Advanced Micro Devices 10-Q 2021-09-25

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 September 25, 2021

OR

☐			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 October 22, 2021: 1,207,610,455

INDEX

						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			19
Item 3			Quantitative and Qualitative Disclosures about Market Risk			26
Item 4			Controls and Procedures			26
Part II Other Information
Item 1			Legal Proceedings			27
Item 1A			Risk Factors			27
Item 2			Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 6			Exhibits			49
Signature						50

PART I. FINANCIAL INFORMATION

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

			Three Months Ended												Nine Months Ended
			September 25, 2021						September 26, 2020						September 25, 2021						September 26, 2020
			(In millions, except per share amounts)
Net revenue			$	4,313					$	2,801					$	11,608					$	6,519
Cost of sales			2,227						1,571						6,105						3,623
Gross profit			2,086						1,230						5,503						2,896
Research and development			765						508						2,034						1,410
Marketing, general and administrative			376						273						1,036						687
Licensing gain			(3)						—						(8)						—
Operating income			948						449						2,441						799
Interest expense			(7)						(11)						(26)						(38)
Other income (expense), net			62						(37)						51						(32)
Income before income taxes and equity income			1,003						401						2,466						729
Income tax provision			82						12						284						22
Equity income in investee			2						1						6						2
Net income			$	923					$	390					$	2,188					$	709
Earnings per share
Basic			$	0.76					$	0.33					$	1.80					$	0.60
Diluted			$	0.75					$	0.32					$	1.78					$	0.59
Shares used in per share calculation
Basic			1,214						1,184						1,214						1,176
Diluted			1,230						1,215						1,231						1,208

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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) 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 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 acquisition of Xilinx, 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, and such other risks and uncertainties as set forth in this report or detailed in our other Securities and Exchange Commission (SEC) reports and filings. We assume no obligation to update forward-looking statements.

AMD, the AMD Arrow logo, ATI, and the ATI logo, Athlon, EPYC, Radeon, Ryzen, Threadripper, AMD Instinct 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. 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 and December 28, 2019, and for each of the three years for the period ended December 26, 2020 as filed in our Annual Report on Form 10-K for the fiscal year ended December 26, 2020.

Overview

We are a global semiconductor company. Our products include x86 microprocessors (CPUs), accelerated processing units which integrate microprocessors and graphics (APUs), discrete graphics processing units (GPUs) semi-custom System-on-Chip (SoC) products and chipsets for the PC, gaming, datacenter and embedded markets. In addition, we provide development services and sell or license portions of our intellectual property portfolio.

In this section, we will describe the general financial condition and the results of operations of Advanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, “us,” “our” or “AMD”), including a discussion of our results of operations for the three and nine months ended September 25, 2021 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 September 25, 2021 was $4.3 billion, a 54% increase compared to the prior year period. The increase was due to a 44% increase in Computing and Graphics net revenue and a 69% increase in Enterprise, Embedded and Semi-Custom net revenue. The increase in Computing and Graphics segment net revenue was primarily due to higher sales of our client and graphics processors. The increase in

Enterprise, Embedded and Semi-Custom net revenue was primarily due to higher sales volume of our server processors and semi-custom products.

Gross margin in the third quarter of 2021 improved compared to the third quarter of 2020. Gross margin for the three months ended September 25, 2021 was 48% compared to gross margin of 44% for the prior year period. The increase in gross margin was primarily driven by a richer mix of EPYC™, Ryzen™ and Radeon™ processor sales.

Our operating income for the three months ended September 25, 2021 was $948 million compared to operating income of $449 million for the prior year period. The increase in operating income was primarily driven by strong revenue growth which more than offset higher operating expenses.

Our net income for the three months ended September 25, 2021 was $923 million compared to net income of $390 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, cash equivalents and short-term investments as of September 25, 2021 were $3.6 billion, compared to $2.3 billion as of December 26, 2020. The principal amount of our outstanding debt obligations was $313 million and $338 million as of September 25, 2021 and December 26, 2020, respectively. During the three months ended September 25, 2021, we repurchased 7.2 million shares of our common stock under our share repurchase program for $750 million.

We saw strong demand across our business in the third quarter of 2021 and we are making strategic investments in our long-term supply chain capacity to support future revenue growth.

We continued to further our roadmap by introducing new products during the third quarter of 2021. In July 2021, we announced the AMD Radeon RX 6600 XT graphics card, designed to deliver high-framerate, high-fidelity and highly responsive 1080p gaming experience. In August 2021, we introduced the AMD Radeon Pro W6000X series GPUs for the Mac Pro, designed to power a wide variety of demanding professional applications and workloads, including 3D rendering, 8K video compositing, and color correction.

Although the current COVID-19 pandemic continues to impact our business operations and practices, we experienced limited financial disruption during the third quarter of 2021. We continue to focus on the health and safety of our employees during the COVID-19 pandemic. We monitor and take 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. COVID-19 also continues to impact the global supply chain causing disruptions to service providers, logistics and the flow and availability of supplies and products.

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. 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.

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.

Results of Operations

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

Additional information on our reportable segments is contained in Note 11—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.

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

			Three Months Ended												Nine Months Ended
			September 25, 2021						September 26, 2020						September 25, 2021						September 26, 2020
			(In millions)
Net revenue:
Computing and Graphics			$	2,398					$	1,667					$	6,748					$	4,472
Enterprise, Embedded and Semi-Custom			1,915						1,134						4,860						2,047
Total net revenue			$	4,313					$	2,801					$	11,608					$	6,519
Operating income (loss):
Computing and Graphics			$	513					$	384					$	1,524					$	846
Enterprise, Embedded and Semi-Custom			542						141						1,217						148
All Other			(107)						(76)						(300)						(195)
Total operating income			$	948					$	449					$	2,441					$	799

Computing and Graphics

Computing and Graphics net revenue of $2.4 billion for the three months ended September 25, 2021 increased by 44%, compared to net revenue of $1.7 billion for the prior year period, primarily as a result of an 83% increase in average selling price, partially offset by a decrease in unit shipments of 23%. Computing and Graphics net revenue of $6.7 billion for the nine months ended September 25, 2021 increased by 51%, compared to net revenue of $4.5 billion for the prior year period, primarily as a result of a 56% increase in average selling price, partially offset by a decrease in unit shipments of 3%. The increase in average selling price for both periods was primarily driven by a richer mix of Ryzen, Radeon and AMD Instinct™ products. The decrease in unit shipments for both periods was primarily driven by a strategic focus on premium and higher end products in a tight supply environment.

Computing and Graphics operating income was $513 million for the three months ended September 25, 2021, compared to operating income of $384 million for the prior year period. Computing and Graphics operating income was $1.5 billion for the nine months ended September 25, 2021, compared to operating income of $846 million for the prior year period. The increase in operating income for both periods was primarily due to higher revenue which more than offset higher operating expenses. Operating expenses increased for the reasons outlined under “Expenses” below.

Enterprise, Embedded and Semi-Custom

Enterprise, Embedded and Semi-Custom net revenue of $1.9 billion for the three months ended September 25, 2021 increased by 69%, compared to net revenue of $1.1 billion for the prior year period. Enterprise, Embedded and Semi-Custom net revenue of $4.9 billion for the nine months ended September 25, 2021 increased by 137%, compared to net revenue of $2.0 billion for the prior year period. The increase for both periods was primarily driven by higher sales of our EPYC server processors and semi-custom products.

Enterprise, Embedded and Semi-Custom operating income was $542 million for the three months ended September 25, 2021 compared to operating income of $141 million for the prior year period. Enterprise, Embedded and Semi-Custom operating income was $1.2 billion for the nine months ended September 25, 2021 compared to operating income of $148 million for the prior year period. The increase in operating income for both periods was driven by higher revenue and richer product mix, partially offset by higher operating expenses. Operating expenses increased for the reasons outlined under “Expenses” below.

All Other

All Other operating loss of $107 million for the three months ended September 25, 2021 consisted of $99 million of stock-based compensation expense and $8 million of acquisition-related costs. All Other operating loss of $76 million for the prior year period consisted of stock-based compensation expense.

All Other operating loss of $300 million for the nine months ended September 25, 2021 consisted of $267 million of stock-based compensation expense and $33 million of acquisition-related costs. All Other operating loss of $195 million for the prior year period consisted of stock-based compensation expense.

International Sales

International sales as a percentage of net revenue were 67% and 72% for the three months ended September 25, 2021 and September 26, 2020, respectively. International sales as a percentage of net revenue were 72% and 77% for the nine months ended September 25, 2021 and September 26, 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												Nine Months Ended
			September 25, 2021						September 26, 2020						September 25, 2021						September 26, 2020
			(In millions except for percentages)
Net revenue			$	4,313					$	2,801					$	11,608					$	6,519
Cost of sales			2,227						1,571						6,105						3,623
Gross profit			2,086						1,230						5,503						2,896
Gross margin			48		%				44		%				47		%				44		%
Research and development			765						508						2,034						1,410
Marketing, general and administrative			376						273						1,036						687
Licensing gain			(3)						—						(8)						—
Interest expense			(7)						(11)						(26)						(38)
Other income (expense), net			62						(37)						51						(32)
Income tax provision			82						12						284						22
Equity income in investee			2						1						6						2

Gross Margin

Gross margin was 48% and 44% for the three months ended September 25, 2021 and September 26, 2020, respectively. Gross margin was 47% and 44% for the nine months ended September 25, 2021 and September 26, 2020, respectively. The increase for both periods was primarily driven by a richer mix of EPYC, Ryzen and Radeon processor sales.

Expenses

Research and Development Expenses

Research and development expenses of $765 million for the three months ended September 25, 2021 increased by $257 million, or 51%, compared to $508 million for the prior year period. Research and development expenses of $2.0 billion for the nine months ended June 26, 2021 increased by $624 million, or 44%, compared to $1.4 billion for the prior year period. The increase for both periods was primarily driven by an increase in product development costs in both the Computing and Graphics and Enterprise, Embedded and Semi-Custom segments due to an increase in headcount and higher annual employee incentives as a result of our improved financial performance.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses of $376 million for the three months ended September 25, 2021 increased by $103 million, or 38%, compared to $273 million for the prior year period. Marketing, general and administrative expenses of $1.0 billion for the nine months ended September 25, 2021 increased by $349 million, or 51%, compared to $687 million for the prior year period. The increase for both periods was primarily due to 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 of Xilinx, Inc., we incurred $8 million and $33 million of acquisition-related costs for the three and nine months ended September 25, 2021, respectively.

Licensing Gain

During the three and nine months ended September 25, 2021, we recognized $3 million and $8 million, respectively, of royalty income associated with the licensed IP to the THATIC JV, our two joint ventures with Higon Information Technology Co., Ltd., a third-party Chinese entity.

Interest Expense

Interest expense for the three months ended September 25, 2021 was $7 million compared to $11 million for the prior year period. Interest expense for the nine months ended September 25, 2021 was $26 million compared to $38 million for the prior year period. The decrease for both periods was due to lower debt balances as a result of conversions by the holders of our 2.125% Convertible Senior Notes due 2026.

Other Income (Expense), Net

Other income, net for the three months ended September 25, 2021, was $62 million compared to $37 million of Other expense, net for the prior year period. The change was primarily due to a $60 million gain from an increase in the fair value of an equity investment.

Other income, net was $51 million for the nine months ended September 25, 2021, compared to $32 million of Other expense, net for the prior year period. The change was primarily due to a $60 million gain from an increase in fair value of an equity investment and lower losses from conversion of our convertible debt of $31 million, partially offset by an impairment charge of $8 million associated with an equity investment in the first quarter of 2021.

Income Tax Provision

We recorded an income tax provision of $82 million and $12 million for the three months ended September 25, 2021 and September 26, 2020, representing effective tax rates of 8.2% and 3.0%, respectively. We recorded an income tax provision of $284 million and $22 million for the nine months ended September 25, 2021 and September 26, 2020, representing effective tax rates of 11.5% and 3.0%, respectively.

The increase in income tax expense and effective 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 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 was due to a full valuation allowance against deferred tax assets in the United States during 2020, a significant portion of which was released by us in the fourth quarter of 2020.

As of September 25, 2021, we continue 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. Certain state and foreign valuation allowance maintained is due to lack of sufficient sources of taxable income.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of September 25, 2021, our cash, cash equivalents and short-term investments were $3.6 billion, compared to $2.3 billion as of December 26, 2020. The percentage of cash, cash equivalents and short-term investments held domestically were 92% and 94% as of September 25, 2021 and December 26, 2020, respectively.

Our operating, investing and financing activities for the nine months ended September 25, 2021 compared to the prior year period are as described below:

			Nine Months Ended
			September 25, 2021						September 26, 2020
			(In millions)
Net cash provided by (used in):
Operating activities			$	2,699					$	517
Investing activities			(686)						(658)
Financing activities			(1,168)						(29)
Net increase (decrease) in cash, cash equivalents, and restricted cash			$	845					$	(170)

Our principal debt obligations were $313 million and $338 million as of September 25, 2021 and December 26, 2020, respectively.

We believe our cash, cash equivalents and short-term investments along with our Revolving Credit Facility and cash flows from operations will be sufficient to fund current and long-term operations, including capital expenditures, 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 $2.7 billion in the nine months ended September 25, 2021, primarily due to our net income of $2.2 billion, adjusted for non-cash and non-operating charges of $769 million and net cash outflows of $258 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a $504 million increase in inventories driven by an increase in product build in support of customer demand and a $284 million increase in prepaid expenses and other assets driven primarily by prepayments of long-term supply agreements, partially offset by a $526 million increase in accounts payable due to an increase in inventory purchases.

Net cash provided by operating activities was $517 million in the nine months ended September 26, 2020, primarily due to our net income of $709 million, adjusted for non-cash and non-operating charges of $538 million and net cash outflows of $730 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a $287 million increase in accounts receivable driven primarily by higher revenue in the third quarter of 2020 compared to the fourth quarter of 2019, partially offset by higher collections due to better revenue linearity in the third quarter of 2020 compared to the fourth quarter of 2019, a $310 million increase in inventories driven by an increase in product build, and a $172 million increase in prepaid expenses and other assets primarily due to an increase in vendor credits.

Investing Activities

Net cash used in investing activities was $686 million for the nine months ended September 25, 2021 which primarily consisted of $1.9 billion for purchases of short-term investments and $215 million for purchases of property and equipment, partially offset by $1.4 billion for maturities of short-term investments.

Net cash used in investing activities was $658 million for the nine months ended September 26, 2020, which primarily consisted of $530 million for purchases of short-term investments and $220 million for purchases of property and equipment, partially offset by $92 million for maturities of short-term investments.

Financing Activities

Net cash used in financing activities was $1.2 billion for the nine months ended September 25, 2021, which primarily consisted of common stock repurchases of $1.0 billion and repurchases for tax withholding on employee equity plans of $219 million, partially offset by a cash inflow of $55 million from issuance of common stock under our employee equity plans.

Net cash used in financing activities was $29 million for the nine months ended September 26, 2020, which primarily consisted of common stock repurchased for tax withholding on employee equity plans of $73 million, partially offset by proceeds from the issuance of common stock under our employee equity plans of $45 million. We borrowed $200 million short-term debt and paid off the balance during the nine months ended September 26, 2020.

Contractual Obligations

Other than the unconditional purchase commitments disclosed in Note 12—Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements, there were no significant changes outside the ordinary course of business in our contractual obligations from those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K for the fiscal year ended December 26, 2020.

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 nine months ended September 25, 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.

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.

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

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 September 25, 2021, 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 was no change in our internal controls over financial reporting for the three months ended September 25, 2021 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

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 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.

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

• 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.

• 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 and Acquisition Risks

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

• Our 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 and our Revolving Credit Facility 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.

For a more complete discussion of the material risks

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31.1						Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document.
101.SCH						XBRL Taxonomy Extension Schema Document.
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document
_____________________

SIGNATURE

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

						ADVANCED MICRO DEVICES, INC.
October 27, 2021						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