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

The statements in this report include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements and should not be relied upon as predictions of future events, as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” “anticipates,” or the negative of these words and phrases, other variations of these words and phrases or comparable terminology. The forward-looking statements relate to, among other things: possible impact of future accounting rules on AMD’s condensed consolidated financial statements; demand for AMD’s products; AMD’s strategy and expected benefits; the growth, change and competitive landscape of the markets in which AMD participates; the expectation that international sales will continue to be a significant portion of total sales in the foreseeable future; the expectation that AMD’s cash, cash equivalents, short-term investments and cash flows from operations along with our revolving credit facility and our commercial paper program will be sufficient to fund AMD’s operations, capital expenditures, commitments and strategic activities over the next 12 months and beyond; AMD’s ability to access capital markets; AMD’s expectation that based on management’s current knowledge, the potential liability related to AMD’s current litigation will not have a material adverse effect on its financial positions, results of operations or cash flows; anticipated ongoing and increased costs related to enhancing and implementing information security controls; the expectation that revenue allocated to remaining performance obligations that are unsatisfied will be recognized in the next 12 months; that a small number of customers will continue to account for a substantial part of AMD’s revenue and receivables in the future; the expected implications from the development of the legal and regulatory environment relating to emerging technologies, such as AI; AMD’s expectation to utilize the cloud service capacity in its operations or assign the capacity; AMD’s ability to achieve its corporate responsibility initiatives; compliance costs associated with new or developing sustainability laws and requirements; expected future AI technology trends and developments; the expected benefits of AMD’s acquisitions; the extent of impact of export restrictions imposed by the U.S. on our business; and AMD’s expectation to fund stock repurchases through cash generated from operations. 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 in “Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, and such other risks and uncertainties as set forth below in this report or detailed in our other Securities and Exchange Commission (SEC) reports and filings. We assume no obligation to update forward-looking statements.

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

AMD, the AMD Arrow logo, AMD Instinct, EPYC, Radeon, Ryzen, Xilinx and combinations thereof are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and are used to identify companies and products and may be trademarks of their respective owners. “Zen” is a codename 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 27, 2025 and December 28, 2024, and for each of the three years for the period ended December 27, 2025 as filed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2025.

Overview and Recent Developments

We are a global semiconductor company primarily offering:

• Artificial Intelligence (AI) accelerators, microprocessors (CPUs) for servers, graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), AI Network Interface Cards (AI NICs), Field Programmable Gate Arrays (FPGAs) and adaptive System-on-Chip (SoC) products for data centers;

• CPUs, APUs, chipsets for desktops and notebooks, discrete GPUs, semi-custom SoC products and development services; and

• embedded CPUs, APUs, FPGAs, System on Modules (SOMs), and adaptive SoC products.

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

In this section, we will describe the general financial condition and the results of operations of Advanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, “we”, “us,” “our”, “AMD” or the “Company”), including a discussion of our results of operations for the three months ended March 28, 2026 compared to the prior year period and an analysis of changes in our financial condition.

Net revenue for the three months ended March 28, 2026 was $10.3 billion, a 38% increase compared to the prior year period. The increase in net revenue was driven by an increase in Data Center segment revenue primarily driven by strong demand for our 5th generation AMD EPYC™ processors and AMD Instinct™ MI350 Series GPUs, an increase in Client and Gaming segment revenue, primarily driven by strong demand for our AMD Ryzen™ processors and an increase in Embedded segment revenue as certain end market demand increased.

Gross margin for the three months ended March 28, 2026 was 53% compared to gross margin of 50% for the prior year period, a 3% increase primarily driven by a favorable product mix, including higher Data Center segment revenue.

Operating income for the three months ended March 28, 2026 was $1.5 billion compared to operating income of $806 million for the prior year period. The increase in operating income was due to higher gross profit, partially offset by higher operating expenses. Net income for the three months ended March 28, 2026 was $1.4 billion compared to net income of $709 million for the prior year period. The increase in net income was primarily driven by higher operating income.

As of March 28, 2026, our cash, cash equivalents and short-term investments were $12.3 billion compared to $10.6 billion as of December 27, 2025. During the three months ended March 28, 2026, we generated $3.0 billion of cash from operating activities and we returned $221 million to stockholders through the repurchase of common stock under our stock repurchase program (Repurchase Program).

In February 2026, we amended a master purchase agreement with Meta Platforms, Inc. (Meta) and Meta agreed to deploy up to 6 gigawatts of AMD GPUs, with the first gigawatt of capacity powered by custom AMD Instinct MI450-based GPU and 6th Gen AMD EPYC™ CPUs. Concurrent with the agreement, we issued to Meta a warrant to purchase up to 160 million shares of AMD’s common stock at an exercise price of $0.01 per share. The warrant will vest in tranches based on AMD Instinct GPU purchase milestones by Meta, or its affiliates, or indirectly through authorized third parties and achievement of specified AMD stock price targets. Each vested tranche is further subject to the fulfillment of certain other technical and commercial conditions by Meta prior to exercisability. The warrant is exercisable through February 23, 2031. As of March 28, 2026, none of the warrant shares had vested or become exercisable, and the warrant had no impact on our Condensed Consolidated Financial Statements for the three months then ended.

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our 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 consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related to our revenue, inventories, goodwill, long-lived and intangible assets, business combination accounting 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.

There have been no significant changes for the three months ended March 28, 2026 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 27, 2025.

Results of Continuing Operations

Each of the Client and Gaming businesses do not qualify as a separate reportable operating segment, however, we continue to separately disclose revenues for each business. 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
															March 28, 2026						March 29, 2025
															(In millions)
Net revenue:
Data Center															$	5,775					$	3,674
Client and Gaming
Client															$	2,885					$	2,294
Gaming															720						647
Total Client and Gaming															3,605						2,941
Embedded															873						823
Total net revenue															$	10,253					$	7,438
Cost of sales and operating expenses:
Data Center															$	4,176					$	2,742
Client and Gaming															3,030						2,445
Embedded															535						495
All other															1,036						950
Total cost of sales and operating expenses															$	8,777					$	6,632
Operating income (loss):
Data Center															$	1,599					$	932
Client and Gaming															575						496
Embedded															338						328
All other															(1,036)						(950)
Total operating income															$	1,476					$	806

Data Center

Data Center net revenue of $5.8 billion for the three months ended March 28, 2026 increased by 57%, compared to net revenue of $3.7 billion for the prior year period. The increase was primarily driven by strong demand for our 5th generation AMD EPYC™ processors and AMD Instinct™ MI350 Series GPUs.

Data Center operating income was $1.6 billion for the three months ended March 28, 2026, compared to operating income of $932 million for the prior year period. The increase in operating income was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.

Client and Gaming

Client and Gaming net revenue of $3.6 billion for the three months ended March 28, 2026 increased by 23%, compared to net revenue of $2.9 billion for the prior year period.

Client net revenue of $2.9 billion for the three months ended March 28, 2026 increased by 26% compared to net revenue of $2.3 billion for the prior year period, primarily driven by a 25% increase in unit shipments and a 1% increase in average selling price primarily of AMD Ryzen mobile processors.

Gaming net revenue of $720 million for the three months ended March 28, 2026 increased by 11% compared to net revenue of $647 million for the prior year period, primarily driven by higher demand of our RadeonTM GPUs partially offset by lower semi-custom revenue.

Client and Gaming operating income was $575 million for the three months ended March 28, 2026, compared to operating income of $496 million for the prior year period. The increase in operating income was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.

Embedded

Embedded net revenue of $873 million for the three months ended March 28, 2026 increased by 6%, compared to net revenue of $823 million for the prior year period. Net revenue increased as demand strengthened across several end markets.

Embedded operating income was $338 million for the three months ended March 28, 2026, compared to operating income of $328 million for the prior year period. The increase in operating income was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.

All Other

All Other operating loss of $1.0 billion for the three months ended March 28, 2026 primarily consisted of $551 million of amortization of acquisition-related intangibles and $487 million of stock-based compensation expense. All Other operating loss of $950 million for the three months ended March 29, 2025 primarily consisted of $567 million of amortization of acquisition-related intangibles and $364 million of stock-based compensation expense.

International Sales

International sales as a percentage of net revenue were 74% and 66% for the three months ended March 28, 2026 and March 29, 2025, 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.

Gross Margin and Expenses

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

									Three Months Ended
															March 28, 2026						March 29, 2025
															In millions, except percentages
Net revenue															$	10,253					$	7,438
Cost of sales															4,576						3,451
Amortization of acquisition-related intangibles															261						251
Gross profit															5,416						3,736
Gross margin															53			%			50			%
Research and development															2,397						1,728
Marketing, general and administrative															1,253						886
Amortization of acquisition-related intangibles															290						316
Interest expense															(37)						(20)
Other income (expense), net															165						39
Income tax provision															238						123
Income from discontinued operations, net of tax															11						—

Gross Margin

Gross margin was 53% and 50% for the three months ended March 28, 2026 and March 29, 2025, respectively. The increase in gross margin was primarily due to a favorable product mix, including higher Data Center segment revenue.

Expenses

Research and Development Expenses

Research and development expenses of $2.4 billion for the three months ended March 28, 2026 increased by $669 million, or 39%, compared to $1.7 billion for the prior year period. The increase was due to higher employee-related costs from an increase in headcount in support of our continued focus on our AI strategy and long-term growth opportunities.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses of $1.3 billion for the three months ended March 28, 2026 increased by $367 million, or 41%, compared to $886 million for the prior year period. The increase was primarily due to an increase in go‑to‑market activities to support our revenue growth.

Amortization of Acquisition-Related Intangibles

Amortization of acquisition-related intangibles of $551 million for the three months ended March 28, 2026 decreased by $16 million, or 3%, compared to $567 million for the prior year period. The decrease was primarily due to certain acquisition-related intangibles that were fully amortized in the prior fiscal year.

Interest Expense

Interest expense for the three months ended March 28, 2026 and March 29, 2025 was $37 million and $20 million, respectively. The increase was due to the issuance of $1.5 billion in aggregate principal amount of 4.212% Notes and 4.319% Notes on March 24, 2025.

Other Income (Expense), Net

Other income (expense), net primarily consists of interest income from short-term investments, changes in valuation of long-term investments, and foreign currency transaction gains and losses.

Other income (expense), net for the three months ended March 28, 2026 was $165 million, an increase of $126 million, or 323%, compared to $39 million for the prior year period. The increase was primarily due to unrealized gains from long-term investments and interest income from short-term investments.

Income Taxes

We determine income taxes for interim reporting periods by applying our estimated annual effective tax rate to the year-to-date results and adjusted for tax items discrete to each period.

For the three months ended March 28, 2026, we recorded an income tax provision from continuing operations of $238 million representing an effective tax rate of 14.8%. The difference between the U.S. federal statutory tax rate of 21% and our estimated annual effective tax rate was primarily due to the income tax benefit from foreign-derived deduction eligible income (FDDEI), formerly FDII, and research and development (R&D) tax credits.

For the three months ended March 29, 2025, we recorded an income tax provision from continuing operations of $123 million representing an effective tax rate of 14.8%. The difference between the U.S. federal statutory tax rate of 21% and our estimated annual effective tax rate was primarily due to the income tax benefit from foreign-derived intangible income (FDII) and research and development (R&D) tax credits, partially offset by the tax rate detriment from foreign earnings.

Results of Discontinued Operations

Net income from discontinued operations for the three months ended March 28, 2026 of $11 million included measurement period adjustments related to the ZT Systems acquisition and post-close adjustments related to the sale of the ZT Manufacturing business.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of March 28, 2026 and December 27, 2025, our cash, cash equivalents and short-term investments were $12.3 billion and $10.6 billion, respectively.

Our operating, investing and financing activities for the three months ended March 28, 2026 compared to the prior year period are as described below:

			Three Months Ended
			March 28, 2026						March 29, 2025
			(In millions)
Net cash provided by (used in):
Operating activities of continuing operations			$	2,955					$	939
Investing activities of continuing operations			(2,565)						(357)
Financing activities of continuing operations			(350)						1,666
Net increase in cash, cash equivalents and restricted cash			$	40					$	2,248

As of March 28, 2026 and December 27, 2025, our aggregate principal short-term and long-term debt obligations were $3.3 billion.

We have $3.0 billion available under an unsecured revolving credit facility that expires on April 29, 2027. No funds were drawn from this credit facility during the three months ended March 28, 2026.

We also have a commercial paper program to issue unsecured commercial paper notes up to a maximum principal amount outstanding, at any time, of $3.0 billion, with a maturity of up to 397 days from the date of issue. We had no commercial paper outstanding as of March 28, 2026.

As of March 28, 2026, we had unconditional commitments of approximately $25.7 billion, of which $18.3 billion are for the remainder of fiscal year 2026. Our contractual obligations and purchase commitments relate primarily to our obligations to purchase wafers, substrates and components from third parties and future payments related to multi-year cloud service provider arrangements, and certain software and technology licenses. We work continually with our suppliers and partners on the timing of payments and deliveries of purchase commitments, taking into account business conditions. We also have commitments for leases that have commenced for approximately $805 million and leases that have not yet commenced for $4.4 billion. In addition, as of March 28, 2026, we provided lease guarantees with maximum potential amount of future payments of $4.1 billion. For additional information on lease guarantees and commitments, refer to Notes 8 and 10 of the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q).

We believe our cash, cash equivalents, short-term investments and cash flows from operations along with our revolving credit facility and commercial paper program will be sufficient to fund operations, capital expenditures, commitments and strategic activities 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 of continuing operations was $3.0 billion in the three months ended March 28, 2026, primarily due to our net income of $1.4 billion, adjusted for non-cash and non-operating charges of $1.1 billion and net cash inflows of $456 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a $713 million increase in accrued and other liabilities driven primarily by higher customer-related accruals and a $280 million reduction in accounts receivable driven primarily by customer payments, partially offset by a $308 million increase in prepaid expenses and other assets primarily by prepayments of supply agreements.

Net cash provided by operating activities was $939 million in the three months ended March 29, 2025, primarily due to our net income of $709 million, adjusted for non-cash and non-operating charges of $1.0 billion and net cash outflows of $700 million from changes in our operating assets and liabilities. The primary drivers of the change in operating assets and liabilities were a $748 million decrease in accounts receivable due to customer payments, and a $682 million increase in inventory primarily to support the continued ramp of Data Center products in advanced process technology nodes.

Investing Activities

Net cash used in investing activities of continuing operations was $2.6 billion for the three months ended March 28, 2026, which primarily consisted of purchases of short-term investments of $2.5 billion, purchases of property and equipment of $389 million, and purchases of long-term investments of $409 million, partially offset by $778 million of proceeds from the maturity and sale of short-term investments.

Net cash used in investing activities was $357 million for the three months ended March 29, 2025, which primarily consisted of cash used in the purchases of short-term investments of $304 million, purchases of strategic investments of $239 million, and purchases of property and equipment of $212 million, partially offset by $398 million of proceeds from the maturity and sale of short-term investments.

Financing Activities

Net cash used in financing activities of continuing operations was $350 million for the three months ended March 28, 2026, which primarily consisted of stock repurchases of $221 million and stock repurchases for tax withholding on employee equity plans of $134 million.

Net cash provided by financing activities was $1.7 billion for the three months ended March 29, 2025, which primarily consisted of cash received from the issuance of senior notes for $1.5 billion and commercial paper of $950 million, partially offset by stock repurchases of $749 million and stock repurchases for tax withholding on employee equity plans of $30 million.