The~~the 2.125% Notes ~~are governed by the terms of a base indenture and a supplemental indenture (together the 2.125% Indentures) dated September 14, 2016 between the Company and Wells Fargo Bank, N.A., as trustee.~~

Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding June 1, 2026 under the occurrence of one of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the Measurement Period) in which the trading price per $1,000converted $24 million principal amount of notes, in exchange for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after June 1, 2026 until the close of business on the business day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances. Upon conversion,which the Company ~~will pay or deliver, as the case may be, cash,~~issued approximately 3 million shares of the ~~Company's common stock or a combination of cash and shares of the Company's~~Company’s common stock at the ~~Company's election.~~conversion price of $8.00 per share. The ~~first event described~~Company recorded a loss of $6 million from these conversions in (1) above was met during the third quarter of 2017 and as a result, the 2.125% Notes are convertible at the option of the holder from October 1, 2017 and remain convertible until December 31, 2017. The Company's current intent is to deliver shares of its common stock upon conversion of the 2.125% Notes. As such, the Company continued to classify the carrying value of the liability component of the 2.125% Notes as long-term debt and the equity component of the 2.125% Notes as permanent equityOther income (expense), net on its condensed consolidated ~~balance sheet as~~statements of ~~September 30, 2017.~~

~~The Company may not redeem the notes prior to the maturity date, and no sinking fund is provided for the 2.125% Notes.~~

The conversion rate is currently 125.0031 shares of common stock per $1,000 principal amount of 2.125% Notes (equivalent to an initial conversion price of approximately $8.00 per share of common stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event in certain circumstances.

If the Company undergoes a fundamental change prior to the maturity date of the notes, holders may require the Company to repurchase for cash all or any portion of their 2.125% Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2.125% Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the 2.125% Notes, the Company separated the 2.125% Notes into liability and equity components. The carrying amounts of the liability component was calculated by measuring the fair value of a similar liability that does not have associated conversion features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2.125% Notes as a whole. The excess of the principal amount of the liability component over its book value (debt discount) is accreted to interest expense over the term of the 2.125% Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the 2.125% Notes, the Company allocated the total amount of issuance costs incurred to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the 2.125% Notes, and the issuance costs attributable to the equity component were netted against the equity component in~~additional paid-in capital. During 2016, the Company recorded issuance costs of $15 million and $9 million, for the liability and equity portions, respectively.~~

~~The determination of whether or not the 2.125% Notes are convertible must continue to be performed on a calendar-quarter basis.~~

~~The 2.125% Notes consisted of the following:~~

September 30,
2017 December 31,
2016
(In millions)
Principal amounts:
Principal $ 805
$ 805
Unamortized debt discount⁽¹⁾
(291 ) (308 )
Unamortized debt issuance costs (13 ) (14 )
Net carrying amount $ 501
$ 483
Carrying amount of the equity component, net⁽²⁾
$ 305
$ 305


⁽¹⁾	~~Included in the consolidated balance sheets within Long-term debt, net and amortized over the remaining life of the notes using the effective interest rate method.~~


⁽²⁾	~~Included in the consolidated balance sheets within additional paid-in capital, net of $9 million of equity issuance costs.~~

operations. As of ~~September 30, 2017, the remaining life of the 2.125% Notes was approximately 108 months.~~

Based on the closing price of the Company's common stock of $12.75 on September 29, 2017, the last business day of the third quarter of 2017, the if-converted value of the 2.125% Notes exceeded its principal amount by approximately $478 million.

The effective interest rate of the liability component of the 2.125% Notes is 8%. This interest rate was based on the interest rates of similar liabilities at the time of issuance that did not have associated conversion features. The following table sets forth total interest expense recognized related to the 2.125% Notes:

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Contractual interest expense $ 4
$ —
$ 13
$ —
Interest cost related to amortization of debt issuance costs —
—
1
—
Interest cost related to amortization of the debt discount $ 6
$ 1
$ 17
$ 1

~~6.75% Senior Notes Due 2019~~

~~On February 26, 2014, the Company issued $600 million of its 6.75% Senior Notes due 2019 (6.75% Notes). The 6.75% Notes are general unsecured senior obligations of the Company. Interest is payable on~~ March 1 and September 1 of each year beginning September 1, 2014 until the maturity date of March 1, 2019. The 6.75% Notes are governed by the terms of an indenture (the 6.75% Indenture) dated February 26, 2014 between the Company and Wells Fargo Bank, N.A., as trustee.

~~During the first nine months of 2017, the Company settled $5 million in aggregate principal amount of its 6.75% Notes with treasury stock. As of September 30, 2017,~~27, 2021, the outstanding aggregate principal amount of the ~~6.75%~~2.125% Notes was ~~$191~~$2 million.

7.50% Senior Notes Due 2022

On August 15, 2012, the Company issued $500 million of its 7.50% Senior Notes due 2022 (7.50% Notes). The 7.50% Notes are general unsecured senior obligations of the Company. Interest is payable on February 15 and August 15 of each year beginning February 15, 2013 until the maturity date of August 15, 2022. ~~The 7.50% Notes are governed by the terms of an indenture (the 7.50%Indenture) dated August 15, 2012 between the Company and Wells Fargo Bank, N.A., as trustee.~~

~~During the first nine months of 2017, the Company settled $3 million in aggregate principal amount of its 7.50% Notes with treasury stock.~~ As of ~~September 30, 2017,~~March 27, 2021, the outstanding aggregate principal amount of the 7.50% Notes was ~~$347~~$312 million.

~~7.00% Senior Notes Due 2024~~

On June 16, 2014, the Company issued $500 million of its 7.00% Senior Notes due 2024 (7.00% Notes). The 7.00% Notes are general unsecured senior obligations of the Company. Interest is payable on January 1 and July 1 of each year beginning January

1, 2015 until the maturity date of July 1, 2024. The 7.00% Notes are governed by the terms of an indenture (the 7.00% Indenture) dated June 16, 2014 between the Company and Wells Fargo Bank, N.A., as trustee.

~~During the third quarter of 2017, the Company repurchased $26 million in aggregate principal amount of its 7.00% Notes for $28 million.~~

During the first nine months of 2017, the Company settled $92 million in aggregate principal amount of its 7.00% Notes for $70 million in cash and $26 million in treasury stock. As of September 30, 2017, the outstanding aggregate principal amount of the 7.00% Notes was $324 million.

~~Subsequent to the end of the third quarter of 2017 and through November 2, 2017, the Company repurchased $13 million in aggregate principal amount of its 7.00% Notes.~~

~~Potential Repurchase of Outstanding Notes~~Revolving Credit Facility

The Company ~~may elect~~is party to ~~purchase or otherwise retire the 6.75% Notes, 7.50% Notes, 7.00% Notes~~a $500 million unsecured revolving credit facility (the Revolving Credit Facility), including a $50 million swingline sub-facility and 2.125% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries, or by tender offer when the Company believes the market conditions are favorable.

~~Secured Revolving Line of Credit~~

~~Amended and Restated Loan and Security Agreement~~

On April 14, 2015, the Company and its subsidiaries, AMD International Sales & Service, Ltd. (AMDISS) and ATI Technologies ULC (collectively, the Loan Parties), entered into an amended and restated loan and security agreement (the Amended and Restated Loan Agreement) by and among the Loan Parties, the financial institutions party thereto from time to time as lenders (the Lenders) and Bank of America, N.A., acting as agent for the Lenders (the Agent).

~~Fifth Amendment to the Amended and Restated Loan and Security Agreement~~

~~On March 21, 2017, the Loan Parties entered into~~ a fifth amendment to the Amended and Restated Loan Agreement (the Fifth Amendment) by and among the Loan Parties, the financial institutions party thereto from time to time as lenders and the Agent, which modifies the Amended and Restated Loan Agreement. The Fifth Amendment amends the Amended and Restated Loan Agreement by, among other things, extending the maturity date of the Secured Revolving Line of Credit from April 14, 2020 to March 21, 2022, reducing the Applicable Margin (as defined in the Amended and Restated Loan Agreement), reducing the commitment fee, lowering the minimum threshold of Availability (as defined in the Amended and Restated Loan Agreement) required to be maintained by the Company and AMDISS in order to avoid cash dominion, amending the borrowing base reporting requirement, amending maximum dollar limits related to supply chain finance arrangements, and reducing the amount of the Secured Revolving Line of Credit available for the issuance$75 million sublimit for letters of credit ~~from $75 million~~pursuant to ~~$45 million.~~

~~The Amended and Restated Loan Agreement provides for~~ a ~~Secured Revolving Line~~credit agreement with a syndicate of ~~Credit for a principal amount up to $500 million with up to $45 million available for issuance of letters of credit.~~banks (expiring in June 2024). Borrowings under the ~~Secured~~ Revolving ~~Line of~~ Credit ~~are limited to up to 85% of eligible accounts receivable (90% for certain qualified eligible accounts receivable), minus specified reserves. The size of~~Facility bear interest at either the ~~commitments under~~LIBOR rate or the ~~Secured Revolving Line of Credit may be increased by up to an aggregate amount of $200 million.~~

The Secured Revolving Line of Credit is secured by a first priority security interest in the Loan Parties’ accounts receivable, inventory, deposit accounts maintained with the Agent and other specified assets, including books and records.

~~Sixth Amendment to the Amended and Restated Loan and Security Agreement~~

On September 19, 2017, the Loan Parties entered into a sixth amendment to the Amended and Restated Loan Agreement (the Sixth Amendment) by and among the Loan Parties, the financial institutions party thereto from time to time as lenders and the Agent, which modifies the Amended and Restated Loan Agreement. The Sixth Amendment amends the definition of the term “Qualified Factor Arrangement” to state that the amount held or owing or subject to repurchase is limited to (i) duringbase rate at the Company’s ~~first fiscal quarter of~~option (in each of its fiscal years, $220 million in the aggregate, (ii) during the Company’s second and third fiscal quarter of each of its fiscal years, $300 million in the aggregate, and (iii) (x) from the first day of the Company’s fourth fiscal quarter of each of its fiscal years to December 20 of each of its fiscal years, $300 million in the aggregate (provided, that not more than $220 million of such amount may consist of Qualified Factor Accounts (as defined in the Sixth Amendment) sold in such period) and

~~(y) from December 21 of each of the Company’s fiscal years to and including the last day of the Company’s fourth fiscal quarter of each of its fiscal years, $220 million in the aggregate.~~

case, as customarily defined) plus an applicable margin. As of ~~September 30, 2017, the Secured Revolving Line of Credit had an outstanding loan balance of $70 million, at an interest rate of 4.75%. As of December 31, 2016, the Company did not have any~~March 27, 2021, there were no borrowings outstanding under the ~~Secured~~ Revolving ~~Line of Credit. As of September 30, 2017, the Company had $19 million letter of credit outstanding~~Credit Facility and up to $327 million available for future borrowings under the Secured Revolving Line of Credit. The Company reports its intra-period changes in its revolving credit balance on a net basis in its condensed consolidated statement of cash flows as the Company intends the period of the borrowings to be brief, repaying borrowed amounts within 90 days. As of September 30, 2017, the Company was in compliance with all required ~~covenants in~~covenants. As of March 27, 2021, the ~~Amended and Restated Loan Agreement.~~Company had $13 million of letters of credit outstanding under the Revolving Credit Facility.

NOTE ~~7. Net Income (Loss) Per Share~~

~~Basic net income (loss) per share is computed based on the weighted average number of shares outstanding.~~

Diluted net income (loss) per share is computed based on the weighted average number of shares outstanding plus any potentially dilutive shares outstanding. Potentially dilutive shares include stock options, restricted stock units, shares issuable upon conversion of the 2.125% Notes and the exercise of the warrant under the Warrant Agreement.

~~The following table sets forth the components of basic and diluted net income (loss) per share:~~

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions, except per share amounts)
Numerator – Net income (loss):
Numerator for basic and diluted net income (loss) per share $ 71
$ (406 ) $ (18 ) $ (446 )
Denominator - Weighted average shares
Denominator for basic net income (loss) per share 957
815
947
801
Effect of potentially dilutive shares:
Employee stock options and restricted stock units 44
—
—
—
Warrants 41
—
—
—
Denominator for diluted net income (loss) per share 1,042
815
947
801
Net income (loss) per share:
Basic $ 0.07
$ (0.50 ) $ (0.02 ) $ (0.56 )
Diluted $ 0.07
$ (0.50 ) $ (0.02 ) $ (0.56 )

Potential shares from certain employee stock options, restricted stock units and the conversion of the 2.125% Notes totaling 102 million for the third quarter of 2017 and potential shares from certain employee stock options, restricted stock units, the conversion of the 2.125% Notes and the warrants under the Warrant Agreement totaling 144 million for the third quarter of 2016 were not included in the net income (loss) per share calculations because their inclusion would have been anti-dilutive.

Potential shares from certain employee stock options, restricted stock units, the conversion of the 2.125% Notes and the warrants under the Warrant Agreement totaling 193 million for the nine months ended September 30, 2017 and potential shares from certain employee stock options, restricted stock units, the conversion of the 2.125% Notes and the warrants under the Warrant Agreement totaling 217 million for the nine months ended September 24, 2016 were not included in the net loss per share calculations because their inclusion would have been anti-dilutive.

~~NOTE 8.~~6 – Financial Instruments

~~Cash and Cash Equivalents~~Fair Value Measurements

~~Cash and financial instruments measured and recorded~~Financial Instruments Recorded at ~~fair value~~Fair Value on a ~~recurring basis as~~Recurring Basis

As of ~~September 30, 2017~~March 27, 2021 and December ~~31, 2016 are summarized below:~~

September 30, 2017 December 31, 2016
(In millions)
Cash $ 118
$ 67
Level 1^{(1) (2)}

Government money market funds $ 115
$ 50
Total level 1 $ 115
$ 50
Level 2^{(1) (3)}

Commercial paper $ 646
$ 1,147
Total level 2 $ 646
$ 1,147
Total $ 879
$ 1,264


⁽¹⁾	~~The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter and nine months ended September 30, 2017 or the year ended December 31, 2016.~~


⁽²⁾	~~The Company's Level 1 assets are valued using quoted prices for identical instruments in active markets.~~


⁽³⁾	The Company’s Level 2 assets are valued using broker reports that utilize quoted market prices for identical or comparable instruments. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of industry data providers and other third-party sources.

~~In addition to those amounts presented above, as of September 30, 2017 and December 31, 2016,~~26, 2020, the Company had ~~approximately $2~~$1.0 billion and $295 million of ~~investments in government money market funds, used as collateral for letters of credit deposits, which were~~commercial paper, respectively, included in ~~Other current assets~~Short-term investments on the Company’s condensed consolidated balance sheets. ~~These government money market funds are~~The commercial paper is classified within Level ~~1 because they are valued using~~2 as its fair value estimates were based on quoted prices for ~~identical~~comparable instruments ~~in active markets. Their amortized cost approximates the fair value for all periods presented. The Company is restricted from accessing these deposits.~~.

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As of ~~September 30, 2017~~March 27, 2021 and December ~~31, 2016,~~26, 2020, the Company also had approximately ~~$17~~$59 million and ~~$15~~$46 million, respectively, of investments in mutual funds held in a Rabbi trust established for the ~~Company's~~Company’s deferred compensation plan, which were included in Other non-current assets on the ~~Company's~~Company’s condensed consolidated balance sheets. These money market funds and mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized cost approximates the fair value for ~~all~~both periods presented. The Company is restricted from accessing these investments.

Financial Instruments Recorded at Fair Value on a Non-recurring Basis

During the three months ended March 27, 2021, the Company recorded in Other income (expense), net an impairment charge of $8 million associated with an equity investment.

Financial Instruments Not Recorded at Fair Value ~~on a Recurring Basis.~~

The Company carries its financial instruments at fair value ~~with the exception of~~except for its long-term debt. ~~Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes.~~ The carrying amounts and estimated fair values of ~~financial instruments not recorded at fair value are as follows:~~

September 30, 2017 December 31, 2016

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value
(In millions)
Short-term debt $ 70
$ 70
$ —
$ —
Long-term debt, net⁽¹⁾
$ 1,355
$ 2,294
$ 1,434
$ 2,313


⁽¹⁾	~~Carrying amounts of long-term debt are net of unamortized debt issuance costs of $21 million as of September 30, 2017 and $25 million as of December 31, 2016, based on~~ the ~~adoption of ASU 2015-03 and net of unamortized debt discount associated with the 2.125% Notes of $291 million as of September 30, 2017 and $308 million as of December 31, 2016.~~

~~The~~ Company’s long-term debt are as follows:


	March 27, 2021				December 26, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)

Long-term debt, net	$	313	$	361	$	330	$	642

The estimated fair values of the Company’s long-term debt are based on Level 2 inputs as the fair value is ~~classified within Level 2.~~based on quoted prices for the Company’s debt and comparable instruments in inactive markets. The estimated fair value of the ~~debt was estimated based on the quoted market prices for the same or similar issues or on~~2.125% Notes takes into account the current ~~rates offered~~value of the Company’s stock price compared to the ~~Company for debt~~initial conversion price of ~~the same remaining maturities.~~ approximately $8.00 per share of common stock.

The fair value of the Company’s time deposits, accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing ~~payment~~ terms.

Hedging Transactions and Derivative Financial Instruments

Cash Flow Hedges Designated as Accounting Hedges and Foreign Currency Forward Contracts Not Designated as Accounting Hedges

The following table shows the amount of gain (loss) included in accumulated other comprehensive gain (loss) and the amount of gain (loss) reclassified from accumulated other comprehensive gain (loss) and included in earningsCompany enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in currencies other than the U.S. Dollar. These contracts generally mature within 18 months and are designated as accounting hedges. As of March 27, 2021 and December 26, 2020, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow ~~hedges:~~

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments
Other comprehensive income (loss) $ 1
$ (1 ) $ 8
$ 7
Research and development 3
1
4
—
Marketing, general and administrative 1
—
1
—
Contracts not designated as hedging instruments
Other income (expense), net $ (2 ) $ —
$ (3 ) $ 2
hedges was $811 million and $501 million, respectively. The fair value of these contracts was not material as of March 27, 2021 and December 26, 2020.

The ~~Company’s~~Company also enters into foreign currency ~~derivative~~forward contracts to reduce the short-term effects of foreign currency fluctuations on certain receivables or payables denominated in currencies other than the U.S. Dollar. These forward contracts generally mature within 3 months and are ~~classified within Level 2 because~~not designated as accounting hedges. As of March 27, 2021 and December 26, 2020, the ~~valuation inputs are based on quoted prices~~notional values of these outstanding contracts were $443 million and ~~market observable data~~$254 million, respectively. The fair value of ~~similar instruments~~these contracts was not material as of March 27, 2021 and December 26, 2020.

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NOTE 7 – Accumulated Other Comprehensive Income (Loss)

The table below summarizes the changes in ~~active markets, such as currency spot and forward rates.~~accumulated other comprehensive Income (loss):


	Three Months Ended
		March 27, 2021		March 28, 2020
Gains (losses) on cash flow hedges:		(In millions)
Beginning balance		$	17	$	0
Net unrealized losses arising during the period		0		(17)
Net losses (gains) reclassified into income during the period		(10)		3
Tax effect		(1)		0
Total other comprehensive income (loss)		(11)		(14)
Ending balance		$	6	$	(14)

NOTE 8 – Earnings Per Share

The following table ~~shows~~sets forth the fair value amounts included in Other current assets should the foreign currency forward contracts be in a gain position or included in Other current liabilities should these contracts be in a loss position. These amountscomponents of basic and diluted earnings per share:


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions, except per share amounts)
Numerator
Net income for basic earnings per share		$	555	$	162
Effect of potentially dilutive shares:
Interest expense related to the 2.125% Notes		0		4
Net income for diluted earnings per share		$	555	$	166
Denominator
Basic weighted average shares		1,213		1,170
Effect of potentially dilutive shares:
Employee equity plans and warrants		18		23
2.125% Notes		0		31
Diluted weighted average shares		1,231		1,224
Earnings per share:
Basic		$	0.46	$	0.14
Diluted		$	0.45	$	0.14

NOTE 9 – Common Stock and Employee Equity Plans

Shares of common stock outstanding were ~~recorded in the Company's condensed consolidated balance sheets~~ as follows:


	Three Months Ended
	March 27, 2021	March 28, 2020
	(In millions)
Balance, beginning of period	1,211	1,170
Common stock issued under employee equity plans	1	1
Issuance of common stock to settle convertible debt	3	0
Balance, end of period	1,215	1,171

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September 30,
2017 December 31,
2016
(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments $ 6
$ (2 )
Stock-based compensation expense was as follows:

For the foreign currency contracts designated as cash flow hedges, the ineffective portions of the hedging relationship and the amounts excluded from the assessment of hedge effectiveness were immaterial.


	Three Months Ended
			March 27, 2021		March 28, 2020
		(In millions)
Cost of sales			$	1	$	2
Research and development			55		37
Marketing, general and administrative			29		20
Total stock-based compensation expense before income taxes			85		59
Income tax benefit			(13)		0
Total stock-based compensation expense after income taxes			$	72	$	59

As of September 30, 2017 and December 31, 2016, the notional values of the Company’s outstanding foreign currency forward contracts were $305 million and $138 million, respectively. All the contracts mature within 12 months, and, upon maturity, the amounts recorded in Accumulated other comprehensive gain (loss) are expected to be reclassified into earnings. The Company hedges its exposure to the variability in future cash flows for forecasted transactions over a maximum of 12 months.

NOTE 9.10 – Income Taxes

~~In the third quarter of 2017, the~~The Company recorded an income tax provision of ~~$19~~$89 million ~~consisting primarily of withholding taxes applicable to IP related revenue from foreign locations.~~

~~For~~and $6 million for the ~~nine~~three months ended ~~September 30, 2017, the Company recorded an income~~March 27, 2021 and March 28, 2020, respectively, representing effective tax ~~provision~~rates of ~~$27 million, consisting primarily of withholding taxes applicable to IP related revenue~~13.8% and ~~licensing gain from foreign locations.~~3.3%, respectively.

In the third quarter of 2016, the Company recorded an income tax provision of $4 million, consisting of $3 million for withholding taxes applicable to licensing gain from foreign locations and $1 million of foreign taxesThe increase in ~~profitable locations.~~

For the nine months ended September 24, 2016, the Company recorded an income tax provision of $34 million, including $6 million of foreign taxes in profitable locations, $5 million for withholding taxes primarily applicable to licensing gain from foreign locations and $4 million of tax benefits arising from other comprehensive income and Canadian tax credits. In addition, the Company recorded the tax effect of completion of the sale of a majority equity interest in two subsidiaries comprising $21 million of income tax expense and effective tax rate was due to significantly higher income in ~~China~~the United States in the current period, partially offset by the foreign derived intangible income benefit, research and ~~$6 million of withholding~~development tax credits, and excess tax benefit for stock-based compensation. The lower income tax expense ~~associated with~~and effective tax rate for the prior year period was due to a ~~future repatriation~~full valuation allowance in the United States during 2020, a significant portion of ~~the gain generated in China~~which was released by the ~~Chinese portion~~Company in the fourth quarter of ~~that transaction (see Note 4. Equity Interest Purchase Agreement - ATMP Joint Venture).~~2020.

The ~~Company has not recognized~~Company’s effective tax rate for the three months ended March 27, 2021 and March 28, 2020 was lower than the United States federal statutory rate primarily due to the tax ~~benefit of future foreign tax credits associated with the withholding tax expense~~

~~as the size and age profile of existing tax attributes does not allow it to satisfy the “more likely than not” criterion~~benefits recognized for the ~~recognition~~three months ended March 27, 2021 discussed above, and due to the maintenance of ~~deferred tax assets.~~a full valuation allowance during the three months ended March 28, 2020.

As of ~~September 30, 2017, substantially all of~~March 27, 2021, the ~~Company’s U.S.~~Company continues to maintain a valuation allowance for certain federal, state, and ~~Canadian deferred~~foreign tax ~~assets, net of deferred tax liabilities, continue~~attributes. The federal valuation allowance maintained is due to ~~be subject~~limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. The state and foreign valuation allowance maintained is due to a ~~valuation allowance. The realization~~lack of ~~these assets is dependent on substantial future~~sufficient sources of taxable ~~income which, as of September 30, 2017, in management’s estimate, is not more likely than not to be achieved.~~income.

The Company's total gross unrecognized tax benefits increased from $58 million in prior quarter to $61 million as of September 30, 2017. This increase was due to additional R&D unrecognized tax benefits in foreign locations. The Company does not believe it is reasonably possible that unrecognized tax benefits will materially change in the next 12 months. However, the settlement, resolution or closure of tax audits are highly uncertain.

NOTE ~~10.~~11 – Segment Reporting

Management, including the Chief Operating Decision Maker, who is the Company’s Chief Executive Officer, reviews and assesses operating performance using segment net revenue and operating income (loss) ~~before interest, other income (expense), net and income taxes.~~. These performance measures include the allocation of expenses to the operating segments based on management’s judgment. The Company has the following ~~two~~2 reportable segments:

•the Computing and Graphics segment, which primarily includes desktop and notebook ~~processors~~microprocessors, accelerated processing units that integrate microprocessors and graphics, chipsets, discrete graphics processing units (GPUs), data center and professional ~~graphics processors~~GPUs and ~~licensing~~development services. From time to time, the Company may also sell or license portions of its ~~intellectual property (IP) portfolio; and~~IP portfolio.

•the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded processors, semi-custom System-on-Chip (SoC) products, development services and technology for game ~~consoles and licensing~~consoles. From time to time, the Company may also sell or license portions of its IP portfolio.

In addition to these reportable segments, the Company has an All Other category, which is not a reportable segment. This category primarily includes certain expenses and credits that are not allocated to any of the reportable segments because management does not consider these expenses and credits in evaluating the performance of the reportable segments. This category ~~also~~primarily includes employee stock-based compensation expense and ~~restructuring and other special charges, net.~~acquisition-related costs.

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The following table provides a summary of net revenue and operating income ~~(loss)~~ by segment:


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Net revenue:
Computing and Graphics		$	2,100	$	1,438
Enterprise, Embedded and Semi-Custom		1,345		348

Total net revenue		$	3,445	$	1,786
Operating income (loss):
Computing and Graphics		$	485	$	262
Enterprise, Embedded and Semi-Custom		277		(26)
All Other (1)		(100)		(59)
Total operating income		$	662	$	177

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Net revenue:
Computing and Graphics $ 819
$ 472
$ 2,071
$ 1,367
Enterprise, Embedded and Semi-Custom 824
835
1,778
1,799
Total net revenue $ 1,643
$ 1,307
$ 3,849
$ 3,166
Operating income (loss):
Computing and Graphics $ 70
$ (66 ) $ 62
$ (217 )
Enterprise, Embedded and Semi-Custom 84
136
135
236
All Other (28 ) (363 ) (75 ) (388 )
Total operating income (loss) $ 126
$ (293 ) $ 122
$ (369 )


(1)			For the three months ended March 27, 2021, all other operating losses included $85 million of stock-based compensation expense and $15 million of acquisition-related costs. For the three months ended March 28, 2020, all other operating losses were related to stock-based compensation expense.

~~The following table provides major items included in All Other category:~~

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Operating loss:
Stock-based compensation expense $ (29 ) $ (23 ) $ (76 ) $ (57 )
Restructuring and other special charges, net —
—
—
10
Charge related to the sixth amendment to the WSA with GF —
(340 ) —
(340 )
Other 1
—
1
(1 )
Total operating loss $ (28 ) $ (363 ) $ (75 ) $ (388 )

NOTE ~~11. Stock-Based Incentive Compensation Plans~~

~~Stock Options~~

~~The weighted average assumptions applied in the lattice-binomial model that the Company uses to estimate the fair value of employee stock options are as follows:~~

Three and Nine Months Ended
September 30,
2017 September 24,
2016
Expected volatility 56.32 % 59.85 %
Risk-free interest rate 1.65 % 1.00 %
Expected dividends 0.00 % 0.00 %
Expected life 3.92 years
3.98 years

During the quarter and nine months ended September 30, 2017 and quarter and nine months ended September 24, 2016, the Company granted 0.9 million and 2.2 million shares of employee stock options, respectively, with weighted average grant date fair value per share of $5.46 and $3.10, respectively.

~~Restricted Stock Units~~

In the third quarter of 2017, the Company granted 8.3 million shares of restricted stock units, including 0.8 million performance-based restricted stock units (PRSUs) with market conditions discussed below, with weighted average grant date fair value per share of $13.24. In the third quarter of 2016, the Company granted 19.5 million shares of restricted stock units including, 2.0 million PRSUs with market conditions discussed below, with weighted average grant date fair value per share of $5.10.

During the nine months ended September 30, 2017, the Company granted 10.4 million shares of restricted stock units including, 0.8 million PRSUs with market conditions discussed below, with weighted average grant date fair value per share of $13.03. During the nine months ended September 24, 2016, the Company granted 26 million shares of restricted stock units including, 2.0 million PRSUs with market conditions discussed below, with weighted average grant date fair value per share of $4.55.

~~Performance-based Restricted Stock Units with Market Conditions~~

During the third quarter of 2017, the Company granted restricted stock units with both a market condition and a service condition (market-based restricted stock units) to the Company's senior executives. The vesting is based on relative Total Shareholder Return (TSR) performance. The number of shares that may be earned is calculated based on the TSR of AMD's common stock as compared to the TSR of the companies included in the PHLX Semiconductor Sector Index (SOX), with the potential payout level of shares within a range from 0% to 250% of the target number of shares granted. These payout levels can be adjusted by two criteria - one based on AMD's TSR and one based on AMD's stock price during the last year of performance period; and an overall payout cap based on total value. Any shares earned shall vest upon the compensation committee's certification of the attainment of the performance level, subject to the recipient's continuous employment or service through each such vesting date.

The Company estimated the fair value of the market-based restricted stock units using a Monte Carlo simulation model on the date of grant. As of September 30, 2017 there were 0.8 million market-based restricted stock units with potential payout level at 100% with a grant date fair value per share of $17.18.

During the third quarter of 2016, the Company granted market-based restricted stock units to the Company’s senior executives. The number of shares that may be earned is based on three-year compounded annual growth rate milestones related to the Company’s closing stock price that may be attained within the three-year performance period, with the potential payout levels of shares at 50%, 100%, 150%, 200% and 250% of the target number of shares granted. Any shares earned pursuant to the attainment of a performance level shall vest 50% upon the compensation committee's certification of the attainment of the performance level (provided, however, that no shares may be earned or vest prior to the first anniversary of the grant date) and the remaining 50% shall vest at the end of the performance period, subject to the recipient’s continuous employment or service through each such vesting date.

The Company estimated the fair value of the market-based restricted stock units using a Monte Carlo simulation model on the date of grant. As of September 24, 2016, there were 2.0 million market-based restricted stock units with the potential payout level at 100% with a grant date fair value per share of $4.50. As of September 30, 2017, all the 2016 market-based restricted stock units achieved the 250% payout level.

~~NOTE 12. Commitments and~~12 – Contingencies

~~Warranties and Indemnities~~

The Company generally warrants that its products sold to its customers will conform to the Company’s approved specifications and be free from defects in material and workmanship under normal use and service for one year. Subject to certain exceptions, the Company also offers a three-year limited warranty to end users for only those central processing unit (CPU) and AMD accelerated processing unit (APU) products that are commonly referred to as “processors in a box” and for certain server CPU products. The Company also offers extended limited warranties to certain customers of “tray” microprocessor products and/or professional graphics products who have written agreements with the Company and target their computer systems at the commercial and/or embedded markets.

~~Changes in the Company’s estimated liability for product warranty were as follows:~~

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Beginning balance $ 10
$ 11
$ 12
$ 15
New warranties issued 7
5
18
15
Settlements (7 ) (5 ) (16 ) (13 )
Changes in liability for pre-existing warranties, including expirations 1
—
(3 ) (6 )
Ending balance $ 11
$ 11
$ 11
$ 11

In addition to product warranties, the Company, from time to time in its normal course of business, indemnifies other parties, with whom it enters into contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. In these limited matters, the Company has agreed to hold certain third parties harmless against specific types of claims or losses, such as those arising from a breach of representations or covenants, third-party claims that the Company’s products, when used for their intended purpose(s) and under specific conditions, infringe the intellectual property rights of a third party, or other specified claims made against the indemnified party. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.

~~Contingencies~~

~~Securities Class Action~~

~~On January 15, 2014, a class action lawsuit captioned~~ ~~Hatamian v. AMD, et al.~~, C.A. No. 3:14-cv-00226 (the Hatamian Lawsuit) was filed against the Company in the United States District Court for the Northern District of California. The complaint purports to assert claims against the Company and certain individual officers for alleged violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Rule 10b-5 of the Exchange Act. The plaintiffs seek to represent a proposed class of all persons who purchased or otherwise acquired the Company's common stock during the period April 4, 2011 through October 18, 2012. The complaint seeks damages allegedly caused by alleged materially misleading statements and/or material omissions by the Company and the individual officers regarding the Company's 32nm technology and “Llano” product, which statements and omissions, the plaintiffs claim, allegedly operated to artificially inflate the price paid for the Company's common stock during the period. The complaint seeks unspecified compensatory damages, attorneys’ fees and costs. On July 7, 2014, the Company filed a motion to dismiss plaintiffs’ claims. On March 31, 2015, the Court denied the motion to dismiss. On May 14, 2015, the Company filed its answer to plaintiffs’ corrected amended complaint. On September 4, 2015, plaintiffs filed their motion for class certification, and on March 16, 2016, the Court granted plaintiffs' motion. A court-ordered mediation held in January 2016 did not result in a settlement of the lawsuit. The discovery process was concluded. The plaintiffs and defendants filed cross-motions for summary judgment, and briefing on those motions was completed in July 2017. On October 9, 2017, the parties signed a definitive settlement agreement resolving this matter and submitted it to the Court for approval. Under the terms of this agreement, the settlement will be funded entirely by certain of AMD’s insurance carriers and the defendants will continue to deny any liability or wrongdoing.

Based upon information presently known to management, the Company believes that the potential liability, if any, will not have a material adverse effect on its financial condition, cash flows or results of operations.

Shareholder Derivative Lawsuits (Wessels, Hamilton and Ha)

On March 20, 2014, a purported shareholder derivative lawsuit captioned Wessels v. Read, et al., Case No. 1:14 cv-262486 (Wessels) was filed against the Company (as a nominal defendant only) and certain of its directors and officers in the Santa Clara County Superior Court of the State of California. The complaint purports to assert claims against the Company and certain individual directors and officers for breach of fiduciary duty, waste of corporate assets and unjust enrichment. The complaint seeks damages allegedly caused by alleged materially misleading statements and/or material omissions by the Company and the individual directors and officers regarding its ~~32nm~~32 nm technology and “Llano” product, which statements and omissions, the plaintiffs claim, allegedly operated to artificially inflate the price paid for the ~~Company's~~Company’s common stock during the period. On April 27, 2015, a similar purported shareholder derivative lawsuit captioned Christopher Hamilton and David Hamilton v. Barnes, et al., Case No. 5:15-cv-01890 (Hamilton) was filed against the Company (as a nominal defendant only) and certain of its directors and officers in the United States District Court for the Northern District of California. ~~The case was transferred to the judge handling the Hatamian Lawsuit and is now Case No. 4:15-cv-01890.~~

On September 29, 2015, a similar purported shareholder derivative lawsuit captioned Jake Ha v Caldwell, et al., Case No. 3:15-cv-04485 (Ha) was filed against the Company (as a nominal defendant only) and certain of its directors and officers in the United States District Court for the Northern District of California. The lawsuit also seeks a court order voiding the stockholder vote on the Company’s 2015 proxy. The case was transferred to the judge handling the ~~Hatamian~~Hamilton Lawsuit and is now Case No. 4:15-cv-04485.

The Wessels, Hamilton and Ha shareholder derivative lawsuits ~~are currently stayed.~~were stayed pending resolution of a class action lawsuit captioned Hatamian v. AMD, et al., C.A. No. 3:14-cv-00226 filed against the Company in the United States District Court for the Northern District of California (the Hatamian Lawsuit). The Hatamian Lawsuit asserted claims against the Company and certain of its officers for alleged violations of Section 10(b) of the Exchange Act of 1934, as amended (the Exchange Act), and SEC Rule 10b-5 concerning certain statements regarding its 32 nm technology and “Llano” products. On October 9, 2017, the parties signed a definitive settlement agreement resolving the Hatamian Lawsuit and submitted it to the Court for approval. Under the terms of this agreement, the settlement was funded entirely by certain of the Company’s insurance carriers and the defendants continued to deny any liability or wrongdoing. On March 2, 2018, the court approved the settlement and entered a final judgment in the Hatamian Lawsuit.

On July 23, 2018, the Santa Clara Superior Court sustained the Company’s demurrer in the Wessels case, dismissing all claims in that matter with prejudice. The California Court of Appeal affirmed this decision on August 27, 2020 and issued its remittitur on September 9, 2020, which foreclosed further appeals in the state court litigation. On October 4, 2018, the district court issued an order dismissing the Hamilton and Ha amended complaints and both plaintiffs appealed. On March 16, 2020, the Ninth Circuit affirmed the district court’s dismissal

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of the Ha complaint and the time to seek further appeals has since expired. On the same day, the Ninth Circuit also reversed and remanded the district court’s dismissal of the Hamilton complaint for further consideration of defendants’ motion to dismiss. Following supplemental briefing, the district court entered an order on April 5, 2021 dismissing with prejudice all claims in the Hamilton action as precluded by the decision in the Wessels case.

~~ZiiLabs~~Quarterhill Inc. Litigation

~~On December 16, 2016, a patent lawsuit captioned~~ ~~ZiiLabs v. AMD~~, C.A. No. 2:16-cv-1418 in the United States District Court for Eastern District of Texas (the ZiiLabs Lawsuit) was filed against the Company. The complaint alleged that the Company infringed four patents related generally to graphics processors and memory controllers. The complaint sought damages, interest, and attorneys’ fees. ZiiLabs filed several similar lawsuits against other companies on the same day. On the same date, ZiiLabs also filed a complaint with the United States International Trade Commission (USITC) pursuant to Section 337 of the Tariff Act of 1930 against the Company and several other companies asserting the same four patents (USITC Proceeding). The complaint sought a limited exclusion order barring the importation of certain products that contain AMD memory controllers and graphics processors. Some of the Company’s customers are also named respondents. On January 18, 2017, the USITC announced that it would institute the investigation, entitled 337-TA-1037, ~~In the Matter of Certain Graphics Processors, DDR Memory Controllers, and Products Containing the Same~~. On July ~~20, 2017, the Company obtained a license to the patents-in-suit. Accordingly, the USITC~~2, 2018, three entities named Aquila Innovations, Inc. (Aquila), Collabo Innovations, Inc. (Collabo), and ~~the Court have dismissed the Company from the proceedings. The resulting settlement obligation was not material. The applicable amount of the~~Polaris Innovations, Ltd. (Polaris), filed separate patent ~~license was capitalized on the Company's balance sheet in the third quarter of 2017 and amortized over its useful life.~~

~~Dickey Litigation~~

~~On October 26, 2015, a putative class action complaint captioned~~ ~~Dickey et al. v. AMD, No. 15-cv-04922~~ ~~was filed~~infringement complaints against the Company in the United States District Court for the ~~Northern~~Western District of ~~California. Plaintiffs allege~~Texas. Aquila alleges that the Company ~~misled consumers by using~~infringes two patents (6,239,614 and 6,895,519) relating to power management; Collabo alleges that the ~~term "eight cores" in connection with~~Company infringes one patent (7,930,575) related to power management; and Polaris alleges that the ~~marketing~~Company infringes two patents (6,728,144 and 8,117,526) relating to control or use of ~~certain AMD FX CPUs that are based on~~dynamic random-access memory, or DRAM. Each of the ~~Company's “Bulldozer” core architecture. The plaintiffs allege these products cannot perform eight calculations simultaneously, without restriction. The plaintiffs seek to obtain~~three complaints seeks unspecified monetary damages, ~~under several causes of action for a nationwide class of consumers who allegedly were deceived into purchasing certain Bulldozer-based CPUs that were marketed as containing eight cores. The plaintiffs~~interest, fees, expenses, and costs against the Company; Aquila and Collabo also seek ~~attorneys' fees.~~enhanced damages. Aquila, Collabo, and Polaris each appear to be related to a patent assertion entity named Quarterhill Inc. (formerly WiLAN Inc.). On ~~December 21, 2015,~~November 16, 2018, AMD filed answers in the ~~Company~~Collabo and Aquila cases and filed a motion to dismiss in the ~~complaint, which~~Polaris case. On January 25, 2019, the Company filed amended answers and counterclaims in the Collabo and Aquila cases. On July 22, 2019, the Company’s motion to dismiss in the Polaris case was ~~granted on April 7, 2016. The plaintiffs then filed an amended complaint with~~denied. On August 23, 2019, the Court held a ~~narrowed putative class definition, which~~claim construction hearing in each case. On May 14, 2020, at the request of Polaris, the Court dismissed ~~upon~~all claims related to one of the ~~Company's motion on October 31, 2016. The plaintiffs subsequently filed a second amended complaint, and~~two patents in suite in the ~~Company filed a motion to dismiss the second amended complaint.~~Polaris case. On June ~~14, 2017,~~10, 2020, the Court granted AMD’s motions to stay the Polaris and Aquila cases pending the completion of inter partes review of each of the patents-in-suit in those cases by the Patent Trial and Appeal Board. On February 22, 2021, February 26, 2021, and March 10, 2021, the Patent Trial and Appeal Board issued ~~an order granting~~final written decisions in ~~part~~inter partes reviews invalidating all asserted claims of the remaining Polaris and denying in part the Company's motion to dismiss, and allowing the plaintiffs to move forward with a portion of their complaint. The putative class definition does not encompass the Company's Ryzen or EYPC processors.Aquila patents.

City of Pontiac Police and Fire Retirement System Litigation

On September 29, 2020, the City of Pontiac Police and Fire Retirement System, an AMD shareholder, filed a shareholder derivative complaint (the “Complaint”) against AMD and the members of its Board of Directors (collectively, “Defendants”) in the United States District Court for the Northern District of California. See City of Pontiac Police and Fire Retirement System v. Caldwell, et al., No. 5:20-cv-6794 (N.D. Cal.). The Complaint alleges that Defendants breached their fiduciary duties, violated Section 14(a) of the Exchange Act of 1934, and were unjustly enriched by misrepresenting the Company’s commitment to diversity, particularly with respect to the composition of the membership of AMD’s Board of Directors and senior leadership team. On December 18, 2020, Defendants filed a motion to dismiss the Complaint. On February 12, 2021, Plaintiff filed an opposition to Defendants’ motion to dismiss, and on March 12, 2021, Defendants filed a reply brief in support of the motion to dismiss.

Xilinx Acquisition Litigation

On October 26, 2020, the Company, its wholly-owned subsidiary, Thrones Merger Sub, Inc., and Xilinx, Inc. (“Xilinx”) entered a definitive agreement (the “Merger Agreement”) in which the Company will acquire Xilinx by merging Thrones Merger Sub, Inc. with and into Xilinx, with Xilinx continuing as the surviving corporation and becoming a wholly-owned subsidiary of the Company (the “Proposed Transaction”). See Note 13 of Notes to Condensed Consolidated Financial Statements for additional information. On December 3, 2020, the Company and Xilinx filed a Registration Statement on Form S-4 (together with the joint proxy statement and prospectus contained therein, the “Registration Statement”) describing the Proposed Transaction and other related matters. On December 11, 2020, a Xilinx shareholder filed a putative class action in the New York State Supreme Court, New York County, regarding the Proposed Transaction. Nunez v. Xilinx, Case No. 656971/2020 (N.Y. Sup. Ct.) (“Nunez”). The lawsuit alleges that the Board of Directors of Xilinx breached their fiduciary duties to Xilinx shareholders in connection with the Proposed Transaction by allegedly failing to obtain fair, adequate and maximum consideration for Xilinx

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shareholders in connection with the Proposed Transaction and by not disclosing certain material information about the Proposed Transaction in the Registration Statement. The lawsuit asserts a single claim against the Company, alleging that it aided and abetted the Xilinx directors’ breach of their fiduciary duties. The lawsuit seeks to enjoin or rescind any transaction with Xilinx as well as certain other equitable relief, unspecified damages and attorneys’ fees and costs.

On December 15, 2020, a Xilinx shareholder filed a lawsuit in the United States District Court for the Southern District of New York, regarding the Proposed Transaction. Shumacher v. Xilinx, Case No. 1:20-cv-10595 (S.D.N.Y.) (“Shumacher”). The lawsuit alleges that Xilinx and its Board of Directors disseminated a false and misleading Registration Statement that omitted material information regarding the Proposed Transaction, thereby violating Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The lawsuit also asserts a single claim against the Company, alleging that it acted as a controlling person of Xilinx within the meaning of Section 20(a) of the Exchange Act by virtue of its supervisory control over the composition of the Registration Statement. The lawsuit seeks to enjoin or rescind any transaction with Xilinx as well as certain other equitable relief, unspecified damages and attorneys’ fees and costs.

On December 23, 2020, a shareholder of the Company filed a lawsuit in the United States District Court of the Southern District of New York regarding the Proposed Transaction. Vazirani v. Advanced Micro Devices, Case No. 1:20-cv-10894 (S.D.N.Y) (“Vazirani”). The lawsuit alleges that the Company and its Board of Directors disseminated a false and misleading Registration Statement that omitted material information regarding the Proposed Transaction, thereby violating Sections 14(a) and 20(a) of the Exchange Act. The lawsuit seeks to enjoin or rescind any transaction with Xilinx as well as certain other equitable relief, unspecified damages and attorneys’ fees and costs.

On March 22, 2021, the Nunez complaint was voluntarily dismissed, and on March 25, 2021, the Vazirani complaint was voluntarily dismissed. The Shumacher complaint was voluntarily dismissed on April 9, 2021.

Future Link Systems Litigation

On December 21, 2020, Future Link Systems, LLC filed a patent infringement complaint against the Company in the United States District Court for the Western District of Texas. Future Link Systems alleges that the Company infringes three U.S. patents: 7,983,888 (related to simulated PCI express circuitry); 6,363,466 (related to out of order data transactions); and 6,622,108 (related to interconnect testing). Future Link Systems seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against the Company. On March 22, 2021, the Company filed its answer to Future Link Systems’ complaint and also filed counterclaims based on Future Link Systems’ breach of the parties’ pre-suit non-disclosure agreement.

Other Legal Matters

The Company is a defendant or plaintiff in various actions that arose in the normal course of business. With respect to these matters, based on the management’s current knowledge, the Company believes that the amount or range of reasonably possible loss, if any, will not, either individually or in the aggregate, have a material adverse effect on the Company’s ~~business,~~ financial position, ~~and~~ results of operations, or cash flows.

NOTE ~~13. Accumulated Other Comprehensive Income (Loss)~~13 – Pending Acquisition

On October 26, 2020, the Company entered into an Agreement and Plan of Merger (the Merger Agreement), with Thrones Merger Sub, Inc., a wholly-owned subsidiary of the Company (Merger sub), and Xilinx, Inc. (Xilinx), whereby Merger Sub will merge with and into Xilinx (the Merger), with Xilinx surviving such Merger as a wholly-owned subsidiary of the Company. Under the Merger Agreement, at the effective time of the Merger (the Effective Time), each share of common stock of Xilinx (Xilinx Common Stock) issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of Xilinx Common Stock held directly by the Company or Merger Sub) will be converted into the right to receive 1.7234 fully paid and non-assessable shares of common stock of the Company and, if applicable, cash in lieu of fractional shares, subject to any applicable withholding. As of the signing of the Merger Agreement, the transaction was valued at $35 billion. The ~~tables below summarize~~actual valuation of the ~~changes in accumulated other comprehensive income (loss) by component:~~

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Three Months Ended
September 30,
2017 September 24,
2016
Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on cash flow hedges Total Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on cash flow hedges Total
(In millions)
Beginning balance $ (1 ) $ 1
$ —
$ (2 ) $ (1 ) $ (3 )
Unrealized gains arising during the period —
6
6
1
—
1
Reclassification adjustment for (gains) losses realized and included in net income (loss) —
(4 ) (4 ) —
(1 ) (1 )
Tax effect —
—
—
—
—
—
Total other comprehensive income (loss) —
2
2
1
(1 ) —
Ending balance $ (1 ) $ 3
$ 2
$ (1 ) $ (2 ) $ (3 )
transaction could differ significantly from the estimated amount due to movements in the price of the Company’s common stock, the number of shares of Xilinx common stock outstanding on the closing date of the Merger and other factors.

Under the Merger Agreement, the Company will be required to pay a termination fee to Xilinx equal to $1.5 billion if the Merger Agreement is terminated in certain circumstances, including if the Merger Agreement is terminated because the Company’s board of directors has changed its recommendation. The Company will be required to pay a termination fee equal to $1 billion if the Merger Agreement is terminated in certain circumstances related to the failure to obtain required regulatory approvals prior to October 26, 2021 (subject to automatic extension first to January 26, 2022 and then to April 26, 2022, in each case, to the extent the regulatory closing conditions remain outstanding).

On April 7, 2021, the Company’s and Xilinx’s stockholders voted to approve their respective proposals relating to the pending acquisition of Xilinx by the Company. The closing of the Merger is subject to customary conditions, including regulatory approval, and is currently expected to occur by the end of calendar year 2021.

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Nine Months Ended
September 30,
2017 September 24,
2016
Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on cash flow hedges Total Unrealized gains (losses) on available-for-sale securities Unrealized gains (losses) on cash flow hedges Total
(In millions)
Beginning balance $ (1 ) $ (4 ) $ (5 ) $ (1 ) $ (7 ) $ (8 )
Unrealized gains (losses) arising during the period —
14
14
(1 ) 7
6
Reclassification adjustment for (gains) losses realized and included in net income (loss) —
(5 ) (5 ) —
1
1
Tax effect —
(2 ) (2 ) 1
(3 ) (2 )
Total other comprehensive income (loss) —
7
7
—
5
5
Ending balance $ (1 ) $ 3
$ 2
$ (1 ) $ (2 ) $ (3 )



ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this report include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements and should not be relied upon as predictions of future events, as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” “anticipates,” or the negative of these words and phrases, other variations of these words and phrases or comparable terminology. The forward-looking statements relate to, among other things: possible impact of future accounting rules on ~~AMD's~~AMD’s condensed consolidated financial statements; demand for AMD’s products; the growth, change and competitive landscape of the markets in which AMD participates; future restructuring activities; the ability to implement new revenue recognition accounting standards; the nature and extent of AMD’s future payments to GLOBALFOUNDRIES Inc. (GF) and the materiality of these payments; the materiality of AMD’s future purchases from GF; AMD's ability to meet it's 2017 wafer purchase target; the expected amounts to be received by AMD under the IP licensing agreement and AMD's expected royalty payments from future product sales of China JVs' products to be developed on the basis of such licensed IP; sales patterns of AMD's PC products and semi-custom System-on-Chip (SoC) products for game consoles; the level of international sales as compared to total sales; international sales will continue to be a significant portion of total sales in the foreseeable future; that ~~other unrecognized tax benefits will not materially change in the next 12 months; that~~ AMD’s cash, ~~and~~ cash equivalents and short-term investment balances together with the availability under that certain ~~secured~~ revolving ~~line of~~ credit ~~(Secured~~facility (the Revolving ~~Line of Credit)~~Credit Facility) made available to AMD and certain of its subsidiaries under the ~~Amended and Restated Loan~~Credit Agreement, will be sufficient to fund AMD’s operations including capital expenditures over the next 12 months; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; ~~AMD's~~AMD’s expectation that based on the information presently known to management, the potential liability related to ~~AMD's~~AMD’s current litigation will not have a material adverse effect on its financial condition, cash flows or results of operations; ~~AMD does not expect~~anticipated ongoing and increased costs related to ~~pay dividends in~~enhancing and implementing information security controls; revenue allocated to remaining performance obligations that are unsatisfied which will be recognized over the ~~future;~~next 12 months; all unbilled accounts receivables are expected to be billed and collected within 12 months; a small number of customers will continue to account for a substantial part of ~~AMD's~~AMD’s revenue in the future; ~~and anticipated sales~~that AMD may have tax audits close in the ~~fourth quarter of 2017. Material factors~~next 12 months that could ~~cause actual results to differ~~ materially ~~from current expectations include, without limitation,~~change the ~~following: Intel Corporation’s dominance~~balance of the microprocessor market and its aggressive business practices may limit AMD’s ability to compete effectively; AMD has a wafer supply agreement with GF with obligations to purchase all of its microprocessor and APU product requirements, and a certain portion of its GPU product requirements from GF with limited exceptions. If GF is not able to satisfy AMD’s manufacturing requirements, AMD's business could be adversely impacted; AMD relies on third parties to manufacture its products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, AMD’s business could be materially adversely affected; failure to achieve expected manufacturing yields for AMD’s products could negatively impact its financial results; the success of AMD’s business is dependent upon its ability to introduce products on a timely basis with features and performance levels that provide value to its customers while supporting and coinciding with significant industry transitions; if AMD cannot generate sufficient revenue and operating cash flow or obtain external financing, it may face a cash shortfall and be unable to make all of its planned investments in research and development or other strategic investments; the loss of a significant customer may have a material adverse effect on AMD; AMD’s receipt of revenue from its semi-custom SoC products is dependent upon its technology being designed into third-party productsuncertain tax benefits; and the ~~success~~acquisition of ~~those products; global economic uncertainty may adversely impact AMD’s business and operating results; the markets in which AMD’s products are sold are highly competitive; AMD may not be able~~Xilinx, Inc. is currently expected to generate sufficient cash to service its debt obligations or meet its working capital requirements; AMD has a large amount of indebtedness which could adversely affect its financial position and prevent it from implementing its strategy or fulfilling its contractual obligations; the agreements governing AMD’s notes and the Secured Revolving Line of Credit impose restrictions on AMD that may adversely affect its ability to operate its business; AMD's issuance to West Coast Hitech L.P. (WCH) of warrants to purchase 75 million shares of its common stock, if and when exercised, will dilute the ownership interests of AMD's existing stockholders, and the conversion of the 2.125% Convertible Senior Notes due 2026 (2.125% Notes) may dilute the ownership interest of AMD's existing stockholders, or may otherwise depress the price of its common stock; uncertainties involving the ordering and shipment of AMD’s products could materially adversely affect it; the demand for AMD’s products depends in part on the market conditions in the industries into which they are sold. Fluctuations in demand for AMD’s products or a market decline in any of these industries could have a material adverse effect on its results of operations; AMD’s ability to design and introduce new products in a timely manner is dependent upon third-party intellectual property; AMD depends on third-party companies for the design, manufacture and supply of motherboards, software and other computer platform components to support its business; if AMD loses Microsoft Corporation’s support for its products or other software vendors do not design and develop software to run on AMD’s products, its ability to sell its products could be materially adversely affected; AMD’s reliance on third-party distributors and AIB partners subjects it to certain risks; AMD’s inability to continue to attract and retain qualified personnel may hinder its business; in the event of a change of control, AMD may not be able to repurchase its outstanding debt as requiredclose by the ~~applicable indentures and its Secured Revolving Line~~end of ~~Credit, which would result in a default under the indentures and its Secured Revolving Line of Credit; the semiconductor industry is highly cyclical and has experienced se~~

~~vere downturns that have materially adversely affected, and may continue to materially adversely affect~~its business in the future; acquisitions, divestitures and/or joint ventures could disrupt its business, harm its financial condition and operating results or dilute, or adversely affect the price of, its common stock; AMD’s business is dependent upon the proper functioning of its internal business processes and information systems and modification or interruption of such systems may disrupt its business, processes and internal controls; data breaches and cyber-attacks could compromise AMD’s intellectual property or other sensitive information, be costly to remediate and cause significant damage to its business and reputation; AMD’s operating results are subject to quarterly and seasonal sales patterns; if essential equipment, materials or manufacturing processes are not available to manufacture its products, AMD could be materially adversely affected; if AMD’s products are not compatible with some or all industry-standard software and hardware, it could be materially adversely affected; costs related to defective products could have a material adverse effect on AMD; if AMD fails to maintain the efficiency of its supply chain as it responds to changes in customer demand for its products, its business could be materially adversely affected; AMD outsources to third parties certain supply-chain logistics functions, including portions of its product distribution, transportation management and information technology support services; AMD may incur future impairments of goodwill; AMD's stock price is subject to volatility; AMD’s worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on it; worldwide political conditions may adversely affect demand for AMD’s products; unfavorable currency exchange rate fluctuations could adversely affect AMD; AMD’s inability to effectively control the sales of its products on the gray market could have a material adverse effect on it; if AMD cannot adequately protect its technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, it may lose a competitive advantage and incur significant expenses; AMD is a party to litigation and may become a party to other claims or litigation that could cause it to incur substantial costs or pay substantial damages or prohibit it from selling its products; AMD’s business is subject to potential tax liabilities; and AMD is subject to environmental laws, conflict minerals-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as a variety of other laws or regulations that could result in additional costs and liabilities.

calendar year 2021. For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements, see “Part II, Item 1A—Risk Factors” ~~beginning on page 41~~ and the “Financial Condition” ~~beginning on page 33~~section set forth below, and such other risks and uncertainties as set forth ~~below~~ in this report or detailed in our other Securities and Exchange Commission (SEC) reports and filings. We assume no obligation to update forward-looking statements.

AMD, the AMD Arrow logo, ATI, and the ATI logo, Athlon, EPYC, Radeon, Ryzen, Threadripper and combinations thereof, are trademarks of Advanced Micro Devices, Inc. Microsoft ~~is a~~and Xbox One are trademarks or registered ~~trademark~~trademarks of Microsoft Corporation in the United States and other jurisdictions. ~~Sony is a trademark of Sony Corporation.~~ Other names are for informational purposes only and are used to identify companies and products and may be trademarks of their respective owners. “Zen” is a code name for an AMD architecture, and is not a product name.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as of December ~~31, 2016~~26, 2020 and December ~~26, 2015,~~28, 2019, and for each of the three years infor the period ended December ~~31, 2016~~26, 2020 as filed in our Annual Report on Form 10-K for the fiscal year ended December ~~31, 2016.~~26, 2020.

Overview

We are a global semiconductor ~~company with facilities around the world. Within the global semiconductor industry, we offer primarily:~~

company. Our products include x86 microprocessors ~~as standalone devices or as incorporated as an~~(CPUs), accelerated processing ~~unit (APU)~~units which integrate microprocessors and graphics (APUs), ~~chipsets,~~ discrete graphics processing units (GPUs), semi-custom System-on-Chip (SOC) products and ~~professional graphics processors; and~~

~~server~~chipsets for the PC, gaming, datacenter and embedded ~~processors, semi-custom System-on-Chip (SoC) products~~markets. In addition, we provide development services and ~~technology for game consoles.~~

~~We also~~sell or license portions of our intellectual property ~~(IP)~~ portfolio.

In this section, we will describe the general financial condition and the results of operations of Advanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, “us,” “our” or “AMD”), including a discussion of our results of operations for the ~~quarter and nine~~three months ended ~~September 30, 2017~~March 27, 2021 compared to the ~~quarter and nine months ended September 24, 2016,~~prior year period, an analysis of changes in our financial condition and a discussion of our contractual obligations.

Net revenue infor the ~~third quarter of 2017~~three months ended March 27, 2021 was ~~$1.64~~$3.4 billion, a ~~26%~~93% increase compared to the ~~third quarter of 2016.~~prior year period. The ~~year-over-year~~ increase was ~~primarily~~ due to a ~~74%~~46% increase in Computing and Graphics net revenue ~~partially offset by~~and a ~~1% decrease~~286% increase in Enterprise, Embedded and Semi-Custom net revenue. The increase in Computing and Graphics segment net

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revenue was primarily due to higher sales ~~from~~of our ~~graphics~~Ryzen™ processors and ~~desktop processors and IP related revenue.~~Radeon™ products. The ~~decrease~~increase in Enterprise, Embedded and Semi-Custom ~~segment~~ net revenue was primarily ~~driven by lower sales of our~~due to higher semi-custom ~~SoCs, mostly offset by IP related~~ revenue and ~~revenue from our AMD~~ EPYC™ ~~datacenter processors.~~ server processor revenue.

Our operating income for the ~~third quarter of 2017~~three months ended March 27, 2021 was ~~$126~~$662 million compared to operating ~~loss~~income of ~~$293~~$177 million infor the ~~third quarter of 2016.~~prior year period. Our net income for the ~~third quarter of 2017~~three months ended March 27, 2021 was ~~$71~~$555 million compared to net income of $162 million for the prior year period. The increase in operating income was primarily driven by strong revenue growth which more than offset higher operating expenses. The increase in net income was primarily driven by higher operating income, partially offset by a ~~net loss~~higher income tax provision.

Cash, cash equivalents and short-term investments as of ~~$406~~March 27, 2021 were $3.1 billion, compared to $2.3 billion as of December 26, 2020. The aggregate principal amount of our outstanding debt obligations was $314 million ~~a year ago.~~and $338 million as of March 27, 2021 and December 26, 2020, respectively.

~~We introduced a number of new products in~~During the ~~third~~first quarter of ~~2017. We released mainstream high efficiency AMD Ryzen™ 3 desktop processors,~~2021, we expanded our mobile processor and graphics product families. In January 2021, we announced the AMD Ryzen™ 3 1300x and AMD Ryzen™ 3 1200 processors. We designed both processors to deliver optimum performance for gaming and computing applications. We also launched our Ryzen™ Threadripper™ processor, the AMD Ryzen™ Threadripper™ 1950x and Ryzen™ Threadripper™ 1920x,Ryzen 5000 Series Mobile Processors for the high-end desktop market. In addition, we launched our Radeon™ Pro WX 9100 and Radeon™ Pro SSG. These new professional graphics cards can help accelerate the pace of professional content creation. In August 2017, we formally launched our Radeon™ RX Vega family of graphics processors, our most sophisticated graphics processor unitlaptop market with Zen 3 core architecture designed for gamers, creators and professionals. In March 2021, we introduced the ~~enthusiast-class~~AMD Radeon RX 6700 XT graphics card built on 7 nm process technology and AMD RDNA 2 gaming ~~segment.~~architecture to deliver performance and power efficiency. We also announced our new AMD EPYC 7003 Series CPUs for high-performance computing, cloud and enterprise customers. The EPYC 7003 series processors have up to 64 Zen 3 cores per processor and per-core cache memory and also include security features through AMD Infinity Guard to help drive faster times to results and improve business outcomes. In March 2021, we also announced, as part of our AMD Ryzen mobile processor family, the AMD Ryzen PRO 5000 Series Mobile Processors with Zen 3 core architecture for business laptops. AMD Ryzen PRO Series Mobile Processors are built to provide powerful computing experiences with security features for demanding business environments like remote working.

Amid the COVID-19 pandemic, our main priority remains the health and safety of our employees. We continue to monitor and take safety measures to protect our employees and support those employees who work from home so that they can be productive. Our offices remain open to enable critical on-site business functions in accordance with local government guidelines and the majority of our employees in China and Singapore now work on site subject to local government health measures. However, in most other geographies, the majority of our employees continued to work from home during the first quarter of 2021. The current COVID-19 pandemic continues to impact our business operations and practices, and while we expect that it may continue to impact our business, we experienced limited financial disruption during the first quarter of 2021. We continue to monitor demand signals as we adjust our supply chain requirements based on changing customer needs and demands.

~~Cash~~As part of our strategy to establish AMD as the industry’s high performance computing leader, we announced in October 2020 that we entered into a definitive agreement to acquire Xilinx, Inc. in an all-stock transaction. On April 7, 2021, our stockholders and ~~cash equivalents as~~Xilinx’s stockholders voted to approve their respective proposals relating to the pending acquisition of Xilinx by AMD. The closing of the Merger is subject to customary conditions, including regulatory approval, and is currently expected to occur by the end of ~~the third quarter of 2017 were $879 million, compared to $1.26 billion as of the end of the fourth quarter of 2016.~~

calendar year 2021.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist ~~you~~ in understanding our financial statements, the changes in certain key items in those financial statements from ~~year~~period to ~~year and quarter to quarter,~~period, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.

Results of Operations

~~Management, including the Chief Operating Decision Maker, who is~~We report our ~~Chief Executive Officer, reviews and assesses our operating~~financial performance using segment net revenue and operating income (loss) before interest, other income (expense), net and income taxes. These performance measures include the allocation of expenses to the operating segments based on ~~management’s judgment. We have~~ the following two reportable segments:

the Computing and Graphics segment ~~which primarily includes desktop~~ and ~~notebook processors and chipsets, discrete graphics processors, professional graphics processors and licensing portions of our IP portfolio; and~~

the Enterprise, Embedded and Semi-Custom ~~segment, which primarily includes server and embedded processors, semi-custom SoC products, development services, technology for game consoles and licensing portions of~~segment.

Additional information on our ~~IP portfolio.~~

~~In addition to these~~ reportable segments ~~we have an All Other category, which~~ is ~~not a reportable segment. This category primarily includes certain expenses and credits that are not allocated to any~~contained in Note 11—Segment Reporting of the ~~reportable segments because management does not consider these expenses and credits in evaluating the performance~~notes to condensed consolidated financial statements (Part I, Financial Information of ~~the reportable segments. This category also includes employee stock-based compensation expense and restructuring and other special charges, net.~~

We use a 52 or 53 week fiscal year ending on the last Saturday in December. The quarters ended September 30, 2017 and September 24, 2016 each consisted of 13 weeks. The nine months ended September 30, 2017 and September 24, 2016 each consisted of 39 weeks.this Form 10-Q).

Our operating results tend to vary ~~seasonally with~~seasonally. Historically, our net revenue has been generally higher in the ~~markets in which our products are sold. For example, historically, first quarter PC product sales are generally lower~~second half of the year than ~~fourth quarter sales. In addition, with respect to our semi-custom SoC products for game consoles, we expect sales patterns to follow the seasonal trends of a consumer business with sales~~ in the first half of the year, ~~being lower than sales in the second half~~although market conditions and product transitions could impact these trends.

Table of ~~the year.~~Contents

The following table provides a summary of net revenue and operating income (loss) by segment:


	Three Months Ended
		March 27, 2021		March 28, 2020
		(In millions)
Net revenue:
Computing and Graphics		$	2,100	$	1,438
Enterprise, Embedded and Semi-Custom		1,345		348

Total net revenue		$	3,445	$	1,786
Operating income (loss):
Computing and Graphics		$	485	$	262
Enterprise, Embedded and Semi-Custom		277		(26)
All Other		(100)		(59)
Total operating income		$	662	$	177

Computing and Graphics

Computing and Graphics net revenue of ~~$819 million in~~$2.1 billion for the ~~third quarter of 2017~~three months ended March 27, 2021 increased by ~~74%~~46%, compared to net revenue of ~~$472 million in~~$1.4 billion for the ~~third quarter of 2016,~~prior year period, primarily as a result of a ~~61%~~12% increase in unit shipments and a 32% increase in average selling ~~price and a 1%~~price. The increase in unit ~~shipments.~~shipments was primarily due to higher demand for our Ryzen processors. The increase in average selling price was primarily ~~due to~~driven by a richer mix of ~~higher-end Radeon™ graphics processors~~Ryzen and Ryzen™ desktop processors. The increase in unit shipments was primarily attributable to strong demand for our Radeon™ graphics processors and Ryzen™ desktop processors. In addition, Computing and Graphics net revenue in the third quarter of 2017 included IP related revenue.

Computing and Graphics net revenue of $2,071 million in the first nine months of 2017 increased by 51%, compared to net revenue of $1,367 million in the first nine months of 2016, primarily as a result of a 40% increase in average selling price and a 4% increase in unit shipments. The increase in average selling price was primarily due to a shift in product mix to higher-end Radeon™ graphics processors and Ryzen™ desktop processors. The increase in unit shipments was primarily attributable to higher demand for our graphics processors and Ryzen™ desktopRadeon processors.

Computing and Graphics operating income was ~~$70~~$485 million infor the ~~third quarter of 2017,~~three months ended March 27, 2021, compared to an operating ~~loss~~income of ~~$66~~$262 million infor the ~~third quarter of 2016.~~prior year period. The ~~improvement~~increase in operating ~~results~~income was primarily ~~due to the increase in net revenue referenced above, partially offset~~driven by the ~~related increase in cost of~~margin contribution from higher sales~~and a $30 million increase in~~ which more than offset higher operating expenses. Operating expenses increased for the reasons ~~set forth~~outlined under “Expenses” below.

Computing and Graphics operating income was $62 million in the first nine months of 2017, compared to an operating loss of $217 million in the first nine months of 2016. The improvement in operating results was primarily due to the increase in net revenue referenced above, partially offset by the related increase in cost of sales~~and a $57 million increase in operating expenses. Operating expenses increased for the reasons set forth under “Expenses” below.~~

Enterprise, Embedded and Semi-Custom

Enterprise, Embedded and Semi-Custom net revenue of ~~$824 million in~~$1.3 billion for the ~~third quarter of 2017 decreased~~three months ended March 27, 2021 increased by 1%286%, compared to net revenue of ~~$835~~$348 million infor the ~~third quarter of 2016. The decrease in net~~prior year period, primarily driven by higher semi-custom revenue ~~was primarily due to lower~~and higher sales of our ~~semi-custom SoC products, mostly offset by IP related revenue and sales of our AMD EPYC™ datacenter processors.~~

Enterprise, Embedded and Semi-Custom net revenue of $1,778 million in the first nine months of 2017 decreased by 1%, compared to net revenue of $1,799 million in the first nine months of 2016. The decrease in net revenue was primarily due to a decrease in non-recurring engineering (NRE) revenue and lower sales of our semi-custom SoC products, mostly offset by IP related revenue and sales of our AMD EPYC™ datacenterEPYC server processors.

Enterprise, Embedded and Semi-Custom operating income was ~~$84~~$277 million infor the ~~third quarter of 2017~~three months ended March 27, 2021 compared to operating ~~income~~loss of ~~$136~~$26 million infor the ~~third quarter of 2016.~~prior year period. The ~~decline in operating results was primarily due to costs associated with the WSA for certain wafers purchased at another foundry, a $36 million~~ increase in operating ~~expenses and $24 million of THATIC JV licensing gain in~~income was due to the ~~third quarter of 2016, partially~~higher revenue which more than offset ~~by the benefit from IP related revenue.~~higher operating expenses. Operating expenses increased for the reasons ~~set forth~~outlined under “Expenses” below.

Enterprise, Embedded and Semi-Custom operating income was $135 million in the first nine months of 2017, compared to operating income of $236 million in the first nine months of 2016. The decline in operating results was primarily due to an $81 million increase in operating expenses driven primarily by datacenter-related operating expenses, and costs associated with the WSA for certain wafers purchased at another foundry, partially offset by IP related revenue. Operating expenses increased for the reasons set forth under “Expenses” below.

All Other

All Other operating loss of ~~$28~~$100 million infor the ~~third quarter~~three months ended March 27, 2021 consisted of ~~2017 was related to~~$85 million of stock-based compensation ~~expense.~~expense and $15 million of acquisition-related costs. All Other operating loss of ~~$363~~$59 million infor the ~~third quarter~~prior year period consisted of 2016 included a charge of $340 million, consisting of the $100 million payment under the sixth amendment to the Wafer Supply Agreement with GF (WSA Sixth Amendment) and the $240 million value of the warrant under a warrant agreement with WCH (Warrant Agreement) and stock-based compensation ~~expense of $23 million.~~expense.

All Other operating loss of $75 million in the first nine months of 2017 was primarily related to stock-based compensation expense. All Other operating loss of $388 million in the first nine months of 2016 primarily included a charge of $340 million, consisting of the $100 million payment under the WSA Sixth Amendment and the $240 million value of the warrant under the Warrant Agreement and stock-based compensation expense of $57 million, partially offset by restructuring reversals of $10 million.

International Sales

International sales as a percentage of net revenue were ~~72% in~~76% for the ~~third quarter of 2017~~three months ended March 27, 2021 and ~~73% in~~82% for the third quarter of 2016. The decrease in international sales as a percentage of net revenue in the third quarter of 2017 compared to the third quarter of 2016 was primarily driven by a higher proportion of revenue from domestic sales of our products from the Computing and Graphics segment.

~~International sales as a percentage of net revenue were~~75% in the first nine months of 2017 and 78% in the first nine months of 2016. The decrease in international sales as a percentage of net revenue in the first nine months of 2017 compared to the first nine months of 2016 was primarily driven by a higher proportion of revenue from domestic sales of our desktop processors, graphics processors and semi-custom SoC products.

prior year period. We expect that international sales will continue to be a significant portion of total sales in the foreseeable future. Substantially all of our sales transactions were denominated in U.S. dollars.

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Comparison of Gross Margin, Expenses, Licensing Gain, Interest Expense, Other ~~Income (Expense), Net~~Expense and Income Taxes

The following is a summary of certain condensed consolidated statement of operations data for the periods indicated:


														Three Months Ended
	Three Months Ended						Nine Months Ended								March 27, 2021			March 28, 2020
	September 30, 2017			September 24, 2016			September 30, 2017			September 24, 2016					(In millions except for percentages)
	(In millions except for percentages)
Net revenue													Net revenue		$	3,445		$	1,786
Cost of sales	$	1,070		$	1,248		$	2,541		$	2,519		Cost of sales		1,858			968
Gross profit													Gross profit		1,587			818
Gross margin	573			59			1,308			647			Gross margin		46		%	46		%
Gross margin percentage	35		%	5		%	34		%	20		%
Research and development	315			259			860			744			Research and development		610			442
Marketing, general and administrative	132			117			378			339			Marketing, general and administrative		319			199
Restructuring and other special charges, net	—			—			—			(10		)

Licensing gain	—			(24		)	(52		)	(57		)	Licensing gain		(4)			—
Interest expense	(31		)	(41		)	(95		)	(122		)	Interest expense		(9)			(13)
Other income (expense), net	(3		)	(63		)	(11		)	87			Other income (expense), net		(11)			4
Provision for income taxes	19			4			27			34
Equity loss in investee	$	(2	)	$	(5	)	$	(7	)	$	(8	)
Income tax provision													Income tax provision		89			6
Equity income in investee													Equity income in investee		2			—

Gross Margin

Gross margin ~~as a percentage of net revenue~~ was ~~35% in~~46% for the ~~third quarter of 2017, compared to 5% in the third quarter of 2016 and 34% in the first nine months of 2017, compared to 20% in the first nine months of 2016. The gross margins in the quarter and nine~~three months ended ~~September 24, 2016 were negatively impacted~~March 27, 2021 and March 28, 2020. During the three months ended March 27, 2021, the higher gross margin from the richer mix of our Ryzen, Radeon and EPYC processors sales was offset by a ~~charge~~higher proportion of ~~$340 million consisting~~sales of the $100 million payment under the WSA Sixth Amendment and the value of the warrant of $240 million under the Warrant Agreement. The impact of the charge in the quarter and nine months ended September 24, 2016 accounted for 26 and 11 percentage points, respectively. Substantially all of the resultingour semi-custom products, which have a lower gross margin ~~increase for~~than the third quarter of 2017 compared with the third quarter of 2016 was driven by the benefit from IP related revenue and also a richer revenue mix from the Computing and Graphics segment, which were partially offset by costs associated with the WSA for certain wafers purchased at another foundry. The resulting increase in gross margin for the nine months ended September 30, 2017 compared to the nine months ended September 24, 2016 was primarily due to richer mix from Computing and Graphics segment and the benefit from IP related revenue, partially offset by costs associated with the WSA for certain wafers purchased at another foundry.Company’s average.

Expenses

Research and Development Expenses

Research and development expenses of ~~$315~~$610 million infor the ~~third quarter of 2017~~three months ended March 27, 2021 increased by ~~$56~~$168 million, or ~~22%~~38%, compared to ~~$259~~$442 million infor the ~~third quarter of 2016.~~prior year period. The increase was primarily driven by an increase in product development costs in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments due to an increase in ~~research~~headcount and ~~development expenses, mainly product engineering and design costs, and annual employee incentives driven by improved financial performance.~~

Research and development expenses of $860 million in the first nine months of 2017 increased by $116 million, or 16%, compared to $744 million in the first nine months of 2016. The increase was primarily due to an increase in research and development expenses, mainly product engineering and design related costs driven primarily by higher ~~datacenter related investments, and~~ annual employee incentives driven by improved financial performance.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses of ~~$132~~$319 million infor the ~~third quarter of 2017~~three months ended March 27, 2021 increased by ~~$15~~$120 million, or ~~13%~~60%, compared to ~~$117~~$199 million infor the ~~third quarter of 2016.~~prior year period. The increase was primarily due to an increase in ~~expenses related to~~go-to-market activities in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments, an increase in headcount and higher annual employee incentives driven by ~~our~~ improved financial ~~performance, increases~~performance. In addition, we incurred $15 million of acquisition-related costs for the three months ended March 27, 2021 in ~~general and administrative and sales and marketing expenses primarily attributable~~connection with our pending acquisition of Xilinx, Inc.

Licensing Gain

During the three months ended March 27, 2021, we recognized $4 million of royalty income associated with the licensed IP to ~~our Enterprise, Embedded and Semi-Custom segment.~~THATIC JV.

Marketing, general and administrative expenses of $378 million in the first nine months of 2017 increased by $39 million, or 12%, compared to $339 million in the first nine months of 2016. The increase was due to increase in expenses related to annual employee incentives driven by our improved financial performance, increases in general and administrative and sales and marketing expenses primarily attributable to our Enterprise, Embedded and Semi-Custom segment.

Interest Expense

Interest ~~expenses~~expense for the ~~third quarter and the first nine~~three months ~~of 2017 were $31~~ended March 27, 2021 was $9 million ~~and $95 million, respectively,~~ compared to ~~interest expenses~~$13 million for the ~~third quarter and the first nine months of 2016 were $41 million and $122 million, respectively.~~prior year period. The ~~decreases are primarily~~decrease was due to lower ~~weighted average interest rates and lower~~ debt ~~balances.~~balances as a result of conversions by the holders of our 2.125% Convertible Senior Notes due 2026.

Table of Contents

Other Income ~~(expense)~~(Expense), Net

Other expense, net was $11 million for the three months ended March 27, 2021, compared to $4 million of $3Other income, net for the prior year period. The change was primarily due to an impairment charge of $8 million associated with an equity investment and a loss on conversion of our convertible debt instruments of $6 million in the ~~third quarter of 2017, decreased by $60 million, compared to $63 million in the third quarter of 2016, primarily due to the $61 million total loss on debt repurchases in the third quarter of 2016.~~current period.

Other expense, net of $11 million in the first nine months of 2017, changed by $98 million, compared to $87 million Other income, net in the first nine months of 2016, primarily due to the gain on sale of equity interests in ATMP JV of $150 million, partially offset by the $61 million total loss on debt repurchases in the first nine months of 2016 and $9 million total loss on debt redemption in the first nine months of 2017.

Income ~~Taxes~~Tax Provision

~~In the third quarter of 2017, we~~We recorded an income tax provision of ~~$19~~$89 million ~~consisting primarily of withholding taxes applicable to IP related revenue from foreign locations.~~

~~For~~and $6 million for the ~~nine~~three months ended ~~September 30, 2017, we recorded an income~~March 27, 2021 and March 28, 2020, respectively, representing effective tax ~~provision~~rates of ~~$27 million, consisting primarily of withholding taxes applicable to IP related revenue~~13.8% and ~~licensing gain from foreign locations.~~3.3%, respectively.

In the third quarter of 2016, we recorded an income tax provision of $4 million, consisting of $3 million for withholding taxes applicable to licensing gain from foreign locations and $1 million of foreign taxesThe increase in ~~profitable locations.~~

For the nine months ended September 24, 2016, we recorded an income tax provision of $34 million, including $6 million of foreign taxes in profitable locations, $5 million for withholding taxes primarily applicable to licensing gain from foreign locations and $4 million of tax benefits arising from other comprehensive income and Canadian tax credits. In addition, we recorded the tax effect of completion of the sale of a majority equity interest in two subsidiaries comprising $21 million of income tax expense and effective tax rate in ~~China~~the current year period was due to significantly higher income in the United States, partially offset by the foreign derived intangible income benefit, research and ~~$6 million of withholding~~development tax credits, and excess tax benefit for stock-based compensation. The lower income tax expense ~~associated with~~and effective tax rate for the prior year period was due to a ~~future repatriation of~~full valuation allowance in the ~~gain generated in China by the Chinese~~United States during 2020, a significant portion of ~~that transaction (see Note 4. Equity Interest Purchase Agreement - ATMP Joint Venture).~~

~~We have not recognized~~which was released by us in the ~~tax benefit~~fourth quarter of future foreign tax credits associated with the withholding tax expense as the size and age profile of existing tax attributes does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets.2020.

As of ~~September 30, 2017, substantially all of our U.S. and Canadian deferred tax assets, net of deferred tax liabilities,~~March 27, 2021, we continue to ~~be subject to~~maintain a valuation ~~allowance.~~allowance for certain federal, state, and foreign tax attributes. The ~~realization of these assets~~federal valuation allowance maintained is ~~dependent on substantial future taxable income, which as of September 30, 2017, in our estimate, is not more likely than not to be achieved.~~

~~Our total gross unrecognized tax benefits increased from $58 million in the prior quarter to $61 million as of September 30, 2017. This increase was~~ due to ~~additional R&D unrecognized tax benefits in~~limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. The state and foreign ~~locations. We do not believe it~~valuation allowance maintained is ~~reasonably possible that unrecognized tax benefits will materially change in the next 12 months. However, the settlement, resolution or closure of our tax audits are highly uncertain.~~

~~Stock-Based Compensation Expense~~

The following table summarizes stock-based compensation expense related to employee stock options and restricted stock units, which we allocated in our condensed consolidated statements of operations as follows:

Three Months Ended Nine Months Ended
September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
(In millions)
Cost of sales $ 1
$ —
$ 2
$ 1
Research and development 18
15
45
34
Marketing, general and administrative 10
8
29
22
Stock-based compensation expense, net of tax of $0 $ 29
$ 23
$ 76
$ 57

~~For all periods presented, we did not realize any excess tax benefit related to stock-based compensation and therefore did not record any related operating cash flows.~~

Stock-based compensation expense of $29 million in the third quarter of 2017 increased by $6 million, compared to $23 million in the third quarter of 2016. Stock-based compensation expense of $76 million in the first nine months of 2017 increased by $19 million, compared to $57 million in the first nine months of 2016. The increase was primarily due to ~~a higher weighted average grant date fair value~~lack of unvested restricted stock units in the three and nine months ended September 30, 2017, compared to the three and nine months ended September 24, 2016. The increase was also driven by fewer actual forfeitures in 2017 compared to 2016.sufficient sources of taxable income.

~~GLOBALFOUNDRIES~~

~~Wafer Supply Agreement.~~ ~~The Wafer Supply Agreement (WSA) governs the terms by which we purchase products manufactured by GLOBALFOUNDRIES Inc. (GF).~~

~~Sixth Amendment to Wafer Supply Agreement~~. On August 30, 2016, we entered into a sixth amendment to the WSA (the WSA Sixth Amendment). The WSA Sixth Amendment modified certain terms of the WSA applicable to wafers for our microprocessor, graphics processor and semi-custom products for a five-year period from January 1, 2016 to December 31, 2020. AMD and GF also agreed to establish a comprehensive framework for technology collaboration for the 7nm technology node.

The WSA Sixth Amendment also provides us a limited waiver with rights to contract with another wafer foundry with respect to certain products in the 14nm and 7nm technology nodes and gives us greater flexibility in sourcing foundry services across our product portfolio. In consideration for these rights, we agreed to pay GF $100 million in installments starting in the fourth fiscal quarter of 2016 through the third fiscal quarter of 2017. During the third fiscal quarter of 2017, we paid GF $25 million and, as of September 30, 2017, we had paid GF $100 million in aggregate. Starting in 2017 and continuing through 2020, we also agreed to make quarterly payments to GF based on the volume of certain wafers purchased from another wafer foundry.

Further, for each calendar year during the term of the WSA Sixth Amendment, AMD and GF agreed to annual wafer purchase targets that increase from 2016 through 2020. If we do not meet the annual wafer purchase target for any calendar year, we will be required to pay to GF a portion of the difference between our actual wafer purchases and the wafer purchase target for that year. The annual targets were established based on our business and market expectations and took into account the limited waiver we received for certain products. As of September 30, 2017, we expect to meet our 2017 wafer purchase target.

AMD and GF also agreed on fixed pricing for wafers purchased during 2016 and established a framework to agree on annual wafer pricing for the years 2017 to 2020. AMD and GF have agreed on pricing for wafer purchases for 2017.

Our total purchases from GF related to wafer manufacturing, research and development activities and other for the quarters ended September 30, 2017 and September 24, 2016 were $331 million and $186 million, respectively. Our total purchases from GF related to wafer manufacturing, research and development activities and other for the nine months ended September 30, 2017 and September 24, 2016 were $773 million and $479 million, respectively. Included in the total purchases for the quarter and nine months ended September 30, 2017 are amounts related to the volume of certain wafers purchased from another wafer foundry, as agreed to by us and GF under the WSA Sixth Amendment. As of September 30, 2017 and December 31, 2016, the amount of prepayment and other receivables related to GF was $20 million and $32 million, respectively, included in Prepayment and other receivables - related parties on our condensed consolidated balance sheets. As of September 30, 2017 and December 31, 2016, the amount payable to GF was $270 million and $255 million, respectively, included in Payable to related parties on our condensed consolidated balance sheets.

~~Warrant Agreement~~. Also on August 30, 2016, in consideration for the limited waiver and rights under the WSA Sixth Amendment, we entered into a warrant agreement (the Warrant Agreement) with West Coast Hitech L.P. (WCH), a wholly-owned subsidiary of Mubadala Development Company PJSC (Mubadala). Under the Warrant Agreement, WCH and its permitted assigns are entitled to purchase 75 million shares of our common stock (the Warrant Shares) at a purchase price of $5.98 per share. The warrant is exercisable in whole or in part until February 29, 2020. Notwithstanding the foregoing, the Warrant Agreement will only be exercisable to the extent that Mubadala does not beneficially own, either directly through any other entities directly and indirectly owned by Mubadala or its subsidiaries, an aggregate of more than 19.99% of our outstanding capital stock after any such exercise.

GF continues to be a related party of AMD because Mubadala and Mubadala Technology Investments LLC (Mubadala Tech, a party to the WSA) are affiliated with WCH, a significant stockholder of ours. GF, WCH and Mubadala Tech are wholly-owned subsidiaries of Mubadala.

~~Equity Interest Purchase Agreement~~ - ~~ATMP Joint Venture~~

On April 29, 2016, we and certain of our subsidiaries completed the sale of a majority of the equity interests in Suzhou TF-AMD Semiconductor Co., Ltd. (formerly, AMD Technologies (China) Co., Ltd.), and TF-AMD Microelectronics (Penang) Sdn. Bhd. (formerly, Advanced Micro Devices Export Sdn. Bhd.), to affiliates of Tongfu Microelectronics Co., Ltd. (formerly, Nantong Fujitsu Microelectronics Co., Ltd.) (TFME), a Chinese joint stock company, to form two joint ventures (collectively, the ATMP JV). As a result of the sale, TFME’s affiliates own 85% of the equity interests in the ATMP JV while certain of our subsidiaries own the remaining 15%. We have no obligation to fund the ATMP JV.

We account for our equity interests in the ATMP JV under the equity method of accounting due to our significant influence over the ATMP JV. As of September 30, 2017 and December 31, 2016, the carrying value of our investment in the ATMP JV was approximately $57 million and $59 million, respectively. The ATMP JV is a related party of ours. The ATMP JV provides assembly, test, mark and packaging (ATMP) services to us. We currently pay the ATMP JV for ATMP services on a cost-plus basis. Our total purchases from the ATMP JV during the three and nine months ended September 30, 2017 amounted to approximately $131 million and $332 million, respectively. Our total purchases from the ATMP JV during the three and nine months ended September 24, 2016 amounted to approximately $107 million and $173 million, respectively. As of September 30, 2017 and December 31, 2016, the amount payable to the ATMP JV was $174 million and $128 million, respectively, included in Payables to related parties on our condensed consolidated balance sheets.

During the three and nine months ended September 30, 2017, we recorded $2 million and $7 million, respectively, in Equity loss in investee on our condensed consolidated statements of operations, which included certain expenses incurred by us on behalf of the ATMP JV. During the three and nine months ended September 24, 2016, we recorded a loss of $5 million and $8 million, respectively, in Equity loss in investee on our condensed consolidated statements of operations, which included certain expenses incurred by us on behalf of the ATMP JV.

~~Equity Joint Venture~~

In February 2016, we and Tianjin Haiguang Advanced Technology Investment Co., Ltd. (THATIC), a third-party Chinese entity (JV Partner), formed a joint venture comprised of two separate legal entities, China JV1 and China JV2 (collectively, the THATIC JV). Our equity share in China JV1 and China JV2 is a majority and minority interest, respectively, funded by our contribution of certain of our patents. The JV Partner is responsible for the initial and on-going financing of the THATIC JV’s operations. We have no obligations to fund the THATIC JV.

We concluded the China JV1 and China JV2 are not operating joint ventures and are variable interest entities due to their reliance on on-going financing by the JV Partner. We determined that we are not the primary beneficiary of either China JV1 or China JV2, as we do not have unilateral power to direct selling and marketing, manufacturing and product development activities related to the THATIC JV’s products. Accordingly, we will not consolidate either of these entities and therefore account for our investments in the THATIC JV under the equity method of accounting. The THATIC JV is a related party of ours.

In February 2016, we licensed certain of our intellectual property (Licensed IP) to the THATIC JV for a total of approximately $293 million in license fee payable over several years contingent upon achievement of certain milestones. We also expect to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such Licensed IP. We will also provide certain engineering and technical support to the THATIC JV in connection with the product development. In March 2017, we entered into a development and intellectual property agreement with THATIC JV, and also expect to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such agreement. In addition, from time to time, we enter into certain agreements with the THATIC JV to provide other services primarily related to research and development.

We recognize income related to the Licensed IP over the period commencing upon delivery of the first Licensed IP milestone through the date of the milestone that requires our continuing involvement in the product development process. Royalty payments will be recognized in income once earned. We classify Licensed IP income and royalty income as other operating income. During the three and nine months ended September 30, 2017, we recognized zero and $52 million licensing gain associated with the Licensed IP, respectively, and development and other services fees of $7 million and $17 million, respectively, as a credit to research and development expenses. During the three and nine months ended September 24, 2016, we recognized $24 million and $57 million licensing gain, respectively. No credits for development and other services associated with these agreements was recognized by us during the three and nine months ended September 24, 2016. No royalty income was recognized during the three and nine months ended September 30, 2017 and September 24, 2016.

Our total exposure to losses through our investment in the THATIC JV is limited to our investment in the THATIC JV, which was zero as of September 30, 2017. Our share in the net losses of the THATIC JV for the three and nine months ended September 30, 2017 and September 24, 2016 was not material and is not recorded in our condensed consolidated statements of operations since we are not obligated to fund the THATIC JV’s losses in excess of our investment in the THATIC JV. Our receivable from THATIC JV for these agreements was $5 million and zero as of September 30, 2017 and December 31, 2016, respectively, included in Prepayment and other receivables - related parties on our condensed consolidated balance sheets. As of September 30, 2017, the total assets and liabilities of the THATIC JV were not material.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of ~~September 30, 2017,~~March 27, 2021, our cash, ~~and~~ cash equivalents and short-term investments were ~~$879 million,~~$3.1 billion, compared to ~~$1.26~~$2.3 billion as of December ~~31, 2016. The decrease in the nine months of 2017 was due to net cash used in our operating and investing activities as described below.~~26, 2020. The percentage of cash, ~~and~~ cash equivalents and short-term investments held domestically ~~was~~were 93% and 94% as of ~~September 30, 2017,~~March 27, 2021 and December 26, 2020, respectively.

Our operating, investing and financing activities for the three months ended March 27, 2021 compared to ~~98% at December 31, 2016.~~the prior year period are as described below:

~~The following is a summary of our cash flows for the periods indicated:~~


	Nine Months Ended							Three Months Ended
	September 30, 2017			September 24, 2016				March 27, 2021		March 28, 2020
	(In millions )							(In millions)
Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	$	(315	)	$	(98	)	Operating activities	$	898	$	(65)
Investing activities	(71		)	293			Investing activities	(722)		(73)
Financing activities	1			278			Financing activities	(8)		2
Net increase (decrease) in cash, cash equivalents, and restricted cash							Net increase (decrease) in cash, cash equivalents, and restricted cash	$	168	$	(136)

~~make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments;~~

~~limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes;~~

~~limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes;~~

~~require us to use a substantial portion of our cash flow from operations to make debt service payments;~~

~~place us at a competitive disadvantage compared to our competitors with relatively less debt; and~~

~~increase our vulnerability to the impact of adverse economic and industry conditions.~~

We enter into sale and factoring arrangements from time to time with respect to certain of our accounts receivables, which arrangements are non-recourse to us in the event that an account debtor fails to pay for credit-related reasons, and are not included in our indebtedness. We could become obligated to repurchase such accounts receivables or otherwise incur liability to the counterparties under these arrangements under certain circumstances, such as where a commercial dispute arises between us and an account debtor.

~~The agreements governing our notes and our Secured Revolving Line of Credit impose restrictions on us that may adversely affect our ability to operate our business.~~

The indentures governing our 6.75% Senior Notes due 2019 (6.75% Notes), 7.50% Senior Notes due 2022 (7.50% Notes), 7.00% Senior Notes due 2024 (7.00% Notes) and 2.125% Notes contain various covenants which limit our ability to, among other things:

~~incur additional indebtedness;~~

~~pay dividends and make other restricted payments;~~

~~make certain investments, including investments in our unrestricted subsidiaries;~~

~~create or permit certain liens;~~

~~create or permit restrictions on the ability of certain restricted subsidiaries to pay dividends or make other distributions to us;~~

~~use the proceeds from sales of assets;~~

~~enter into certain types of transactions with affiliates; and~~

~~consolidate or merge or sell our assets as an entirety or substantially as an entirety.~~

In addition, the Amended and Restated Loan Agreement restricts our ability to make cash payments on the notes to the extent that, on the date of such payment, a default or event of default exists under the Amended and Restated Loan Agreement, or we have not had at all times during the 45 consecutive days immediately preceding such payment, or would not have, on a pro forma basis after giving effect to such payment, Excess Cash Availability (as defined in the Amended and Restated Loan Agreement) of at least $50 million. Any of our future debt agreements may contain similar restrictions. If we fail to make any cash payment on a series of notes when required by the applicable indenture, it would constitute an event of default under such indenture, which, in turn, would constitute an event of default under the agreements governing our other indebtedness.

Our Secured Revolving Line of Credit also contains various covenants which limit our ability to, among other things, make certain investments, merge or consolidate with other entities and permit certain subsidiaries from incurring indebtedness. In addition, further restrictions apply when certain payment conditions (the Payment Conditions) are not satisfied with respect to specified transactions, events or payments. The Payment Conditions include that (i) no default or event of default exists and (ii) at all times during the 45 consecutive days immediately prior to such transaction, event or payment and on a pro forma basis after giving effect to such transaction, event or payment and any incurrence or repayment of indebtedness in connection therewith, the Loan Parties’ Excess Cash Availability (as defined in the Amended and Restated Loan Agreement) available cash is greater than the greater of 10% of the total commitment amount and $50 million. If Payment Conditions are not satisfied under certain circumstances, we will become subject to various additional covenants which limit our ability to, among other things:

create liens upon any of the Loan Parties’ property (other than customary permitted liens and liens in respect of up to $1.5 billion of secured credit facilities debt (which amount includes our Secured Revolving Line of Credit);

~~declare or make cash distributions;~~

~~create any encumbrance on the ability of a subsidiary to make any upstream payments;~~

~~make asset dispositions other than certain ordinary course dispositions and certain supply chain finance arrangements;~~

~~make certain loans, make payments with respect to subordinated debt or certain borrowed money prior to its due date; and~~

~~enter into any non-arm’s-length transaction with an affiliate (except for certain customary exceptions).~~

The agreements governing our notes and our Secured Revolving Line of Credit contain cross-default provisions whereby a default under one agreement would likely result in cross defaults under agreements covering other borrowings. For example, the

occurrence of a default with respect to any indebtedness or any failure to repay debt when due in an amount in excess of $50 million would cause a cross default under the indentures (to the extent such default would result in the acceleration of such indebtedness) governing our 6.75% Notes, 7.50% Notes, 7.00% Notes and 2.125% Notes, as well as under our Secured Revolving Line of Credit. The occurrence of a default under any of these borrowing arrangements would permit the applicable note holders or the lenders under our Secured Revolving Line of Credit to declare all amounts outstanding under those borrowing arrangements to be immediately due and payable. If the note holders or the trustee under the indentures governing our 6.75% Notes, 7.50% Notes, 7.00% Notes or 2.125% Notes or the lenders under our Secured Revolving Line of Credit accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings.

Our issuance to West Coast Hitech L.P. (WCH) of warrants to purchase 75 million shares of our common stock, if and when exercised, will dilute the ownership interests of our existing stockholders, and the conversion of the 2.125% Notes may dilute the ownership interest of our existing stockholders, or may otherwise depress the price of our common stock.

In consideration for the limited waiver and rights under the WSA Sixth Amendment, we issued warrants to WCH to purchase 75 million shares of our common stock. Any issuance by us of common shares to WCH upon exercise of the warrants will dilute the ownership interests of our existing stockholders. Any sales in the public market by WCH of any shares owned by WCH could adversely affect prevailing market prices of our common stock, and the anticipated exercise by WCH of the warrants could depress the price of our common stock.

Also, the conversion of some or all of the 2.125% Notes may dilute the ownership interests of our existing stockholders. All of the 2.125% Notes are convertible at the option of their holders prior to their scheduled term from October 1, 2017 until December 31, 2017. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the 2.125% Notes may encourage short selling by market participants because the conversion thereof could be used to satisfy short positions, or the anticipated conversion of the 2.125% Notes into cash and/or shares of our common stock could depress the price of our common stock.

Uncertainties involving the ordering and shipment of our products could materially adversely affect us.

We typically sell our products pursuant to individual purchase orders. We generally do not have long-term supply arrangements with our customers or minimum purchase requirements except that orders generally must be for standard pack quantities. Generally, our customers may cancel orders for standard products more than 30 days prior to shipment without incurring significant fees. We base our inventory levels in part on customers’ estimates of demand for their products, which may not accurately predict the quantity or type of our products that our customers will want in the future or ultimately end up purchasing. Our ability to forecast demand is even further complicated when our products are sold indirectly through downstream channel distributors and customers, as our forecasts for demand are then based on estimates provided by multiple parties throughout the downstream channel. For instance, we have experienced and continue to experience increased demand for our products. To the extent we fail to forecast demand and product mix accurately or are unable to increase production or secure sufficient capacity and there is a mismatch between supply and demand for our products, it could limit our ability to meet customer demand and have a material adverse effect on our business.

~~PC and consumer~~Many of our markets are characterized by short product lifecycles, which can lead to rapid obsolescence and price erosion. In addition, our customers may change their inventory practices on short notice for any reason. For instance, our customers may experience a shortage of, or delay in receiving certain components to build their products, which in turn may affect the demand for or the timing of our products. We may build inventories during periods of anticipated growth, and the cancellation or deferral of product orders or overproduction due to failure of anticipated orders to materialize could result in excess or obsolete inventory, which could result in write-downs of inventory and an adverse effect on gross margins.

Factors that may result in excess or obsolete inventory, which could result in write-downs of the value of our inventory, a reduction in the average selling price or a reduction in our gross margin include:

a sudden or significant decrease in demand for our products;

a production or design defect in our products;

a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements;

a failure to accurately estimate customer demand for our products, including for our older products as our new products are introduced; or

our competitors introducing new products or taking aggressive pricing actions.

The demand for our products depends in part on the market conditions in the industries into which they are sold. Fluctuations in demand for our products or a market decline in any of these industries could have a material adverse effect on our results of operations.

Industry-wide fluctuations in the computer marketplace have materially adversely affected us in the past and may materially adversely affect us in the future. A large portion of our Computing and Graphics revenue is focused on the consumer desktop PC

and notebook segments, which have experienced and continue to experience a decline driven by, among other factors, the adoption of smaller and other form factors, increased competition and changes in replacement cycles. The success of our semi-custom SoC products is dependent on securing customers for our semi-custom design pipeline and consumer market conditions, including the success of the Sony PlayStation^®~~4, Sony PlayStation~~^®4 Pro, Microsoft Xbox One and Microsoft Xbox One X game console systems worldwide. In addition, the GPU market has seen elevated demand due to the application of GPU products to cryptocurrency mining. For example, in the third quarter of 2017, our GPU revenue was driven in part due to an increased interest in cryptocurrency mining. The cryptocurrency market is unstable and demand could change quickly. For example, China and South Korea have recently instituted restrictions on cryptocurrency trading. If we are unable to manage the risks related to a decrease in the demand for cryptocurrency mining, our GPU business could be materially adversely affected.

Our ability to design and introduce new products in a timely manner is dependent upon third-party intellectual property.

In the design and development of new and enhanced products, we rely on third-party intellectual property such as development and testing tools for software ~~development tools~~ and ~~hardware testing tools.~~hardware. Furthermore, certain product features may rely on intellectual property acquired from third parties. The design requirements necessary to meet customer demand for more features and greater functionality from semiconductor products may exceed the capabilities of the third-party intellectual property or development or testing tools available to us. If the third-party intellectual property that we use becomes unavailable, is not available with required functionality ~~and~~or performance in the time frame, manufacturing technology, or price point needed for our new products or fails to produce designs that meet customer demands, our business could be materially adversely affected.

We depend on third-party companies for the design, manufacture and supply of motherboards, software, memory and other computer platform components to support our business.

We depend on third-party companies for the design, manufacture and supply of motherboards, graphics cards, software (e.g., BIOS, operating systems, drivers), memory and other components that our customers utilize to support and/or use our microprocessor, GPU and APU offerings. We also rely on ~~AIBs~~our AIB partners to support our GPU and APU products. In addition, our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors. If the designers, manufacturers, AIBs and suppliers of motherboards, graphics cards, software, memory and other components ~~decrease~~cease or reduce their design, manufacture or production of current or future products that are based on or support ~~for~~ our ~~product offerings,~~products, our business could be materially adversely affected.

If we lose Microsoft Corporation’s support for our products or other software vendors do not design and develop software to run on our products, our ability to sell our products could be materially adversely affected.

Our ability to innovate beyond the x86 instruction set controlled by Intel depends partially on Microsoft designing and developing its operating systems to run on or support our x86-based microprocessor products. With respect to our graphics products, we depend in part on Microsoft to design and develop its operating system to run on or

support our graphics products. Similarly, the success of our products in the market, such as our APU products, is dependent on independent software providers designing and developing software to run on our products. If Microsoft does not continue to design and develop its operating systems so that they work with our x86 instruction sets or does not continue to develop and maintain their operating systems to support our graphics products, independent software providers may forego designing their software applications to take advantage of our innovations and customers may not purchase PCs with our products. In addition, some software drivers ~~sold~~licensed for use with our products are certified by Microsoft. If Microsoft did not certify a driver, or if we otherwise fail to retain the support of Microsoft or other software vendors, our ability to market our products would be materially adversely affected.

Our reliance on third-party distributors and AIB partners subjects us to certain risks.

We market and sell our products directly and through third-party distributors and AIB partners pursuant to agreements that can generally be terminated for convenience by either party upon prior notice to the other party. These agreements are non-exclusive and permit both our distributors and ~~AIBs~~AIB partners to offer our competitors’ products. We are dependent on our distributors and ~~AIBs~~AIB partners to supplement our direct marketing and sales efforts. If any significant distributor or AIB partner or a substantial number of our distributors or ~~AIBs~~AIB partners terminated their relationship with us, decided to market our competitors’ products over our products or decided not to market our products at all, our ability to bring our products to market would be impacted and we would be materially adversely affected. In addition, if we are unable to collect accounts receivable from our significant distributors and/or AIB partners, it could have a material adverse effect on our business. If we are unable to manage the risks related to the use of our third-party distributors and AIB partners or offer appropriate incentives to focus them on the sale of our products, our business could be materially adversely affected.

Additionally, distributors and ~~AIBs~~AIB partners typically maintain an inventory of our products. In most instances, our agreements with distributors protect their inventory of our products against price reductions, as well as provide return rights for any product that we have removed from our price book and that is not more than 12 months older than the manufacturing ~~code~~ date. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. Our agreements with ~~AIBs~~AIB partners protect their inventory of our products against price reductions. ~~We defer the gross margins on our sales to distributors and AIBs, resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by the~~

~~distributors or the AIBs. However, in~~In the event of a significant decline in the price of our products, the price protection rights we offer would materially adversely affect us because our revenue and corresponding gross margin would decline.

~~Our inability to continue to attract and retain qualified personnel may hinder our business.~~

Much of our future success depends upon the continued service of numerous qualified engineering, marketing, sales and executive personnel. Competition for highly skilled employees and executives in the technology industry is intense. If we are not able to continue to attract, train and retain qualified personnel necessary for our business, the progress of our product development programs could be hindered, and we could be materially adversely affected. To help attract, retain and motivate qualified personnel, we use share-based incentive awards such as employee stock options and non-vested share units (restricted stock units). If the value of such stock awards does not appreciate as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate personnel could be weakened, which could harm our results of operations. Also, if the value of our stock awards increases substantially, this could potentially create great personal wealth for our employees and affect our ability to retain these employees. In addition, our current and any future restructuring plans may adversely impact our ability to attract and retain key employees.

In the event of a change of control, we may not be able to repurchase our outstanding debt as required by the applicable indentures and our Secured Revolving Line of Credit, which would result in a default under the indentures and our Secured Revolving Line of Credit.

Upon a change of control, we will be required to offer to repurchase all of our 6.75% Notes, 7.50% Notes, 7.00% Notes and 2.125% Notes then outstanding at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the repurchase date. In addition, a change of control would be an event of default under our Secured Revolving Line of Credit. As of September 30, 2017, $70 million borrowings were outstanding under the Secured Revolving Line of Credit, $19 million related to letters of credit under the Secured Revolving Line of Credit remained outstanding and $1.7 billion principal was outstanding under our notes. Future debt agreements may contain similar provisions. We may not have the financial resources to repurchase our outstanding notes and prepay all of our outstanding obligations under our Secured Revolving Line of Credit.

~~The semiconductor industry is highly cyclical and has experienced severe downturns that have materially adversely affected, and may continue to materially adversely affect, our business in the future.~~

The semiconductor industry is highly cyclical and has experienced significant downturns, often in conjunction with constant and rapid technological change, wide fluctuations in supply and demand, continuous new product introductions, price erosion and declines in general economic conditions. We have incurred substantial losses in recent downturns, due to:

~~substantial declines in average selling prices;~~

~~the cyclical nature of supply and demand imbalances in the semiconductor industry;~~

~~a decline in demand for end-user products (such as PCs) that incorporate our products; and~~

~~excess inventory levels.~~

Industry-wide fluctuations in the computer marketplace have materially adversely affected us in the past and may materially adversely affect us in the future. For example, a large portion of our Computing and Graphics revenue is focused on consumer desktop PC and notebook segments. While the overall growth in these segments is stabilizing, the sub-segments of these markets are changing. Our ability to take advantage of the growth in these sub-segments is based on foreseeing those changes and making timely investments in the form factors that serve those growing sub-segments.

Global economic uncertainty and weakness have also impacted the semiconductor market as consumers and businesses have deferred purchases, which negatively impacted demand for our products. Our financial performance has been, and may in the future be, negatively affected by these downturns.

The growth of our business is also dependent on continued demand for our products from high-growth adjacent emerging global markets. Our ability to be successful in such markets depends in part on our ability to establish adequate local infrastructure, as well as our ability to cultivate and maintain local relationships in these markets. If demand from these markets is below our expectations, sales of our products may decrease, which would have a material adverse effect on us.

~~Acquisitions, divestitures and/or joint ventures could disrupt our business, harm our financial condition and operating results or dilute, or adversely affect the price of, our common stock.~~

development. The identification of suitable acquisition or joint venture candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions or joint ventures. Moreover, if such acquisitions or joint ventures require us to seek additional debt or equity financing, we may not be able to obtain such financing on terms favorable to us or at all. Even if we successfully complete an acquisition or a joint venture, we may not be able to assimilate and integrate effectively or efficiently the acquired business, technologies, solutions, assets, personnel or operations, particularly if key personnel of the acquired company decide not to work for us. Acquisitions and joint ventures may also involve the entry into geographic or business markets in which we have little or no prior experience. Consequently, we may not achieve anticipated benefits of the acquisitions or joint ventures which could harm our operating results. In addition, to complete an acquisition, we may issue equity securities, which would dilute our stockholders’ ownership and could adversely affect the price of our common stock, as well as incur debt, assume contingent liabilities or have amortization expenses and write-downs of acquired assets, which could adversely affect our results of operations. Acquisitions and joint ventures may also reduce our cash available for operations and other uses, which could harm our business. Also, any failure on our part to effectively evaluate and execute new business initiatives could adversely affect our business. We may not adequately assess the risk of new business initiatives and subsequent events may arise that alter the risks that were initially considered.

Furthermore, we may not achieve the objectives and expectations with respect to future operations, products and services. On April 2016, we consummated the transaction with TFME, under which we sold to TFME 85% of the equity interests in our JVs. Going forward, we expect the majority of our ATMP services will be provided by the JVs and there is no guarantee that the JVs will be able to fulfill our long-term ATMP requirements. If we are unable to meet customer demand due to fluctuating or late supply from the JVs, it could result in lost sales and have a material adverse effect on our business.

In addition, we may not realize the anticipated benefits from any new business initiatives. For example, in connection with our strategy of licensing portions of our intellectual property portfolio, in the first quarter of 2016, we entered into a joint venture with Tianjin Haiguang Advanced Technology Investment Co., Ltd. (THATIC), comprised of two separate legal entities, China JV1 and China JV2 (collectively, the THATIC JV). The primary purpose of the THATIC JV is to support our expansion into the server and workstation product market in China. We also licensed certain of our intellectual property (Licensed IP) to the THATIC JV for license fees payable over several years contingent upon achievement of certain milestones. We also expect to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such Licensed IP. We may not realize the expected benefits from this joint venture, including the THATIC JV’s expected future performance, the receipt of any future milestone payments from the Licensed IP, and the receipt of any royalty payments from future sales of products by the THATIC JV.

Our business is dependent upon the proper functioning of our internal business processes and information systems and modification or interruption of such systems may disrupt our business, processes and internal controls.

We rely upon a number of internal business processes and information systems to support key business functions, and the efficient operation of these processes and systems is critical to our business. Our business processes and information systems need to be sufficiently scalable to support the growth of our business and may require modifications or upgrades that expose us to a number of operational risks. As such, our information systems will continually evolve and adapt in order to meet our business needs. These changes may be costly and disruptive to our operations and could impose substantial demands on management time.

These changes may also require changes in our information systems, modification of internal control procedures and significant training of employees and third-party resources. We continuously work on simplifying our information systems and applications through consolidation and standardization efforts. There can be no assurance that our business and operations will not experience any disruption in connection with this transition. Our information technology systems, and those of third-party information technology providers or business partners, may also be vulnerable to damage or disruption caused by circumstances beyond our control including catastrophic events, power anomalies or outages, natural disasters, viruses or malware, cyber-attacks, data breaches and computer system or network failures, exposing us to significant cost, reputational harm and disruption or damage to our business.

In addition, as our IT environment continues to evolve, we are embracing new ways of communicating and sharing data internally and externally with customers and partners using methods such as mobility and the cloud that can promote business efficiency. However, these practices can also result in a more distributed IT environment, making it more difficult for us to maintain visibility and control over internal and external users, and meet scalability and administrative requirements. If our security controls cannot keep pace with the speed of these changes, or if we are not able to meet regulatory and compliance requirements, our business would be materially adversely affected.

~~Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information, be costly to remediate and cause significant damage to our business and reputation.~~

In the ordinary course of our business, we maintain sensitive data on our networks, and also may maintain sensitive information on our business partners' and third party providers' networks, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking and phishing attacks, and other attempts to gain unauthorized access. These threats can come from a variety of sources, all ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Cyber-attacks have become increasingly more prevalent and much harder to detect and defend against. Our network and storage applications, as well as those of our customers, business partners, and third party providers, may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any unauthorized access, misuse or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. Cyber-attacks on us or our customers, business partners or third party providers could also cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources. These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business. In addition, we could be subject to potential claims for damages resulting from loss of data from alleged vulnerabilities in the security of our processors. We also maintain confidential and personally identifiable information about our workers. The integrity and protection of our worker data is critical to our business and our workers have a high expectation that we will adequately protect their personal information. We anticipate an increase in costs related to:

~~implementing new data security procedures, including costs related to upgrading computer and network security;~~

~~training workers to maintain and monitor our security measures;~~

~~remediating any data security breach and addressing the related litigation; and~~

~~mitigating reputational harm.~~

We often partner with third-party providers for certain worker services and we may provide certain limited worker information to such third parties based on the scope of the services provided to us. However, if these third parties fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, our workers’ data may be improperly accessed, used or disclosed. A breach of data privacy is likely to cause significant disruption of our business operations. Failure to adequately maintain and update our security systems could materially adversely affect our operations and our ability to maintain worker confidence. Failure to prevent unauthorized access to electronic and other confidential information and data breaches could materially adversely affect our financial condition, our competitive position and operating results.

~~Our operating results are subject to quarterly and seasonal sales patterns.~~

A large portion of our quarterly sales have historically been made in the last month of the quarter. This uneven sales pattern makes prediction of revenue for each financial period difficult and increases the risk of unanticipated variations in quarterly results and financial condition. In addition, our operating results tend to vary seasonally with the markets in which our products are sold. For example, historically, first quarter PC product sales are generally lower than fourth quarter sales. In addition, with respect to our semi-custom SoC products for game consoles, we expect sales patterns to follow the seasonal trends of a consumer business with sales in the first half of the year being lower than sales in the second half of the year. Many of the factors that create and affect quarterly and seasonal trends are beyond our control.

~~If essential equipment, materials or manufacturing processes are not available to manufacture our products, we could be materially adversely affected.~~

We may purchase equipment and materials for our back-end manufacturing operations from a number of suppliers and our operations depend upon obtaining deliveries of adequate supplies of equipment and materials on a timely basis. Our third-party suppliers also depend on the same timely delivery of adequate quantities of equipment and materials in the manufacture of our products. In addition, as many of our products increase in technical complexity, we rely on our third-party suppliers to update their processes in order to continue meeting our back-end manufacturing needs. Certain equipment and materials that are used in the manufacture of our products are available only from a limited number of suppliers, or in some cases, a sole supplier. We also depend on a limited number of suppliers to provide the majority of certain types of integrated circuit packages for our microprocessors, including our APU products. Similarly, certain non-proprietary materials or components such as memory, printed circuit boards (PCBs), interposers, substrates and capacitors used in the manufacture of our products are currently available from only a limited number of sources. Because some of the equipment and materials that we and our third-party manufacturing suppliers purchase are complex, it is sometimes difficult to substitute one supplier for another.

From time to time, suppliers may extend lead times, limit supply or increase prices due to capacity constraints or other factors. Also, some of these materials and components may be subject to rapid changes in price and availability. Interruption of supply or increased demand in the industry could cause shortages and price increases in various essential materials. Dependence on a sole supplier or a limited number of suppliers exacerbates these risks. If we are unable to procure certain of these materials for our back-end manufacturing operations, or our third-party foundries or manufacturing suppliers are unable to procure materials for manufacturing our products, our business would be materially adversely affected.

If our products are not compatible with some or all industry-standard software and hardware, we could be materially adversely affected.

Our products may not be fully compatible with some or all industry-standard software and hardware. Further, we may be unsuccessful in correcting any such compatibility problems in a timely manner. If our customers are unable to achieve compatibility with software or hardware, we could be materially adversely affected. In addition, the mere announcement of an incompatibility problem relating to our products could have a material adverse effect on our business.

Costs related to defective products could have a material adverse effect on us.

Products as complex as those we offer may contain defects or failures when first introduced or when new versions or enhancements to existing products are released. We cannot assure you that, despite our testing procedures, errors will not be found in new products or releases after commencement of commercial shipments in the future, which could result in loss of or delay in market acceptance of our products, material recall and replacement costs, ~~delay in recognition or~~ loss of revenue, writing down the inventory of defective products, the diversion of the attention of our engineering personnel from product development efforts, defending against litigation related to defective products or related liabilities, including property damage, or personal injury, ~~and~~ damage to our reputation in the industry and loss of data or intangible property, and could adversely affect our relationships with our customers. In addition, we may have difficulty identifying the end customers of the defective products in the field. As a result, we could incur substantial costs to implement modifications to correct defects. Any of these problems could materially adversely affect our business.

We could be subject to potential product liability claims if one of our products causes, or merely appears to have caused, an ~~injury.~~injury, whether tangible or intangible. Claims may be made by consumers or others selling our products, and we may be subject to claims against us even if an alleged injury is due to the actions of others. A product liability claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse effect on our business.

If we fail to maintain the efficiency of our supply chain as we respond to changes in customer demand for our products, our business could be materially adversely affected.

Our ability to meet customer demand for our products depends, in part, on our ability to deliver the products our customers want on a timely basis. Accordingly, we rely on our supply chain for the manufacturing, distribution and fulfillment of our products. As we continue to grow our business, expand to high-growth adjacent markets, acquire new customers and strengthen relationships with existing customers, the efficiency of our supply chain will become increasingly important because many of our customers tend to have specific requirements for particular products, and specific time-frames in which they require delivery of these products. If we are unable to consistently deliver the right products to our customers on a timely basis in the right locations, our customers may reduce the quantities they order from us, which could have a material adverse effect on our business.

We outsource to third parties certain supply-chain logistics functions, including portions of our product distribution, transportation management and information technology support services.

We rely on third-party providers to operate our regional product distribution centers and to manage the transportation of our work-in-process and finished products among our facilities, to our manufacturing suppliers and to our customers. In addition, we rely on third parties to provide certain information technology services to us, including help desk support, desktop application services, business and software support applications, server and storage administration, ~~datacenter~~data center operations, database administration and voice, video and remote access. We cannot guarantee that these providers will fulfill their respective responsibilities in a timely manner in accordance with the contract terms, in which case our internal operations and the distribution of our products to our customers could be materially adversely affected. Also, we cannot guarantee that our contracts with these third-party providers will be renewed, in which case we would have to transition these functions in-house or secure new providers, which could have a material adverse effect on our business if the transition is not executed appropriately.

~~We may incur future impairments of goodwill.~~

We perform our annual goodwill impairment analysis as of the first day of the fourth quarter of each year. Subsequent to our annual goodwill impairment analysis, we monitor for any events or changes in circumstances, such as significant adverse changes in business climate or operating results, changes in management’s business strategy, an inability to successfully introduce

new products in the marketplace, an inability to successfully achieve internal forecasts or significant declines in our stock price, which may represent an indicator of impairment. The occurrence of any of these events may require us to record future goodwill impairment charges.

~~Our stock price is subject to volatility.~~

Our stock price has experienced price and volume fluctuations and could be subject to wide fluctuations in the future. The trading price of our stock may fluctuate widely due to various factors including, actual or anticipated fluctuations in our financial conditions and operating results, changes in financial estimates by us or securities analysts, changes in our capital structure, including issuance of additional debt or equity to the public, interest rate changes, and broad market and industry fluctuations. Stock price fluctuations could impact the value of our equity compensation, which could affect our ability to recruit and retain employees. In addition, volatility in our stock price could adversely affect our business and financing opportunities.

~~Our worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on us.~~

We maintain operations around the world, including in the United States, Canada, Europe and Asia. We rely on third-party wafer foundries in Europe and Asia. Nearly all product assembly and final testing of our products is performed at manufacturing facilities, operated by third-party manufacturing facilities, in China, Malaysia and Taiwan. We also have international sales operations. International sales, as a percent of net revenue, were 72% in the third quarter of 2017. We expect that international sales will continue to be a significant portion of total sales in the foreseeable future.

~~The political, legal and economic risks associated with our operations in foreign countries include, without limitation:~~

~~expropriation;~~

~~changes in a specific country’s or region’s political or economic conditions;~~

~~changes in tax laws, trade protection measures and import or export licensing requirements;~~

~~difficulties in protecting our intellectual property;~~

~~difficulties in managing staffing and exposure to different employment practices and labor laws;~~

~~changes in foreign currency exchange rates;~~

~~restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions;~~

~~changes in freight and interest rates;~~

~~disruption in air transportation between the United States and our overseas facilities;~~

~~loss or modification of exemptions for taxes and tariffs; and~~

~~compliance with U.S. laws and regulations related to international operations, including export control and economic sanctions laws and regulations and the Foreign Corrupt Practices Act.~~

In addition, our worldwide operations (or those of our business partners) could be subject to natural disasters such as earthquakes, tsunamis, flooding, typhoons and volcanic eruptions that disrupt manufacturing or other operations. For example, our Sunnyvale operations are located near major earthquake fault lines in California. Any conflict or uncertainty in the countries in which we operate, including public health issues (for example, an outbreak of a contagious disease such as Avian Influenza, measles or Ebola), safety issues, natural disasters, fire, disruptions of service from utilities, nuclear power plant accidents or general economic or political factors. For example, the United Kingdom’s recent referendum, commonly referred to as “Brexit,” has created economic and political uncertainty in the European Union. Also the new U.S. administration has called for changes to domestic and foreign policy. We cannot predict the impact, if any, of the policies adopted by the new administration will have on our business. Until we know what changes are enacted, we will not know whether in total we benefit from, or are negatively affected by, the changes. Any of the above risks, should they occur, could result in an increase in the cost of components, production delays, general business interruptions, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business.

~~Worldwide political conditions may adversely affect demand for our products.~~

or adversely affect demand for our products, and such attacks or related armed conflicts may impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks or hostile acts may make travel and the transportation of our products more difficult and more expensive, which could materially adversely affect us. Any of these events could cause consumer spending to decrease or result in increased volatility in the United States economy and worldwide financial markets.

~~Unfavorable currency exchange rate fluctuations could adversely affect us.~~

We have costs, assets and liabilities that are denominated in foreign currencies. As a consequence, movements in exchange rates could cause our foreign currency denominated expenses to increase as a percentage of revenue, affecting our profitability and cash flows. Whenever we believe appropriate, we hedge a portion of our short-term foreign currency exposure to protect against fluctuations in currency exchange rates. We determine our total foreign currency exposure using projections of long-term expenditures for items such as payroll. We cannot assure you that these activities will be effective in reducing foreign exchange rate exposure. Failure to do so could have an adverse effect on our business, financial condition, results of operations and cash flow. In addition, the majority of our product sales are denominated in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases or decreases in the cost of our products in the local currency of such customers. An appreciation of the U.S. dollar relative to the local currency could reduce sales of our products.

Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us.

We market and sell our products directly to OEMs and through authorized third-party distributors. From time to time, our products are diverted from our authorized distribution channels and are sold on the “gray market.” Gray market products result in shadow inventory that is not visible to us, thus making it difficult to forecast demand accurately.

Also, when gray market products enter the market, we and our distribution channels compete with these heavily discounted gray market products, which adversely affects demand for our products and negatively ~~impact~~impacts our margins. In addition, our inability to control gray market activities could result in customer satisfaction issues because any time products are purchased outside our authorized distribution channels there is a risk that our customers are buying counterfeit or substandard products, including products that may have been altered, mishandled or damaged, or are used products represented as new.

Legal and Regulatory Risks

Government actions and regulations such as export administration regulations, tariffs, and trade protection measures may limit our ability to export our products to certain customers.

We have equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. In June 2019, the Bureau of Industry and Security (BIS) of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. In October 2019, the BIS added additional Chinese entities to the Entity List. Also, the United States administration has called for changes to domestic and foreign policy. Specifically, United States-China trade relations remain uncertain. The United States administration has announced tariffs on certain products imported into the United States with China as the country of origin, and China has imposed tariffs in response to the actions of the United States. We are taking steps to mitigate the impact of these tariffs on our business and AMD processor-based products. There is also a possibility of future tariffs, trade protection measures, import or export regulations or other restrictions imposed on our products or on our customers by the United States, China or other countries that could have a material adverse effect on our business. A significant trade disruption or the establishment or increase of any tariffs, trade protection measures or restrictions could result in lost sales adversely impacting our reputation and business.

If we cannot ~~adequately protect~~realize our ~~technology~~deferred tax assets, our results of operations could be adversely affected.

Our deferred tax assets include net operating losses and tax credit carryforwards that can be used to offset taxable income and reduce income taxes payable in future periods. Each quarter, we consider both positive and negative evidence to determine whether all or a portion of the deferred tax assets are more likely than not to be realized. If we determine that some or all of our deferred tax assets are not realizable, it could result in a material expense in the period in which this determination is made which may have a material adverse effect on our financial condition and results of operations.

In addition, a significant amount of our deferred tax assets and a portion of the deferred tax assets related to net operating losses or tax credits which remain under a valuation allowance could be subject to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. The limitations could reduce our ability to utilize the net operating losses or tax credits before the expiration of the tax attributes.

Our business is subject to potential tax liabilities, including as a result of tax regulation changes.

We are subject to income tax, indirect tax or other ~~intellectual property~~tax claims by tax agencies in jurisdictions in which we conduct business. Significant judgment is required in determining our worldwide provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the ~~United States~~law are issued or applied. Any changes to tax laws could have a material adverse effect on our tax obligations and ~~abroad, through patents, copyrights, trade secrets, trademarks~~effective tax rate.

In the ordinary course of our business, there are many transactions and calculations where the ultimate income tax, indirect tax, or other ~~measures,~~tax determination is uncertain. Although we ~~may lose a competitive advantage and incur significant expenses.~~

We rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, copyrights, patents, trademarks and common law rights, such as trade secrets, to protectbelieve our ~~intellectual property. However,~~tax estimates are reasonable, we cannot assure ~~you~~ that wethe final determination of any tax audits and litigation will not be ~~able to adequately protect~~materially different from that which is reflected in historical tax provisions and accruals. Should additional taxes be assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on our ~~technology or other intellectual property from third-party infringement or from misappropriation~~cash, tax provisions and net income in the ~~United States and abroad. Any patent licensed by us~~period or ~~issued to us could be challenged, invalidated or circumvented or rights granted there under may not provide a competitive advantage to us.~~

~~Furthermore, patent applications~~periods for which that ~~we file may not result in issuance of a patent or, if a patent~~determination is issued, the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a cost-effective manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded in the United States and abroad, our technology or other intellectual property may be compromised, and our business would be materially adversely affected.made.

We are party to litigation and may become a party to other claims or litigation that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our products.

From time to time, we are a defendant or plaintiff in various legal actions. For example, ~~on January 15, 2014, March 20, 2014, April 27, 2015, and September 29, 2015, complaints were filed against us seeking damages for alleged securities law violations which are~~as described in Note 12 of our condensed consolidated financial ~~statements.~~statements, we have been subject to certain claims concerning federal securities laws and corporate governance. Our products are purchased by and/or used by consumers, which could increase our exposure to consumer actions such as product liability claims and consumer class action ~~claims.~~claims,

including those described in Note 12 of our condensed consolidated financial statements. On occasion, we receive claims that individuals were allegedly exposed to substances used in our former semiconductor wafer manufacturing facilities and that this alleged exposure caused harm. Litigation can involve complex factual and legal questions, and its outcome is uncertain. ~~Any~~It is possible that if a claim ~~that~~ is successfully asserted against us, including the claims ~~filed against us on January 15, 2014, March 20, 2014, April 27, 2015 and September 29, 2015, may~~described in Note 12 of our condensed consolidated financial statements, it could result in the payment of damages that could be material to our business.

With respect to intellectual property litigation, from time to time, we have been notified of, or third parties may bring or have brought, actions against us and/or against our customers based on allegations that we are infringing the intellectual property rights of others, contributing to or inducing the infringement of the intellectual property rights of others, improperly claiming ownership of intellectual property or otherwise improperly using the intellectual property of others. If any such claims are asserted,

we may seek to obtain a license under the third parties’ intellectual property rights. We cannot assure you that we will be able to obtain all of the necessary licenses on satisfactory terms, if at all. These parties may file lawsuits against us or our customers seeking damages (potentially up to and including treble damages) or an injunction against the sale of products that incorporate allegedly infringed intellectual property or against the operation of our business as presently conducted, which could result in our having to stop the sale of some of our products or to increase the costs of selling some of our products or which could damage our reputation. The award of damages, including material royalty payments, or other types of damages, or the entry of an injunction against the manufacture and sale of some or all of our products could have a material adverse effect on us. We could decide, in the alternative, to redesign our products or to resort to litigation to challenge such claims. Such challenges could be extremely expensive and time-consuming regardless of their merit, could cause delays in product release or shipment and/or could have a material adverse effect on us. We cannot assure you that litigation related to our intellectual property rights or the intellectual property rights of others can always be avoided or successfully concluded.

Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations, which could have a material adverse effect on us.

~~Our business is subject to potential tax liabilities.~~

We are subject to income taxes in the United States, Canada and other foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, we cannot assure you that the final determination of any tax audits and litigation will not be materially different from that which is reflected in historical income tax provisions and accruals. Should additional taxes be assessed as a result of an audit, assessment or litigation, there could be a material adverse effect on our cash, income tax provision and net income in the period or periods for which that determination is made.

We are subject to environmental laws, conflict minerals-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as a variety of other laws or regulations that could result in additional costs and liabilities.

Our operations and properties have in the past been and continue to be subject to various United States and foreign laws and regulations, including those relating to materials used in our products and manufacturing processes, discharge of pollutants into the environment, the treatment, transport, storage and disposal of solid and hazardous wastes and remediation of contamination. These laws and regulations require our suppliers to obtain permits for operations making our products, including the discharge of air pollutants and wastewater. Although our management systems are designed to oversee our suppliers’ compliance, we cannot assure you that our suppliers have been or will be at all times in complete compliance with such laws, regulations and permits. If our suppliers violate or fail to comply with any of them, a range of consequences could result, including fines, suspension of production, alteration of manufacturing processes, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions. Such non-compliance from our manufacturing suppliers could result in disruptions in supply, higher sourcing costs, and/or reputational damage for us.

Environmental laws are complex, change frequently and have tended to become more stringent over time. For example, the European Union (EU) and China are two among a growing number of jurisdictions that have enacted restrictions on the use of lead and other materials in electronic products. These regulations affect semiconductor devices and packaging. As regulations restricting materials in electronic products continue to increase around the world, there is a risk that the cost, quality and manufacturing yields of products that are subject to these restrictions may be less favorable compared to products that are not subject to such restrictions, or that the transition to compliant products may not meet customer roadmaps, or produce sudden changes in demand, which may result in excess inventory. A number of jurisdictions including the EU, Australia, California and China are developing or have finalized market entry or public procurement regulations for computers and servers based on ENERGY STAR specifications as well as additional energy consumption limits. There is the potential for certain of our products being excluded from some of these markets which could materially adversely affect us.

Certain environmental laws, including the ~~U.S.~~United States Comprehensive, Environmental Response, Compensation and Liability Act of 1980, or the Superfund Act, impose strict or, under certain circumstances, joint and several liability on current and previous owners or operators of real property for the cost of removal or remediation of hazardous substances and impose liability for damages to natural resources. These laws often impose liability even

if the owner or operator did not know of, or was not responsible for, the release of such hazardous substances. These environmental laws also assess liability on persons who arrange for hazardous substances to be sent to disposal or treatment facilities when such facilities are found to be contaminated. Such persons can be responsible for cleanup costs even if they never owned or operated the contaminated facility. We have been named as a responsible party at three Superfund sites in Sunnyvale, California. Although we have not yet been, we could be named a potentially responsible party at other Superfund or contaminated sites in the future. In addition, contamination that has not yet been identified could exist at our other facilities.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted disclosure and reporting requirements for companies that use “conflict” minerals originating from the Democratic Republic of Congo or adjoining countries. We continue to incur additional costs associated with complying with these requirements, such as costs related to developing internal controls for the due diligence process, determining the source of any conflict minerals used in our products, auditing the process and reporting to our customers and the SEC. In addition to the SEC regulation, the European Union, China and other jurisdictions are developing new policies focused on conflict minerals that may impact and increase the cost of our compliance program. Also, since our supply chain is complex, we may face reputational challenges if we are unable to sufficiently verify the origins of the subject minerals. Moreover, we are likely to encounter challenges to satisfy those customers who require that all of the components of our products ~~are~~be certified as “conflict free.” If we cannot satisfy these customers, they may choose a competitor’s products.

The ~~U.S.~~United States federal government has issued new policies for federal procurement focused on eradicating the practice of forced labor and human trafficking. Germany’s federal procurement office, in collaboration with the Bitkom trade association, issued new supply chain labor requirements. In addition, the United Kingdom, Australia and the State of California have issued laws that require us to disclose our policy and practices for identifying and eliminating forced labor and human trafficking in our supply chain. Several customers as well as the ~~Electronic Industry Citizenship Coalition (EICC)~~Responsible Business Alliance have also issued expectations to eliminate these practices that may impact us. While we have a policy and management systems to identify and avoid these practices in our supply chain, we cannot guarantee that our suppliers will always be in conformance to these laws and expectations. We may face enforcement liability and reputational challenges if we are unable to sufficiently meet these expectations. Moreover, we are likely to encounter challenges with customers if we cannot satisfy their forced and trafficked labor polices and they may choose a competitor’s ~~products.~~

product.

Xilinx Merger and Acquisition Risks

Acquisitions, joint ventures and/or investments, including our recently announced acquisition of Xilinx, and the failure to integrate acquired businesses, could disrupt our business and/or dilute or adversely affect the price of our common stock.

Our success will depend, in part, on our ability to expand our product offerings and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may pursue growth through the acquisition of complementary businesses, solutions or technologies or through joint ventures or investments rather than through internal development. The identification of suitable acquisition or joint venture candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions or joint ventures.

For example, on October 26, 2020, we, along with a direct wholly-owned subsidiary of ours, entered into an Agreement and Plan of Merger (the Merger Agreement) with Xilinx, Inc. (Xilinx), whereby we agreed to acquire Xilinx (the Merger). We entered into the Merger Agreement with the belief that the Merger will result in certain benefits, including certain operational synergies and cost efficiencies, and drive product innovations. Achieving these anticipated benefits will depend on successfully combining our and Xilinx’s businesses together. It is not certain that Xilinx’s business can be successfully integrated with our business in a timely manner or at all, or that any of the anticipated benefits will be realized for a variety of reasons, including, but not limited to: failure to obtain applicable regulatory approval in a timely manner or otherwise; failure to satisfy other closing conditions to the Merger; our inability to integrate or benefit from Xilinx’s acquired technologies or services in a profitable manner; diversion of capital and other resources, including management’s attention from our existing business; unanticipated costs or liabilities associated with the Merger; failure to leverage the increased scale of the combined businesses quickly and effectively; coordinating and integrating in countries in which we have not previously operated; the potential impact of the Merger on our relationships with employees, vendors, suppliers and customers; the impairment of relationships with, or the loss of, Xilinx’s employees, vendors, suppliers and customers; adverse changes in general economic conditions in regions in which we and Xilinx operate; potential litigation associated

with the Merger; difficulties in the assimilation of employees and culture; difficulties in managing the expanded operations of a larger and more complex company; challenges in attracting and retaining key personnel; and difficulties with harmonizing our and Xilinx’s financial reporting systems. Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in expected revenues and diversion of management’s time and attention, which could materially impact the combined company. In addition, even if the operations of the businesses are integrated successfully, the full benefits of the Merger may not be realized within the anticipated time frame or at all. All of these factors could decrease or delay the expected accretive effect of the Merger and negatively impact the combined company. If we cannot successfully integrate our and Xilinx’s businesses and operations, or if there are delays in combining the businesses, it could negatively impact our ability to develop or sell new products and impair our ability to grow our business, which in turn could adversely affect our financial condition and operating results.

Acquisitions and joint ventures may also involve the entry into geographic or business markets in which we have little or no prior experience. Consequently, we may not achieve anticipated benefits of acquisitions or joint ventures, which could harm our operating results. In addition, to complete an acquisition (and as contemplated in the Merger), we may issue equity securities, which would dilute our stockholders’ ownership and could adversely affect the price of our common stock, and/or incur debt, assume contingent liabilities or have amortization expenses and write-downs of acquired assets, which could adversely affect our results of operations. Moreover, if such acquisitions or joint ventures require us to seek additional debt or equity financing, we may not be able to obtain such financing on terms favorable to us or at all. Even if we successfully complete an acquisition or joint venture, we may not be able to assimilate and integrate effectively or efficiently the acquired business, technologies, solutions, assets, personnel or operations, particularly if key personnel of the acquired company decide not to work for us.

Acquisitions and joint ventures may also reduce our cash available for operations and other uses, which could harm our business. Also, any failure on our part to effectively evaluate and execute new business initiatives could adversely affect our business. We may not adequately assess the risks of new business initiatives and subsequent events may arise that alter the risks that were initially considered. Furthermore, we may not achieve the objectives and expectations with respect to future operations, products and services. The majority of our ATMP services are provided by the ATMP JVs, and there is no guarantee that the JVs will be able to fulfill our long-term ATMP requirements. If we are unable to meet customer demand due to fluctuating or late supply from the ATMP JVs, it could result in lost sales and have a material adverse effect on our business.

In addition, we may not realize the anticipated benefits from our business initiatives. For example, we may not realize the expected benefits from the THATIC JV’s expected future performance, including the receipt of any future milestone payments and any royalties from certain licensed intellectual property. In June 2019, the BIS added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. We are complying with U.S. law pertaining to the Entity List designation.

Our ability to complete the Merger is subject to closing conditions, including the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the Merger not to be completed.

The Merger is subject to a number of closing conditions as specified in the Merger Agreement. These include, among others, the receipt of approvals under certain competition laws and the absence of governmental restraints or prohibitions preventing the consummation of the Merger. No assurance can be given that the required consents and approvals will be obtained or that the closing conditions will be satisfied in a timely manner or at all. Also, if a settlement or other resolution is not reached in any legal proceedings that have been, or might be, instituted against us, our directors, Xilinx or its directors relating to the transactions contemplated by the Merger Agreement and the plaintiffs in such proceedings secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our and/or Xilinx’s ability to complete the Merger on the terms contemplated by the Merger Agreement, then such injunctive or other relief may prevent the Merger from becoming effective in a timely manner, or at all. Any delay in completing the Merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve. We cannot provide any assurances that these conditions will not result in the abandonment or delay of the Merger. The occurrence of any of these events could have a material adverse effect on our results of operations and the trading price of our common stock. Additionally, under the Merger Agreement, Xilinx will be required to pay a termination fee to us equal to $1 billion if the Merger Agreement is terminated in certain circumstances, including if the Merger Agreement is terminated because Xilinx’s board of directors has changed its recommendation. We will be required to pay a termination fee to Xilinx equal to $1.5 billion if the Merger Agreement is terminated in certain circumstances, including if the Merger Agreement is terminated because our board of directors has changed its recommendation. We will be required to pay a termination fee equal

to $1 billion if the Merger Agreement is terminated in certain circumstances related to the failure to obtain required regulatory approvals by October 26, 2021 (subject to automatic extension first to January 26, 2022 and then to April 26, 2022, in each case, to the extent the regulatory closing conditions remain outstanding).

Whether or not it is completed, the announcement and pendency of the Merger could cause disruptions in our business, which could have an adverse effect on our business and financial results.

Whether or not it is completed, the announcement and pendency of the Merger could cause disruptions in our business: our and Xilinx’s current and prospective employees may experience uncertainty about their future roles with the combined company, which might adversely affect the ability to retain key employees; uncertainty regarding the completion of the Merger may cause customers, suppliers, distributors, vendors, strategic partners or others to delay or defer entering into contracts, make other decisions or seek to change or cancel existing business relationships; and the attention of management may be directed toward the completion of the Merger. If the Merger is not completed, we will have incurred significant costs, including the potential payment of termination fees and the diversion of management resources, for which we will have received little or no benefit.

Any impairment of the combined company’s tangible, definite-lived intangible or indefinite-lived intangible

assets, including goodwill, may adversely impact the combined company’s financial position and results of operations.

The Merger will be accounted for using the acquisition method of accounting under the provisions of ASC 805, Business Combinations, with AMD representing the accounting acquirer under this guidance. We will record assets acquired, including identifiable intangible assets, and liabilities assumed from Xilinx at their respective fair values at the date of completion of the Merger. Any excess of the purchase price over the net fair value of such assets and liabilities will be recorded as goodwill. In connection with the Merger, the combined company is expected to record significant goodwill and other intangible assets on its consolidated balance sheet.

Indefinite-lived intangible assets, including goodwill, will be tested for impairment at least annually, and all tangible and intangible assets including goodwill will be tested for impairment when certain indicators are present. If, in the future, the combined company determines that tangible or intangible assets, including goodwill, are impaired, the combined company would record an impairment charge at that time. Impairment testing of goodwill and intangible assets requires significant use of judgment and assumptions, particularly as it relates to the determination of fair value. A decrease in the long-term economic outlook and future cash flows of the combined company’s business could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill, which may have a material adverse impact on the combined company’s financial position and results of operations.

Liquidity and Capital Resources Risks

The agreements governing our notes and our Revolving Credit Facility impose restrictions on us that may adversely affect our ability to operate our business.

The indenture governing our 7.50% Senior Notes due 2022 (7.50% Notes) contains various covenants which limit our ability to, among other things: make certain investments, including investments in our unrestricted subsidiaries; and consolidate or merge or sell our assets as an entirety or substantially as an entirety.

In addition, the Revolving Credit Facility’s credit agreement (Credit Agreement) restricts our ability to make cash payments on the notes to the extent that (i) on the date of such payment, an event of default exists under the Credit Agreement or would result therefrom or (ii) if we would have, on a pro forma basis after giving effect to such payment, a consolidated total leverage ratio that exceeds 3.50x. Any of our future debt agreements may contain similar restrictions. If under certain circumstances we fail to make a cash payment on a series of notes when required by the applicable indenture, it would constitute an event of default under such indenture, which, in turn, could constitute an event of default under the agreements governing our other indebtedness.

Our Revolving Credit Facility also contains various covenants which limit our ability to, among other things, incur additional indebtedness and liens, make certain investments, merge or consolidate with other entities, make certain dispositions, create any encumbrance on the ability of a subsidiary to make any upstream payments, make payments with respect to subordinated debt or certain borrowed money prior to its due date and enter into any non-arm’s-length transaction with an affiliate (in each case, except for certain customary exceptions).

The agreements governing our notes and our Revolving Credit Facility contain cross-default provisions whereby a default under certain agreements with respect to other indebtedness would result in cross defaults under the indentures or the Revolving Credit Facility. For example, the occurrence of a default with respect to any indebtedness or any failure to repay indebtedness when due in an amount in excess of (i) $50 million would cause a cross default under the indentures (to the extent such default would result in the acceleration of such indebtedness) governing our 7.50% Notes and 2.125% Convertible Senior Notes due 2026 (2.125% Notes), and (ii) $100 million would cause a cross default under the Revolving Credit Facility. The occurrence of a default under any of these borrowing arrangements would permit the applicable note holders or the lenders under our Revolving Credit Facility to declare all amounts outstanding under the indentures or the Revolving Credit Facility to be immediately due and payable. If the note holders or the trustee under the indentures governing our 7.50% Notes or 2.125% Notes or the lenders under our Revolving Credit Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings.

Our indebtedness could adversely affect our financial position and prevent us from implementing our strategy or fulfilling our contractual obligations.

Our total debt principal amount outstanding as of March 27, 2021 was $314 million. Our indebtedness may make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments; limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes; limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes; require us to use a substantial portion of our cash flow from operations to make debt service payments; place us at a competitive disadvantage compared to our competitors with relatively less debt; and increase our vulnerability to the impact of adverse economic and industry conditions.

We may not be able to generate sufficient cash to service our debt obligations or meet our working capital requirements.

Our ability to make payments on and to refinance our debt will depend on our financial and operating performance, which may fluctuate significantly from quarter to quarter, and is subject to prevailing economic, financial and business conditions along with other factors, many of which are beyond our control. We cannot assure you that we will be able to generate cash flow or that we will be able to borrow funds, including under our revolving credit facility for a principal amount up to $500 million (our Revolving Credit Facility), in amounts sufficient to enable us to service our debt or to meet our working capital requirements. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, we may be required to sell assets or equity, reduce expenditures, refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that we will be able to refinance our debt, sell assets or equity, borrow funds under our Revolving Credit Facility or borrow more funds on terms acceptable to us, if at all.

In the event of a change of control, we may not be able to repurchase our outstanding debt as required by the applicable indentures and our Revolving Credit Facility, which would result in a default under the indentures and our Revolving Credit Facility.

Upon a change of control, we will be required to offer to repurchase all of our 7.50% Notes and 2.125% Notes then outstanding at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, up to, but excluding, the repurchase date. In addition, a change of control would be an event of default under our Revolving Credit Facility. As of March 27, 2021, $314 million principal amount of our Notes was outstanding and we had $13 million of letters of credit outstanding under our Revolving Credit Facility. Future debt agreements may contain similar provisions. We may not have the financial resources to repurchase our outstanding notes and prepay all of our outstanding obligations under our Revolving Credit Facility.

If we cannot generate sufficient revenue and operating cash flow or obtain external financing, we may face a cash shortfall and be unable to make all of our planned investments in research and development or other strategic investments.

Our ability to fund research and development expenditures depends on generating sufficient revenue and cash flow from operations and the availability of external financing, if necessary. Our research and development expenditures, together with ongoing operating expenses, will be a substantial drain on our cash flow and may decrease our cash balances. If new competitors, technological advances by existing competitors, or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses would increase. If we are required to invest significantly greater resources than anticipated in research

and development efforts without an increase in revenue, our operating results could decline.

We regularly assess markets for external financing opportunities, including debt and equity financing. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. The health of the credit markets may adversely impact our ability to obtain financing when needed. Any downgrades from credit rating agencies such as Moody’s or Standard & Poor’s may adversely impact our ability to obtain external financing or the terms of such financing. Credit agency downgrades or concerns regarding our credit worthiness may impact relationships with our suppliers, who may limit our credit lines. Our inability to obtain needed financing or to generate sufficient cash from operations may require us to abandon projects or curtail planned investments in research and development or other strategic initiatives. If we curtail planned investments in research and development or abandon projects, our products may fail to remain competitive and our business would be materially adversely affected.

General Risks

Our worldwide operations are subject to political, legal and economic risks and natural disasters, which could have a material adverse effect on us.

We maintain operations around the world, including in the United States, Canada, Europe, Australia and Asia. We rely on third-party wafer foundries in the United States, Europe and Asia. Nearly all product assembly and final testing of our products is performed at manufacturing facilities, operated by third-party manufacturing facilities, in China, Malaysia and Taiwan. We also have international sales operations. International sales, as a percent of net revenue, were 76% for the three months ended March 27, 2021. We expect that international sales will continue to be a significant portion of total sales in the foreseeable future.

The political, legal and economic risks associated with our operations in foreign countries include, without limitation: expropriation; changes in a specific country’s or region’s political or economic conditions; changes in tax laws, trade protection measures and import or export licensing requirements; difficulties in protecting our intellectual property; difficulties in managing staffing and exposure to different employment practices and labor laws; changes in foreign currency exchange rates; restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions; changes in freight and interest rates; disruption in air transportation between the United States and our overseas facilities; loss or modification of exemptions for taxes and tariffs; and compliance with U.S. laws and regulations related to international operations, including export control and economic sanctions laws and regulations and the Foreign Corrupt Practices Act.

In addition, our worldwide operations (or those of our business partners) could be subject to natural disasters such as earthquakes, tsunamis, flooding, typhoons, droughts, fires and volcanic eruptions that disrupt manufacturing or other operations. For example, our Santa Clara operations are located near major earthquake fault lines in California. There may be conflict or uncertainty in the countries in which we operate, including public health issues (for example, an outbreak of a contagious disease such as COVID-19, avian influenza, measles or Ebola), safety issues, natural disasters, fire, disruptions of service from utilities, nuclear power plant accidents or general economic or political factors. For example, governments worldwide have implemented, and continue to implement, measures to slow down the outbreak of COVID-19. We have experienced, and will continue to experience, disruptions to our business as these measures have, and will continue to have, an effect on our business operations and practices. Also, the European Union’s General Data Protection Regulation imposes significant new requirements on how we collect, process and transfer personal data, as well as significant fines for non-compliance. Any of the above risks, should they occur, could result in an increase in the cost of components, production delays, general business interruptions, delays from difficulties in obtaining export licenses for certain technology, tariffs and other barriers and restrictions, longer payment cycles, increased taxes, restrictions on the repatriation of funds and the burdens of complying with a variety of foreign laws, any of which could ultimately have a material adverse effect on our business.

We may incur future impairments of goodwill and technology license purchases.

internal forecasts or significant declines in our stock price, which may represent an indicator of impairment. The occurrence of any of these events may require us to record future goodwill impairment charges.

We license certain third-party technologies and tools for the design and production of our products. We report the value of those licenses as other non-current assets on the balance sheet and we periodically evaluate the carrying value of those licenses based on their future economic benefit to us. Factors such as the life of the assets, changes in competing technologies, and changes to the business strategy may represent an indicator of impairment. The occurrence of any of these events may require us to record future technology license impairment charges.

Our inability to continue to attract and retain qualified personnel may hinder our business.

Much of our future success depends upon the continued service of numerous qualified engineering, marketing, sales and executive employees. Competition for highly skilled executives and employees in the technology industry is intense and our competitors have targeted individuals in our organization that have desired skills and experience. If we are not able to continue to attract, train and retain our leadership team and our qualified employees necessary for our business, the progress of our product development programs could be hindered, and we could be materially adversely affected. To help attract, retain and motivate our executives and qualified employees, we use share-based incentive awards such as employee stock options and non-vested share units (restricted stock units). If the value of such stock awards does not appreciate as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate our executives and employees could be weakened, which could harm our results of operations. Also, if the value of our stock awards increases substantially, this could potentially create great personal wealth for our executives and employees and affect our ability to retain our personnel. In addition, any future restructuring plans may adversely impact our ability to attract and retain key employees.

Our stock price is subject to volatility.

Our stock price has experienced price and volume fluctuations and could be subject to wide fluctuations in the future. The trading price of our stock may fluctuate widely due to various factors including actual or anticipated fluctuations in our financial conditions and operating results, changes in financial estimates by us or financial estimates and ratings by securities analysts, changes in our capital structure, including issuance of additional debt or equity to the public, interest rate changes, news regarding our products or products of our competitors, and broad market and industry fluctuations. Stock price fluctuations could impact the value of our equity compensation, which could affect our ability to recruit and retain employees. In addition, volatility in our stock price could adversely affect our business and financing opportunities.

Worldwide political conditions may adversely affect demand for our products.

Worldwide political conditions may create uncertainties that could adversely affect our business. The United States has been and may continue to be involved in armed conflicts that could have a further impact on our sales and our supply chain. The consequences of armed conflict, political instability or civil or military unrest are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us. Terrorist attacks or other hostile acts may negatively affect our operations, or adversely affect demand for our products, and such attacks or related armed conflicts may impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks or hostile acts may make travel and the transportation of our products more difficult and more expensive, which could materially adversely affect us. Any of these events could cause consumer spending to decrease or result in increased volatility in the United States economy and worldwide financial markets.


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We issued warrants dated March 29, 2021 to purchase 67,586 shares, of our common stock to a commercial partner pursuant to a strategic arrangement with such partner. The warrants have an exercise price of $25.50 per share and expire on March 29, 2024.

The warrants were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Restricted Stock Unit Share Withholding

During the fiscal quarter ended March 27, 2021, we paid approximately $10 million in employee withholding taxes due upon the vesting of net settled equity awards. We withheld approximately 0.1 million shares of common stock from employees in connection with such net share settlement at an average price of $92.43 per share. These shares may be deemed to be “issuer purchases” of shares.



~~ITEM 6.~~	~~EXHIBITS~~

ITEM 6. EXHIBITS



~~10.1~~31.1		Sixth Amendment to Amended and Restated Loan Security Agreement dated as of September 19, 2017 by and among Advanced Micro Devices, Inc., AMD International Sales & Services, Ltd., ATI Technologies ULC and Bank of America, N.A.
~~10.2~~	~~Outside Director Equity Compensation Policy, as amended and restated as of October 31, 2017.~~
~~31.1~~	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ADVANCED MICRO DEVICES, INC.

April 28, 2021			~~ADVANCED MICRO DEVICES, INC.~~By:	/s/Devinder Kumar
			Name:	Devinder Kumar
~~November 2, 2017~~			~~By:~~Title:	~~/s/Devinder Kumar~~
	~~Name:~~	~~Devinder Kumar~~
	~~Title:~~	~~Senior~~Executive Vice President, Chief Financial Officer and Treasurer Signing on behalf of the Registrant as the Principal Financial Officer

5649



Delaware		94-1692300
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~One AMD Place~~ ~~Sunnyvale, California~~	~~94085~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	AMD	The Nasdaq Global Select Market



		Page No.
Part I Financial Information
Item 1	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations ~~– Three and Nine Months Ended September 30, 2017 and September 24, 2016~~	3
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss) – Three and Nine Months Ended September 30, 2017 and September 24, 2016~~	4
	Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~	5
	Condensed Consolidated Statements of Cash Flows ~~– Nine Months Ended September 30, 2017 and September 24, 2016~~	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	78
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2419
Item 3	Quantitative and Qualitative Disclosures about Market Risk	3725
Item 4	Controls and Procedures	3725
Part II Other Information

Item 1	Legal Proceedings	3826
Item 1A	Risk Factors	3926
Item 62	~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds	5547
~~Signature~~Item 6	56Exhibits	48
Signature		49



~~Period~~	~~Price as~~ ~~Percentage of~~ ~~Principal Amount~~
~~Beginning on July 1, 2019 through June 30, 2020~~	~~103.500~~	%
~~Beginning on July 1, 2020 through June 30, 2021~~	~~102.333~~	%
~~Beginning on July 1, 2021 through June 30, 2022~~	~~101.167~~	%
~~On July 1, 2022 and thereafter~~	~~100.000~~	%



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



	September 30, 2017			December 31, 2016
	(In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	879		$	1,264
Accounts receivable, net	771			311
Inventories, net	794			751
Prepayment and other receivables - related parties	26			32
Prepaid expenses	72			63
Other current assets	157			109
Total current assets	2,699			2,530
Property, plant and equipment, net	236			164
Goodwill	289			289
Investment: equity method	57			59
Other assets	305			279
Total assets	$	3,586		$	3,321
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	70		$	—
Accounts payable	472			440
Payables to related parties	444			383
Accrued liabilities	460			391
Other current liabilities	73			69
Deferred income on shipments to distributors	72			63
Total current liabilities	1,591			1,346
Long-term debt, net	1,356			1,435
Other long-term liabilities	119			124
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; 1,500 shares authorized on September 30, 2017 and December 31, 2016; shares issued: 977 on September 30, 2017 and 949 shares on December 31, 2016; shares outstanding: 965 on September 30, 2017 and 935 shares on December 31, 2016	10			9
Additional paid-in capital	8,437			8,334
Treasury stock, at cost (12 shares on September 30, 2017 and 14 shares on December 31, 2016)	(108		)	(119		)
Accumulated deficit	(7,821		)	(7,803		)
Accumulated other comprehensive income (loss)	2			(5		)
Total stockholders’ equity	520			416
Total liabilities and stockholders’ equity	$	3,586		$	3,321



	September 30, 2017		December 31, 2016
	(In millions)
Cash	$	118	$	67
Level 1^{(1) (2)}
Government money market funds	$	115	$	50
Total level 1	$	115	$	50
Level 2^{(1) (3)}
Commercial paper	$	646	$	1,147
Total level 2	$	646	$	1,147
Total	$	879	$	1,264



	Three and Nine Months Ended
	September 30, 2017		September 24, 2016
Expected volatility	56.32	%	59.85	%
Risk-free interest rate	1.65	%	1.00	%
Expected dividends	0.00	%	0.00	%
Expected life	3.92 years		3.98 years



	Payments due by period as of September 30, 2017
(In millions)	Total		Remainder of 2017		2018		2019		2020		2021		2022 and thereafter
6.75% Notes	$	191	$	—	$	—	$	191	$	—	$	—	$	—
7.50% Notes	347		—		—		—		—		—		347
7.00% Notes	324		—		—		—		—		—		324
2.125% Notes	805		—		—		—		—		—		805
Secured Revolving Line of Credit	70		70		—		—		—		—		—
Other long-term liabilities ⁽¹⁾	134		18		52		51		8		3		2
Aggregate interest obligation ⁽²⁾	468		—		80		74		67		67		180
Operating leases	265		10		40		35		31		29		120
Purchase obligations ⁽³⁾	313		255		42		12		3		1		—
Obligations to GF ⁽⁴⁾	2,931		335		1,052		764		780		—		—
Total contractual obligations ⁽⁵⁾	$	5,848	$	688	$	1,266	$	1,127	$	889	$	100	$	1,778


₍₁₎	~~Amounts largely represent future fixed and non-cancelable cash payments associated with software technology and licenses and IP licenses, including the payments due within the next 12 months.~~


₍₂₎	~~Represents estimated aggregate interest obligations for our outstanding debt obligations that are payable in cash, excluding non-cash amortization of debt issuance costs and debt discount.~~


₍₃₎	We have purchase obligations for goods and services where payments are based, in part, on the volume or type of services we acquire. In those cases, we only included the minimum volume of purchase obligations in the table above. Purchase orders for goods and services that are cancelable upon notice and without significant penalties are not included in the amounts above.


₍₄₎	Includes our currently expected purchases from GF for the remainder of 2017 for wafer manufacturing and research and development activities and minimum purchase obligations for wafer purchases for years 2018 through 2020. We cannot meaningfully quantify or estimate our future purchase obligations to GF beyond 2020 but expect that our future purchases from GF will continue to be material.



☒



ITEM 1.			CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


₍₅₎	Total amount excludes contractual obligations already recorded on our condensed consolidated balance sheets except for debt obligations and other liabilities related to software and technology licenses and IP licenses.



ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK