UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended JuneMarch 27, 20092010

OR

For the transition period from             to

Commission File Number 001-07882

ADVANCED MICRO DEVICES, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (408) 749-4000

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 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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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” and “smaller reporting company” in Rule 12b-2 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  x

Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of JulyApril 30, 2009: 667,616,6472010: 673,364,610

INDEX

PART I. FINANCIAL INFORMATION

Advanced Micro Devices, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to condensed consolidated financial statements

Advanced Micro Devices, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

See accompanying notes to condensed consolidated financial statements

Advanced Micro Devices Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed consolidated financial statements

Advanced Micro Devices Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Advanced Micro Devices, Inc. and subsidiaries and GLOBALFOUNDRIES Inc. (GF) andits subsidiaries (the Company or AMD) have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the quarter and six months ended JuneMarch 27, 20092010 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 26, 2009.25, 2010. 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 and cash flows. 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 27, 2008.26, 2009.

Beginning in the first quarter of 2010, the Company concluded that it is no longer the primary beneficiary of GLOBALFOUNDRIES Inc. (GF). Accordingly, it deconsolidated the results of operations of GF and started accounting for GF under the equity method of accounting. (See Note 2, “GLOBALFOUNDRIES”). Therefore, the users of the Company’s financial statements should consider the effect of deconsolidation when comparing the current period to the periods prior to 2010.

The Company uses a 52 to 53 week fiscal year ending on the last Saturday in December. The quarters ended March 27, 2010 and six months ended June 27,March 28, 2009 and June 28, 2008 each consisted of 13 and 26 weeks, respectively.weeks.

Principles of Consolidation. The condensed consolidated financial statements include the Company’s accounts and those of its majority-owned subsidiaries, as well as GF and its majority-owned subsidiaries. Upon consolidation, all significant intercompany accounts and transactions are eliminated, and amounts pertaining to the noncontrollingnon-controlling ownership interests held by third parties in the operating results and financial position of the Company’s majority-owned subsidiaries and GF are reported as noncontrollingnon-controlling interest.

The Company consolidates the accounts of GF and its majority-owned subsidiaries as required by Financial Accounting Standard Board (FASB) Interpretation No. 46 (revised December 2003),Consolidation of Variable Interest Entities, An Interpretation of ARB No. 51(FIN 46R) (See Note 2, “GLOBALFOUNDRIES”).NOTE 2. GLOBALFOUNDRIES

Recently Adopted Accounting Pronouncements.

Noncontrolling Interest.In December 2007, the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (SFAS 160). SFAS 160 requires that noncontrolling interests in subsidiaries be reported as a component of stockholders’ equity in the condensed consolidated balance sheet. However, securities of an issuer that are redeemable at the option of the holder or outside the control of the issuer continue, pursuant to Securities and Exchange Commission (SEC) Accounting Series Release (ASR) 268 and EITF Topic D-98, to be classified outside stockholders’ equity. SFAS 160 also requires that earnings or losses attributed to the noncontrolling interests be reported as part of consolidated earnings and not as a separate component of income or expense and requires disclosure of the attribution of consolidated earnings to the controlling and noncontrolling interests on the face of the condensed consolidated statement of operations. The Company adopted SFAS 160 at the beginning of its fiscal year 2009. Upon the formation of GF during the first quarter of 2009, the Company accounts for the noncontrolling interest held by Advanced Technology Investment Company LLC (ATIC) in GF in accordance with this accounting pronouncement. Since the preferred securities issued by GF to ATIC can be put to AMD in limited circumstances, ATIC’s noncontrolling interest is, accordingly, not reported as a component of stockholders’ equity in the condensed consolidated balance sheet. (See Note 2, “GLOBALFOUNDRIES”).

Business Combinations.In December 2007, the FASB issued Statement No. 141 (revised 2007),Business Combinations(SFAS 141(R)). Under SFAS 141(R), an entity is required to recognize assets acquired, liabilities assumed, contractual contingencies and contingent consideration at their fair value on the acquisition date. It further requires: that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period, including changes related to acquired tax assets and income tax uncertainties from acquisitions that occurred prior to the date of adoption, be recognized as a component of the provision for taxes. In addition, acquired in-process research and development is measured at fair value, capitalized as an indefinite-life intangible asset and tested for impairment pursuant to FASB Statement No. 142,Goodwill and Other Intangible Assets (SFAS 142) during the development period. Subsequent to the development period the carrying value, if any, of acquired in-process development will be considered a definite-life intangible asset and amortized over its estimated useful life. The Company adopted SFAS 141(R) in the first quarter of 2009 and will apply this accounting standard for future business combinations and changes in acquired tax assets and liabilities.

Derivative Instruments and Hedging Activities. In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities—An Amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. The Company adopted SFAS 161 in the first quarter of 2009. (See Note 16, “Hedging Transactions and Derivative Financial Instruments”).

Life of Intangible Assets. In April 2008, the FASB issued FSP No. 142-3,Determination of the Useful Life of Intangible Assets (FSP 142-3), which amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. FSP 142-3 requires a consistent approach between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of an asset under SFAS 141(R). The FSP also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. The Company adopted FSP 142-3 in the first quarter of 2009. The new accounting standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

Convertible Debt Instruments.In May 2008, the FASB issued FSP APB No. 14-1,Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP 14-1). This FSP requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The effective date of this FSP is for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years, and it does not permit earlier application. However, the transition guidance requires retrospective application to all periods presented in the Company’s financial statements. In the first quarter of 2009, the Company adopted this FSP and modified its accounting for its 6.00% Convertible Senior Notes due 2015 (6.00% Notes). To retrospectively apply this FSP, the proceeds from the issuance of the Company’s 6.00% Notes were allocated between a liability (issued at a discount) and equity in a manner that reflects interest expense at the market interest rate for similar nonconvertible debt as of the original issuance date. The debt discount is being accreted from issuance through April 2015, the period the 6.00% Notes are expected to be outstanding, and is recorded as additional non-cash interest expense. The equity component is included in the paid-in-capital portion of stockholders’ equity on the Company’s condensed consolidated balance sheet. The initial value of the equity component, which reflects the equity conversion feature of the 6.00% Notes, is equal to the initial debt discount. (See Note 15, “Accounting Changes—Convertible Debt Instruments”).

Fair Value of Financial Instruments. In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments (FSP 107-1 and APB 28-1), which require disclosure in the body or in the accompanying notes of the Company’s summarized financial information for interim reporting periods and in its financial statements for annual reporting periods, of the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not in the statement of financial position, as required by FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments. The Company adopted this FSP in the second quarter of 2009. The adoption of this FSP had no financial impact the Company’s consolidated results of operations or financial condition. (See Note 10, “Financial Instruments”).

Other Than Temporary Impairment. In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,Recognition and Presentation of Other Than Temporary Impairments (FSP 115-2 and 124-2), which clarifies the interaction of the factors that should be considered when determining whether a debt security is other than temporarily impaired. The Company adopted this FSP in the second quarter of 2009. The adoption of this FSP did not have a material effect on the Company’s consolidated results of operations or financial condition.

Fair Value Considering Volume and Level of Activity. In April 2009, the FASB issued FSP No. FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4), which clarifies the interaction of the factors that should be considered when evaluating whether there has been a significant decrease in the volume and level of activity for an asset or liability when compared with normal market activity for the asset or liability (or similar assets or liabilities). If there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the transactions or quoted prices is required, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. The Company adopted this FSP in the second quarter of 2009. The adoption of this FSP did not have a material effect on the Company’s consolidated results of operations or financial condition. (See Note 10, “Financial Instruments”).

Subsequent Events.In May 2009, the FASB issued Statement No. 165,Subsequent Events(SFAS 165), which provides authoritative accounting literature for a topic that was previously addressed only in the auditing literature. The guidance in SFAS 165 largely is similar to the current guidance in the auditing literature with some exceptions that are not intended to result in significant changes in practice. The Company adopted SFAS 165 in the second quarter of 2009. The Company has evaluated subsequent events through the date and time of the filing of this Quarterly Report on Form 10-Q for the quarter ended June 27, 2009 on August 5, 2009. (See Note 17, “Subsequent Events”).

Recently Issued Accounting Pronouncements.

Transfer of Financial Assets.In June 2009, the FASB issued Statement No. 166,Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140(SFAS 166), which removes the concept of a qualifying special-purpose entity from FASB Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statement 125 (SFAS 140), and removes the exception from applying FIN 46R to qualifying special-purposeimprove financial reporting by enterprises involved with variable interest entities. This Statement clarifies that the objective of paragraph 9 of SFAS 140 is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over the transferred financial assets. That determination must consider the transferor’s continuing involvement in the transferred financial asset, including all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of the transfer. SFAS 166 will benew guidance became effective for interim and annual reporting periodsthe Company beginning after November 15, 2009. The Companythe first day of fiscal 2010. Under the new guidance, the investor who is currently evaluatingdeemed to both (i) have the future impact SFAS 166 will have on its consolidated results of operations or financial condition.

Variable Interest Entities.In June 2009,power to direct the FASB issued Statement No. 167,Amendments to FASB Interpretation No. 46(R)(SFAS 167). SFAS 167 amends the evaluation criteria to identify the primary beneficiary of a variable interest entity provided by FIN 46(R). Additionally, SFAS 167 requires ongoing reassessments of whether an enterprise is the primary beneficiaryactivities of the variable interest entity. SFAS 167entity that most significantly impact the variable interest entity’s economic performance and (ii) be exposed to losses and returns will be effective for interim and annual reporting periods beginning after November 15, 2009. The Company is currently evaluating the future impact SFAS 167 will have on its consolidated results of operations or financial condition.

2. GLOBALFOUNDRIES

On March 2,primary beneficiary who should then consolidate the variable interest entity. In December 2009, the Company consummatedagreed to irrevocably waive rights under the transactionsShareholders Agreement with respect to certain matters that require unanimous GF board approval. The Company evaluated whether these governance changes would, pursuant to the new guidance, affect its consolidation of GF. The Company considered the purpose and design of GF, the activities of GF that most significantly affect the economic performance of GF and the concept of “who has the power,” as contemplated by the Master Transaction Agreement amongnew guidance. Based on the results of this evaluation and in light of the governance changes whereby the Company believes it now only has protective rights relative to the operations of GF, the Company concluded that the other investor in GF, Advanced Technology Investment Company LLC (ATIC), a limited liability company establishedis the party who has the power to direct the activities of GF that most significantly impact GF’s performance and is, therefore, the primary beneficiary of GF. Accordingly, effective as of December 27, 2009, the Company deconsolidated GF and started accounting for its ownership interest in GF under the lawsequity method of accounting. Under the deconsolidation accounting guidelines the investor’s opening investment is recorded at fair value as of the Emiratedate of Abu Dhabi and wholly owned by the Governmentdeconsolidation. The difference between this initial fair value of the Emirateinvestment and the net carrying value is recognized as a gain or loss in earnings. During the first quarter of Abu Dhabi, and West Coast Hitech L.P., an exempted limited partnership organized under2010, the lawsCompany completed a valuation analysis to determine the initial fair value of its investment in GF. In determining the fair value, the Company used a combination of the Cayman Islands (WCH), acting through its general partner, West Coast Hitech G.P., Ltd.,income approach and the market approach.

The income approach included the following inputs and assumptions:

When choosing the appropriate inputs associated with the market approach to apply to GF trailing and projected financial metrics, GF historical and forecasted performance was benchmarked against that of selected comparable companies. The selected multiple ranges were applied to GF trailing and projected financial metrics in order to obtain an indication of the Cayman Islands, pursuantGF business enterprise value on a minority, marketable basis.

Advanced Micro Devices Inc.

Notes to whichCondensed Consolidated Financial Statements—(Continued)

(Unaudited)

Each approach resulted in comparable business enterprise value. The Company equally weighed the Company formed GLOBALFOUNDRIES Inc., or GF. Atbusiness enterprise value of GF provided by each method. Based on the closingresults of this transaction (Closing),valuation, the Company contributed certain assets and liabilities to GF, including, among other things, shares of the groups of German subsidiaries owning Fab 1 Module 1 (formerly Fab 36) and Fab 1 Module 2 (formerly Fab 30/38) (Dresden Subsidiaries), certain manufacturing assets, real property, tangible personal property, employees, inventories, books and records, a portiondeconsolidation date fair value of the Company’s patent portfolio, intellectual propertyinvestment in GF was determined to be $454 million. The Company recognized approximately $325 million which is the difference between the fair value as of the deconsolidation date and technology, rights under certain material contracts and authorizations necessarythe net carrying value of its investment, as a non-cash gain in other income (expense), net, in the quarter ended March 27, 2010.

Equity in Net Income (Loss) of Investee

The equity in net income (loss) of investee is comprised of the Company’s proportionate share of GF’s earnings or losses for GF to carrythe period based on its business. In exchange the Company receivedCompany’s ownership percentage of GF securities consisting of one Class A Ordinary Share, 1,090,950 Class A Preferred Shares and 700,000 Class B Preferred Shares, andshares, the assumption of certain liabilities by GF. ATIC contributed $1.4 billion of cash to GF in exchange for GF securities consisting of one Class A Ordinary Share, 218,190 Class A Preferred Shares, 172,760 Class B Preferred Shares, $202 million aggregate principal amount of 4% Class A Subordinated Convertible Notes (the Class A Notes) and $807 million aggregate principal amount of 11% Class B Subordinated Convertible Notes (the Class B Notes), and transferred $700 million of cash to the Company in exchange for the transfer by the Company of 700,000non-cash accretion on GF Class B Preferred Shares.

At the Closing,shares allocable to the Company, also issued to WCH, for an aggregate purchase pricethe elimination of $125 million, 58 million shares of its common stock and warrants to purchase 35 million shares of its common stock at an exercise price of $0.01 per share (the Warrants). The Warrants are exercisable after the earlier of (i) public ground-breaking of GF’s planned manufacturing facility in New York and (ii) March 2, 2011. The Warrants expireintercompany profit on March 2, 2019. (See Note 17, “Subsequent Events.”)

In connection with the Closing, AMD Fab 36 Holding GmbH and AMD Fab 36 Admin GmbH, repurchased the limited and silent partnership interests in AMD Fab 36 Limited Liability Company & Co KG (AMD Fab 36 KG)inventory held by the remaining unaffiliated limited partner, Leipziger Messe Gesellschaft mbH (Leipziger Messe).

UnderCompany at the Master Transaction Agreement,end of the cash consideration that WCH and ATIC paidperiod and the securities that they received are as follows:amortization of basis differences arising from differences in deconsolidation date fair values and carrying values of certain GF long-lived assets and liabilities identified in the deconsolidation process.

As of the Closing, the Company and ATIC owned 1,090,950, or 83.3%, and 218,190, or 16.7%, respectively, of Class A Preferred Shares, and ATIC owned 100% of the Class B Preferred Shares and 100% of the Class A Notes and Class B Notes.

Class A Preferred Shares. The Class A Preferred Shares rank senior in right of payment to the Ordinary Sharesoperation of GF and junior in right of payment toChartered. Under the Class B Preferred Shares for purposes of dividends, distributions and uponapplicable accounting rules, as a Liquidation Event (as defined below). The Class A Preferred Shares are not entitled to any dividend or pre-determined accretion in value. In the eventresult of the liquidation, dissolution or winding up of GF (Liquidation Event), each Class A Preferred Share will be entitled to receive, after the distribution to the holders of the Class B Preferred Shares but prior to any distribution to the holders of Ordinary Shares, out of the remaining assets of GF, if any, an amount equal to the initial purchase price per share of the Class A Preferred Shares. Each Class A Preferred Share is convertible, at the option of the holder thereof, into Class B Ordinary Shares at the then applicable Class A Conversion Rate upon a Liquidation Event. Each Class A Preferred Share will automatically convert into Class B Ordinary Shares at the then applicable Class A Conversion Rate upon the earlier of (i) an initial public offering of GF (IPO) or (ii) a change of control transaction of GF. The “Class A Conversion Rate” is 100 Class B Ordinary Shares for each Class A Preferred Share converted, subject to customary anti-dilution adjustments. The Class A Preferred Shares are non-voting until the Reconciliation Event (defined below). Following the Reconciliation Event, each Class A Preferred Share will vote on an as-converted basis with the Ordinary Shares, voting together as a single class, with respect to any question upon which holders of Ordinary Shares have the right to vote.

Class B Preferred Shares. The Class B Preferred Shares rank senior in right of payment to all other classes or series of equity securities of GF for purposes of dividends, distributions and upon a Liquidation Event. Each Class B Preferred Share is deemed to accrete in value at a rate of 12% per year, compounded semiannually, of the initial purchase price per such share. The accreted value accrues daily from the Closing and is taken into account upon certain distributions to the holders of Class B Preferred Shares or upon conversion of the Class B Preferred Shares. In the event of a Liquidation Event, each Class B Preferred Share will be entitled to receive, prior to any distribution to the holders of any other classes or series of equity securities, an amount equal to its accreted value. Upon completion of the above distribution to the holders of Class B Preferred Shares, each Class A Preferred Share will be entitled to receive its liquidation preference amount out of any remaining assets of GF. Upon completion of the above distributions to the holders of Preferred Shares, all of the remaining assets of GF, if any, will be distributed pro rata among the holders of Ordinary Shares. Each Class B Preferred Share is convertible, at the option of the holder thereof, into Class B Ordinary Shares at the then applicable Class B Conversion Rate (as hereinafter defined) upon a Liquidation Event. Each Class B Preferred Share automatically converts into Class B Ordinary Shares at the then applicable Class B Conversion Rate upon the earlier of (i) an IPO or (ii) a change of control transaction of GF. The “Class B Conversion Rate” is 100 Class B Ordinary Shares for each Class B Preferred Share converted, subject to customary anti-dilution adjustments. The Class B Preferred Shares are non-voting until the Reconciliation Event (defined below). Following the Reconciliation Event, each Class B Preferred Share will vote on an as-converted basis with the Ordinary Shares, voting together as a single class, with respect to any question upon which holders of Ordinary Shares have the right to vote.

Class A Subordinated Convertible Notes. The Class A Notes accrue interest at a rate of 4% per annum, compounded semiannually, and mature upon the later of (i) 10 years from the date of issuance or (ii) the date of the earlier of (i) such time when the Company has secured for GF certain rights under its existing cross license agreement with Intel Corporation (Intel Patent Cross License Agreement), or (ii) such time when GF’s Board of Directors determines that GF no longer needs to be a “Subsidiary” under the Intel Patent Cross License Agreement (the Reconciliation Event). Interest on the Class A Notes is payable semiannually in additional Class A Notes. The Class A Notes are the unsecured obligations of GF and rank subordinated in right of payment to any current or future senior indebtedness of GF. The Class A Notes are not redeemable by GF without the noteholder’s consent. The Class A Notes are convertible, in whole or in part, in multiples of $1,000, into GF Class A Preferred Shares at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date based on the conversion ratio in effect on the date of conversion, if (i) such conversion would not cause GF to fail to constitute its “Subsidiary” under the Intel Patent Cross License Agreement or (ii) the Reconciliation Event has occurred. On or after the Reconciliation Event, the Class A Notes will automatically convert into Class A Preferred Shares upon the earlier of (i) an IPO, (ii) certain change of control transactions of GF or (iii) the close of business on the business day immediately preceding the maturity date.

Class B Subordinated Convertible Notes. The Class B Notes accrue interest at a rate of 11% per annum, compounded semiannually, and mature upon the later of (i) 10 years from the date of issuance or (ii) the date of the Reconciliation Event. Interest on the Class B Notes is payable semiannually in additional Class B Notes. The Class B Notes are the unsecured obligations of GF and rank subordinated in right of payment to any current or future senior indebtedness of GF. The Class B Notes are not redeemable by GF without the noteholder’s consent. The Class B Notes are convertible, in whole or in part, in multiples of $1,000, into GF Class B Preferred Shares at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date at the conversion ratio in effect on the date of conversion, if (i) such conversion would not cause GF to fail to constitute its “Subsidiary” under the Intel Patent Cross License Agreement or (ii) the Reconciliation Event has occurred. On or after the Reconciliation Event, the Class B Notes will automatically convert into GF Class B Preferred Shares upon the earlier of (i) an IPO, (ii) certain change of control transactions of GF or (iii) the close of business on the business day immediately preceding the maturity date.

Based on the structure of the transaction, pursuant to the guidance in FIN 46R,MOA, GF is a variable-interest entity, and the Companyrequired to consolidate Chartered because it is deemed to be the primary beneficiary and is, therefore, required to consolidateof Chartered. The numbers in the accountsfollowing table reflect the consolidated results of GF. Pursuant toFor the requirementspurposes of SFAS 160, whichthe Company’s application of the equity method of accounting, the Company applied asrecords its share of the beginningGF results excluding the results of fiscal 2009, ATIC’s noncontrolling interest, represented by itsChartered because GF does not have an equity interests in GF, is presented outside of stockholders’ equity in its condensed consolidated balance sheet due to the right that ATIC has to put those securities back to the Company in the event of a change of control of AMD during the two years following the Closing. The Company’s net income (loss) attributable to its common stockholders per share consists of its consolidated net income (loss), as adjusted for (i) the portion of GF’s earnings or losses attributable to ATIC, which is based on ATIC’s proportional ownership interest in GF’sChartered.

As of March 27, 2010, the Company’s ownership interest in GF Class A Preferred Shares (16.7% as of June 27, 2009)shares was approximately 83%, and (ii) the non-cash accretion on GF’s Class B Preferred Shares attributable tocarrying value of the Company, based on its proportional ownership interest of GF’s Class A Preferred Shares (83.3%Company’s investment in GF was $270 million. Summarized financial information for GF is as of June 27, 2009).

The table below reflects the changes in noncontrolling interest during the quarter ended and six months ended June 27, 2009.follows:

For the quarter and six months ended June 28, 2008, the noncontrolling interest recordedIf there is a change in the Company’s condensed consolidated statementownership interest in GF in subsequent periods, the Company will record a gain or loss on such changes, the measurement of operations was $7 million and $20 million, respectively. This noncontrollingwhich will depend on the pricing of the transaction causing the change. There were no changes in ownership interest in GF during the first quarter of 2010. (See NOTE 12, “Subsequent Events”). The Company cannot currently quantify its maximum exposure to future losses of GF.

Following the deconsolidation, GF is a related toparty of the guaranteed rate of return of between 11 and 13 percent for the unaffiliated partner contributions in AMD Fab 36 Limited LiabilityCompany. The Company & Co. KG.

At the Closing, AMD, ATIC and GF also entered intoare parties to a Shareholders’ Agreement (the Shareholders’ Agreement), a Funding Agreement (the Funding Agreement), and a Wafer Supply Agreement (the Wafer Supply Agreement), certain terms ofwafer supply agreement, which, are summarized below.

Shareholders’ Agreement. The Shareholders’ Agreement sets forth the rights and obligations of AMD and ATIC as shareholders of GF. The initial GF board of directors (GF Board) consists of eight directors, and AMD and ATIC each designated four directors. After the Reconciliation Event, the number of directors a GF shareholder may designate may decrease according to the percentage of GF’s shares it owns on a fully diluted basis.

Pursuant to the Shareholders’ Agreement, GF is not allowed to take certain corporate actions without unanimous GF Board approval. The Shareholders’ Agreement sets forth procedures by which any deadlock with respect to matters requiring GF Board approval is to be resolved.

Pursuant to the Shareholders’ Agreement, if a change of control of AMD occurs within two years of Closing, ATIC will have the right to put any or all GF securities (valued at their fair market value) held by ATIC and its permitted transferees to the Company in exchange for cash, or if a change of control of AMD occurs after a specified event, ATIC will have the option to purchase in cash any or all of GF securities (valued at their fair market value) held by the Company and its permitted transferees.

Funding Agreement. The Funding Agreement provides for the future funding of GF and governs the terms and conditions under which ATIC is obligated to provide such funding. Pursuant to the Funding Agreement, ATIC has committed to additional equity funding of a minimum of $3.6 billion and up to $6.0 billion to be provided in phases over the next five years. The Company has the right, but not the obligation, to provide additional future capital to GF in an amount pro rata to its interest in the fully converted ordinary shares of GF.

At each equity funding, the equity securities to be issued by GF will consist of 20% of Class A Preferred Shares and 80% of Class B Preferred Shares. Rather than issuing Preferred Shares, GF may, in certain circumstances, issue additional Class A Notes and Class B Notes to ATIC in those same proportions in connection with future funding. The aggregate amount of equity funding to be provided by the shareholders in any fiscal year depends on the time period of such funding and the amounts set forth in the five-year capital plan of GF. In addition, GF is required to obtain specified third-party debt in any given fiscal year, as set forth in its five-year capital plan. To the extent that GF obtains more than the specified amount of third-party debt, ATIC is able to reduce its funding commitment accordingly. To the extent that GF is not able to obtain the full amount of third-party debt, ATIC is not obligated to make up the difference. To the extent the Company chooses not to participate in an equity financing of GF, ATIC is obligated to purchase its share of GF securities, subject to ATIC’s funding commitments under the Funding Agreement.

ATIC’s obligations to provide funding are subject to certain conditions including the accuracy of GF’s representations and warranties in the Funding Agreement, the absence of a material adverse effect on GF or AMD and the absence of a material breach or default by GF or AMD under the provisions of any transaction document. There are additional funding conditions for each of the phases which are set forth in more detail in the Funding Agreement.

Wafer Supply Agreement. The Wafer Supply Agreementamong other things, governs the terms by which the Company purchases products manufactured by GF. Pursuant to the Wafer Supply Agreement, the Company purchases,GF, subject to limited exceptions, all of its microprocessor unit (MPU) product requirements from GF. If theminimum purchase obligations. The Company acquirescurrently pays GF for wafers on a third-party business that manufactures MPU products,cost-plus basis, which it will have up to two years to transition the manufacture of such MPU products to GF. In addition, once GF establishes a 32nm-qualified process, the Company will purchasebelieves represents market price. The wafer supply agreement terminates no later than February 2024. The Company’s total purchases from GF where competitive, specified percentages of its graphics processor unit (GPU) requirements at all process nodes, which percentages will increase linearly over a five-year period. At its request, GF will also provide sort services to the Company on a product-by-product basis.

The Company will provide GF with product forecasts of its MPU and GPU product requirements. The price for MPU products is related to wafer manufacturing and research and development activities during the percentagefirst quarter of the Company’s MPU-specific total cost of goods sold. The price for GPU products will be determined by the parties when GF is able2010 amounted to begin manufacturing GPU products for the Company.approximately $329 million.

The Wafer Supply Agreement is in effect through May 2, 2024. However, the Wafer Supply Agreement may be terminated if a business plan deadlock exists and ATIC elects to enter into a transition period pursuant to the Funding Agreement. GF has agreed to use commercially reasonable efforts to assist the Company to transition the supply of products to another provider, and continue to fulfill purchase orders for up to two years following the termination or expiration of the Wafer Supply Agreement.

Advanced Micro Devices Inc.

3. Stock-Based Incentive Compensation PlansNotes to Condensed Consolidated Financial Statements—(Continued)

The following table summarizes stock-based compensation expense related to employee stock options, restricted stock and restricted stock units of continuing operations for the quarters and six months ended June 27, 2009 and June 28, 2008, respectively, which was allocated in the condensed consolidated statements of operations as follows:

For the quarter and six months ended June 27, 2009, the Company did not have employee stock-based compensation expense for discontinued operations. For the quarter and six months ended June 28, 2008, employee stock-based compensation expense included in discontinued operations and excluded from continuing operations was $1 million.

Stock Options. The weighted-average assumptions that the Company applied in the lattice-binomial model that the Company uses to value employee stock options are as follows:(Unaudited)

For the quarters ended June 27, 2009 and June 28, 2008, the Company granted 1,674,629 and 1,021,822 employee stock options, respectively, with average estimated grant date fair values of $2.07 and $3.13, respectively. For the six months ended June 27, 2009 and June 28, 2008, the Company granted 2,778,663 and 10,555,698 employee stock options, respectively, with average estimated grant date fair values of $1.79 and $3.04, respectively.

Restricted Stock Units and Awards.For the quarters ended June 27, 2009 and June 28, 2008, the Company granted 15,549,456 and 6,797,802 shares of restricted stock and restricted stock units, respectively, with an average grant date fair value of $4.01 and $7.40, respectively. For the six months ended June 27, 2009 and June 28, 2008, the Company granted 15,749,106 and 7,288,586 shares of restricted stock and restricted stock units, respectively, with an average grant date fair value of $3.99 and $7.34, respectively.NOTE 3. Supplemental Balance Sheet Information

4. Goodwill and Acquisition Related Intangible AssetsAccounts Receivable

The carrying amount of goodwill for the Graphics segment as of June 27, 2009 and December 27, 2008, was $323 million.

Information regarding the Company’s acquisition-related intangible assets as of June 27, 2009 and December 27, 2008, and for the six months ended June 27, 2009, is as follows:

Estimated future amortization expense related to acquisition-related intangible assets is as follows:Inventory

5.Property, Plant and Equipment

Accrued Liabilities

Noncontrolling Interest

Advanced Micro Devices Inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 4. Net Income (Loss) Attributable to AMD Common Stockholders Per Share

Basic net income (loss) attributable to AMD common stockholders per share is computed using the weighted-average number of common shares outstanding. outstanding and shares issuable upon exercise of warrants issued by the Company to West Coast Hitech L.P., in connection with the GF transaction. The warrants became exercisable for a nominal consideration upon the July 24, 2009 public ground-breaking of the GF manufacturing facility in New York. Accordingly, the 35 million shares of AMD common stock issuable upon the exercise of the warrants have been included in the weighted-average basic per share computations from that date forward.

Diluted net income (loss) attributable to AMD common stockholders per share is computed using the weighted-average number of common shares outstanding plus any dilutive potential common shares outstanding. Potential dilutive common shares include stock options, restricted stock awards and shares issuable upon the conversion of convertible debt and shares issuable upon exercise of the Warrant issued by the Company to WCH in connection with the GF transaction.debt. The following table sets forth the components of basic and diluted income (loss) attributable to AMD common stockholders per share:

		Quarter Ended
		March 27, 2010			March 28, 2009
		(In millions, except per share amounts)
Numerator:
Numerator for basic net income (loss) attributable to AMD common stockholders		$	257		$	(416	)
Effect of assumed conversion of 5.75% convertible senior notes:
Interest expense and amortization of financing cost			7			—
Numerator for diluted net income (loss) attributable to AMD common stockholders		$	264		$	(416	)
Denominator - weighted average shares:
Denominator for basic net income (loss) attributable to AMD common stockholders per share			707			626
Effect of dilutive potential common shares:
Employee stock options and awards			23			—
5.75% convertible senior notes			24			—
Denominator for diluted net income (loss) attributable to AMD common stockholders per share			754			626
Net income (loss) attributable to AMD common stockholders per common share:
Basic		$	0.36		$	(0.66	)
Diluted		$	0.35		$	(0.66	)

Potential common shares (i) from outstanding equity incentive awards totaling approximately 6916 million for the first quarter of 2010 were not included in the net income (loss) attributable to AMD common stockholders per share calculations as their inclusion would have been anti-dilutive.

Potential common shares (i) from outstanding stock awards totaling approximately 67 million and (ii) issuable under the Company’s 5.75% Convertible Senior Notes due 2012 totaling 75 million and (iii) issuable upon exercisefor the first quarter of the Warrants totaling 35 million2009 were not included in the net lossincome (loss) attributable to AMD common stockholders per share calculation for the second quarter ended June 27, 2009 because their inclusion would have been anti-dilutive.

Potential common shares (i) from outstanding equity incentive awards totaling approximately 68 million, (ii) issuable under

Advanced Micro Devices Inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 5. Comprehensive Income (Loss)

The following are the components of comprehensive income (loss):

Advanced Micro Devices Inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 6. Financial Instruments

Available-for-sale securities held by the Company as of March 27, 2010 and December 26, 2009 were as follows:

Advanced Micro Devices Inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

All contractual maturities of the Company’s 5.75% Convertible Senior Notes due 2012 totaling 75available-for-sale marketable debt securities at March 27, 2010 were within one year except those for auction rate securities (ARS). The Company’s ARS have stated maturities ranging from January 2025 to December 2050. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

In addition, at March 27, 2010 and December 26, 2009, the Company had approximately $30 million and (iii) issuable upon exercise$45 million, respectively, of available-for-sale investments in money market funds and commercial paper used as collateral for long-term workers’ compensation, leased buildings, foreign exchange hedging activities and letter of credit deposits, which are included in other assets on the Warrants totaling 35 million were notCompany’s condensed consolidated balance sheets. The Company is restricted from accessing these deposits.

In addition to the ARS classified as available-for-sale and included in the table above, as of March 27, 2010 and December 26, 2009, the Company had trading securities, consisting of ARS subject to a UBS put option, with carrying values of $59 million (par value $61 million) and $67 million (par value $69 million) included in marketable securities.

The Company did not sell any available-for-sale securities prior to maturity in the quarter ended March 27, 2010. The Company’s realized net loss attributable to AMD common stockholders per share calculationgains from sale of available-for-sale securities for the sixquarter ended March 28, 2009 was minimal.

Advanced Micro Devices Inc.

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Fair Value Measurements

Financial instruments measured and recorded at fair value on a recurring basis are summarized below: