UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~June~~March 26, ~~2021~~2022


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

For the transition period from to

Commission File Number 001-07882

ADVANCED MICRO DEVICES, INC.

(Exact name of registrant as specified in its charter)


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

2485 Augustine Drive

Santa Clara, California 95054

(Address of principal executive offices)

(408) 749-4000

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of ~~July 23, 2021: 1,212,965,282~~April 27, 2022: 1,620,507,904

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INDEX

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PART I. FINANCIAL INFORMATION


ITEM 1.			CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020				March 26, 2022		March 27, 2021
		(In millions, except per share amounts)										(In millions, except per share amounts)
Net revenue	Net revenue	$	3,850	$	1,932	$	7,295	$	3,718	Net revenue		$	5,887	$	3,445
Cost of sales	Cost of sales	2,020		1,084		3,878		2,052		Cost of sales		2,883		1,858
Amortization of acquisition-related intangibles										Amortization of acquisition-related intangibles		186		—
Total cost of sales										Total cost of sales		3,069		1,858
Gross profit	Gross profit	1,830		848		3,417		1,666		Gross profit		2,818		1,587

Research and development	Research and development	659		460		1,269		902		Research and development		1,060		610
Marketing, general and administrative	Marketing, general and administrative	341		215		660		414		Marketing, general and administrative		597		319

Amortization of acquisition-related intangibles										Amortization of acquisition-related intangibles		293		—
Licensing gain	Licensing gain	(1)		0		(5)		0		Licensing gain		(83)		(4)
Operating income	Operating income	831		173		1,493		350		Operating income		951		662

Interest expense	Interest expense	(10)		(14)		(19)		(27)		Interest expense		(13)		(9)
Other income (expense), net		0		1		(11)		5
Other expense, net										Other expense, net		(42)		(11)
Income before income taxes and equity income	Income before income taxes and equity income	821		160		1,463		328		Income before income taxes and equity income		896		642

Income tax provision	Income tax provision	113		4		202		10		Income tax provision		113		89
Equity income in investee	Equity income in investee	2		1		4		1		Equity income in investee		3		2
Net income	Net income	$	710	$	157	$	1,265	$	319	Net income		$	786	$	555

Earnings per share	Earnings per share									Earnings per share
Basic	Basic	$	0.58	$	0.13	$	1.04	$	0.27	Basic		$	0.56	$	0.46
Diluted	Diluted	$	0.58	$	0.13	$	1.03	$	0.27	Diluted		$	0.56	$	0.45
Shares used in per share calculation	Shares used in per share calculation									Shares used in per share calculation
Basic	Basic	1,216		1,174		1,214		1,172		Basic		1,393		1,213
Diluted	Diluted	1,232		1,227		1,231		1,225		Diluted		1,410		1,231

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020				March 26, 2022		March 27, 2021
		(In millions)										(In millions)
Net income	Net income	$	710	$	157	$	1,265	$	319	Net income		$	786	$	555
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Net change in unrealized gains (losses) on cash flow hedges	Net change in unrealized gains (losses) on cash flow hedges	1		10		(10)		(4)		Net change in unrealized gains (losses) on cash flow hedges		1		(11)

Total comprehensive income	Total comprehensive income	$	711	$	167	$	1,255	$	315	Total comprehensive income		$	787	$	544

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


		June 26, 2021		December 26, 2020			March 26, 2022		December 25, 2021
		(In millions, except par value amounts)					(In millions, except par value amounts)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,623	$	1,595	Cash and cash equivalents	$	4,740	$	2,535
Short-term investments	Short-term investments	1,170		695		Short-term investments	1,792		1,073
Accounts receivable, net	Accounts receivable, net	2,020		2,066		Accounts receivable, net	3,677		2,706
Inventories	Inventories	1,765		1,399		Inventories	2,431		1,955
Receivables from related parties	Receivables from related parties	6		10		Receivables from related parties	4		2
Prepaid expenses and other current assets	Prepaid expenses and other current assets	234		378		Prepaid expenses and other current assets	725		312

Total current assets	Total current assets	7,818		6,143		Total current assets	13,369		8,583
Property and equipment, net	Property and equipment, net	671		641		Property and equipment, net	1,406		702
Operating lease right-of-use assets	Operating lease right-of-use assets	247		208		Operating lease right-of-use assets	416		367
Goodwill	Goodwill	289		289		Goodwill	23,083		289
Acquisition-related intangibles						Acquisition-related intangibles	26,832		—
Investment: equity method	Investment: equity method	67		63		Investment: equity method	72		69
Deferred tax assets	Deferred tax assets	1,090		1,245		Deferred tax assets	32		931
Other non-current assets	Other non-current assets	509		373		Other non-current assets	1,705		1,478
Total assets	Total assets	$	10,691	$	8,962	Total assets	$	66,915	$	12,419
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	836	$	468	Accounts payable	$	1,476	$	1,321
Payables to related parties	Payables to related parties	36		78		Payables to related parties	205		85
Accrued liabilities	Accrued liabilities	1,911		1,796		Accrued liabilities	3,070		2,424
Current portion of long-term debt, net						Current portion of long-term debt, net	312		312
Other current liabilities	Other current liabilities	109		75		Other current liabilities	518		98
Total current liabilities	Total current liabilities	2,892		2,417		Total current liabilities	5,581		4,240
Long-term debt, net		313		330
Long-term debt, net of current portion						Long-term debt, net of current portion	1,475		1
Long-term operating lease liabilities	Long-term operating lease liabilities	240		201		Long-term operating lease liabilities	370		348
Deferred tax liabilities						Deferred tax liabilities	3,109		12
Other long-term liabilities	Other long-term liabilities	181		177		Other long-term liabilities	1,047		321
Commitments and Contingencies (See Note 12)		0		0
Commitments and Contingencies (See Note 13)						Commitments and Contingencies (See Note 13)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Capital stock:	Capital stock:					Capital stock:
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,223 and 1,217; shares outstanding: 1,213 and 1,211		12		12
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,629 and 1,232; shares outstanding: 1,620 and 1,207						Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,629 and 1,232; shares outstanding: 1,620 and 1,207	16		12
Additional paid-in capital	Additional paid-in capital	10,795		10,544		Additional paid-in capital	56,925		11,069
Treasury stock, at cost (shares held: 10 and 6)		(401)		(131)
Treasury stock, at cost (shares held: 9 and 25)						Treasury stock, at cost (shares held: 9 and 25)	(941)		(2,130)
Accumulated deficit	Accumulated deficit	(3,348)		(4,605)		Accumulated deficit	(665)		(1,451)
Accumulated other comprehensive income		7		17
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(2)		(3)
Total stockholders’ equity	Total stockholders’ equity	7,065		5,837		Total stockholders’ equity	55,333		7,497
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,691	$	8,962	Total liabilities and stockholders’ equity	$	66,915	$	12,419

See accompanying notes.

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Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended
June 26,
2021 June 27,
2020
(In millions)
Cash flows from operating activities:
Net income $ 1,265 $ 319
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 192 140
Stock-based compensation 168 119
Amortization of debt discount and issuance costs 3 8
Amortization of operating lease right-of-use assets 25 20
Loss on debt conversion 6 0
Loss on sale/disposal of property and equipment 19 26
Deferred income taxes 145 1
Impairment of investment 8 0
Other (4) 7
Changes in operating assets and liabilities:
Accounts receivable, net 46 64
Inventories (366) (342)
Receivables from related parties 4 10
Prepaid expenses and other assets (55) (12)
Payables to related parties (42) (21)
Accounts payable 346 (201)
Accrued liabilities and other 90 40
Net cash provided by operating activities 1,850 178
Cash flows from investing activities:
Purchases of property and equipment (130) (146)
Purchases of short-term investments (1,130) (55)
Proceeds from maturity of short-term investments 655 92
Other 2 0
Net cash used in investing activities (603) (109)
Cash flows from financing activities:
Proceeds from short-term debt borrowing 0 200
Proceeds from sales of common stock through employee equity plans 51 42
Repurchases of common stock (256) 0
Common stock repurchases for tax withholding on employee equity plans (14) (1)
Other 0 (1)
Net cash provided by (used in) financing activities (219) 240
Net increase (decrease) in cash, cash equivalents, and restricted cash 1,028 309
Cash, cash equivalents, and restricted cash at beginning of period 1,595 1,470
Cash, cash equivalents, and restricted cash at end of period $ 2,623 $ 1,779
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid $ 41 $ 52
Issuance of common stock to settle convertible debt $ 25 $ 0
Transfer of assets for acquisition of property and equipment $ 37 $ 41


	Three Months Ended
	March 26, 2022		March 27, 2021
	(In millions)
Cash flows from operating activities:
Net income	$	786	$	555
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	609		95
Stock-based compensation	199		85

Amortization of operating lease right-of-use assets	19		12
Amortization of inventory fair value adjustment	89		—
Loss on debt redemption, repurchase and conversion	—		6
Loss on sale or disposal of property and equipment	15		8
Deferred income taxes	(342)		73
(Gains) losses on equity investments, net	44		8
Other	(2)		(1)
Changes in operating assets and liabilities
Accounts receivable, net	(672)		(112)
Inventories	(26)		(254)
Receivables from related parties	(1)		3
Prepaid expenses and other assets	(260)		33
Payables to related parties	121		(38)
Accounts payable	4		466
Accrued liabilities and other	412		(41)
Net cash provided by operating activities	995		898
Cash flows from investing activities:
Purchases of property and equipment	(71)		(66)
Purchases of short-term investments	(100)		(858)
Proceeds from maturity of short-term investments	964		200
Cash received from acquisition of Xilinx	2,366		—
Other	(1)		2
Net cash provided by (used in) investing activities	3,158		(722)
Cash flows from financing activities:


Proceeds from sales of common stock through employee equity plans	2		2
Repurchases of common stock	(1,914)		—
Common stock repurchases for tax withholding on employee equity plans	(35)		(10)
Other	(1)		—
Net cash used in financing activities	(1,948)		(8)
Net increase in cash, cash equivalents, and restricted cash	2,205		168
Cash, cash equivalents, and restricted cash at beginning of period	2,535		1,595
Cash, cash equivalents, and restricted cash at end of period	$	4,740	$	1,763
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	67	$	34
Issuance of common stock to settle convertible debt	$	—	$	24

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Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities $ 77 $ 30
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents $ 2,623 $ 1,775
Restricted cash included in Prepaid expenses and other current assets 0 4
Total cash, cash equivalents, and restricted cash $ 2,623 $ 1,779


Issuance of common stock and treasury stock for the acquisition of Xilinx	$	48,514	$	—
Fair value of replacement share-based awards related to acquisition of Xilinx	$	275	$	—
Transfer of assets for acquisition of property and equipment	$	13	$	34
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities	$	7	$	58

See accompanying notes.

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Advanced Micro Devices

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020				March 26, 2022		March 27, 2021
		(In millions)										(In millions)
Capital stock:	Capital stock:									Capital stock:
Common stock
Common stock, par value										Common stock, par value
Balance, beginning of period	Balance, beginning of period	$	12	$	12	$	12	$	12	Balance, beginning of period		$	12	$	12

Issuance of common stock as consideration for acquisition										Issuance of common stock as consideration for acquisition		4		—
Balance, end of period	Balance, end of period	$	12	$	12	$	12	$	12	Balance, end of period		$	16	$	12
Additional paid-in capital	Additional paid-in capital									Additional paid-in capital
Balance, beginning of period	Balance, beginning of period	$	10,658	$	10,026	$	10,544	$	9,963	Balance, beginning of period		$	11,069	$	10,544
Common stock issued under employee equity plans	Common stock issued under employee equity plans	49		39		51		42		Common stock issued under employee equity plans		2		2
Stock-based compensation	Stock-based compensation	83		60		168		119		Stock-based compensation		199		85
Issuance of common stock to settle convertible debt	Issuance of common stock to settle convertible debt	1		0		25		0		Issuance of common stock to settle convertible debt		—		24
Issuance of common stock warrant		4		2		7		3
Issuance of common stock as consideration for acquisition										Issuance of common stock as consideration for acquisition		45,372		—
Fair value of replacement share-based awards related to acquisition										Fair value of replacement share-based awards related to acquisition		275		—
Issuance of common stock warrants										Issuance of common stock warrants		8		3

Balance, end of period	Balance, end of period	$	10,795	$	10,127	$	10,795	$	10,127	Balance, end of period		$	56,925	$	10,658
Treasury stock	Treasury stock									Treasury stock
Balance, beginning of period	Balance, beginning of period	$	(141)	$	(54)	$	(131)	$	(53)	Balance, beginning of period		$	(2,130)	$	(131)

Repurchases of common stock	Repurchases of common stock	(256)		0		(256)		0		Repurchases of common stock		(1,914)		—
Common stock repurchases for tax withholding on employee equity plans	Common stock repurchases for tax withholding on employee equity plans	(4)		0		(14)		(1)		Common stock repurchases for tax withholding on employee equity plans		(35)		(10)
Reissuance of treasury stock as consideration for acquisition										Reissuance of treasury stock as consideration for acquisition		3,138		—
Balance, end of period	Balance, end of period	$	(401)	$	(54)	$	(401)	$	(54)	Balance, end of period		$	(941)	$	(141)

Accumulated deficit:	Accumulated deficit:									Accumulated deficit:
Balance, beginning of period	Balance, beginning of period	$	(4,058)	$	(6,933)	$	(4,605)	$	(7,095)	Balance, beginning of period		$	(1,451)	$	(4,605)
Cumulative effect of adoption of accounting standard	Cumulative effect of adoption of accounting standard	0		0		(8)		0		Cumulative effect of adoption of accounting standard		—		(8)
Net income	Net income	710		157		1,265		319		Net income		786		555
Balance, end of period	Balance, end of period	$	(3,348)	$	(6,776)	$	(3,348)	$	(6,776)	Balance, end of period		$	(665)	$	(4,058)

Accumulated other comprehensive income (loss):	Accumulated other comprehensive income (loss):									Accumulated other comprehensive income (loss):
Balance, beginning of period	Balance, beginning of period	$	6	$	(14)	$	17	$	0	Balance, beginning of period		$	(3)	$	17
Other comprehensive income (loss)	Other comprehensive income (loss)	1		10		(10)		(4)		Other comprehensive income (loss)		1		(11)
Balance, end of period	Balance, end of period	$	7	$	(4)	$	7	$	(4)	Balance, end of period		$	(2)	$	6

Total stockholders' equity	Total stockholders' equity	$	7,065	$	3,305	$	7,065	$	3,305	Total stockholders' equity		$	55,333	$	6,477

See accompanying notes.

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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), as standalone devices or as incorporated into accelerated processing units ~~which integrate microprocessors~~(APUs), chipsets, discrete and ~~graphics (APUs), discrete~~integrated graphics processing units (GPUs), data center and professional GPUs, server and embedded processors, semi-custom System-on-Chip ~~(SOC)~~(SoC) products, microprocessor and ~~chipsets for the PC, gaming, datacenter and embedded markets. In addition, AMD provides~~SoC development services and ~~sells~~technology, Field Programmable Gate Arrays (FPGAs), adaptive SoC products, and Adaptive Compute Acceleration Platform (ACAP) products. From time to time, the Company may also sell or ~~licenses~~license portions of its intellectual property (IP) portfolio.

On February 14, 2022 (the Acquisition Date), the Company completed the acquisition of Xilinx, Inc. (Xilinx). See Note 4 - Business Combination for additional information.

NOTE 2 – Basis of Presentation and Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of 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 three ~~and six~~ months ended ~~June~~March 26, ~~2021~~2022 shown in this report are not necessarily indicative of results to be expected for the full year ending December ~~25, 2021~~31, 2022 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 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 ~~26, 2020.~~25, 2021. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company uses a 5252- or ~~53 week~~53-week fiscal year ending on the last Saturday in December. The three ~~and six~~ months ended ~~June~~March 26, ~~2021~~2022 and ~~June~~March 27, ~~2020~~2021 each consisted of 13 ~~weeks~~weeks.

Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and ~~26 weeks, respectively.~~assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results are likely to differ from those estimates, and such differences may be material to the financial statements. Areas where management uses judgment include, but are not limited to, revenue allowances, inventory valuation and related carrying value adjustments, valuation and assessing potential impairment, if any, of goodwill and intangible assets, business combination accounting and deferred income tax assets.

Significant Accounting Policies. ~~There~~Except for the addition of business combination, impairment of long-lived and intangible assets, and Global Intangible Low-Taxed Income (GILTI) accounting policies to the Company’s significant accounting policies, there have been no material changes to the Company’s significant accounting policies in Note 2 - Summary of 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.~~25, 2021.

~~Recently Adopted Accounting Standards~~

~~In December 2019,~~Business Combination. The Company is required to use the ~~Financial Accounting Standards Board (FASB) issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies various aspects~~acquisition method of accounting for ~~income taxes by removing certain exceptions~~business combinations. The acquisition method of accounting requires the Company to allocate the purchase consideration to the ~~general principles in Topic 740~~assets acquired 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 standard inliabilities assumed from the ~~first quarter of 2021, which resulted in the recognition of an immaterial deferred tax liability.~~

~~Recently Issued Accounting Standards~~

~~In August 2020, the FASB issued ASU 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ~~This standard simplifies the accounting for convertible instruments and the application~~acquiree based on their respective fair values as of the ~~derivatives scope exception for contracts in an entity’s own equity by eliminating some~~Acquisition Date. The excess of the ~~models that require separating embedded conversion features from convertible instruments. The guidance also addresses how convertible instruments are accounted for in~~fair value of purchase consideration over the 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, 2021, and can be adopted through either a modified retrospective method with a cumulative effect adjustment to opening accumulated deficit or a full retrospective method. The Company does not expect the adoption of this standard to result in a material impact to its consolidated financial statements.

~~Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any~~fair value of these ~~accounting pronouncements had~~assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future revenue growth and margins, future changes in technology, expected cost and time to develop in-process research and development and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or ~~will have~~liability. These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made. As a ~~material impact on its consolidated financial statements.~~result,

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during the measurement period of up to one year from the Acquisition Date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Operations.

Impairment of Long-Lived and Intangible Assets. Long-lived and Intangible assets to be held and used are reviewed for impairment if indicators of potential impairment exist. Impairment indicators are reviewed on a quarterly basis. Assets are grouped and evaluated for impairment at the lowest level of identifiable cash flows.

When indicators of impairment exist and assets are held for use, the Company estimates future undiscounted cash flows attributable to the related assets groups. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the asset group or based on appraisals. Factors affecting impairment of assets held for use include the ability of the specific assets to generate separately identifiable positive cash flows.

When assets are removed from operations and held for sale, the Company estimates impairment losses as the excess of the carrying value of the assets over their fair value. Market conditions are among the factors affecting impairment of assets held for sale. Changes in any of these factors could necessitate impairment recognition in future periods for assets held for use or assets held for sale.

Long-lived assets such as property and equipment and intangible assets are considered non-financial assets and are measured at fair value when indicators of impairment exist.

Global Intangible Low-Taxed Income (GILTI). In 2022, the Company elected to change its method of accounting for the United States GILTI tax from recording the tax impact in the period it is incurred to recognizing deferred taxes for temporary tax basis differences expected to reverse as GILTI tax in future years. The change is considered preferable based on the Company’s facts and circumstances as it provides better and more timely information of expected future income tax liabilities arising from temporary tax differences primarily associated with the Xilinx acquisition. As a result of the acquisition, the Company recorded $27.3 billion of identified intangible assets (refer to Note 4 - Business Combination), of which $16.9 billion are related to foreign operations which will be amortized to income from operations over the assets’ estimated useful lives, but for which the Company will not receive a tax deduction under GILTI. Recognition of deferred taxes for the future GILTI impact of this amount is considered preferable as it provides better information about potential future tax liabilities of the Company based on current transactions. This accounting policy change resulted in the recording of $863 million of deferred tax liabilities in connection with the Xilinx acquisition as disclosed in Note 11 - Income Taxes. In addition, for the three months ended March 26, 2022, it resulted in a decrease in income tax provision with a corresponding increase to net income of $71 million, and an increase in basic and diluted earnings per share of $0.05, as compared to the computation under the previous accounting policy. This accounting policy change had no material impact on the Company’s historical consolidated financial statements.

NOTE 3 – Supplemental Financial Statement Information

~~Short-term Investments~~

June 26,
2021 December 26,
2020
(In millions)
Commercial paper $ 993 $ 295
Time deposits 177 400
Total short-term investments $ 1,170 $ 695

Accounts Receivable, net

As of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, Accounts receivable, net included unbilled accounts receivable of ~~$158~~$619 million and ~~$123~~$329 million, respectively. Unbilled accounts receivables primarily represent work completed on development services ~~recognized as revenue but not yet invoiced to customers~~ and ~~semi-custom~~on 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 yet ~~invoiced to customers.~~invoiced. All unbilled accounts receivable are expected to be billed and collected within 12 months.

~~Inventories~~

June 26,
2021 December 26,
2020
(In millions)
Raw materials $ 129 $ 93
Work in process 1,408 1,139
Finished goods 228 167
Total inventories $ 1,765 $ 1,399

~~Property and Equipment, net~~

June 26,
2021 December 26,
2020
(In millions)
Leasehold improvements $ 184 $ 208
Equipment 1,342 1,209
Construction in progress 150 136
Property and equipment, gross 1,676 1,553
Accumulated depreciation (1,005) (912)
Total property and equipment, net $ 671 $ 641

~~Other Non-Current Assets~~

June 26,
2021 December 26,
2020
(In millions)
Software technology and licenses, net $ 204 $ 229
Other 305 144
Total other non-current assets $ 509 $ 373


Inventories	March 26, 2022		December 25, 2021
	(In millions)
Raw materials	$	112	$	82
Work in process	1,966		1,676
Finished goods	353		197
Total inventories	$	2,431	$	1,955

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~~Accrued Liabilities~~


Prepaid Expenses and Other Current Assets	March 26, 2022		December 25, 2021
	(In millions)
Prepaid supply agreements	$	449	$	74
Other	276		238
Total prepaid expenses and other current assets	$	725	$	312

June 26,
2021 December 26,
2020
(In millions)
Accrued marketing programs and advertising expenses $ 855 $ 839
Accrued compensation and benefits 417 513
Other accrued and current liabilities 639 444
Total accrued liabilities $ 1,911 $ 1,796
Prepaid supply agreements relate to the short-term portion of payments made to vendors to secure long-term supply capacity.


Property and Equipment, net	March 26, 2022		December 25, 2021
	(In millions)
Land	$	120	$	—
Building and leasehold improvements	562		206
Equipment	1,766		1,534
Construction in progress	144		96
Property and equipment, gross	2,592		1,836
Accumulated depreciation	(1,186)		(1,134)
Total property and equipment, net	$	1,406	$	702


Other Non-Current Assets	March 26, 2022		December 25, 2021
	(In millions)
Long-term prepaid supply agreements	$	798	$	916
Software and technology licenses, net	516		328
Other	391		234
Total other non-current assets	$	1,705	$	1,478


Accrued Liabilities	March 26, 2022		December 25, 2021
	(In millions)
Accrued marketing programs	$	964	$	933
Accrued compensation and benefits	744		705
Other accrued and current liabilities	1,362		786
Total accrued liabilities	$	3,070	$	2,424

Revenue

Revenue allocated to remaining performance obligations that ~~were~~are unsatisfied (or partially unsatisfied) ~~as of June 26, 2021 was $281 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~~for development services, IP licensing and product revenue. ~~The Company expects to recognize $170 million~~As of ~~revenue~~March 26, 2022, the aggregate transaction price allocated to remaining performance obligations under contracts with an original expected duration of more than one year was $206 million, of which $148 million is expected to be recognized 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 24% and 22% of the Company’s revenue for ~~both~~the three ~~and six~~ months ended ~~June~~March 26, 2022 and March 27, 2021, respectively.

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NOTE 4 – Business Combination

On February 14, 2022, the Company completed the acquisition of all issued and 9%outstanding shares of Xilinx (the Merger), a leading provider of adaptive computing solutions, for a total purchase consideration of $48.8 billion ($46.4 billion, net of cash acquired of $2.4 billion). The acquisition of Xilinx expands the Company’s product portfolio to include adaptable hardware platforms that enable hardware acceleration and 7%rapid innovation across a variety of technologies. With the acquisition of Xilinx, the Company now offers FPGAs, adaptive SoC products, and ACAP products. The purchase consideration consisted of $48.5 billion of fair value of 429 million shares of the Company’s common stock issued to Xilinx stockholders and $275 million of fair value of replacement equity awards attributable to services rendered pre-combination. As the transaction closed prior to the opening of markets on February 14, 2022, the fair value of the common stock issued to Xilinx stockholders was based on the closing price of the Company’s common stock on February 11, 2022 of $113.18 per share.

The financial results of Xilinx are included in the Company’s consolidated financial statements from the date of acquisition, February 14, 2022, through March 26, 2022, and are reported under the Xilinx segment.

The purchase consideration was preliminarily allocated as follows:


	(In millions)
Cash and cash equivalents	$	2,366
Short-term investments	1,582
Accounts receivable	299
Inventories	539
Prepaid expenses and other current assets	61
Property and equipment	692
Operating lease right-of-use assets	61
Acquisition-related intangibles	27,308
Deferred tax assets	11
Other non-current assets	418
Total Assets	33,337
Accounts payable	116
Accrued liabilities	633
Other current liabilities	191
Long-term debt	1,474
Long-term operating lease liabilities	45
Deferred tax liabilities	4,346
Other long-term liabilities	533
Total Liabilities	7,338
Fair value of net assets acquired	25,999
Goodwill	22,794
Total purchase consideration	$	48,793

The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained. The primary items pending are related to income tax matters. Any adjustments to the preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined.

Goodwill was primarily attributed to increased synergies expected to be achieved from the integration of Xilinx. None of the goodwill is expected to be deductible for income tax purposes. Goodwill is not amortized to earnings, but instead will be reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill arising from the Xilinx acquisition was allocated to the Xilinx segment.

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Following are details of the purchase consideration allocated to acquired intangible assets:


	Fair Value		Weighted-average estimated useful life
	(In millions)		(In years)
Developed technology (1)	$	12,295	16 years
Customer relationships (2)	12,290		14 years
Customer backlog (3)	793		1 year
Corporate trade name (4)	65		1 year
Product trademarks (4)	895		12 years
Identified intangible assets subject to amortization	26,338
In-process research and development (IPR&D) not subject to amortization (5)	970		N/A
Total identified intangible assets acquired	$	27,308

(1)The fair value of developed technology was determined using the income approach, specifically, the multi-period excess earnings method.

(2)Customer relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships using the income approach, specifically, the with and without method.

(3)Customer backlog represents the fair value of non-cancellable customer contract orders using the income approach, specifically, the multi-period excess earnings method.

(4)Corporate trade name and product trademarks primarily relate to the Xilinx brand and product-related trademarks, respectively, and the fair values were determined by applying the income approach, specifically, the relief from royalty method.

(5)The fair value of IPR&D was determined using the income approach, specifically, the multi-period excess earnings method.

The fair value of the identified intangible assets subject to amortization will be amortized over the assets’ estimated useful lives based on the pattern in which the economic benefits are expected to be received to cost of sales and operating expenses.

IPR&D consists of projects thathave not yet reached technological feasibility as of the Acquisition Date. Accordingly, we recorded an indefinite-lived intangible asset of $970 million for the fair value of these projects, which will initially not be amortized. Instead, these projects will be tested for impairment annually and whenever events or changes in circumstances indicate that these projects may be impaired. Once the project reaches technological feasibility, the Company will begin to amortize the intangible assets over their estimated useful life.

The Company also assumed unvested restricted stock units with estimated fair value of $1.2 billion, of which $275 million was included as a component of the purchase consideration and $951 million will be recognized as expense subsequent to the acquisition.

The Consolidated Statement of Operations include the following revenue and operating income attributable to the Xilinx segment from the date of acquisition, February 14, 2022, to March 26, 2022:


	March 26, 2022
	(In millions)
Revenue	$	559
Operating income	$	233

Operating income attributable to the Xilinx segment does not include amortization of acquisition-related intangibles, employee stock-based compensation expense and acquisition-related costs, which are included in the “All Other” segment.

Acquisition-related costs of $208 million were included in the Company’s Condensed Consolidated Statement of Operations and recorded under Cost of sales, Research and development, and Marketing, general and administrative expenses for the first fiscal quarter of 2022. The Company may incur additional acquisition-related costs in the future related to the acquisition.

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Supplemental Unaudited Pro Forma Information

Following are the supplemental consolidated financial results of AMD and Xilinx on an unaudited pro forma basis, as if the acquisition had been consummated as of the beginning of the fiscal year 2021 (i.e., December 27, 2020). AMD’s fiscal year ends on the last Saturday in December of each year and Xilinx’s fiscal year ended on the Saturday nearest March 31 of each year. The unaudited pro forma information is presented on the basis of AMD’s fiscal year and combines the historical results of the fiscal periods of AMD and Xilinx. Since AMD’s and Xilinx’s fiscal year ends differed, AMD combined its statement of operations for the fiscal quarter ended March 26, 2022 with that of Xilinx for the three-month period beginning January 2, 2022 through March 26, 2022. Also, AMD combined its statement of operations for the fiscal quarter ended March 27, 2021 with that of Xilinx for the three ~~and six~~ months ended ~~June 27, 2020, respectively.~~April 3, 2021.


	Three Months Ended
	March 26, 2022		March 27, 2021
	(In millions)
Revenue	$	6,364	$	4,296
Net income (loss)	$	769	$	(443)

The unaudited pro forma financial information presented is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition were completed at the beginning of fiscal year 2021 and are not indicative of the future operating results of the combined company. The pro forma results include adjustments related to purchase accounting, primarily amortization of acquisition-related intangible assets, fixed asset depreciation expense and expense from assumed stock-based compensation awards. The pro forma results also include amortization expense of acquired inventory fair value step-up of $184 million in the first quarter of fiscal year 2021 and no inventory fair value step-up expense in the first quarter of fiscal year 2022.

NOTE 45 – Acquisition-related Intangible Assets and Goodwill

Acquisition-related Intangible Assets

Acquisition-related intangibles as of March 26, 2022 were as follows:


	Weighted-average Remaining Useful Life (In years)	March 26, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
		(In millions)
Developed technology	16 years	$	12,295	$	(95)	$	12,200
Customer relationships	14 years	12,290		(277)		12,013
Customer backlog	1 year	793		(91)		702
Corporate trade name	1 year	65		(7)		58
Product trademarks	12 years	895		(9)		886
Identified intangible assets subject to amortization		26,338		(479)		25,859
IPR&D not subject to amortization	N/A	973		—		973
Total acquisition-related intangible assets		$	27,311	$	(479)	$	26,832

Acquisition-related intangible asset balance as of March 27, 2021 was not material.

Acquisition-related intangible amortization expense was $479 million for the three months ended March 26, 2022.

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Based on the carrying value of acquisition-related intangibles recorded as of March 26, 2022, and assuming no subsequent impairment of the underlying assets, the estimated annual amortization expense for acquisition-related intangibles is expected to be as follows:


Fiscal Year	(In millions)
Remainder of 2022	$	3,000
2023	2,780
2024	2,260
2025	2,040
2026	1,941
2027 and thereafter	13,838
Total	$	25,859

Goodwill

The carrying amount of goodwill as of March 26, 2022 and March 27, 2021 was $23.1 billion and $289 million, respectively, and was allocated to reporting units within the following operating segments:


	March 26, 2022		December 26, 2021
	(In millions)
Enterprise, Embedded and Semi-custom	$	289	$	289
Xilinx	22,794		—
Total	$	23,083	$	289

NOTE 6 – Related Parties — Equity Joint Ventures

ATMP Joint Ventures

The Company holds a 15% equity interest in 2 joint ventures (collectively, the ATMP JV) with affiliates of Tongfu Microelectronics Co., Ltd, a Chinese joint stock 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.

The ATMP JV provides assembly, testing, marking and packaging (ATMP) services to the Company. The Company assists the ATMP JV in its management of certain raw material inventory. The purchases from and resales to the ATMP 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~~statements of operations.

The Company’s purchases from the ATMP JV during the three ~~and six~~ months ended ~~June~~March 26, 2022 and March 27, 2021 amounted to ~~$270~~$348 million and ~~$516 million, respectively. The Company’s purchases from the ATMP JV during the three and six months ended June 27, 2020 amounted to $204 million and $355~~$246 million, respectively. As of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the amounts payable to the ATMP JV were ~~$36~~$205 million and ~~$78~~$85 million, respectively, and are included in Payables to related parties on the Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three ~~and six~~ months ended ~~June~~March 26, 2022 and March 27, 2021 amounted to $9$4 million and ~~$19 million, respectively. The Company’s resales to the ATMP JV during the three and six months ended June 27, 2020 amounted to $8 million and $15~~$10 million, respectively. As of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the ~~Company’s~~Company had receivables from the ATMP JV ~~were $6~~of $4 million and ~~$10~~$2 million, respectively, ~~and were~~ included in Receivables from related parties on the Company’s condensed consolidated balance sheets.

During the three ~~and six~~ months ended ~~June~~March 26, 2022 and March 27, 2021, the Company recorded a gain of $2$3 million and $4$2 million in Equity income in investee on its condensed consolidated statements of operations, respectively. As of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the carrying value of the Company’s investment in the ATMP JV was ~~$67~~$72 million and ~~$63~~$69 million, respectively.

1115

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THATIC Joint Ventures

The Company holds equity interests in 2 joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. As of both ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the carrying value of the investment was 0.zero.

In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV, payable over several years upon achievement of certain milestones. The Company also receives a royalty based on the sales of the THATIC JV’s products developed on the basis of such Licensed IP. The Company classifies Licensed IP and royalty income associated with the February 2016 agreement as Licensing gain within operating income. During the three ~~and six~~ months ended ~~June~~March 26, 2022, the Company recognized $83 million of licensing gain from a milestone achievement and royalty income and during the three months ended March 27, 2021, the Company recognized ~~$1 million and $5~~$4 million of licensing gain from royalty income, ~~under the agreement, respectively.~~both associated with Licensed IP. As of both ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the Company had 0no receivables from the THATIC JV.

In June 2019, the Bureau of Industry and Security of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. The Company is complying with U.S. law pertaining to the Entity List designation.

NOTE 57 – Debt and Revolving Credit Facility

Debt

The Company’s total debt as of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020~~25, 2021 consisted of the following:


		June 26, 2021		December 26, 2020			March 26, 2022		December 25, 2021
		(In millions)					(In millions)
7.50% Senior Notes Due 2022 (7.50% Notes)		$	312	$	312
2.95% Senior Notes Due 2024 (Xilinx 2024 Notes)						2.95% Senior Notes Due 2024 (Xilinx 2024 Notes)	$	750	$	—
2.375% Senior Notes Due 2030 (Xilinx 2030 Notes)						2.375% Senior Notes Due 2030 (Xilinx 2030 Notes)	750		—
7.50% Senior Notes Due August 2022 (7.50% Notes)						7.50% Senior Notes Due August 2022 (7.50% Notes)	312		312
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	1		26		2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	1		1

Total debt (principal amount)	Total debt (principal amount)	313		338		Total debt (principal amount)	1,813		313
Unamortized debt discount and issuance costs	Unamortized debt discount and issuance costs	0		(8)		Unamortized debt discount and issuance costs	(26)		—

Total long-term debt, net		$	313	$	330
Total debt (net)						Total debt (net)	1,787		313
Less: current portion of long-term debt						Less: current portion of long-term debt	(312)		(312)
Total long-term debt						Total long-term debt	$	1,475	$	1

~~2.125% Convertible Senior~~Assumed Xilinx Notes ~~Due 2026~~

In ~~September 2016,~~connection with the acquisition of Xilinx, the Company ~~issued $805 million~~assumed $1.5 billion in aggregate principal ~~amount~~ of ~~2.125% Convertible Senior~~Xilinx’s 2.95% and 2.375% Notes ~~due 2026.~~(Assumed Xilinx Notes) which were recorded at fair value as of the Acquisition Date. The ~~2.125%~~difference between the fair value at the Acquisition Date and the principal outstanding of the Assumed Xilinx Notes will be amortized through interest expense over the remaining term of the debt. The Assumed Xilinx Notes are general unsecured senior obligations of the ~~Company.~~Company with semi-annual fixed interest payments due on June 1 and December 1. The indentures governing the Assumed Xilinx Notes contain various covenants which limit the Company’s ability to, among other things, create certain liens on principal property or the capital stock of certain subsidiaries, enter into certain sale and leaseback transactions with respect to principal property, and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s assets to another person.

2.125% Notes

During the ~~six~~three months ended ~~June~~March 26, 2022, the activity on the 2.125% Notes was immaterial.

During the three months ended March 27, 2021, holders of the 2.125% Notes converted $25 million principal amount of notes in exchange for ~~which the Company issued~~ approximately 3 million shares of the Company’s common stock at the conversion price of $8.00 per share. The Company recorded a loss of $6 million from these conversions in Other ~~income (expense),~~expense, net on its condensed consolidated statements of operations.

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Future Debt Payment Obligations

As of ~~June~~March 26, ~~2021,~~2022, the ~~outstanding aggregate principal amount of the 2.125% Notes was $1 million.~~

~~7.50% Senior Notes Due 2022~~

On August 15, 2012, the Company issued $500 million of its 7.50% Senior Notes due August 15, 2022. As of June 26, 2021, the outstanding aggregate principal amount of the 7.50% Notes was $312 million.Company’s future debt and related interest payment obligations were as follows:


	Principal		Interest		Total
Fiscal Year	(In millions)

2022	$	312	$	64	$	376



2023	—		41		41
2024	750		29		779
2025	—		18		18
2026	1		18		19
2027 and thereafter	750		62		812
Total	$	1,813	$	232	$	2,045

Revolving Credit Facility

The Company is party to a $500 million unsecured revolving credit facility (the Revolving Credit Facility), including a $50 million swingline sub-facility and a $75 million sublimit for letters of credit pursuant to a credit agreement with a syndicate of banks. The Revolving Credit Facility expires in June 2024. Borrowings under the Revolving Credit Facility bear interest at either the LIBOR ~~rate~~ or the base rate at the Company’s option (in each case, as customarily defined) plus an applicable margin. As of ~~June~~March 26, ~~2021,~~2022, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants. As of ~~June~~March 26, ~~2021,~~2022, the Company had ~~$13~~$14 million of letters of credit outstanding under the Revolving Credit Facility.

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NOTE 68 – Financial Instruments

Fair Value Measurements

The Company’s financial instruments are measured and recorded at fair value on a recurring basis, except for non-marketable equity investments in privately-held companies. These equity investments are generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred.

Fair Value Hierarchy

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

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Financial Instruments Recorded at Fair Value on a Recurring Basis

~~As of June~~


	March 26, 2022						December 25, 2021
(In millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash equivalents
Money market funds	$	2,289	$	—	$	2,289	$	4	$	—	$	4
Commercial paper	—		145		145		—		45		45
U.S. Treasury and agency securities	75		125		200		—		—		—
Short-term investments
Commercial paper	—		559		559		—		880		880
Time deposits and certificates of deposits	—		491		491		—		193		193
Asset-backed and mortgage-backed securities	—		49		49		—		—		—
U.S. Treasury and agency securities	469		224		693		—		—		—
Other non-current assets
Equity investments	22		—		22		66		—		66
Deferred compensation plan investments	90		—		90		72		—		72
Total assets measured at fair value	$	2,945	$	1,593	$	4,538	$	142	$	1,118	$	1,260

During the three months ended March 26, ~~2021,~~2022, the Company ~~had $200~~recognized a $44 million ~~of cash equivalent~~loss, in ~~money market funds, which are classified within Level 1, and $100 million of cash equivalent~~Other income (expense), due to a decrease in commercial paper, which are classified within Level 2. The money market funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. The commercial paper is classified within Level 2 as itsthe fair value ~~estimates were based on quoted prices for comparable instruments~~.of an equity investment.

~~As of June 26, 2021 and December 26, 2020, the Company had $993 million and $295 million of commercial paper, respectively, included in Short-term~~Deferred compensation plan investments ~~on the Company’s condensed consolidated balance sheets. The commercial paper is classified within Level 2 as its fair value estimates were based on quoted prices for comparable instruments~~.

~~As of June 26, 2021 and December 26, 2020, the Company also had approximately $65 million and $46 million, respectively, of~~are mutual fund investments ~~in mutual funds~~ held in a Rabbi trust established ~~for~~to maintain the Company’s executive deferred compensation plan, which were included in Other non-current assets on the Company’s condensed consolidated balance sheets. These investments are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. plan.

The ~~Company~~following is ~~restricted from accessing these investments.~~a summary of cash equivalents and short-term investments:

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


	March 26, 2022
	Cost/ Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in millions)
Asset-backed and mortgage-backed securities	$	50	$	—	$	(1)	$	49
Commercial paper	704		—		—		704
Money market funds	2,289		—		—		2,289
Time deposits and certificates of deposits	491		—		—		491��
U.S. Treasury and agency securities	895		—		(2)		893
	$	4,429	$	—	$	(3)	$	4,426

~~During the six months ended June~~As of March 26, ~~2021,~~2022, the Company ~~recorded~~did not have any available-for-sale debt securities which had been in ~~Other income (expense), net an impairment charge~~a continuous unrealized loss position of ~~$8 million associated with an equity investment.~~more than twelve months.

The contractual maturities of investments classified as available-for-sale are as follows:


	March 26, 2022				December 25, 2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In millions)				(In millions)
Due within 1 year	$	2,090	$	2,089	$	1,118	$	1,118
Due in 1 year through 5 years	1		1		—		—
Due in 5 years and later	49		47		—		—
	$	2,140	$	2,137	$	1,118	$	1,118

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Financial Instruments Not Recorded at Fair Value

The Company carries its financial instruments at fair value except for its ~~long-term~~ debt. The carrying amounts and estimated fair values of the Company’s ~~long-term~~ debt are as follows:

June 26, 2021 December 26, 2020
Carrying
Amount Estimated
Fair Value Carrying
Amount Estimated
Fair Value
(In millions)
Long-term debt, net $ 313 $ 351 $ 330 $ 642


	March 26, 2022				December 25, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)

Current portion of long-term debt, net	$	312	$	320	$	312	$	326
Long-term debt, net of current portion	$	1,475	$	1,451	$	1	$	15

The estimated fair value of the Company’s long-term debt is based on Level 2 inputs of quoted prices for the Company’s debt and comparable instruments in inactive markets The estimated fair value of the 2.125% Notes takes into account the current value of the Company’s stock price compared to the initial conversion price of approximately $8.00 per share of common stock.markets.

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 terms.

Financial Instruments Measured at Fair Value on a Non-Recurring Basis

As of March 26, 2022, the Company had non-marketable securities in private companies of $137 million, which were classified as Level 3 assets. The Company’s investments in non-marketable securities of private companies are recorded using a measurement alternative that adjusts the securities to fair value when the Company recognizes an observable price adjustment or an impairment. Such impairment losses or observable price adjustments were not material during the three months ended March 26, 2022. The balance of non-marketable securities in private companies as of March 27, 2021 was not material.

Hedging Transactions and Derivative Financial Instruments

Foreign Currency Forward Contracts Designated as Accounting Hedges

The Company 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 ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was ~~$819~~$1.3 billion and $894 million ~~and $501 million,~~, respectively. The fair value of these contracts was not material as of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020.~~

~~Table of Contents~~25, 2021.

Foreign Currency Forward Contracts Not Designated as Accounting Hedges

The Company also enters into foreign currency 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 not designated as accounting hedges. As of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, the notional ~~values~~value of these outstanding contracts ~~were $132~~was $539 million and ~~$254~~$291 million, respectively. The fair value of these contracts was not material as of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020.~~25, 2021.

~~NOTE 7 – Accumulated Other Comprehensive Income (Loss)~~

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~~The table below summarizes the changes in accumulated other comprehensive income (loss):~~

Three Months Ended Six Months Ended
June 26,
2021 June 27,
2020 June 26,
2021 June 27,
2020
Gains (losses) on cash flow hedges: (In millions)
Beginning balance $ 6 $ (14) $ 17 $ 0
Net unrealized gains (losses) arising during the period 11 5 11 (12)
Net (gains) losses reclassified into income during the period (9) 5 (19) 8
Tax effect (1) 0 (2) 0
Total other comprehensive income (loss) 1 10 (10) (4)
Ending balance $ 7 $ (4) $ 7 $ (4)

NOTE 89 – Earnings Per Share

The following table sets forth the components of basic and diluted earnings per share:

Three Months Ended Six Months Ended
June 26,
2021 June 27,
2020 June 26,
2021 June 27,
2020
(In millions, except per share amounts)
Numerator
Net income for basic earnings per share $ 710 $ 157 $ 1,265 $ 319
Effect of potentially dilutive shares:
        Interest expense related to the 2.125% Notes 0 3 0 7
Net income for diluted earnings per share $ 710 $ 160 $ 1,265 $ 326
Denominator
Basic weighted average shares 1,216 1,174 1,214 1,172
Effect of potentially dilutive shares:
        Employee equity plans and warrants 16 22 17 22
        2.125% Notes 0 31 0 31
Diluted weighted average shares 1,232 1,227 1,231 1,225
Earnings per share:
Basic $ 0.58 $ 0.13 $ 1.04 $ 0.27
Diluted $ 0.58 $ 0.13 $ 1.03 $ 0.27


	Three Months Ended
		March 26, 2022		March 27, 2021
		(In millions, except per share amounts)
Numerator
Net income for basic earnings per share		$	786	$	555



Denominator
Basic weighted average shares		1,393		1,213
Effect of potentially dilutive shares:
Employee equity plans and warrants		17		18

Diluted weighted average shares		1,410		1,231
Earnings per share:
Basic		$	0.56	$	0.46
Diluted		$	0.56	$	0.45

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NOTE 910 – Common Stock and Employee Equity Plans

Common Stock

Shares of common stock outstanding were as follows:


		Three Months Ended		Six Months Ended			Three Months Ended
		June 26, 2021	June 27, 2020	June 26, 2021	June 27, 2020			March 26, 2022	March 27, 2021
		(In millions)						(In millions)
Balance, beginning of period	Balance, beginning of period	1,215	1,171	1,211	1,170	Balance, beginning of period		1,207	1,211
Common stock issued for the acquisition of Xilinx						Common stock issued for the acquisition of Xilinx		429	—
Common stock issued under employee equity plans	Common stock issued under employee equity plans	1	3	2	4	Common stock issued under employee equity plans		1	1
Common stock repurchases for tax withholding on equity awards						Common stock repurchases for tax withholding on equity awards		(1)	—
Issuance of common stock to settle convertible debt	Issuance of common stock to settle convertible debt	0	0	3	0	Issuance of common stock to settle convertible debt		—	3
Repurchase of common stock		(3)	0	(3)	0
Repurchases of common stock						Repurchases of common stock		(16)	—
Balance, end of period	Balance, end of period	1,213	1,174	1,213	1,174	Balance, end of period		1,620	1,215

Stock Repurchase Program

In May 2021, the Company’s Board of Directors approved a stock repurchase program ~~authorizing~~of up to $4 billion of ~~repurchases~~the Company’s common stock (Existing Repurchase Program). In February 2022, the Company’s Board of Directors approved a new stock repurchase program in addition to the ~~Company’s~~Existing Repurchase Program to purchase up to $8 billion of outstanding common stock ~~(the Repurchase Program)~~in the open market (collectively referred to as the “Repurchase Program”). During the three ~~and six~~ months ended ~~June~~March 26, ~~2021,~~2022, the Company repurchased 315.8 million shares of its common stock under the Repurchase Program for ~~a total cash outlay of $256 million.~~$1.9 billion. As of ~~June~~March 26, ~~2021, $3.7~~2022, $8.3 billion remains available for future stock repurchases under ~~this program.~~the Repurchase Program. The stock Repurchase Program does not obligate the Company to acquire any common stock, has no termination date and may be suspended or discontinued at any time.

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Stock-based Compensation

Stock-based compensation expense was recorded in the Condensed Consolidated Statements of Operations as follows:


	Three Months Ended
		March 26, 2022		March 27, 2021
		(In millions)
Cost of sales		$	4	$	1
Research and development		113		55
Marketing, general and administrative		82		29
Total stock-based compensation expense before income taxes		199		85
Income tax benefit		(43)		(13)
Total stock-based compensation expense after income taxes		$	156	$	72

Three Months Ended Six Months Ended
June 26,
2021 June 27,
2020 June 26,
2021 June 27,
2020
(In millions)
Cost of sales $ 1 $ 2 $ 2 $ 4
Research and development 53 37 108 74
Marketing, general and administrative 29 21 58 41
Total stock-based compensation expense before income taxes 83 60 168 119
Income tax benefit (14) 0 (27) 0
Total stock-based compensation expense after income taxes $ 69 $ 60 $ 141 $ 119
The Company recorded $25 million of acquisition-related stock-based compensation expense during the three months ended March 26, 2022 under post-acquisition service conditions.

Xilinx Replacement Awards

In connection with the Merger, the Company issued equity awards as replacement for assumed equity awards to Xilinx employees. The replacement awards include restricted stock units of approximately 12 million shares with a weighted average fair value of $103.35 per share and have terms that are substantially the same as the assumed Xilinx awards. The fair value of replacement awards related to services rendered up to the Acquisition Date was recognized as a component of the total purchase consideration while the remaining fair value of replacement awards attributable to post-combination services will be recognized as stock-based compensation expense over the remaining post-acquisition vesting period.

NOTE 1011 – Income Taxes

The Company recorded an income tax provision of $113 million and ~~$202~~$89 million for the three ~~and six~~ months ended ~~June~~March 26, 2022 and March 27, 2021, ~~respectively,~~ representing effective tax rates of ~~13.7%~~12.6% and 13.8%, respectively. The Company recorded an income tax provision of $4 million and $10 million for the three and six months ended June 27, 2020, respectively, representing effective tax rates of 2.5% and 3.0%, respectively.

The ~~increase in income tax expense and effective~~difference between the U.S. federal statutory tax rate ~~was due to significantly higher income in~~of 21% and the United States in the current period, partially offset by the foreign-derived intangible income benefit, research and development tax credits, and excess tax benefit for stock-based compensation. The lower income tax expense and effective tax rate for the prior year period were due to a full valuation allowance in the United States during 2020, a significant portion of which was released by the Company in the fourth quarter of 2020.

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~~The Company’s~~Company's effective tax rate for the three ~~and six~~ months ended ~~June~~March 26, ~~2021 and the three and six months ended June 27, 2020~~2022 was ~~lower than the United States federal statutory rate~~ primarily due to the geographic mix of income taxed in lower tax ~~benefits recognized~~rate jurisdictions, research credits and the beneficial rate impact from the foreign-derived intangible income tax benefit (FDII), which was partially offset by the U.S. tax on GILTI.

The difference between the U.S. federal statutory tax rate of 21% and the Company's effective tax rate for the three ~~and six~~ months ended ~~June 26,~~March 27, 2021 ~~discussed above, and~~was primarily due to the ~~maintenance of a full valuation allowance during~~excess tax benefits with respect to stock-based compensation and the ~~three and six months ended June 27, 2020.~~beneficial rate impact from the FDII tax benefit.

As of ~~June~~March 26, ~~2021,~~2022, the Company continues to maintain a valuation allowance for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. ~~The~~Certain state and foreign valuation allowance maintained is due to a lack of sufficient sources of taxable income.

During the quarter ended March 26, 2022, the liability for uncertain tax positions increased by $212 million primarily due to the utilization of certain tax attributes that may be subject to additional limitation.

As a result of the acquisition of Xilinx, the Company recorded $4.3 billion of net deferred tax liabilities primarily on the excess of book basis over the tax basis of the acquired intangible assets, including $863 million of GILTI net deferred tax liability. The Company also recorded $147 million of current tax payable as of the Acquisition Date. Additionally, the Company assumed $204 million of liability for uncertain tax positions and $321 million of long-term liability for transition-tax, which is payable over the next three years.

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NOTE 1112 – Segment Reporting

Management, including the Chief Operating Decision Maker (CODM), who is the Company’s Chief Executive Officer, reviews and assesses operating performance using segment net revenue and operating income (loss). These performance measures include the allocation of expenses to the operating segments based on management’s judgment. During the three months ended March 26, 2022, the Company added Xilinx as a separate operating segment, consistent with the revised manner in which the Company’s CODM assesses the company’s financial performance and allocates resources.

The ~~Company has the following 2 reportable segments:~~Company’s three operating segments are:

•the Computing and Graphics (CG) segment, which primarily includes desktop and notebook microprocessors, accelerated processing units that integrate microprocessors and graphics, chipsets, discrete ~~graphics processing units (GPUs),~~GPUs, data center and professional GPUs and development services.

•the Enterprise, Embedded and Semi-Custom (EESC) segment, which primarily includes server and embedded processors, semi-custom SoC products, development services and technology for game consoles.

•the Xilinx segment, which primarily includes FPGAs, adaptive SoC products, and ACAP products.

From time to time, the Company may also sell or license portions of its 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. 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 primarily includes amortization of acquisition-related intangibles, employee stock-based compensation expense and acquisition-related costs.

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


		Three Months Ended				Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020				March 26, 2022		March 27, 2021
		(In millions)										(In millions)
Net revenue:	Net revenue:									Net revenue:
Computing and Graphics	Computing and Graphics	$	2,250	$	1,367	$	4,350	$	2,805	Computing and Graphics		$	2,802	$	2,100
Enterprise, Embedded and Semi-Custom	Enterprise, Embedded and Semi-Custom	1,600		565		2,945		913		Enterprise, Embedded and Semi-Custom		2,526		1,345

Xilinx										Xilinx		559		$	—
Total net revenue	Total net revenue	$	3,850	$	1,932	$	7,295	$	3,718	Total net revenue		$	5,887	$	3,445
Operating income (loss):	Operating income (loss):									Operating income (loss):
Computing and Graphics	Computing and Graphics	$	526	$	200	$	1,011	$	462	Computing and Graphics		$	723	$	485
Enterprise, Embedded and Semi-Custom	Enterprise, Embedded and Semi-Custom	398		33		675		7		Enterprise, Embedded and Semi-Custom		881		277
Xilinx										Xilinx		233		—
All Other (1)	All Other (1)	(93)		(60)		(193)		(119)		All Other (1)		(886)		(100)
Total operating income	Total operating income	$	831	$	173	$	1,493	$	350	Total operating income		$	951	$	662


(1)			For the three ~~and six~~ months ended ~~June~~March 26, 2022, all other operating losses included $479 million of amortization of acquisition-related intangibles, $199 million of stock-based compensation expense and $208 million of acquisition-related costs. For the three months ended March 27, 2021, all other operating losses included ~~$83 million and $168~~$85 million of stock-based compensation expense and ~~$10 million and $25~~$15 million of acquisition-related ~~costs, respectively.~~ ~~For the three and six months ended June 27, 2020, all other operating losses were related to stock-based compensation expense.~~costs.

1622

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NOTE 1213 – Commitments and Contingencies

Commitments

The Company’s purchase commitments primarily include the Company’s obligations to purchase wafers and substrates from third parties and future payments related to certain software and technology licenses and IP licenses. Purchase commitments include obligations made under noncancellable purchase orders and contractual obligations requiring minimum purchases or for which cancellation would lead to significant penalties.

Total future unconditional purchase commitments as of ~~June~~March 26, ~~2021~~2022 were as follows:


Year		(In millions)
Remainder of 2021		$	3,204
2022		1,154
Fiscal Year				Fiscal Year	(In millions)
Remainder of 2022				Remainder of 2022	$	6,463
2023	2023	682		2023	1,868
2024	2024	596		2024	762
2025	2025	103		2025	332
2026 and thereafter		277
2026				2026	179
2027 and thereafter				2027 and thereafter	383
Total unconditional purchase commitments	Total unconditional purchase commitments	$	6,016	Total unconditional purchase commitments	$	9,987

~~In May 2021, the Company entered into an amendment (the “A&R Seventh Amendment”)~~Included above are $479 million of purchase commitments related to the Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. (GF) to extend GF’s capacity commitment and pricing for wafer purchases at the 12 nm and 14 nm technology nodes through December 31, 2024. Specifically, GF agreed to a minimum annual capacity allocation to the Company for years 2022, 2023 and 2024. The A&R Seventh Amendment also removes all prior exclusivity commitments and provides the Company with full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node. Further, the parties agreed to pricing and annual wafer purchase targets for years 2022, 2023 and 2024, and the Company agreed to pre-pay GF certain amounts for those wafers in 2022 and 2023. If the Company does not meet the annual wafer purchase target for anyacquisition of ~~these years, it will be required to pay to GF a portion of the difference between the actual wafer purchases and the wafer purchase target for that year.~~Xilinx.

Contingencies

~~City of Pontiac Police~~Quarterhill Inc. Litigation

On July 2, 2018, three entities named Aquila Innovations, Inc. (Aquila), Collabo Innovations, Inc. (Collabo), and ~~Fire Retirement System Litigation~~

~~On September 29, 2020,~~Polaris Innovations, Ltd. (Polaris), filed separate patent infringement complaints against 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”)Company in the United States District Court for the ~~Northern~~Western 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~~Texas. Aquila alleges that ~~Defendants breached their fiduciary duties, violated Section 14(a)~~the Company infringes two patents (6,239,614 and 6,895,519) relating to power management; Collabo alleges that the Company infringes one patent (7,930,575) related to power management; and Polaris alleges that the Company infringes two patents (6,728,144 and 8,117,526) relating to control or use of dynamic random-access memory, or DRAM. Each of the ~~Exchange Act~~three complaints seeks unspecified monetary damages, interest, fees, expenses, and costs against the Company; Aquila and Collabo also seek enhanced damages. Aquila, Collabo, and Polaris each appear to be related to a patent assertion entity named Quarterhill Inc. (formerly WiLAN Inc.). On May 14, 2020, at the request of ~~1934,~~Polaris, the Court dismissed all claims related to one of the two patents in suite in the Polaris case. On June 10, 2020, the Court granted AMD’s motions to stay the Polaris and ~~were unjustly enriched~~Aquila cases pending the completion of inter partes review (IPR) of each of the patents-in-suit in those cases by ~~misrepresenting~~ the ~~Company’s commitment to diversity, particularly with respect~~Patent Trial and Appeal Board.

On February 22, 2021, February 26, 2021, and March 10, 2021, the Patent Trial and Appeal Board (PTAB) issued final written decisions in IPR invalidating all asserted claims of the remaining Polaris and Aquila patents. On May 10, 2021, Aquila filed a notice of appeal to the ~~composition~~Court of Appeals for the ~~membership~~Federal Circuit for the IPR decision regarding U.S. Patent No. 6,895,519. On April 12, 2022, the Federal Circuit affirmed the PTAB’s decision. On April 30, 2021, Polaris filed a notice of ~~AMD’s Board~~appeal to the Court of ~~Directors~~Appeals for the Federal Circuit for the IPR decision regarding U.S. Patent No. 8,117,526. On May 14, 2021, AMD filed a notice of cross-appeal to the Court of Appeals for the Federal Circuit for the IPR decision regarding U.S. Patent No. 8,117,526. Appellate briefing is completed.

On February 8, 2022, Polaris filed a lawsuit against Xilinx, Inc. alleging infringement of four patents related to memory chips and ~~senior leadership team.~~memory interfaces. On ~~December 18, 2020, Defendants~~February 22, 2022, the Company was served with the complaint. On April 14, 2022, the Company filed a motion to dismiss the ~~Complaint.~~ complaint.

Monterey Research Litigation

On ~~February~~November 15, 2019, Monterey Research, LLC filed a patent infringement complaint against the Company in the United States District Court for the District of Delaware (Case. No. 1:19-cv-02149). Monterey Research alleges that the Company infringes six U.S. patents: 6,534,805 (related to SRAM cell design); 6,629,226 (related to read interface protocols); 6,651,134 (related to memory devices); 6,765,407 (related to programmable digital circuits); 6,961,807 (related to integrated circuits and associated memory systems); and 8,373,455 (related to output buffer circuits). On May 2, 2022, the case was dismissed with prejudice as a result of the parties’ settlement.

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On August 12, 2021, ~~Plaintiff~~Monterey filed ~~an opposition~~two patent infringement complaints in the United States District Court for the Western District of Texas (Case. No. 6:21-cv-00839 and Case. No. 6:21-cv-00840). In the first complaint, Monterey alleges that the Company infringes two patents (8,694,776 and 9,767,303) related to ~~Defendants’ motion~~memory controllers, three patents (8,572,297, 7,609,799, and 7,899,145) related to ~~dismiss,~~circuit designs, and ~~on March 12, 2021, Defendants filed a reply brief in support~~one patent (6,979,640) related to semiconductor processing. In the second complaint, Monterey alleges that the Company infringes one patent (6,680,516) related to semiconductor processing. In all of the ~~motion to dismiss.~~complaints, Monterey Research seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against the Company. On ~~July 1, 2021,~~May 2, 2022, these two cases were dismissed with prejudice as a result of the ~~Court granted Defendants’ motion to dismiss, without prejudice.~~parties’ settlement.

~~Based upon information presently known to management,~~On March 31, 2022, the Company ~~believes that~~entered into an agreement which will provide the ~~potential liability, if any, will~~Company a license to the Monterey Research patents. The agreement did not have a material adverse effect on ~~its~~the Company’s financial condition, cash flows, or results of operations.

Analog Devices Litigation

On December 5, 2019, Analog Devices, Inc. (ADI) filed a lawsuit against Xilinx alleging infringement of eight patents related to switching circuits, comparators, analog to digital convertors, signal conditioners, and switched capacitors. On January 21, 2020, Xilinx filed its answer and counterclaims alleging infringement by ADI of eight patents related to digital to analog converters, serializing data paths, transceivers, networks on chip, termination circuits, and data transmitters. On April 3, 2020, Xilinx filed amended counterclaims.

Between July 17 and December 4, 2020, Xilinx filed nine IPR petitions challenging the patentability of seven ADI asserted patents.Between August 31 and September 15, 2020, ADI filed eight IPR petitions challenging eight Xilinx asserted patents. Between January 5 and March 15, 2021, the USPTO entered decisions granting institution of IPR on six ADI asserted patents. On June 10, 2021, the USPTO entered a decision denying institution of IPR on one ADI asserted patent. Between April 8 and May 7, 2021, the USPTO entered decisions granting institution of IPR on all eight Xilinx asserted patents. On May 8, 2020, Xilinx filed a motion to strike ADI’s affirmative defense of inequitable conduct, which the Court granted on February 9, 2021. On February 22, 2021, the Court issued an order staying the case until the issuance of the USPTO’s Final Written Decision on the last-instituted of the parties’ pending IPRs.

Between January 10 and March 11, 2022, the USPTO issued Final Written Decisions (FWDs) finding all challenged claims unpatentable in two ADI patents; finding some challenged claims unpatentable in three ADI patents and finding no challenged claims unpatentable in one ADI patent. Between April 1 and April 5, 2022, the USPTO issued three FWDs finding some challenged claims unpatentable in three Xilinx patents and finding no challenged claims unpatentable in one Xilinx patent. Between March 15, 2022 and April 11, 2022, ADI and the Company filed notices of appeal to the Court of Appeals for the Federal Circuit regarding adverse IPR decisions.

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. On April 12,December 21, 2021, Future Link Systems LLC filed ~~its answer~~a lawsuit alleging infringement of two patents related to power management. On December 28, 2021, Future Link Systems LLC filed a complaint at the United States International Trade Commission alleging infringement of the same two power management patents. Several of the Company’s customers were also named as respondents.

On March 31, 2022, the Company entered into an agreement which will provide the Company a license to the Future Link Systems patents. The agreement did not have a material adverse effect on the Company’s ~~counterclaims. On June 3, 2021, the Company filed a motion to transfer the case to Austin, Texas.~~financial condition, cash flows, or results of operations.

~~Table of Contents~~

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

Table of Contents.

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 financial position, results of operations, or cash flows.

NOTE 1314 – ~~Pending Acquisition~~Subsequent Events

On ~~October 26, 2020,~~April 3, 2022, the Company entered into ~~an Agreement~~a definitive agreement to acquire Pensando Systems, Inc., for $1.9 billion (Pensando Merger), subject to certain working capital adjustments. The acquisition of Pensando will add a leading distributed services platform to the Company’s high-performance CPU, GPU, FPGA and ~~Plan of Merger (the Merger Agreement), with Thrones Merger Sub, Inc., a wholly-owned subsidiary~~adaptive SoC portfolio, and expand the Company’s ability to offer leadership solutions for cloud, enterprise and edge customers. The closing 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 actual valuation of the 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. Effective as of June 29, 2021, the United Kingdom’s Competition and Markets Authority, and effective as of June 30, 2021, the European Commission issued approvals of the Merger. The completion of the Merger remains subject to other closing conditions, including the receipt of certain approvals and clearances required under the competition laws of certain other foreign jurisdictions. ThePensando Merger is subject to customary closing conditions, including regulatory ~~approval and~~approval. The transaction is currently expected to ~~occur~~close in the second quarter of 2022.

On April 29, 2022, the Company entered into a revolving credit agreement (Revolving Credit Agreement) with Wells Fargo Bank, N.A. as administrative agent and other banks identified therein as lenders. The Revolving Credit Agreement provides for a five-year unsecured revolving credit facility in aggregate principal amount of $3.0 billion. Borrowings under the Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the adjusted Term Secured Overnight Financing Rate (SOFR) (as defined in the Revolving Credit Agreement), in each case, plus an applicable margin that is calculated based on the Company’s credit ratings from time to time and ranges from 0.00% to 0.25% in the case of loans accruing at the alternate base rate, and 0.625% to 1.250% in the case of loans accruing at the adjusted Term. In addition, the Company has agreed to pay to the lenders under the Revolving Credit Agreement certain customary fees, including a commitment fee on the average daily unused portion of the Revolving Credit Commitments (as defined in the Revolving Credit Agreement) which ranges between 0.05% and 0.125% based on the Company’s credit ratings from time to time. The Revolving Credit Agreement contains a sustainability-linked pricing component which provides for interest rate margin and commitment fee reductions or increases by meeting or missing targets related to environmental sustainability, specifically, greenhouse gas emissions. Also, on April 29, 2022, in connection with the ~~end~~entry into the Revolving Credit Agreement, the Company terminated its existing $500 million credit agreement dated as of ~~calendar year 2021.~~June 7, 2019, among the Company, the lenders party thereto and Wells Fargo Bank, National Association (the Revolving Credit Facility). There were no amounts drawn upon the Revolving Credit Facility prior to termination.

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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 condensed consolidated financial statements; demand for AMD’s products; the growth, change and competitive landscape of the markets in which AMD participates; international sales will continue to be a significant portion of total sales in the foreseeable future; that AMD’s cash, cash equivalents and short-term investment balances together with the availability under that certain revolving credit facility (the Revolving Credit ~~Facility)~~Agreement) made available to AMD and certain of its subsidiaries under the Credit Agreement, and our cash flows from operations will be sufficient to fund AMD’s operations including capital expenditures and purchase commitments over the next 12 months; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; AMD’s expectation that based on the information presently known to management, the potential liability related to AMD’s current litigation will not have a material adverse effect on its financial condition, cash flows or results of operations; anticipated ongoing and increased costs related to enhancing and implementing information security controls; all unbilled accounts receivables are expected to be billed and collected within 12 months; revenue allocated to remaining performance obligations that are unsatisfied which will be recognized over the next 12 months; a small number of customers will continue to account for a substantial part of AMD’s revenue in the future; and the expected timing of the closing of AMD’s acquisition of ~~Xilinx,~~Pensando Systems Inc. ~~is currently expected to close by the end of 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” and the “Financial Condition” section set forth ~~below,~~in “Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, 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.

References in this Quarterly Report on Form 10-Q to “AMD,” “we,” “us,” “management,” “our” or the “Company” mean Advanced Micro Devices, Inc. and our consolidated subsidiaries.

AMD, the AMD Arrow logo, ~~ATI, and the ATI logo, Athlon,~~AMD Instinct, AMD RDNA, EPYC, Radeon, Ryzen, Threadripper, Versal, Xilinx and combinations thereof are trademarks of Advanced Micro Devices, Inc. Microsoft and Xbox One are trademarks or registered trademarks of Microsoft Corporation in the United States and other jurisdictions. PlayStation is a registered trademark or trademark of Sony Interactive Entertainment, Inc. 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 ~~26, 2020~~25, 2021 and December ~~28, 2019,~~26, 2020, and for each of the three years for the period ended December ~~26, 2020~~25, 2021 as filed in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021.

26 ~~2020.~~

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Overview and Recent Developments

We are a global semiconductor ~~company. Our products include~~ company primarily offering:

•x86 microprocessors, ~~(CPUs),~~as standalone devices or as incorporated into an accelerated processing ~~units which integrate microprocessors~~unit (APU), chipsets, discrete and ~~graphics (APUs), discrete~~integrated graphics processing units (GPUs), data center and professional GPUs, and development services; and

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

From time to time, we may also sell or license portions of our intellectual property ~~portfolio.~~(IP) portfolio

On February 14, 2022, we completed the acquisition of Xilinx, Inc. (Xilinx) for a total purchase consideration of $48.8 billion. Xilinx expands our product portfolio to include adaptable hardware platforms that enable hardware acceleration and rapid innovation across a variety of technologies. With the acquisition of Xilinx, we now offer Field Programmable Gate Arrays (FPGAs), adaptive SoC products, and Adaptive Compute Acceleration Platform (ACAP) products.

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 three ~~and six~~ months ended ~~June~~March 26, ~~2021~~2022 compared to the prior year period, an analysis of changes in our financial condition and a discussion of our contractual obligations.

Net revenue for the three months ended ~~June~~March 26, ~~2021~~2022 was ~~$3.9~~$5.9 billion, a ~~99%~~71% increase compared to the prior year period. The increase was due to a ~~65%~~33% increase in Computing and Graphics net revenue, ~~and a 183%~~an 88% increase in Enterprise, Embedded and Semi-Custom net ~~revenue.~~revenue and $559 million of net revenue from Xilinx for the period from February 14, 2022, the date of acquisition, to March 26, 2022. The increase in Computing and Graphics segment net revenue was primarily due to higher sales of our Ryzen™ ~~processors~~ and Radeon™ ~~products.~~processors. The increase in

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Enterprise, Embedded and Semi-Custom net revenue was primarily due to higher EPYC™ processor revenue, semi-custom revenue and ~~EPYC™ server processor revenue.~~embedded product sales.

Gross margin in the first quarter of 2022 improved compared to the first quarter of 2021. Gross margin for the three months ended ~~June~~March 26, ~~2021~~2022 was 48% compared to gross margin of ~~44%~~46% for the prior year period. The increase in gross margin was primarily driven by ~~a richer mix~~higher server processor revenue and the inclusion of ~~sales, including high-end Ryzen, Radeon~~Xilinx high margin revenue, partially offset by amortization of intangible assets and ~~EPYC processor sales.~~acquisition-related costs.

Our operating income for the three months ended ~~June~~March 26, ~~2021~~2022 was ~~$831~~$951 million compared to operating income of ~~$173~~$662 million for the prior year period. The increase in operating income was primarily driven by strong revenue growth and higher gross margin which more than offset higher operating ~~expenses.~~expenses, amortization of intangible assets and acquisition-related costs.

Our net income for the three months ended ~~June~~March 26, ~~2021~~2022 was ~~$710~~$786 million compared to net income of ~~$157~~$555 million for the prior year period. The increase in net income was primarily driven by higher operating income, partially offset by a higher income tax provision.

~~Cash,~~As of March 26, 2022, our cash, cash equivalents and short-term investments ~~as of June 26, 2021~~ were ~~$3.8~~$6.5 billion, compared to ~~$2.3~~$3.6 billion as of December 25, 2021. The increase in cash, cash equivalents and short-term investments was primarily driven by the $2.4 billion of cash and $1.6 billion of short-term investments acquired from Xilinx on February 14, 2022. As of March 26, ~~2020. The aggregate~~2022, the principal amount of our outstanding debt obligations was $1.8 billion, which includes $1.5 billion of debt assumed from Xilinx, compared to $313 ~~million and $338~~ million as of ~~June 26, 2021 and~~ December ~~26, 2020, respectively.~~25, 2021.

During the ~~second~~first quarter of ~~2021,~~2022, we furthered our product roadmap by introducing a number of new products. We introduced our 3rd Gen AMD EPYC processors with AMD 3D V-Cache technology for leadership performance in technical computing workloads. We announced the availability of the AMD Instinct™ ecosystem, the new AMD Instinct MI210 accelerator and ROCm™ 5 software. Together the AMD Instinct and ROCm ecosystem offers exascale-class technology to a broad base of HPC and AI customers, designed to address the demand for compute-accelerated data center workloads and reduce the time to insights and discoveries.

We expanded our lineup of high-performance AMD Ryzen desktop processors with the introduction of the AMD Ryzen 7 5800X3D processor, the first AMD Ryzen processor to feature AMD 3D V-Cache technology to improve gaming performance. In addition, we announced the availability of 6 new “Zen 3” and “Zen 2” mainstream AMD

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Ryzen desktop processors. For workstations, we introduced the new AMD ~~Radeon RX 6000M Series Mobile Graphics~~Ryzen Threadripper PRO 5000 WX-Series workstation processors designed for ~~high-performance gaming laptops and we announced~~professionals to run demanding workstation applications.

We launched the new AMD Radeon PRO GPUs in the first quarter of 2022 with introduction of the AMD ~~Advantage™ Design Framework to deliver best-in-class gaming experiences. AMD Advantage systems combine~~Radeon PRO W6600X GPU for Mac Pro and the AMD Radeon ~~RX 6000M Series Mobile Graphics,~~PRO W6400 graphics card built on AMD ~~Radeon Software and AMD Ryzen 5000 Series Mobile Processors with AMD smart technologies.~~ RDNA™ 2 architecture.

We also introduced ~~our AMD FidelityFX Super Resolution software for game developers~~the 7nm Xilinx Versal™ ACAP VCK5000 development card designed to ~~help deliver~~offer leadership AI inference performance. In March 2022, we began to ship the Versal HBM series to customers, the industry’s first adaptable platform with integrated HBM2e. The Versal HBM series combines fast memory, modern security features and adaptable compute in a ~~high-quality, high-resolution gaming experience. In June 2021,~~single platform.

During the first quarter of 2022, we announced our AMD Radeon PRO W6000 series workstation graphics for professional users who have demanding architectural design workloads, ultra-high resolution media projects, complex design and engineering simulations and advanced image and video editing applications.

~~Amid~~experienced limited disruptions due to the COVID-19 ~~pandemic, we~~pandemic. We continue to ~~focus~~monitor our operations and public health measures implemented by governmental authorities in response to the pandemic. We are focused on the health and safety of our ~~employees. We monitor~~employees and ~~take~~are taking safety measures to protect our employees who are in the office and support those employees who work from ~~home so that they can be productive. Our offices remain open~~home.

In May 2021, our Board of Directors approved a stock repurchase program of up to ~~enable critical on-site business functions in accordance with local government guidelines. The majority~~$4 billion of our employees in China and Singapore work on site subject to local government health measures and in July 2021, our US employees began to return to the office in accordance with health and safety protocols.common stock (Existing Repurchase Program). In the other geographies in which we operate, the majority of our employees continued to work from home during the second 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 second quarter of 2021.

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 Xilinx’s stockholders voted to approve their respective proposals relating to the pending acquisition of Xilinx by AMD. Effective as of June 29, 2021, the United Kingdom’s Competition and Markets Authority, and effective as of June 30, 2021, the European Commission issued approvals of the Merger. The completion of the Merger remains subject to other closing conditions, including the receipt of certain approvals and clearances required under the competition laws of certain other foreign jurisdictions. 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.

I~~n May 2021, we announced that~~February 2022, our Board of Directors approved a new stock repurchase program in addition to our Existing Repurchase Program to purchase up to $4$8 billion of our outstanding common stock in the open ~~market.~~market (collectively referred to as the “Repurchase Program”). During the three ~~and six~~ months ended ~~June~~March 26, ~~2021,~~2022, we repurchased 315.8 million shares of our common stock for $1.9 billion under the stock Repurchase ~~Program, for a total cash outlay of $256 million.~~Program. As of ~~June~~March 26, ~~2021, $3.7~~2022, $8.3 billion remains available for future stock repurchases under ~~this program.~~the Repurchase Program. The ~~repurchase program~~stock Repurchase Program does not obligate us to acquire any common stock, has no termination date and may be suspended or discontinued at any time.

Also in May 2021, we entered into an amendment (the A&R Seventh Amendment) to the Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. (GF) to extend GF’s capacity commitment and pricing for wafers purchased at the 12 nm and 14 nm technology nodes by us through December 31, 2024. Specifically, GF agreed to a minimum annual capacity allocation to the Company for years 2022, 2023 and 2024. The A&R Seventh Amendment also removes all prior exclusivity commitments and provides us with full flexibility to contract with any wafer foundry with

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respect to all products manufactured at any technology node. Further, the parties agreed to pricing and annual wafer purchase targets for years 2022, 2023 and 2024, and we agreed to pre-pay GF certain amounts for those wafers in 2022 and 2023. If we do not meet the annual wafer purchase target for any of these years, we will be required to pay to GF a portion of the difference between the actual wafer purchases and the wafer purchase target for that year.

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, goodwill, intangibles and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual results have historically been reasonably consistent with management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions. As a result of our acquisition of Xilinx, we believe the following critical accounting estimates, in addition to those disclosed as our critical accounting estimates in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, are the most significant to the presentation of our financial statements and require the most difficult, subjective and complex judgments.

Except as noted below, management believes there have been no significant changes for the three months ended March 26, 2022 to the items that we disclosed as our critical accounting estimates in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended December 25, 2021.

Business Combination. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology and trade names, based on expected future revenue growth rates and margins, future changes in technology, useful lives, and discount rates.

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Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the Acquisition Date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Impairment of Long-Lived and Intangible Assets. Long-lived and intangible assets to be held and used are reviewed for impairment if indicators of potential impairment exist. Impairment indicators are reviewed on a quarterly basis. Assets are grouped and evaluated for impairment at the lowest level of identifiable cash flows.

When indicators of impairment exist and assets are held for use, we estimate future undiscounted cash flows attributable to the related assets groups. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the asset group or based on appraisals. Factors affecting impairment of assets held for use include the ability of the specific assets to generate separately identifiable positive cash flows.

When assets are removed from operations and held for sale, we estimate impairment losses as the excess of the carrying value of the assets over their fair value. Market conditions are amongst the factors affecting impairment of assets held for sale. Changes in any of these factors could necessitate impairment recognition in future periods for assets held for use or assets held for sale.

Long-lived assets such as property and equipment and intangible assets are considered non-financial assets and are measured at fair value when indicators of impairment exist.

Global Intangible Low-Taxed Income (GILTI). In 2022, we elected to change our method of accounting for the United States GILTI tax from recording the tax impact in the period it is incurred to recognizing deferred taxes for temporary tax basis differences expected to reverse as GILTI tax in future years. The change is considered preferable based on our facts and circumstances as it provides better and more timely information of expected future income tax liabilities arising from temporary tax differences primarily associated with the Xilinx acquisition. As a result of the acquisition, we recorded $27.3 billion of identified intangible assets (refer to Note 4 - Business Combination), of which $16.9 billion are related to foreign operations which will be amortized to income from operations over the assets’ estimated useful lives, but for which we will not receive a tax deduction under GILTI. Recognition of deferred taxes for the future GILTI impact of this amount is considered preferable as it provides better information about our potential future tax liabilities based on current transactions. This accounting policy change resulted in the recording of $863 million of deferred tax liabilities in connection with the Xilinx acquisition as disclosed in Note 11 - Income Taxes. In addition, for the three months ended March 26, 2022, it resulted in a decrease in income tax provision with a corresponding increase to net income of $71 million, and an increase in basic and diluted earnings per share of $0.05, as compared to the computation under the previous accounting policy. This accounting policy change had no material impact on our historical consolidated financial statements.

Results of Operations

We report our financial performance based on the following ~~two~~three reportable segments: ~~the~~ Computing and Graphics, ~~segment and the~~ Enterprise, Embedded and Semi-Custom, ~~segment.~~

and Xilinx. During the three months ended March 26, 2022, we added Xilinx as a separate operating segment, consistent with the revised manner in which our CODM assesses our financial performance and allocates resources. Additional information on our reportable segments is contained in Note ~~11—~~12—Segment Reporting of the Notes to Condensed Consolidated Financial Statements (Part I, Financial Information of this Form 10-Q).

Our operating results tend to vary seasonally. Historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact this trend.

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


		Three Months Ended				Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020				March 26, 2022		March 27, 2021
		(In millions)										(In millions)
Net revenue:	Net revenue:									Net revenue:
Computing and Graphics	Computing and Graphics	$	2,250	$	1,367	$	4,350	$	2,805	Computing and Graphics		$	2,802	$	2,100
Enterprise, Embedded and Semi-Custom	Enterprise, Embedded and Semi-Custom	1,600		565		2,945		913		Enterprise, Embedded and Semi-Custom		2,526		1,345
Xilinx										Xilinx		559		—

Total net revenue	Total net revenue	$	3,850	$	1,932	$	7,295	$	3,718	Total net revenue		$	5,887	$	3,445
Operating income (loss):	Operating income (loss):									Operating income (loss):
Computing and Graphics	Computing and Graphics	$	526	$	200	$	1,011	$	462	Computing and Graphics		$	723	$	485
Enterprise, Embedded and Semi-Custom	Enterprise, Embedded and Semi-Custom	398		33		675		7		Enterprise, Embedded and Semi-Custom		881		277
Xilinx										Xilinx		233		—
All Other	All Other	(93)		(60)		(193)		(119)		All Other		(886)		(100)
Total operating income	Total operating income	$	831	$	173	$	1,493	$	350	Total operating income		$	951	$	662

Computing and Graphics

Computing and Graphics net revenue of ~~$2.3~~$2.8 billion for the three months ended ~~June~~March 26, ~~2021~~2022 increased by ~~65%~~33%, compared to net revenue of ~~$1.4~~$2.1 billion for the prior year period, primarily as a result of a ~~5% increase in unit shipments and a 58%~~42% increase in average selling ~~price. Computing and Graphics net revenue of $4.4 billion for the six months ended June 26, 2021 increased~~price, partially offset by ~~55%, compared to net revenue of $2.8 billion for the prior year period, primarily as~~ a ~~result of a 9% increase~~7% decrease in unit ~~shipments and a 44% increase in average selling price. The increase in unit shipments for both periods was primarily due to higher demand for our Ryzen processors.~~shipments. The increase in average selling price ~~for both periods~~ was primarily driven by a richer mix of ~~client~~Ryzen and ~~graphics processors.~~Radeon products. The lower unit shipments were primarily driven by a strategic focus on premium and higher end products in a tight supply environment.

Computing and Graphics operating income was ~~$526~~$723 million for the three months ended ~~June~~March 26, ~~2021,~~2022, compared to operating income of ~~$200 million for the prior year period. Computing and Graphics operating income was $1.0 billion for the six months ended June 26, 2021, compared to operating income of $462~~$485 million for the prior year period. The increase in operating income ~~for both periods~~ was primarily ~~due to~~driven by higher revenue, ~~which more than~~partially offset by higher operating expenses. Operating expenses increased for the reasons outlined under “Expenses” below.

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Enterprise, Embedded and Semi-Custom

Enterprise, Embedded and Semi-Custom net revenue of ~~$1.6~~$2.5 billion for the three months ended ~~June~~March 26, ~~2021~~2022 increased by ~~183%~~88%, compared to net revenue of ~~$565 million for the prior year period. Enterprise, Embedded and Semi-Custom net revenue of $2.9~~$1.3 billion ~~for the six months ended June 26, 2021 increased by 223%, compared to net revenue of $913 million~~ for the prior year period. The increase ~~for both periods~~ was ~~primarily~~ driven by higher EPYC processor revenue, semi-custom revenue and ~~higher sales of our EPYC server processors.~~embedded product sales.

Enterprise, Embedded and Semi-Custom operating income was ~~$398~~$881 million for the three months ended ~~June~~March 26, ~~2021~~2022 compared to operating income of ~~$33 million for the prior year period. Enterprise, Embedded and Semi-Custom operating income was $675 million for the six months ended June 26, 2021 compared to operating income of $7~~$277 million for the prior year period. The increase in operating income ~~for both periods~~ was primarily due to the higher revenue and higher licensing gain in the segment which more than offset higher operating expenses. Operating expenses increased for the reasons outlined under “Expenses” below.

Xilinx

Xilinx net revenue was $559 million for the three months ended March 26, 2022. Xilinx operating income was $233 million for the three months ended March 26, 2022.

All Other

All Other operating loss of ~~$93~~$886 million for the three months ended ~~June~~March 26, ~~2021~~2022 consisted of ~~$83~~$479 million of amortization of acquisition-related intangibles, $199 million of stock-based compensation expense, and ~~$10~~$208 million of acquisition-related ~~costs. All Other operating loss~~costs, which primarily include transaction costs, amortization of ~~$60 million for~~Xilinx inventory fair value step-up adjustment, depreciation related to the ~~prior year period consisted~~Xilinx fixed assets fair value step-up adjustment, and certain compensation charges related to the acquisition of ~~stock-based compensation expense.~~Xilinx.

All Other operating loss of ~~$193~~$100 million for the ~~six~~three months ended ~~June 26,~~March 27, 2021 consisted of ~~$168~~$85 million of stock-based compensation expense and ~~$25~~$15 million of acquisition-related costs. ~~All Other operating loss~~

Table of ~~$119 million for the prior year period consisted of stock-based compensation expense.~~Contents

International Sales

International sales as a percentage of net revenue were ~~74%~~69% and ~~79%~~76% for the three months ended ~~June~~March 26, ~~2021~~2022 and ~~June~~March 27, ~~2020, respectively. International sales as a percentage of net revenue were 75% and 81% for the six months ended June 26,~~ 2021, ~~and June 27, 2020,~~ respectively. 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.

Comparison of Gross Margin, Expenses, Licensing Gain, Interest Expense, Other Expense and Income Taxes

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

Three Months Ended Six Months Ended
June 26,
2021 June 27,
2020 June 26,
2021 June 27,
2020
(In millions except for percentages)
Net revenue $ 3,850 $ 1,932 $ 7,295 $ 3,718
Cost of sales 2,020 1,084 3,878 2,052
Gross profit 1,830 848 3,417 1,666
Gross margin 48 % 44 % 47 % 45 %
Research and development 659 460 1,269 902
Marketing, general and administrative 341 215 660 414
Licensing gain (1) — (5) —
Interest expense (10) (14) (19) (27)
Other income (expense), net — 1 (11) 5
Income tax provision 113 4 202 10
Equity income in investee 2 1 4 1

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	Three Months Ended
		March 26, 2022			March 27, 2021
		(In millions except for percentages)
Net revenue		$	5,887		$	3,445
Cost of sales		2,883			1,858
Amortization of acquisition-related intangibles		186			—
Gross profit		2,818			1,587
Gross margin		48		%	46		%
Research and development		1,060			610
Marketing, general and administrative		597			319

Amortization of acquisition-related intangibles		293			—
Licensing gain		(83)			(4)
Interest expense		(13)			(9)
Other expense, net		(42)			(11)
Income tax provision		113			89
Equity income in investee		3			2

Gross Margin

Gross margin was 48% and ~~44%~~46% for the three months ended ~~June~~March 26, ~~2021~~2022 and ~~June~~March 27, ~~2020, respectively. Gross margin was 47% and 45% for the six months ended June 26,~~ 2021, ~~and June 27, 2020,~~ respectively. The increase ~~for both periods~~ was primarily driven by ~~a richer mix~~higher server processor revenue and the inclusion of ~~sales, including high-end Ryzen, Radeon~~Xilinx high margin revenue, partially offset by amortization of intangible assets and ~~EPYC processor sales.~~acquisition-related costs.

Expenses

Research and Development Expenses

Research and development expenses of ~~$659 million~~$1.1 billion for the three months ended ~~June~~March 26, ~~2021~~2022 increased by ~~$199~~$450 million, or ~~43%~~74%, compared to ~~$460 million for the prior year period. Research and development expenses of $1,269 million for the six months ended June 26, 2021 increased by $367 million, or 41%, compared to $902~~$610 million for the prior year period. The increase ~~for both periods~~ was primarily driven by an increase in ~~product development costs in both~~headcount, the ~~Computing~~addition of Xilinx and ~~Graphics and Enterprise, Embedded and Semi-Custom segments due to~~ an increase in ~~headcount and higher annual employee incentives driven by our improved financial performance.~~product development costs.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses of ~~$341~~$597 million for the three months ended ~~June~~March 26, ~~2021~~2022 increased by ~~$126~~$278 million, or ~~59%~~87%, compared to ~~$215 million for the prior year period. Marketing, general and administrative expenses of $660 million for the six months ended June 26, 2021 increased by $246 million, or 59%, compared to $414~~$319 million for the prior year period. The increase ~~for both periods~~ was ~~primarily~~ due to the addition of Xilinx, an increase in go-to-market activities, ~~in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments, and~~ an increase in headcount, and higher ~~annual employee incentives driven by our improved financial performance. In addition, in connection with our pending acquisition~~acquisition-related costs.

Amortization of ~~Xilinx, Inc., we incurred $10~~Acquisition-Related Intangibles

Cost of sales and operating expense includes $186 million and ~~$25~~$293 million, respectively, of ~~acquisition-related costs for the three and six months ended June 26, 2021, respectively.~~amortization expense from intangible assets acquired from Xilinx.

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Licensing Gain

During the three ~~and six~~ months ended ~~June~~March 26, 2022, we recognized $83 million of licensing gain from a milestone achievement and royalty income and during the three months ended March 27, 2021, we recognized $1$4 million ~~and $5 million, respectively,~~ of licensing gain from royalty income, both associated with ~~the~~ licensed ~~IP to the THATIC JV.~~IP.

Interest Expense

Interest expense for the three months ended ~~June~~March 26, ~~2021~~2022 was ~~$10~~$13 million compared to ~~$14 million for the prior year period. Interest expense for the six months ended June 26, 2021 was $19 million compared to $27~~$9 million for the prior year period. The ~~decrease for both periods~~increase was primarily due to ~~lower debt balances as a result of conversions by~~interest expense from the ~~holders of our 2.125% Convertible Senior Notes due 2026.~~Assumed Xilinx Notes.

Other Income (Expense), Net

Other ~~income,~~expense, net was $42 million for the three months ended ~~June~~March 26, ~~2021, was zero~~2022, compared to $1$11 million of Other ~~income, net for the prior year period. Other~~ expense, ~~net was $11 million for the six months ended June 26, 2021, compared to $5 million of Other income,~~ net for the prior year period. The change was primarily due to ana decrease of $44 million in the fair value of equity investments in the first quarter of 2022, partially offset by lower impairment ~~charge~~on investment of $8 million ~~associated with an equity investment~~ and ~~a loss on~~losses from the conversion of our convertible debt ~~instruments~~ of $6 million in the ~~current period.~~first quarter of 2021.

Income Tax Provision

We recorded an income tax provision of $113 million and $4provision of $89 million for the three months ended ~~June~~March 26, ~~2021~~2022 and ~~June~~March 27, ~~2020, respectively,~~2021, representing effective tax rates of ~~13.7%~~12.6% and ~~2.5%~~13.8%, respectively.

The ~~increase in income tax expense and effective~~difference between the U.S. federal statutory tax rate ~~in the current year period was due to significantly higher income in the United States, partially offset by the foreign-derived intangible income benefit, research~~of 21% and ~~development tax credits, and excess tax benefit for stock-based compensation. The lower income tax expense and~~our effective tax rate for the ~~prior year period~~three months ended March 26, 2022 was primarily due to ~~a full valuation allowance~~the geographic mix of income taxed in lower tax rate jurisdictions, research credits and the ~~United States during 2020, a significant portion of~~beneficial rate impact from the foreign-derived intangible income tax benefit (FDII), which was ~~released~~partially offset by ~~us in~~ the ~~fourth quarter~~U.S. tax on GILTI.

The difference between the U.S. federal statutory tax rate of ~~2020.~~21% and our effective tax rate for the three months ended March 27, 2021 was primarily due to the excess tax benefits with respect to stock-based compensation and the beneficial rate impact from the FDII tax benefit.

As of ~~June~~March 26, ~~2021,~~2022, we ~~continue~~continued to maintain a valuation allowance for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to limitations under Internal Revenue Code Section

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382 or 383, separate return loss year rules, or dual consolidated loss rules. ~~The~~Certain state and foreign valuation allowance maintained is due to lack of sufficient sources of taxable income.

As a result of the acquisition of Xilinx, we recorded $4.3 billion of net deferred tax liabilities primarily on the excess of book basis over the tax basis of the acquired intangible assets. We also recorded $147 million of current tax payable as of the Acquisition Date.Additionally, we assumed $204 million of liability for uncertain tax positions and $321 million of long-term liability for transition tax, which is payable over the next three years.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of ~~June~~March 26, ~~2021,~~2022, our cash, cash equivalents and short-term investments were ~~$3.8~~$6.5 billion, compared to ~~$2.3~~$3.6 billion as of December ~~26, 2020.~~25, 2021. The increase in cash, cash equivalents and short-term investments was primarily driven by the $2.4 billion of cash and $1.6 billion of short-term investments acquired from Xilinx on February 14, 2022. The percentage of cash, cash equivalents and short-term investments held domestically were ~~93%~~79% and ~~94%~~91% as of ~~June~~March 26, ~~2021~~2022 and December ~~26, 2020,~~25, 2021, respectively.

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Our operating, investing and financing activities for the ~~six~~three months ended ~~June~~March 26, ~~2021~~2022 compared to the prior year period are as described below:


		Six Months Ended					Three Months Ended
		June 26, 2021		June 27, 2020			March 26, 2022		March 27, 2021
		(In millions)					(In millions)
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	1,850	$	178	Operating activities	$	995	$	898
Investing activities	Investing activities	(603)		(109)		Investing activities	3,158		(722)
Financing activities	Financing activities	(219)		240		Financing activities	(1,948)		(8)
Net increase (decrease) in cash, cash equivalents, and restricted cash		$	1,028	$	309
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	$	2,205	$	168

~~Our aggregate~~As of March 26, 2022, our principal debt obligations were $1.8 billion, which includes $1.5 billion of debt assumed from Xilinx, compared to $313 ~~million and $338~~ million as of December 25, 2021.

We believe our cash, cash equivalents, ~~and~~ short-term investments and cash flows from operations along with our Revolving Credit ~~Facility~~Agreement will be sufficient to fund ~~current and long-term~~ operations, including capital expenditures and purchase commitments, over the next 12 months and beyond. We believe we will be able to access the capital markets should we require additional funds. However, we cannot assure that such funds will be available on favorable terms, or at all.

Operating Activities

Our working capital cash inflows and outflows from operations are primarily cash collections from our customers, payments for inventory purchases and payments for employee-related expenditures.

Net cash provided by operating activities was ~~$1.9~~$1.0 billion in the ~~six~~three months ended ~~June~~March 26, ~~2021,~~2022, primarily due to our net income of ~~$1.3 billion,~~$786 million, adjusted for non-cash and non-operating charges of ~~$562~~$631 million and net cash ~~inflows~~outflows of ~~$23~~$422 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a ~~$346~~$672 million increase in accounts ~~payable due to an~~receivable driven primarily by higher revenue in the first fiscal quarter of 2022 and a $260 million increase in ~~inventory purchases,~~prepaid expenses and other assets driven primarily by prepayments under long-term supply agreements, partially offset by a ~~$90~~$412 million increase in accrued liabilities and other driven primarily by higher customer-related ~~accruals, partially offset by a $366 million increase in inventories driven by an increase in product build in support of customer demand.~~accruals.

Net cash ~~used in~~provided by operating activities was $~~178~~898 million ~~for~~in the ~~six~~three months ended ~~June~~March 27, ~~2020,~~2021, primarily due to our net income of $~~319~~555 million, adjusted for non-cash and non-operating charges of $~~321~~286 million and net cash ~~outflows~~ inflows of~~of $462~~ $57 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a ~~$342~~$466 million increase in accounts payable due to timing of payments to our suppliers, partially offset by a $112 million increase in accounts receivable driven primarily by higher revenue in the first quarter of 2021 compared to the fourth quarter of 2021, and a $254 million increase in inventories driven by an increase in product build in support of customer ~~demand~~demand.

~~, and a $201 million decrease in accounts payable due to timing~~Table of ~~payments to our suppliers.~~Contents

Investing Activities

Net cash provided by investing activities was $3.2 billion for the three months ended March 26, 2022 which primarily consisted of $2.4 billion of cash received from Xilinx in the acquisition and $964 million of proceeds from the maturity of short-term investments, partially offset by purchases of short-term investments of $100 million and purchases of property and equipment of $71 million.

Net cash used in investing activities was ~~$603~~$722 million for the ~~six~~three months ended ~~June 26,~~March 27, 2021 which primarily consisted of ~~$1.1 billion~~$858 million for purchases of short-term investments and ~~$130~~$66 million for purchases of property and equipment, partially offset by ~~$655~~$200 million for maturities of short-term investments.

Net cash used in investing activities was $109 million for the six months ended June 27, 2020 which primarily consisted of $146 million for purchases of property and equipment and $55 million for purchases of short-term investments, partially offset by $92 million for maturities of short-term investments.

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Financing Activities

Net cash used in financing activities was ~~$219 million~~$1.9 billion for the ~~six~~three months ended ~~June~~March 26, ~~2021,~~2022, which primarily consisted of common stock repurchases of ~~$256 million~~$1.9 billion and repurchases for tax withholding on employee equity plans of ~~$14~~$35 million, partially offset by a cash inflow of ~~$51~~$2 million from issuance of common stock under our employee equity plans.

Net cash ~~provided by~~used in financing activities was ~~$240~~$8 million for the ~~six~~three months ended ~~June~~March 27, ~~2020,~~2021, which primarily consisted of ~~proceeds~~common stock repurchases for tax withholding on employee equity plans of $10 million, partially offset by a cash inflow of $2 million from ~~short-term borrowing~~exercises of ~~$200 million and from the issuance of common~~ stock options under our employee equity ~~plans of $42 million.~~

~~Contractual Obligations~~

~~The following table summarizes our consolidated principal contractual cash obligations, as of June 26, 2021, and is supplemented by the discussion following the table:~~

Payment due by period
(In millions) Total Remainder of 2021 2022 2023 2024 2025 2026 and thereafter
Term debt (1)
$ 313 $ — $ 312 $ — $ — $ — $ 1
Aggregate interest obligation (2)
38 12 24 1 1 — —
Other long-term liabilities (3)
127 19 66 20 10 9 3
Operating leases 344 34 69 62 53 44 82
Purchase obligations (4)
5,889 3,185 1,088 662 586 94 274
Total contractual obligations (5)
$ 6,711 $ 3,250 $ 1,559 $ 745 $ 650 $ 147 $ 360


~~(1)~~						~~See Note 5 – Debt and Revolving Credit Facility of the Notes to Condensed Consolidated Financial Statements for additional information.~~

~~(2)~~						~~Represents interest obligations, payable in cash, for our outstanding debt.~~

~~(3)~~						~~Amounts primarily represent future fixed and non-cancellable cash payments associated with software technology and licenses and IP licenses, including the payments due within the next 12 months.~~

~~(4)~~						Represents 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 cancellable upon notice and without significant penalties are not included in the amounts above.

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

~~Critical Accounting Estimates~~

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts in our condensed consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, goodwill and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual results have historically been reasonably consistent with management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

Management believes there have been no significant changes for the three and six months ended June 26, 2021 to the items that we disclosed as our critical accounting estimates in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended December 26, 2020.plans.

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ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to “Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the fiscal year ended December ~~26, 2020.~~25, 2021.

There have not been any material changes in interest rate risk, default risk or foreign exchange risk since December ~~26, 2020.~~25, 2021.


ITEM 4.			CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports made under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of ~~June~~March 26, ~~2021,~~2022, the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

~~There~~Other than the acquisition of Xilinx, there was no change in our internal controls over financial reporting for the three months ended ~~June~~March 26, ~~2021~~2022 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. We are currently in the process of integrating the Xilinx operations, control processes and information systems into our systems and control environment. We believe that we have taken the necessary steps to monitor and maintain appropriate internal controls over financial reporting during this integration.

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PART II. OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

For a discussion of our legal proceedings, refer to Note ~~12—~~13—Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q).


ITEM 1A.			RISK FACTORS

The risks and uncertainties described below are not the only ones we face. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In addition, you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously.

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Economic and Strategic Risks

•Intel Corporation’s dominance of the microprocessor market and its aggressive business practices may limit our ability to compete effectively on a level playing field.

•Global economic and market uncertainty may adversely impact our business and operating results.

•The loss of a significant customer may have a material adverse effect on us.

•The ongoing novel coronavirus (COVID-19) pandemic could materially adversely affect our business, financial condition and results of operations.

•The markets in which our products are sold are highly competitive.

•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.

•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.

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

•If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, we may lose a competitive advantage and incur significant expenses.

•Unfavorable currency exchange rate fluctuations could adversely affect us.

Operational and Technology Risks

•We rely on third parties to manufacture our products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, our business could be materially adversely affected.

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

•Failure to achieve expected manufacturing yields for our products could negatively impact our financial results.

•The success of our business is dependent upon our ability to introduce products on a timely basis with features and performance levels that provide value to our customers while supporting and coinciding with significant industry transitions.

•Our revenue from our semi-custom ~~SoC~~System-on-Chip (SoC) products is dependent upon our semi-custom SoC products being incorporated into customers’ products and the success of those products.

•Our products may be subject to security vulnerabilities that could have a material adverse effect on us.

•IT outages, data loss, data breaches and cyber-attacks could compromise our intellectual property or other sensitive information, be costly to remediate or cause significant damage to our business, reputation and operations.

•We may encounter difficulties in upgrading and operating our new enterprise resource planning (ERP) system, which could materially adversely affect us.

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

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

•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.~~business and products.

•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 reliance on third-party distributors and add-in-board (AIB) partners subjects us to certain risks.

•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.

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

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

•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.

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

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

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.

•If we cannot realize our deferred tax assets, our results of operations could be adversely affected.

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

•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.

•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.

~~Xilinx~~ Merger, Acquisition and ~~Acquisition~~Integration Risks

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

•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.

•~~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.~~

•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.

Liquidity and Capital Resources Risks

•The agreements governing our notes, our guarantees of Xilinx’s 2.95% and 2.375% Notes (Assumed Xilinx Notes), and our Revolving Credit ~~Facility~~Agreement impose restrictions on us that may adversely affect our ability to operate our business.

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

•We may not be able to generate sufficient cash to meet our working capital requirements. Also, if we cannot generate sufficient revenue and operating cash flow, we may face a cash shortfall and be unable to make all of our planned investments in research and development or other strategic investments.

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 may incur future impairments of goodwill and technology license purchases.

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

•Our stock price is subject to volatility.

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

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For a more complete discussion of the material risks facing our business, see below.

Economic and Strategic Risks

Intel Corporation’s dominance of the microprocessor market and its aggressive business practices may limit our ability to compete effectively on a level playing field.

Intel Corporation (Intel) has been the market share leader for microprocessors for many years. Intel’s market share, margins and significant financial resources enable it to market its products aggressively, to target our customers and our channel partners with special incentives and to influence customers who do business with us. These aggressive activities have in the past resulted in lower unit sales and a lower average selling price for many of our products and adversely affected our margins and profitability.

Intel exerts substantial influence over computer manufacturers and their channels of distribution through various brand and other marketing programs. As a result of Intel’s position in the microprocessor market, Intel has been able to control x86 microprocessor and computer system standards and benchmarks and to dictate the type of products the microprocessor market requires of us. Intel also dominates the computer system platform, which includes core logic chipsets, graphics chips, networking devices (wired and wireless), non-volatile storage and other components necessary to assemble a computer system. Additionally, Intel is able to drive de facto standards and specifications for x86 microprocessors that could cause us and other companies to have delayed access to such standards.

As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s business practices, including rebating and allocation strategies and pricing actions, designed to limit our market share and margins; product mix and introduction schedules; product bundling, marketing and merchandising strategies; exclusivity payments to its current and potential customers, retailers and channel partners; de facto control over industry standards, and heavy influence on PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system (BIOS) suppliers and software companies as well as the graphics interface for Intel platforms; and marketing and advertising expenditures in support of positioning the Intel brand over the brand of its original equipment manufacturer (OEM) customers and retailers.

Intel has substantially greater financial resources than we do and accordingly spends substantially greater amounts on marketing and research and development than we do. We expect Intel to continue to invest heavily in marketing, research and development, new manufacturing facilities and other technology companies. To the extent Intel manufactures a significantly larger portion of its microprocessor products using more advanced process technologies, or introduces competitive new products into the market before we do, we may be more vulnerable to Intel’s aggressive marketing and pricing strategies for microprocessor products.

Intel could also take actions that place our discrete graphics processing units (GPUs) at a competitive disadvantage, including giving one or more of our competitors in the graphics market, such as ~~Nvidia~~NVIDIA Corporation, preferential access to its proprietary graphics interface or other useful ~~information.~~information or restricting access to external companies. Also, Intel has ~~announced that it is developing~~developed and released their own high-end discrete ~~GPUs.~~GPUs, including gaming focused discrete GPUs and announced plans for further releases in 2022. With our recent acquisition of Xilinx, we now compete with Intel in field programmable gate arrays (FPGAs) and adaptive SoC products. Intel’s position in the microprocessor ~~market~~ and integrated graphics chipset ~~market,~~markets, its introduction of competitive new products, its existing relationships with top-tier OEMs, and its aggressive marketing and pricing strategies could result in lower unit sales and lower average selling prices for our products, which could have a material adverse effect on us.

Global economic and market uncertainty may adversely impact our business and operating results.

Uncertain global economic conditions have in the past and may in the future adversely impact our business, including, without limitation, a slowdown in the Chinese economy, one of the largest global markets for desktop and notebook PCs. Uncertainty in the worldwide economic environment or other unfavorable changes in economic conditions, such as inflation, interest rates or recession, may negatively impact consumer confidence and spending causing our customers to postpone purchases. In addition, during challenging economic times, our current or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products. Additionally, if our customers are not successful in generating sufficient revenue or are unable to secure financing, they may not be able to pay, or may delay payment of, accounts receivable that they owe us. The risk related to our customers potentially defaulting on or delaying payments to us is increased because we expect that a small number of customers will continue to account for a substantial part of our revenue. Any inability of our current or potential future customers to pay us for our products may adversely affect our earnings

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~~our earnings~~ and cash flow. Moreover, our key suppliers may reduce their output or become insolvent, thereby adversely impacting our ability to manufacture our products. In addition, uncertain economic conditions may make it more difficult for us to raise funds through borrowings or private or public sales of debt or equity securities.

The loss of a significant customer may have a material adverse effect on us.

We depend on a small number of customers for a substantial portion of our business and we expect that a small number of customers will continue to account for a significant part of our revenue in the future. If one of our key customers decides to stop buying our products, or if one of these customers materially reduces its operations or its demand for our products, our business would be materially adversely affected.

The ongoing novel coronavirus (COVID-19) pandemic could materially adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic has caused government authorities to implement numerous public health measures, including vaccination and testing requirements and recordkeeping, quarantines, business closures, travel bans, and restrictions related to social gathering and mobility, to contain the virus. Various state and federal rules are issued and updated on an ongoing basis, at times in conflict and/or with minimal notice. We have experienced and expect to continue to experience disruptions to our business as these measures have, and will continue to have, an effect on our business operations and practices.

While ~~many of~~ our ~~offices around the world remain open, either because the pandemic has been contained in that location or~~employees gradually return to ~~enable critical on-site business functions in compliance with government guidelines,~~office, we continue to monitor our operations and public health measures implemented by governmental authorities in response to COVID-19. Although some public health measures have ~~some~~eased, our efforts to reopen our offices safely may not be successful and could expose our employees ~~work from home until further notice.~~to health risks. It is uncertain as to when ~~the~~all health measures put in place to attempt to contain the spread of COVID-19 will be ~~lifted or whether there will be additional measures put into place.~~lifted. If ~~COVID-19 continues to spread or if~~ there are further waves of the virus, health measures may be reimplemented and we may need to further limit operations or modify our business practices in a manner that may impact our business. If our employees are not able to perform their job duties due to self-isolation, quarantine, unavailability of COVID 19 tests, travel restrictions or illness, a reluctance or refusal to vaccinate, or are unable to perform them as efficiently at home for an extended period of time, we may not be able to meet our product schedules, roadmaps and customer commitments and we may experience an overall lower productivity of our workforce. We continue to monitor our operations and public health measures implemented by governmental authorities in response to COVID-19. Although some public health measures have eased and a small portion of our employees are at work in certain offices, our efforts to reopen our offices safely may not be successful and could expose our employees to health risks. Even when COVID-19 health measures ~~regarding mobility~~ are lifted or modified, our employees’ ability or willingness to return to work may delay the return of our full workforce and the resumption of normal business operations.

COVID-19 continues to impact the global supply chain causing disruptions to service providers, logistics and the flow and availability of supplies and products. We have experienced some disruptions to parts of our supply chain as a result of ~~COVID-19. We may~~COVID-19 and we adjust our supply chain requirements based on changing customer needs and demands. We have taken efforts to maintain a stable supply of materials to meet our production requirements through long-term purchase commitments and prepayment arrangements with some of our suppliers. If we are unable to procure a stable supply of equipment, materials or substrates at a reasonable cost, it could have a material adverse effect on our business. We may also assess our product schedules and roadmaps to make any adjustments that may be necessary to support remote working requirements and address the geographic and market demand shifts caused by COVID-19. If the supply of our products to customers is delayed, reduced or canceled due to disruptions encountered by our third-party ~~manufacturing,~~manufacturers, back-end manufacturers, warehouses, partners, suppliers or vendors as a result of facility closures, border and port restrictions or closures, ~~and~~transportation delays, labor shortages or workforce mobility limitations, ~~put on their workforces,~~ it could have a material adverse effect on our business.

COVID-19 has in the short-term and may in the long-term adversely impact the global economy, creating uncertainty and potentially leading to an economic downturn. This could negatively impact consumer confidence and spending causing our customers to postpone or cancel purchases, or delay paying or default on payment of outstanding amounts due to us, which may have a material adverse effect on our business. Even in times of robust demand for our products, as we are currently experiencing across our business, the worldwide economic environment remains uncertain due to COVID-19 and such demand may not be sustainable over the longer term.

COVID-19 has also led to a disruption and volatility in the global capital and financial markets. While we believe our cash, cash equivalents and short-term investments along with our Revolving Credit ~~Facility~~Agreement and cash flows from operations will be sufficient to fund operations, including capital expenditures, and purchase commitments, over the next 12 months and beyond, to the extent we may require additional funding to finance our operations and capital expenditures and such funding may not be available to us as a result of contracting capital and financial markets resulting from COVID-19, it may have an adverse effect on our business.

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The extent to which COVID-19 impacts our business and financial results will depend on future developments, which are unpredictable and highly uncertain, including the continued spread, duration and severity of the outbreak, the appearances of new variants of COVID-19, the breadth and duration of business disruptions related to COVID-19, the availability and distribution of effective treatments and vaccines, and public health measures and actions taken throughout the world to contain COVID-19. The prolonged effect of COVID-19 could materially adversely impact our business, financial condition and results of operations.

The markets in which our products are sold are highly competitive.

The markets in which our products are sold are very competitive and delivering the latest and best products to market on a timely basis is critical to achieving revenue growth. We believe that the main factors that determine our product competitiveness are timely product introductions, product quality, product features and capabilities (including enabling state-of-the-art visual and virtual reality experiences), energy efficiency (including power consumption and battery life), reliability, processor clock speed, performance, size (or form factor), selling price, cost, adherence to industry standards (and the creation of open industry standards), level of integration, software and hardware compatibility, ease of use and functionality of software design tools, completeness of applicable software solutions, security and stability, brand recognition and availability.

We expect that competition will continue to be intense due to rapid technological changes, frequent product introductions by our competitors or new competitors of products that may provide better performance/experience or that may include additional features that render our products comparatively less competitive. We may also face aggressive pricing by competitors, especially during challenging economic times. In addition, our competitors have significant marketing and sales resources which could increase the competitive environment in a declining market, leading to lower prices and margins. Some competitors may have greater access or rights to complementary technologies, including interface, processor and memory technical information. For instance, with our APU products and other competing solutions with integrated graphics, we believe that demand for additional discrete graphics chips and cards may decrease in the future due to improvements in the quality and performance of integrated graphics. If competitors introduce competitive new products into the market before us, demand for our products could be adversely impacted and our business could be adversely affected. In addition, Intel is seeking to expand its position in integrated graphics for the PC market with high-end discrete graphics solutions for a broad range of computing segments, which may negatively impact our ability to compete in these computing segments. We also face competition from companies that use competing computing architectures and platforms like the ARM architecture. Increased adoption of ARM-based semiconductor designs could lead to further growth and development of the ARM ecosystem.

In addition, we are entering markets with current and new competitors who may be able to adapt more quickly to customer requirements and emerging technologies. We cannot assure you that we will be able to compete successfully against current or new competitors who may have stronger positions in these new markets or superior ability to anticipate customer requirements and emerging industry trends. Furthermore, we may face competition from some of our customers who internally develop the same products as us. We may face delays or disruptions in research and development efforts, or we may be required to invest significantly greater resources in research and development than anticipated. Also, the semiconductor industry has seen several mergers and acquisitions over the last number of years. Further consolidation could adversely impact our business due to there being fewer suppliers, customers and partners in the industry.

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 in the past experienced 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®5, Microsoft® XboxTM Series S and Microsoft® XboxTM Series X game console systems and next generation consoles for Sony and Microsoft, worldwide. In addition, the GPU market has at times seen elevated demand due to the application of GPU products to cryptocurrency mining. For example, our GPU revenue has been affected in part by the volatility of the cryptocurrency mining market. Demand for cryptocurrency has changed and is likely to continue to change quickly. For example, ~~China and~~ South Korea ~~have~~has instituted restrictions on cryptocurrency trading and the valuations of the

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currencies and China has banned such activities, and corresponding interest in mining of such currencies are subject to significant fluctuations. Alternatively, countries have created and may continue to create ~~or in the case of China are creating,~~ their own cryptocurrencies or equivalents that could also impact interest in mining. If we are unable to manage the risks related to the volatility of the cryptocurrency mining market, our GPU business could be materially adversely affected.

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. Global economic uncertainty and weakness have in the past 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.

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

The profile of our sales may be weighted differently during the year. 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, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact these trends. Many of the factors that create and affect quarterly and seasonal trends are beyond our control.

If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, 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 protect our intellectual property. However, we cannot assure you that we will be able to adequately protect our technology or other intellectual property from third-party infringement or from misappropriation in the United States and abroad. Any patent licensed by us or issued to us could be challenged, invalidated, expire, or circumvented or rights granted thereunder may not provide a competitive advantage to us. Also, due to measures to slow down the ~~outbreak~~spread of COVID-19, various patent offices and courts have been adversely impacted and there is a potential for delay or disruptions that might affect certain of our patent rights.

Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent 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.

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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.

Operational and Technology Risks

We rely on third parties to manufacture our products, and if they are unable to do so on a timely basis in sufficient quantities and using competitive technologies, our business could be materially adversely affected.

We utilize third-party wafer foundries to fabricate the silicon wafers for all of our products. We rely on Taiwan Semiconductor Manufacturing Company Limited (TSMC) for the production of all wafers for ~~our~~microprocessor and GPU products at 7 nanometer (nm) ~~products,~~or smaller nodes, and we rely primarily on GLOBALFOUNDRIES Inc. (GF) for wafers for microprocessor and GPU products manufactured at process nodes larger than 7 nm. We also utilize TSMC, United Microelectronics Corporation (UMC) and Samsung Electronics Co., Ltd. for our integrated circuits (IC) in the form of programmable logic devices. We also rely on third-party manufacturers to assemble, test, mark and pack (ATMP) our products. Our third party package assembly partners are responsible for packaging technology used to fabricate our products. It is important to have reliable relationships with all of these third-party manufacturing suppliers to ensure adequate product supply to respond to customer demand.

We cannot guarantee that these manufacturers or our other third-party manufacturing suppliers will be able to meet our near-term or long-term manufacturing requirements. If we experience supply constraints from our third-party manufacturing suppliers, we may be required to allocate the affected products amongst our customers, which could have a material adverse effect on our relationships with these customers and on our financial condition. In addition, if we are unable to meet customer demand due to fluctuating or late supply from our manufacturing suppliers, it could result in lost sales and have a material adverse effect on our business. For example, if TSMC is not able to manufacture wafers for our microprocessor and GPU products at 7 nm or smaller nodes and our newest IC products in sufficient quantities to meet customer demand, it could have a material adverse effect on our business.

We do not have long-term commitment contracts with some of our third-party manufacturing suppliers. We obtain some of these manufacturing services on a purchase order basis and these manufacturers are not required to provide us with any specified minimum quantity of product beyond the quantities in an existing purchase order. Accordingly, we depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices. The manufacturers we use also fabricate wafers and ATMP products for other companies, including certain of our competitors. They could choose to prioritize capacity for other customers, increase the prices that they charge us on short notice, require prepayments, or reduce or eliminate deliveries to us, which could have a material adverse effect on our business.

Other risks associated with our dependence on third-party manufacturers include limited control over delivery schedules, ~~and~~yield, cycle times, quality assurance, price increases, lack of capacity in periods of excess demand, misappropriation of our intellectual property, dependence on several subcontractors, and limited ability to manage inventory and parts. Moreover, if any of our third-party manufacturers suffer any damage to facilities, lose benefits under material agreements, experience power outages, lack sufficient capacity to manufacture our products, encounter financial difficulties, are unable to secure necessary raw materials from their suppliers, suffer any other disruption or reduction in efficiency, or experience uncertain social economic or political circumstances or conditions, we may encounter supply delays or disruptions. If we are unable to secure sufficient or reliable supplies of products, our ability to meet customer demand may be adversely affected and this could materially affect our business.

If we transition the production of some of our products to new manufacturers, we may experience delayed product introductions, lower yields or poorer performance of our products. If we experience problems with product quality or

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are unable to secure sufficient capacity from a particular third-party manufacturer, or if we for other reasons cease utilizing one of those ~~suppliers,~~manufacturers, we may be unable to secure an alternative supply for any specific product in a short time frame. We could experience significant delays in the shipment of our products if we are required to find alternative third-party manufacturers, which could have a material adverse effect on our business.

We are a party to a wafer supply agreement (WSA) with GF that governs the terms by which we purchase products manufactured by GF and this agreement is in place ~~until 2024.~~through 2025. In May 2021, we entered into an amendment ~~(the “A&R Seventh Amendment”)~~ to the WSA, ~~that modifies certain~~and in December 2021, we further amended these terms ~~applicable to wafer purchases at~~(the Amendment). Under the ~~12 nm and 14 nm technology nodes by us.~~Amendment, GF ~~agreed to~~will provide a minimum annual capacity allocation to us for years 2022 ~~2023~~through 2025 and 2024. The A&R Seventh Amendment also removes all prior exclusivity commitments and provides us with full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node. Further, the parties agreed to pricing and newAMD has corresponding annual wafer purchase ~~targets for years 2022, 2023 and 2024, and we agreed to~~

~~pre-pay GF certain amounts for those wafers in 2022 and 2023.~~targets. If we do not meet the annual wafer purchase target for any of these years, we will be required to pay to GF a portion of the difference between the actual wafer purchases and the wafer purchase target for that year. AMD and GF also have agreed to wafer pricing through 2025, and AMD is obligated to pre-pay GF certain amounts for those wafers in 2022 and 2023. The Amendment no longer includes any exclusivity commitments and provides us with full flexibility to contract with any wafer foundry with respect to all products manufactured at any technology node. If our actual wafer requirements are less than the number of wafers required to meet the applicable annual wafer purchase target, we could have excess inventory or higher inventory unit costs, both of which may adversely impact our gross margin and our results of operations. WeIf GF fails to meet its minimum annual capacity allocation obligations, we could experience significant delays in the shipment of our products, ~~if we are required to find alternative third-party manufacturers,~~ which could have a material adverse effect on our business.

We are party to two ATMP joint ventures (collectively, the ATMP JVs) with affiliates of Tongfu Microelectronics Co., Ltd. The majority of our ATMP services are provided by the ATMP JVs and there is no guarantee that the ATMP 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.

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

We may purchase equipment, materials and substrates for use by our back-end manufacturing service providers 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. If we are unable to procure a stable supply of equipment, materials or substrates on an ongoing basis and at reasonable costs to meet our production requirements, we could experience a shortage in equipment, materials or substrate supply or an increase in production costs, which could have a material adverse effect on our business. We have long-term purchase commitments and prepayment arrangements with some of our ~~substrate suppliers.~~vendors. If the delivery of such supply is delayed or does not occur for any reason, it could materially impact our ability to procure and process the required volume of ~~substrates and~~supply to meet customer demand. Conversely, a decrease in customer demand could result in excess ~~substrate~~ inventory and an increase in our production ~~costs.~~costs, particularly since we have prepayment arrangements with certain vendors. 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.

Failure to achieve expected manufacturing yields for our products could negatively impact our financial results.

Semiconductor manufacturing yields are a result of ~~both~~ product design, process technology and ~~process~~packaging technology, which is typically proprietary to the manufacturer, and low yields can result from design failures, packaging

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technology failures process technology failures or a combination of ~~both.~~these. Our third-party ~~foundries~~manufacturers are responsible for the process technologies used to fabricate silicon wafers. If our third-party ~~foundries~~manufacturers experience manufacturing inefficiencies or encounter disruptions, errors or difficulties during production, we may fail to achieve acceptable yields or experience product delivery delays. We cannot be certain that our third-party ~~foundries~~manufacturers will be able to develop, obtain or successfully implement leading-edge process or packaging technologies needed to manufacture future generations of our products profitably or on a timely basis or that our competitors will not develop new technologies, products or processes earlier. Moreover, during periods when ~~foundries~~our third party manufacturers are implementing new process or packaging technologies, their manufacturing facilities may not be fully productive. A substantial delay in the technology transitions to smaller process technologies could have a material adverse effect on us, particularly if our competitors transition to more cost effective technologies before us. For example, we are presently focusing our 7 nm and lower product microprocessor and GPU portfolio on TSMC’s ~~7 nm process.~~processes. If TSMC is not able to manufacture wafers for our products at 7 nm ~~products~~or smaller nodes in sufficient quantities to meet customer demand, it could have a material adverse effect on our business.

Moreover, we rely on TSMC, UMC and our other foundries to produce wafers with competitive performance attributes for our IC products. Therefore, the foundries, particularly TSMC which manufactures our newest IC products, must be able to transition to advanced manufacturing process technologies and increased wafer sizes, produce wafers at acceptable yields and deliver them in a timely manner.

Any decrease in manufacturing yields could result in an increase in per unit costs, which would adversely impact our gross margin and/or force us to allocate our reduced product supply amongst our customers, which could harm our relationships and reputation with our customers and materially adversely affect our business.

The success of our business is dependent upon our ability to introduce products on a timely basis with features and performance levels that provide value to our customers while supporting and coinciding with significant industry transitions.

Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements that provide value to our customers. Our ability to develop, qualify and distribute, and have manufactured, new products and related technologies to meet evolving industry requirements, at prices acceptable to our customers and on a timely basis, are significant factors in determining our competitiveness in our target markets. As consumers have new product feature preferences or have different requirements than those consumers in the PC market, PC sales could be negatively impacted, which could adversely impact our business. Our product roadmap includes our next-generation AMD Ryzen™, AMD Radeon™, and AMD EPYC™ processors ~~using 7 nm process technology.~~and FPGAs. We cannot assure you that our efforts to execute our product roadmap will result in innovative products and technologies that provide value to our customers. If we fail to or are delayed in developing, qualifying or shipping new products or technologies that provide value to our customers and address these new trends or if we fail to predict which new form factors consumers will adopt and adjust our business accordingly, we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our products. Although we make substantial investments in research and development, we cannot be certain that we will be able to develop, obtain or successfully implement new products and technologies on a timely basis or that they will be well-received by our customers. Moreover, our investments in new products and technologies involve certain risks and uncertainties and could disrupt our ongoing business. New investments may not generate sufficient revenue, may incur unanticipated liabilities and may divert our limited resources and distract management from our current operations. We cannot be certain that our ongoing investments in new products and technologies will be successful, will meet our expectations and will not adversely affect our reputation, financial condition and operating results.

Delays in developing, qualifying or shipping new products can also cause us to miss our customers’ product design windows or, in some cases, breach contractual obligations or cause us to pay penalties. If our customers do not include our products in the initial design of their computer systems or products, they will typically not use our products in their systems or products until at least the next design configuration. The process of being qualified for inclusion in a customer’s system or product can be lengthy and could cause us to further miss a cycle in the demand of end-users, which also could result in a loss of market share and harm our business. We also depend on the success and timing of our customers’ platform launches. If our customers delay their product launches or if our customers do not effectively market their platforms with our products, it could result in a delay in bringing our products to market and cause us to miss a cycle in the demand of end-users, which could materially adversely affect our business. In addition, market demand requires that products incorporate new features and performance standards on an industry-wide basis. Over the life of a specific product, the sale price is typically reduced over time. The introduction of new products and enhancements to existing products is necessary to maintain the overall corporate average selling price. If we are unable to introduce new products with sufficiently high sale prices or to

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increase unit sales volumes capable of offsetting the reductions in the sale prices of existing products over time, our business could be materially adversely affected.

Our revenue from our semi-custom SoC products is dependent upon our semi-custom SoC products being incorporated into customers’ products and the success of those products.

The revenue that we receive from our semi-custom SoC products is in the form of non-recurring engineering fees charged to third parties for design and development services and revenue received in connection with sales of our semi-custom SoC products to these third parties. As a result, our ability to generate revenue from our semi-custom products depends on our ability to secure customers for our semi-custom design pipeline, our customers’ desire to pursue the project and our semi-custom SoC products being incorporated into those customers’ products. Any revenue from sales of our semi-custom SoC products is directly related to sales of the third-party’s products and reflective of their success in the market. Moreover, we have no control over the marketing efforts of these third parties, and we cannot make any assurances that sales of their products will be successful in current or future years. Consequently, the semi-custom SoC product revenue expected by us may not be fully realized and our

operating results may be adversely affected.

Our products may be subject to security vulnerabilities that could have a material adverse effect on us.

The products that we sell are complex and have been and may in the future be subject to security vulnerabilities that could result in, among other things, the loss, corruption, theft or misuse of confidential data or system performance issues. Our efforts to prevent and address security vulnerabilities may decrease performance, be only partially effective or not successful at all. We may depend on vendors to create mitigations to their technology that we incorporate into our products and they may delay or decline to make such mitigations. We may also depend on third parties, such as customers and end users, to deploy our mitigations alone or as part of their own mitigations, and they may delay, decline or modify the implementation of such mitigations. Our relationships with our customers could be adversely affected as some of our customers may stop purchasing our products, reduce or delay future purchases of our products, or use competing products. Any of these actions by our customers could adversely affect our revenue. We have and may in the future be subject to claims and litigation related to security vulnerabilities. Actual or perceived security vulnerabilities of our products may subject us to adverse publicity, damage to our brand and reputation, and could materially harm our business or financial results.

IT outages, data loss, data breaches and cyber-attacks could compromise our intellectual property or other sensitive information, be costly to remediate or cause significant damage to our business, reputation and operations.

In the ordinary course of our business, we maintain sensitive data on our information technology (IT) assets, and also may maintain sensitive information on our business partners’ and third-party providers’ IT assets, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners. The White House, SEC and other regulators have also increased their focus on companies’ cybersecurity vulnerabilities and risks. Maintaining the security of this information is important to our business and reputation. ~~We believe that companies~~Companies like AMD have been increasingly subject to a wide variety of security incidents, cyber-attacks, hacking and phishing attacks, business and system disruption attacks, and other attempts to gain unauthorized access. The increased prevalence of work-from-home arrangements at AMD and our providers has presented additional operational risks and cybersecurity ~~risks~~attack vectors to our IT systems. These threats can come from a variety of sources, all ranging in sophistication from an individual hacker or insider threat to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Cyber threats may come into our network through malicious code that is added to widely available open-source software or security vulnerabilities that are being used by attackers prior to mitigations being put in place, such as zero day attacks. Cyber-attacks have become increasingly more prevalent and much harder to detect, defend against or prevent. 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. It also may not be possible to determine the root cause of such incidents or mitigate quick enough to stop an attack. 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 or personally identifiable 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

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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.

We also maintain confidential and personally identifiable information about our workers and consumers. The confidentiality and integrity of our worker and consumer data is important to our business and our workers and consumers have a high expectation that we adequately protect their personal information. In addition, many governments have enacted laws around personally identifiable information, such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act, and failure to comply or a breach of personally identifiable information could result in sanctions or other actions by the governments or litigation by other entities.

We anticipate ongoing and increasing costs related to: enhancing and implementing information security controls, including costs related to upgrading application, computer, and network security components; training workers to maintain and monitor our security controls; investigating, responding to and remediating any data security breach, and addressing ~~the~~any related litigation; mitigating reputational harm; and ~~compliance~~complying with external ~~regulations, such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act.~~regulations.

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~~We also provide sensitive information to vendors, customers and contractors. 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 and sensitive information may be improperly accessed, used or disclosed.

A breach of data privacy may 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, IT outages, data

loss and data breaches could materially adversely affect our financial condition, our competitive position and operating results.

We may encounter difficulties in upgrading and operating our new enterprise resource planning system, which could materially adversely affect us.

We are currently upgrading to our enterprise resource planning (ERP) system to help us manage our operations and financial reporting. The adoption of a new ERP system is a major undertaking and poses several challenges, both financially and from a management and personnel perspective. Costs and risks inherent in the conversion to our upgraded and new system may include disruption business continuity, maintaining effective internal controls, administrative and technical problems, interruptions or delays in sales processes, expenditure overruns, and data migration issues. If we do not properly address or mitigate these issues it could result in increased costs and the diversion of management’s attention and resources, negatively impacting our operating results and ability to effectively manage our business. Moreover, once our ERP system is upgraded, it may not operate as we expect it to and cause disruption to our operations. There are no assurances that our new ERP system will be successfully implemented and the failure to do so could have a material adverse effect on our business.

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.

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. Our customers may also experience a shortage of, or delay in receiving certain

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components to build their products, which in turn may affect the demand for or the timing of our products. For instance, our OEMs have and continue to experience industry-wide challenges securing matched component sets to build their products.

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.

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 and 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 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.~~business and products.

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 we use to design, support and sell, and our customers utilize to support and/or use our ~~microprocessor, GPU and APU~~product offerings. We also rely on 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 cease or reduce their design, manufacture or production of current or future products that are based on, utilized in, or support our 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 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 AIB partners to offer our competitors’ products. We are dependent on our distributors and 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 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

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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 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~~less than 12 months older than the manufacturing date. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. Our agreements with AIB partners protect their inventory of our products against price reductions. 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 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.

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.

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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, 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, personal injury, 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, 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, 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.

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 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.

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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. Recently, the United States and other countries and coalitions have issued sanctions and revisions to export control and other regulations against Russia, Belarus or the DNR or LNR regions of Ukraine, due to the conflict in the Ukraine. 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.

Our FPGAs and related technologies are subject to Export Administration Regulations (EAR), which are administered by the U.S. Department of Commerce. In addition, we may, from time to time, receive technical data from third parties that is subject to the International Traffic and Arms Regulations (ITAR), which are administered by the U.S. Department of State. EAR and ITAR govern the export and re-export of these FPGAs, the transfer of related technologies, whether in the U.S. or abroad, and the provision of services. We are required to maintain an internal compliance program and security infrastructure to meet EAR and ITAR requirements. An inability to obtain the required export licenses, or to predict when they will be granted, increases the difficulties of forecasting shipments. In addition, security or compliance program failures that could result in penalties or a loss of export privileges, as well as stringent licensing restrictions that may make our products less attractive to overseas customers, could have a material adverse effect on our business, financial condition and/or operating results.

If we cannot realize our 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~~and exposure to greater-than-anticipated income tax liabilities as a result of changes in tax ~~regulation changes.~~rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits, any of which could affect our effective tax rates, financial condition, and results of operations

We are a U.S.-based multinational company subject to income tax, indirect tax or other tax claims byin multiple U.S. and foreign 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 law are issued or applied. Any changes to tax laws could have a material adverse effect on our tax obligations and effective tax rate. Our income tax obligations could be affected by many factors, including, but not limited to, changes to our corporate operating structure, intercompany arrangements, and tax planning strategies.

Our income tax expense is computed based on tax rates at the time of the respective financial period. Our future effective tax rates, financial condition and results from operations could be unfavorably affected by changes in the

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tax rates in jurisdictions where our income is earned, by changes in the tax rules and regulations or the interpretation of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets.

In addition, we are subject to examinations of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the current examinations. There can be no assurance that the final determination of any of these examinations will not have an adverse effect on our effective tax rates, financial condition, and results of operations.

In the ordinary course of our business, there are many transactions and calculations where the ultimate income tax, indirect tax, or other tax determination is uncertain. Although we believe our tax estimates are reasonable, we cannot assure that the final determination of any tax audits ~~and~~or litigation will not be 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 cash, tax provisions and net income in the period or periods for which that determination is 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,~~actions, as described in Note 1213 of our condensed consolidated financial ~~statements,~~statements. For example, 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, including those described in Note 12 of our condensed consolidated financial statements.~~claims. 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. It is possible that if a claim is successfully asserted against us, ~~including the claims 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.

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

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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. We could also be held liable for any and all consequences arising out of exposure to hazardous materials used, stored, released, disposed of by us or located at, under or emanating from our former facilities or other environmental or natural resource damage. While we have budgeted for foreseeable associated expenditures, we cannot assure you that future environmental legal requirements will not become more stringent or costly in the future. Therefore, we cannot assure you that our costs of complying with current and future environmental and health and safety laws, and our liabilities arising from past and future releases of, or exposure to, hazardous substances will not have a material adverse effect on 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 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~~Customers are increasingly seeking information about the source of minerals used in our supply chain ~~is complex,~~beyond those addressed in laws and regulations. Given the complexity of mineral supply chains, 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 be certified as “conflict free.” If we cannot satisfy these customers, they may choose a competitor’s products.

~~The United States federal government has issued new policies for federal procurement~~Customers, governments and authorities are increasingly focused on ~~eradicating~~ the ~~practice~~risk of forced labor ~~and human trafficking.~~in supply chains that may increase the cost of our compliance program. 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 previously 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 Responsible Business Alliance~~ have also issued expectations to eliminate these practices that may impact us. While we have a ~~policy~~Human Rights 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 product.

~~Xilinx~~

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Merger, Acquisition and ~~Acquisition~~Integration 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,~~February 14, 2022, we ~~along with a direct wholly-owned subsidiary~~completed our acquisition of ~~ours, entered into an Agreement and Plan of Merger (the Merger Agreement) with Xilinx, Inc. (Xilinx), whereby~~Xilinx. While we ~~agreed to acquire Xilinx (the Merger). We entered into the Merger Agreement with the belief that~~believe the Merger will result in certain benefits, including certain operational synergies and cost efficiencies, and drive product ~~innovations. Achieving~~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;~~integration; 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~~integrating and upgrading 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

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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~~our tangible, definite-lived intangible or indefinite-lived intangible

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

~~The~~We account for certain acquisitions, including 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, including those from Xilinx at their respective fair values at the ~~date of completion of the Merger.~~Acquisition Date. 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~~we recorded significant goodwill and other intangible assets on ~~its~~our consolidated balance sheet.

Indefinite-lived intangible assets, including goodwill, ~~will be~~is 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~~we determine that tangible or intangible assets, including goodwill, are impaired, ~~the combined company~~we 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~~our 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~~our financial position and results of operations.

Liquidity and Capital Resources Risks

The agreements governing our notes, our guarantees of the Assumed Xilinx Notes, and our Revolving Credit ~~Facility~~Agreement impose restrictions on us that may adversely affect our ability to operate our business.

The indenture governing our 7.50% Senior Notes due August 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,~~Additionally, in connection with the Merger, we entered into supplemental indentures for the Assumed Xilinx Notes pursuant to which all obligations of Xilinx under the Assumed Xilinx Notes are unconditionally guaranteed on a senior unsecured basis by us. The indentures governing the Assumed Xilinx Notes also contain various covenants which limit our ability to, among other things create certain liens on principal property or the capital stock of certain subsidiaries, enter into certain sale and leaseback transactions with respect to principal property, and consolidate or merge with, or convey, transfer or lease all or substantially all our assets, taken as a whole, to another person.

On April 29, 2022, we entered into a revolving credit agreement (Revolving Credit Agreement) with Wells Fargo Bank, N.A. as administrative agent and other banks identified therein as lenders. The Revolving Credit Agreement provides for a five-year unsecured revolving credit facility in the aggregate principal amount of $3.0 billion. Also, on April 29, 2022 and in connection with the entry into the Revolving Credit ~~Facility’s~~Agreement, we terminated our $500 million revolving credit agreement ~~(Credit Agreement) restricts our ability to make cash payments on the notes to the extent that (i) on the date~~dated as 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.June 7, 2019.

Our Revolving Credit ~~Facility~~Agreement also contains various covenants which limit our ability to, among other things, incur ~~additional indebtedness~~liens; and ~~liens, make certain investments,~~consolidate or 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~~sell our assets as an entirety or ~~certain borrowed money prior to its due date and enter into any non-arm’s-length transaction with~~substantially as an ~~affiliate~~entirety (in each case, except for certain customary exceptions).

~~The~~ In addition, our Revolving Credit Agreement requires us to maintain a minimum consolidated interest coverage ratio at the end of each fiscal quarter.The agreements governing our notes and our Revolving Credit ~~Facility~~Agreement 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.~~Agreement. 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~~$500 million would cause a cross default under the Revolving Credit ~~Facility.~~Agreement (to the extent such default (other than the failure to repay indebtedness) would result in the acceleration of such indebtedness). 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~~Agreement to declare all amounts outstanding under the indentures or the Revolving Credit ~~Facility~~Agreement 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~~Agreement accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings.

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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 ~~June~~March 26, ~~2021~~2022 was ~~$313 million.~~$1.8 billion. 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 meet our working capital requirements. Also, if we cannot generate sufficient revenue and operating cash flow, 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 generate sufficient cash to meet our working capital requirements 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 in amounts sufficient to enable us to meet our working capital requirements. If we are not able to generate sufficient cash flow from operations, we may be required to sell assets or equity, reduce expenditures, refinance all or a portion of our existing debt or obtain additional financing.

In addition, 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.

Our inability 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, Latin America 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 depend on third-party subcontractors to provide shipment services. We also have international sales operations. International sales, as a percent of net revenue, were ~~74% and 75%~~69% for the three ~~and six~~ months ended ~~June~~March 26, ~~2021, respectively.~~2022. 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;~~requirements and restrictions; 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; inflation; 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.~~United States laws and regulations related to international operations, including export control and economic sanctions laws and regulations and the Foreign Corrupt Practices Act. Recently, the United States and other countries and coalitions have issued sanctions and revisions to export control and other regulations against Russia, Belarus or the DNR or LNR regions of Ukraine, due to the conflict in the Ukraine.

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In addition, our worldwide operations (or those of our business partners) could be subject to natural disasters and climate change such as earthquakes, tsunamis, flooding, typhoons, droughts, fires, extreme heat and volcanic eruptions that disrupt our operations, or those of our manufacturers, vendors or customers. For example, our Santa Clara and San Jose operations are located near major earthquake fault lines in California. Also, we have operations and employees in regions that have experienced extreme weather such as prolonged heat waves, wildfires and freezing. Extreme weather events can also disrupt the ability of our suppliers to deliver expected manufacturing parts and/or services for periods of time. 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,~~

In addition, many governments have enacted laws around personally identifiable information, such as the European Union’s general Data Protection Regulation and the California Consumer Privacy Act, and the failure to comply could result in sanctions or other actions by the governments. 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 and shipment delays, general business interruptions, the inability to obtain, or delays from difficulties in obtaining export licenses for certain technology, penalties or a loss of export privileges, as well as stringent licensing restrictions that may make our products less attractive to international customers, 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.

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.

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.

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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, inflation, 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.

In May 2021, ~~we announced that~~our Board of Directors approved a stock repurchase program of up to $4 billion of our common stock (Existing Repurchase Program). In February 2022, our Board of Directors approved a new stock repurchase program in addition to our Existing Repurchase Program to purchase up to $4$8 billion of our outstanding common stock in the open ~~market. This repurchase program~~market (collectively referred to as the “Repurchase Program”). The Repurchase Program does not obligate us to acquire any common stock, has no termination date and may be suspended or discontinued at any time. Our stock repurchases could affect the trading price of our stock, the volatility of our stock price, reduce our cash reserves, and may be suspended or discontinued at any time, which may result in a decrease in our stock price.

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.

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

We issued warrants dated ~~June~~March 28, ~~2021~~2022 to purchase ~~107,314~~39,576 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 ~~June~~March 28, ~~2024.~~2025.

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

Issuer Purchases of Equity Securities

In May 2021, ~~we announced that~~our Board of Directors approved a stock repurchase program of up to $4 billion of our common stock (Repurchase Program). In February 2022, our Board of Directors approved a new stock repurchase program in addition to our Existing Repurchase Program to purchase up ~~to $4~~additional $8 billion of ~~our~~the Company’s outstanding common stock in the open ~~market.~~market (collectively referred to as the “Repurchase Program”). We expect to fund repurchases through cash generated from operations, which have been strengthened by our strong operational results. Our stock ~~repurchase program~~Repurchase Program does not obligate us to acquire any common stock, has no termination date and may be suspended or discontinued at any time.

The following table provides information relating to our repurchase of common stock for the three months ended ~~June~~March 26, ~~2021:~~2022:

Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Repurchased as Part of Publicly Announced Program Maximum Dollar Value of Shares That May Yet be Purchased Under the Program
(In millions, except shares and per share data)
March 28, 2021 - April 24, 2021 — $ — — $ —
April 25, 2021 - May 22, 2021 386,649 $ 77.59 386,649 $ 3,970
May 23, 2021 - June 26, 2021 2,848,247 $ 79.35 3,234,896 $ 3,744
Total 3,234,896


	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of Publicly Announced Program	Maximum Dollar Value of Shares That May Yet be Purchased Under the Program
	(In millions, except shares and per share data)
December 26, 2021 - January 22, 2022	7,462,293	$	134.01	7,462,293	$	1,238
January 23, 2022 - February 19, 2022	1,715,256	$	114.29	1,715,256	$	9,042
February 20, 2022 - March 26, 2022	6,608,257	$	108.12	6,608,257	$	8,327
Total	15,785,806

Equity Award Share Withholding

During the ~~six~~three months ended ~~June~~March 26, ~~2021,~~2022, we paid ~~approximately $14~~$35 million in employee withholding taxes due upon the vesting of net settled equity awards. We withheld approximately ~~0.2~~1 million shares of common stock from employees in connection with such net share settlement at an average price of ~~$87.54~~$118.07 per share. These shares may be deemed to be “issuer purchases” of shares.


ITEM 5.			OTHER INFORMATION

The U.S. government has designated the Russian Federal Security Service (the FSB) as a blocked party under Executive Order 13382. In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control has issued General License No. 1B (the OFAC General License), which generally authorizes certain licensing, permitting, certification, notification, and related transactions with the FSB as may be required for the importation, distribution, or use of information technology products in the Russian Federation.

As permitted under the OFAC General License, Xilinx, which we acquired on February 14, 2022, previously authorized certain third-party resellers in Russia to periodically file notifications with, or apply for import licenses and permits from, the FSB on its behalf in connection with the importation of its products into the Russian Federation. Subsequent to February 14, 2022, third-party resellers filed additional notifications with and/or applied for import licenses and permits from the FSB on behalf of Xilinx. During the fiscal quarter ended March 26, 2022, we and our subsidiaries, including Xilinx, suspended shipments to the Russian Federation.

There was no gross revenue or net profits of the Company or any subsidiary directly associated with these filing activities. We and our subsidiaries do not sell products or provide services to the FSB.

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ITEM 6. EXHIBITS


4.1						Fourth Supplemental Indenture governing the Xilinx 2.950% Senior Notes due 2024 , dated as of February 14, 2022 by and among Xilinx, Inc., Advanced Micro Devices, Inc., and U.S. Bank Trust Company, National Association, as successor in interest to U.S. Bank National Association .
4.2						Second Supplemental Indenture governing the Xilinx 2.375% Senior Notes due 2030 . dated as of February 14, 2022, by and among Xilinx, Inc., Advanced Micro Devices, Inc., and U.S. Bank Trust Company, National Association, as successor to interest to U.S. Bank National Association ,
*10.1						~~Form of Performance-based Restricted Stock Unit Agreement for Senior Vice Presidents and Above under the 2004~~Xilinx, Inc. 2007 Equity Incentive ~~Plan~~Plan..
*10.2						~~Form of Restricted Stock Unit Agreement for Senior Vice Presidents and Above under the~~ 2004 Equity Incentive ~~Plan.~~Plan, as amended and restated, dated February 23, 2022.
*10.3						~~Form of Stock Option Agreement for Senior Vice Presidents~~Offer Letter between Advanced Micro Devices, Inc. and ~~Above under the 2004 Equity Incentive plan.~~Victor Peng dated March 8, 2022.
**10.418.1						~~Amended and Restated Wafer Supply Agreement Amendment No. 7, among Advanced Micro Devices, Inc.~~P referability Letter from Ernst & Young , ~~GLOBALFOUNDRIES, Inc. and GLOBALFOUNDRIES U.S. Inc.,~~ LLP dated ~~as of~~ May ~~12, 2021.~~4, 2022.
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
_____________________
*Management contracts and compensatory plans or arrangements.
**~~Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed.~~

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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.

~~July 28, 2021~~May 4, 2022	By:	/s/Devinder Kumar
	Name:	Devinder Kumar
	Title:	Executive Vice President, Chief Financial Officer and Treasurer Signing on behalf of the Registrant as the Principal Financial Officer

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		Page No.
Part I Financial Information
Item 1	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1926
Item 3	Quantitative and Qualitative Disclosures about Market Risk	2635
Item 4	Controls and Procedures	2635
Part II Other Information

Item 1	Legal Proceedings	2736
Item 1A	Risk Factors	2736
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	4858
Item 5	Other Information	58
Item 6	Exhibits	4959
Signature		5060


Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities	$	77	$	30
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	2,623	$	1,775
Restricted cash included in Prepaid expenses and other current assets	0		4
Total cash, cash equivalents, and restricted cash	$	2,623	$	1,779


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

Long-term debt, net	$	313	$	351	$	330	$	642


	Payment due by period
(In millions)	Total		Remainder of 2021		2022		2023		2024		2025		2026 and thereafter
Term debt (1)	$	313	$	—	$	312	$	—	$	—	$	—	$	1
Aggregate interest obligation (2)	38		12		24		1		1		—		—
Other long-term liabilities (3)	127		19		66		20		10		9		3
Operating leases	344		34		69		62		53		44		82
Purchase obligations (4)	5,889		3,185		1,088		662		586		94		274
Total contractual obligations (5)	$	6,711	$	3,250	$	1,559	$	745	$	650	$	147	$	360