Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

See accompanying notes.

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
	(In millions)
Net income	$	923	$	390	$	2,188	$	709
Other comprehensive income (loss), net of tax:
Net change in unrealized gains (losses) on cash flow hedges	(7)		9		(17)		5
Total comprehensive income	$	916	$	399	$	2,171	$	714

See accompanying notes.

Advanced Micro Devices, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 25, 2021		December 26, 2020
	(In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	2,440	$	1,595
Short-term investments	1,168		695
Accounts receivable, net	2,224		2,066
Inventories	1,902		1,399
Receivables from related parties	5		10
Prepaid expenses and other current assets	249		378

Total current assets	7,988		6,143
Property and equipment, net	717		641
Operating lease right-of-use assets	284		208
Goodwill	289		289
Investment: equity method	69		63
Deferred tax assets	1,036		1,245
Other non-current assets	770		373
Total assets	$	11,153	$	8,962
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,048	$	468
Payables to related parties	36		78
Accrued liabilities	2,048		1,796
Short-term debt, net	312		—
Other current liabilities	120		75
Total current liabilities	3,564		2,417
Long-term debt, net	1		330
Long-term operating lease liabilities	269		201
Other long-term liabilities	183		177
Commitments and Contingencies (See Note 12)
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,230 and 1,217; shares outstanding: 1,212 and 1,211	12		12
Additional paid-in capital	10,905		10,544
Treasury stock, at cost (shares held: 18 and 6)	(1,356)		(131)
Accumulated deficit	(2,425)		(4,605)
Accumulated other comprehensive income	—		17
Total stockholders’ equity	7,136		5,837
Total liabilities and stockholders’ equity	$	11,153	$	8,962

See accompanying notes.

Advanced Micro Devices, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	September 25, 2021		September 26, 2020
	(In millions)
Cash flows from operating activities:
Net income	$	2,188	$	709
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	289		222
Stock-based compensation	267		195
Amortization of debt discount and issuance costs	4		12
Amortization of operating lease right-of-use assets	40		31
Loss on debt conversion	7		38
Loss on sale or disposal of property and equipment	19		28
Deferred income taxes	201		1
(Gains) losses on equity investments, net	(52)		(1)
Other	(6)		12
Changes in operating assets and liabilities:
Accounts receivable, net	(158)		(287)
Inventories	(504)		(310)
Receivables from related parties	5		16
Prepaid expenses and other assets	(284)		(172)
Payables to related parties	(42)		(98)
Accounts payable	526		(232)
Accrued and other liabilities	199		353
Net cash provided by operating activities	2,699		517
Cash flows from investing activities:
Purchases of property and equipment	(215)		(220)
Purchases of short-term investments	(1,901)		(530)
Proceeds from maturity of short-term investments	1,428		92
Other	2		—
Net cash used in investing activities	(686)		(658)
Cash flows from financing activities:
Proceeds from short-term debt borrowing	—		200
Repayment of short-term debt borrowing	—		(200)
Proceeds from sales of common stock through employee equity plans	55		45
Repurchases of common stock	(1,004)		—
Common stock repurchases for tax withholding on employee equity plans	(219)		(73)

Other	—		(1)
Net cash used in financing activities	(1,168)		(29)
Net increase (decrease) in cash, cash equivalents, and restricted cash	845		(170)
Cash, cash equivalents, and restricted cash at beginning of period	1,595		1,470
Cash, cash equivalents, and restricted cash at end of period	$	2,440	$	1,300
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	$	74	$	36
Issuance of common stock to settle convertible debt	$	25	$	156


Transfer of assets for acquisition of property and equipment	$	37	$	57
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities	$	128	$	40
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	2,440	$	1,296
Restricted cash included in Prepaid expenses and other current assets	—		4
Total cash, cash equivalents, and restricted cash	$	2,440	$	1,300

See accompanying notes.

Advanced Micro Devices

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
	(In millions)
Capital stock:
Common stock
Balance, beginning of period	$	12	$	12	$	12	$	12



Balance, end of period	$	12	$	12	$	12	$	12
Additional paid-in capital
Balance, beginning of period	$	10,795	$	10,127	$	10,544	$	9,963
Common stock issued under employee equity plans	4		3		55		45
Stock-based compensation	99		76		267		195
Issuance of common stock to settle convertible debt	—		156		25		156
Issuance of common stock warrant	7		—		14		3

Balance, end of period	$	10,905	$	10,362	$	10,905	$	10,362
Treasury stock
Balance, beginning of period	$	(401)	$	(54)	$	(131)	$	(53)

Repurchases of common stock	(750)		—		(1,006)		—
Common stock repurchases for tax withholding on employee equity plans	(205)		(72)		(219)		(73)
Balance, end of period	$	(1,356)	$	(126)	$	(1,356)	$	(126)

Accumulated deficit:
Balance, beginning of period	$	(3,348)	$	(6,776)	$	(4,605)	$	(7,095)
Cumulative effect of adoption of accounting standard	—		—		(8)		709
Net income	923		390		2,188		—
Balance, end of period	$	(2,425)	$	(6,386)	$	(2,425)	$	(6,386)

Accumulated other comprehensive income (loss):
Balance, beginning of period	$	7	$	(4)	$	17	$	—
Other comprehensive income (loss)	(7)		9		(17)		5
Balance, end of period	$	—	$	5	$	—	$	5

Total stockholders' equity	$	7,136	$	3,867	$	7,136	$	3,867

See accompanying notes.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – The Company

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

NOTE 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 nine months ended September 25, 2021 shown in this report are not necessarily indicative of results to be expected for the full year ending December 25, 2021 or any other future period. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and 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. Certain prior period amounts have been reclassified to conform to the current period presentation.

The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December. The three and nine months ended September 25, 2021 and September 26, 2020 each consisted of 13 weeks and 39 weeks, respectively.

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.

NOTE 3 – Supplemental Financial Statement Information

Short-term Investments


	September 25, 2021		December 26, 2020
	(In millions)
Commercial paper	$	974	$	295
Time deposits	194		400
Total short-term investments	$	1,168	$	695

Accounts Receivable, net

As of September 25, 2021 and December 26, 2020, Accounts receivable, net included unbilled accounts receivable of $226 million and $123 million, respectively. Unbilled accounts receivables primarily represent work completed on development services and on custom products for which revenue has been recognized but not yet invoiced. All unbilled accounts receivable are expected to be billed and collected within 12 months.

Inventories


	September 25, 2021		December 26, 2020
	(In millions)
Raw materials	$	85	$	93
Work in process	1,738		1,139
Finished goods	79		167
Total inventories	$	1,902	$	1,399

Property and Equipment, net


	September 25, 2021		December 26, 2020
	(In millions)
Leasehold improvements	$	187	$	208
Equipment	1,410		1,209
Construction in progress	172		136
Property and equipment, gross	1,769		1,553
Accumulated depreciation	(1,052)		(912)
Total property and equipment, net	$	717	$	641

Other Non-Current Assets


	September 25, 2021		December 26, 2020
	(In millions)
Software technology and licenses, net	$	203	$	229
Prepaid long-term supply agreements	355		—
Other	212		144
Total other non-current assets	$	770	$	373

Prepaid long-term supply agreements relate to payments made to vendors to secure long-term supply capacity.

Accrued Liabilities


	September 25, 2021		December 26, 2020
	(In millions)
Accrued marketing programs and advertising expenses	$	907	$	839
Accrued compensation and benefits	567		513
Other accrued and current liabilities	574		444
Total accrued liabilities	$	2,048	$	1,796

Revenue

Revenue allocated to remaining performance obligations that were unsatisfied (or partially unsatisfied) as of September 25, 2021 was $241 million, which may include amounts received from customers but not yet earned and amounts that will be invoiced and recognized as revenue in future periods associated with any combination of development services, intellectual property (“IP”) licensing and product revenue. The Company expects to recognize $151 million of revenue allocated to remaining performance obligations in the next 12 months. The revenue allocated to remaining performance obligations does not include amounts which have an original expected duration of one year or less.

Revenue recognized over time associated with custom products and development services accounted for approximately 22% of the Company’s revenue for both the three and nine months ended September 25, 2021 and 25% and 15% for the three and nine months ended September 26, 2020, respectively.

NOTE 4 – Related Parties — Equity Joint Ventures

ATMP Joint Ventures

The Company holds a 15% equity interest in two 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 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 statements of operations.

The Company’s purchases from the ATMP JV during the three and nine months ended September 25, 2021 amounted to $259 million and $775 million, respectively. The Company’s purchases from the ATMP JV during the three and nine months ended September 26, 2020 amounted to $204 million and $559 million, respectively. As of September 25, 2021 and December 26, 2020, the amounts payable to the ATMP JV were $36 million and $78 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 nine months ended September 25, 2021 amounted to $6 million and $25 million, respectively. The Company’s resales to the ATMP JV during the three and nine months ended September 26, 2020 amounted to $3 million and $18 million, respectively. As of September 25, 2021 and December 26, 2020, the Company’s receivables from the ATMP JV were $5 million and $10 million, respectively, and were included in Receivables from related parties on the Company’s condensed consolidated balance sheets.

During the three and nine months ended September 25, 2021, the Company recorded a gain of $2 million and $6 million in Equity income in investee on its condensed consolidated statements of operations, respectively. As of September 25, 2021 and December 26, 2020, the carrying value of the Company’s investment in the ATMP JV was $69 million and $63 million, respectively.

THATIC Joint Ventures

The Company holds equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. As of both September 25, 2021 and December 26, 2020, the carrying value of the investment was 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 nine months ended September 25, 2021, the Company recognized $3 million and $8 million of licensing gain from royalty income under the agreement, respectively. As of both September 25, 2021 and December 26, 2020, the Company had no 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 5 – Debt and Revolving Credit Facility

Debt

The Company’s total debt as of September 25, 2021 and December 26, 2020 consisted of the following:


	September 25, 2021		December 26, 2020
	(In millions)
7.50% Senior Notes Due August 2022 (7.50% Notes)	$	312	$	312
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)	1		26

Total debt (principal amount)	313		338
Unamortized debt discount and issuance costs	—		(8)
Total debt (net)	313		330
Less: short-term debt	(312)		—
Total long-term debt	$	1	$	330

During the nine months ended September 25, 2021, holders of the 2.125% Notes converted $25 million principal amount of notes in exchange for 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 $7 million from these conversions in Other income (expense), net on its condensed consolidated statements of operations.

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 September 25, 2021, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants. As of September 25, 2021, the Company had $14 million of letters of credit outstanding under the Revolving Credit Facility.

NOTE 6 – Financial Instruments

Fair Value Measurements

Financial Instruments Recorded at Fair Value on a Recurring Basis


	September 25, 2021		December 26, 2020
	Level 2(1)		Level 2(1)
Short-term investments	(in millions)
Commercial paper	$	974	$	295
Time deposits	194		400
Total	$	1,168	$	695


(1)						Level 2 fair value estimates are based on quoted prices for identical or comparable instruments in markets that are not active, comparable instruments in active markets or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

During the three months ended September 25, 2021, the Company recognized a $60 million gain, in Other income (expense), due to an increase in the fair value of an equity investment. This equity investment is classified as Level 1 as it is valued using quoted prices for identical instruments in active markets. As of September 25, 2021, the fair value of this equity investment, included in Other non-current assets on the consolidated balance sheet, was $63 million.

Financial Instruments Not Recorded at Fair Value

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


	September 25, 2021				December 26, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)

Short-term debt, net	$	312	$	332	$	—	$	—
Long-term debt, net	1		15		330		642

The estimated fair value of the Company’s 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.

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

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 September 25, 2021 and December 26, 2020, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was $888 million and $501 million, respectively. The fair value of these contracts was not material as of September 25, 2021 and December 26, 2020.

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 September 25, 2021 and December 26, 2020, the notional value of these outstanding contracts was $403 million and $254 million, respectively. The fair value of these contracts was not material as of September 25, 2021 and December 26, 2020.

NOTE 7 – Accumulated Other Comprehensive Income (Loss)

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


	Three Months Ended				Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Gains (losses) on cash flow hedges:	(In millions)
Beginning balance	$	7	$	(4)	$	17	$	—
Net unrealized gains (losses) arising during the period	(6)		11		6		(1)
Net (gains) losses reclassified into income during the period	(4)		(2)		(23)		6
Tax effect	3		—		—		—
Total other comprehensive income (loss)	(7)		9		(17)		5
Ending balance	$	—	$	5	$	—	$	5

NOTE 8 – Earnings Per Share

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


	Three Months Ended				Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
	(In millions, except per share amounts)
Numerator
Net income for basic earnings per share	$	923	$	390	$	2,188	$	709
Effect of potentially dilutive shares:
Interest expense related to the 2.125% Notes	—		1		—		4
Net income for diluted earnings per share	$	923	$	391	$	2,188	$	713
Denominator
Basic weighted average shares	1,214		1,184		1,214		1,176
Effect of potentially dilutive shares:
Employee equity plans and warrants	16		20		17		21
2.125% Notes	—		11		—		11
Diluted weighted average shares	1,230		1,215		1,231		1,208
Earnings per share:
Basic	$	0.76	$	0.33	$	1.80	$	0.60
Diluted	$	0.75	$	0.32	$	1.78	$	0.59

NOTE 9 – Common Stock and Employee Equity Plans

Common Stock

Shares of common stock outstanding were as follows:


	Three Months Ended		Nine Months Ended
	September 25, 2021	September 26, 2020	September 25, 2021	September 26, 2020
	(In millions)
Balance, beginning of period	1,213	1,174	1,211	1,170
Common stock issued under employee equity plans, net of tax withholding	6	9	8	13
Common stock repurchases for tax withholding on equity awards	—	(1)	—	(1)
Issuance of common stock to settle convertible debt	—	20	3	20
Repurchases of common stock	(7)	—	(10)	—
Balance, end of period	1,212	1,202	1,212	1,202

Stock Repurchase Program

In May 2021, the Company’s Board of Directors approved a stock repurchase program authorizing up to $4 billion of repurchases of the Company’s outstanding common stock (the Repurchase Program). During the three and nine months ended September 25, 2021, the Company repurchased 7.2 million and 10.4 million shares of its common stock under the Repurchase Program for $750 million and $1 billion, respectively. As of September 25, 2021, $3 billion remains available for future stock repurchases under this program. The 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.

Stock-based Compensation

Stock-based compensation expense was as follows:


	Three Months Ended				Nine Months Ended
	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
	(In millions)
Cost of sales	$	2	$	1	$	4	$	5
Research and development	63		48		171		122
Marketing, general and administrative	34		27		92		68
Total stock-based compensation expense before income taxes	99		76		267		195
Income tax benefit	(16)		—		(43)		—
Total stock-based compensation expense after income taxes	$	83	$	76	$	224	$	195

NOTE 10 – Income Taxes

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

The increase in income tax expense and effective tax rate was due to significantly higher income in 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 against deferred tax assets in the United States during 2020, a significant portion of which was released by the Company in the fourth quarter of 2020.

The Company’s effective tax rate for the three and nine months ended September 25, 2021 and the three and nine months ended September 26, 2020 was lower than the United States federal statutory rate primarily due to the tax benefits recognized for the three and nine months ended September 25, 2021 discussed above and due to the maintenance of a full valuation allowance against deferred tax assets in the United States during the three and nine months ended September 26, 2020.

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

NOTE 11 – Segment Reporting

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

the Computing and Graphics segment, which primarily includes desktop and notebook microprocessors, accelerated processing units that integrate microprocessors and graphics, chipsets, discrete graphics processing units (GPUs), data center and professional GPUs and development services. 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 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				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 (1)	(107)		(76)		(300)		(195)
Total operating income	$	948	$	449	$	2,441	$	799


(1)			For the three and nine months ended September 25, 2021, all other operating losses included $99 million and $267 million of stock-based compensation expense and $8 million and $33 million of acquisition-related costs, respectively. For the three and nine months ended September 26, 2020, all other operating losses were related to stock-based compensation expense.

NOTE 12 – 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.

Total future unconditional purchase commitments as of September 25, 2021 were as follows:


Year	(In millions)
Remainder of 2021	$	2,162
2022	2,477
2023	728
2024	658
2025	153
2026 and thereafter	388
Total unconditional purchase commitments	$	6,566

Contingencies

Quarterhill Inc. Litigation

On July 2, 2018, three entities named Aquila Innovations, Inc. (Aquila), Collabo Innovations, Inc. (Collabo), and Polaris Innovations, Ltd. (Polaris), filed separate patent infringement complaints against the Company in the United States District Court for the Western District of Texas. Aquila alleges that 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 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 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 Aquila cases pending the completion of inter partes review of each of the patents-in-suit in those cases by the Patent Trial and Appeal Board. On February 22, 2021, February 26, 2021, and March 10, 2021, the Patent Trial and Appeal Board issued final written decisions in inter partes reviews invalidating all asserted claims of the remaining Polaris and Aquila patents. On May 10, 2021, Aquila filed a notice of appeal to the Court of Appeals for the Federal Circuit for the IPR decision regarding U.S. Patent No. 6,895,519. On April 30, 2021, Polaris filed a notice of appeal to the Court of 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 underway.

Monterey Research Litigation

On 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). Monterey Research seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against the Company. On January 22, 2020, the Company filed a motion to dismiss part of Monterey Research’s complaint. On February 5, 2020, Monterey Research filed an amended complaint. On February 19, 2020, the Company filed a renewed motion to dismiss part of Monterey Research’s complaint. On October 13, 2020, the Court granted in part, and denied in part, the Company’s renewed motion to dismiss. On October 27, 2020, the Company filed its answer to Monterey’s complaint and also filed counterclaims based on Monterey’s breach of the parties’ pre-suit non-disclosure agreement. On December 1, 2020, Monterey filed a motion to dismiss the Company’s counterclaims. On January 5, 2021, the Court granted the Company’s motion to stay the litigation pending inter partes review of the patents-in-suit by the Patent Trial and Appeals Board.

On August 12, 2021, Monterey filed 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 memory controllers, three patents (8,572,297, 7,609,799, and 7,899,145) related to circuit designs, and 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 both complaints, Monterey Research seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against the Company. On October 22, 2021, Monterey Research filed an amended complaint in Case. No. 6:21-cv-00840 withdrawing its infringement claims for the ’776 and ’303 patents, and asserting an additional infringement claim for a patent related to circuit design (8,103,497).

City of Pontiac Police and Fire Retirement System Litigation

On September 29, 2020, the City of Pontiac Police and Fire Retirement System, an AMD shareholder, filed a shareholder derivative complaint (the “Complaint”) against AMD and the members of its Board of Directors (collectively, “Defendants”) in the United States District Court for the Northern District of California. See City of Pontiac Police and Fire Retirement System v. Caldwell, et al., No. 5:20-cv-6794 (N.D. Cal.). The Complaint alleges that Defendants breached their fiduciary duties, violated Section 14(a) of the Exchange Act of 1934, and were unjustly enriched by misrepresenting the Company’s commitment to diversity, particularly with respect to the composition of the membership of AMD’s Board of Directors and senior leadership team. On December 18, 2020, Defendants filed a motion to dismiss the Complaint. On February 12, 2021, Plaintiff filed an opposition to Defendants’ motion to dismiss, and on March 12, 2021, Defendants filed a reply brief in support of the motion to dismiss. On July 1, 2021, the Court granted Defendants’ motion to dismiss, without prejudice. On August 2, 2021, the parties filed a joint stipulation to dismiss the case with prejudice, and the court approved the joint stipulation on August 3, 2021.

Future Link Systems Litigation

On December 21, 2020, Future Link Systems, LLC filed a patent infringement complaint against the Company in the United States District Court for the Western District of Texas. Future Link Systems alleges that the Company infringes three U.S. patents: 7,983,888 (related to simulated PCI express circuitry); 6,363,466 (related to out of order data transactions); and 6,622,108 (related to interconnect testing). Future Link Systems seeks unspecified

monetary damages, enhanced damages, interest, fees, expenses, costs, and injunctive relief against the Company. On March 22, 2021, the Company filed its answer to Future Link Systems’ complaint and also filed counterclaims based on Future Link Systems’ breach of the parties’ pre-suit non-disclosure agreement. On April 12, 2021, Future Link Systems filed its answer to the Company’s counterclaims. On October 12, 2021, the Court granted AMD’s motion to transfer the case to Austin, Texas. On October 14, 2021, the Court issued an order construing certain terms in the asserted patents.

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.

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 13 – Pending Acquisition

On October 26, 2020, the Company entered into an Agreement and Plan of Merger (the Merger Agreement), with Thrones Merger Sub, Inc., a wholly-owned subsidiary of the Company (Merger sub), and Xilinx, Inc. (Xilinx), whereby Merger Sub will merge with and into Xilinx (the Merger), with Xilinx surviving such Merger as a wholly-owned subsidiary of the Company. Under the Merger Agreement, at the effective time of the Merger (the Effective Time), each share of common stock of Xilinx (Xilinx Common Stock) issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of Xilinx Common Stock held directly by the Company or Merger Sub) will be converted into the right to receive 1.7234 fully paid and non-assessable shares of common stock of the Company and, if applicable, cash in lieu of fractional shares, subject to any applicable withholding. As of the signing of the Merger Agreement, the transaction was valued at $35 billion. The 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. The Merger is currently expected to occur by the end of calendar year 2021.

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