ADVANCED MICRO DEVICES INC

Previous wording

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; 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 Agreement) made available to AMD and certain of its subsidiaries, our commercial paper program, and our cash flows from operations will be sufficient to fund AMD’s operations including capital expenditures and purchase commitments and debt payments over the next 12 months and beyond; AMD’s ability to access capital markets; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; 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 operation or cash flows; 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 in the next 12 months; a small number of customers will continue to account for a substantial part of AMD’s revenue in the future; the expected implications from the development of the legal and regulatory environment relating to emerging technologies, such as AI; AMD’s ability to achieve its corporate responsibility initiatives; expected future AI trends and developments; and AMD expects to fund stock repurchases through cash generated from operations. For a discussion of the factors that could cause actual r…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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; 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 made available to AMD and certain of its subsidiaries, our commercial paper program, and our cash flows from operations will be sufficient to fund AMD’s operations including capital expenditures and purchase commitments over the next 12 months and beyond; AMD’s ability to access capital markets; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; 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 operation or cash flows; 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 in the next 12 months; a small number of customers will continue to account for a substantial part of AMD’s revenue in the future; the expected implications from the development of the legal and regulatory environment relating to emerging technologies, such as AI; AMD’s ability to achieve its corporate responsibility initiatives; expected future AI trends and developments; AMD’s acquisition of Silo AI Oy is expected to close in the second half of fiscal year 2024; and AMD expects to fund stock repurchases through cash generated from operations. For a discussio…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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 months ended March 30, 2024 compared to the prior year period and an analysis of changes in our financial condition.

Current wording

In this section, we will describe the general financial condition and the results of operations of Advanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, “us,” “our” or “AMD”), including a discussion of our results of operations for the three and six months ended June 29, 2024 compared to the prior year period and an analysis of changes in our financial condition.

Previous wording

Net revenue for the three months ended March 30, 2024 was $5.5 billion, a 2% increase compared to the prior year period. The increase in net revenue was driven by an increase in Data Center segment revenue from higher sales of AMD Instinct™ GPUs and 4th Gen AMD EPYC™ CPUs, and an increase in Client segment revenue primarily driven by Ryzen™ 8000 Series processor sales, partially offset by a decrease in Gaming segment revenue primarily due to a decrease in semi-custom revenue and lower Radeon™ GPU sales, and a decrease in Embedded segment revenue as customers continued to manage their inventory levels.

Current wording

Net revenue for the three months ended June 29, 2024 was $5.8 billion, a 9% 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 the steep ramp of AMD Instinct™ GPU shipments and strong growth in 4th Gen AMD EPYC™ CPU sales, and an increase in Client segment revenue primarily driven by higher sales of AMD Ryzen™ processors, partially offset by a decrease in Gaming segment revenue primarily due to lower semi-custom revenue, and a decrease in Embedded segment revenue due to customers continuing to normalize their inventory levels.

Previous wording

Gross margin for the three months ended March 30, 2024 was 47% compared to gross margin of 44% for the prior year period. The increase in gross margin was primarily driven by higher Data Center and Client segments revenue, and lower amortization of acquisition-related intangible assets, partially offset by lower Embedded and Gaming segments revenue.

Current wording

Gross margin for the three months ended June 29, 2024 was 49% compared to gross margin of 46% for the prior year period. The increase in gross margin was primarily driven by higher Data Center segment revenue.

Previous wording

Operating income for the three months ended March 30, 2024 was $36 million compared to operating loss of $145 million for the prior year period. Net income for the three months ended March 30, 2024 was $123 million compared to net loss of $139 million for the prior year period. The increase in operating and net income was primarily driven by higher Data Center and Client segments revenue, and lower amortization of acquisition-related intangible assets.

Current wording

Operating income for the three months ended June 29, 2024 was $269 million compared to operating loss of $20 million for the prior year period. Net income for the three months ended June 29, 2024 was $265 million compared to net income of $27 million for the prior year period. The increase in operating and net income was primarily driven by higher revenue and gross margin, and lower amortization of acquisition-related intangible assets, partially offset by increased operating expenses.

Previous wording

As of March 30, 2024, our cash, cash equivalents and short-term investments were $6.0 billion compared to $5.8 billion as of December 30, 2023. During the three months ended March 30, 2024, we generated $521 million of cash from operating activities.

Current wording

As of June 29, 2024, our cash, cash equivalents and short-term investments were $5.3 billion compared to $5.8 billion as of December 30, 2023. During the three and six months ended June 29, 2024, we generated $593 million and $1.1 billion of cash, respectively, from operating activities, and we returned $352 million and $356 million, respectively, to shareholders through the repurchase of common stock under our Repurchase Program. During the quarter, we also used available cash to repay $750 million of debt that matured in June 2024.

Previous wording

Management believes there have been no significant changes for the three months ended March 30, 2024 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 30, 2023.

Current wording

Management believes there have been no significant changes for the three and six months ended June 29, 2024 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 30, 2023.

Previous wording

Data Center net revenue of $2.3 billion for the three months ended March 30, 2024 increased by 80%, compared to net revenue of $1.3 billion for the prior year period primarily driven by higher sales of AMD Instinct GPUs and 4th Gen AMD EPYC CPUs.

Current wording

Data Center net revenue of $2.8 billion for the three months ended June 29, 2024 increased by 115%, compared to net revenue of $1.3 billion for the prior year period. Data Center net revenue of $5.2 billion for the six months ended June 29, 2024 increased by 98%, compared to net revenue of $2.6 billion for the prior year period. The increase in both periods was primarily driven by the steep ramp of AMD Instinct GPU shipments and strong growth in 4th Gen AMD EPYC CPU sales.

Previous wording

Data Center operating income was $541 million for the three months ended March 30, 2024, compared to operating income of $148 million for the prior year period. The increase in operating income was primarily driven by higher revenue.

Current wording

Data Center operating income was $743 million for the three months ended June 29, 2024, compared to operating income of $147 million for the prior year period. Data Center operating income was $1.3 billion for the six months ended June 29, 2024, compared to operating income of $295 million for the prior year period. The increase in operating income in both periods was primarily driven by higher revenue.

Previous wording

Client net revenue of $1.4 billion for the three months ended March 30, 2024 increased by 85%, compared to net revenue of $739 million for the prior year period, primarily driven by a 58% increase in unit shipments and a 16% increase in average selling price of Ryzen processors, resulting from a recovery of weak PC market conditions and inventory corrections across the PC supply chain experienced in the first half of fiscal year 2023.

Current wording

Client net revenue of $1.5 billion for the three months ended June 29, 2024 increased by 49%, compared to net revenue of $1.0 billion for the prior year period, primarily driven by a 34% increase in unit shipments and a 12% increase in average selling price of Ryzen mobile and desktop processors. Client net revenue of $2.9 billion for the six months ended June 29, 2024 increased by 65%, compared to net revenue of $1.7 billion for the prior year period, primarily driven by a 44% increase in unit shipments and a 14% increase in average selling price of Ryzen mobile and desktop processors. The increase in both periods was driven by a recovery from weak PC market conditions and inventory corrections across the PC supply chain experienced in the first half of fiscal year 2023.

Previous wording

Client operating income was $86 million for the three months ended March 30, 2024, compared to operating loss of $172 million for the prior year period. The increase in operating income was primarily driven by higher revenue.

Current wording

Client operating income was $89 million for the three months ended June 29, 2024, compared to operating loss of $69 million for the prior year period. Client operating income was $175 million for the six months ended June 29, 2024, compared to operating loss of $241 million for the prior year period. The increase in operating income in both periods was primarily driven by higher revenue, partially offset by higher operating expenses.

Previous wording

Gaming operating income was $151 million for the three months ended March 30, 2024, compared to operating income of $314 million for the prior year period. The decrease in operating income was primarily due to a decrease in semi-custom revenue and lower Radeon GPU sales.

Current wording

Gaming operating income was $77 million for the three months ended June 29, 2024, compared to operating income of $225 million for the prior year period. Gaming operating income was $228 million for the six months ended June 29, 2024, compared to operating income of $539 million for the prior year period. The decrease in operating income in both periods was primarily due to lower revenue.

Previous wording

Embedded operating income was $342 million for the three months ended March 30, 2024, compared to operating income of $798 million for the prior year period. The decrease in operating income was primarily due to lower revenue.

Current wording

Embedded operating income was $345 million for the three months ended June 29, 2024, compared to operating income of $757 million for the prior year period. Embedded operating income was $687 million for the six months ended June 29, 2024, compared to operating income of $1.6 billion for the prior year period. The decrease in operating income in both periods was primarily due to lower revenue.

Previous wording

All Other operating loss of $1.1 billion for the three months ended March 30, 2024 primarily consisted of $622 million of amortization of acquisition-related intangibles, $371 million of stock-based compensation expense, $65 million of inventory loss at contract manufacturer and $39 million of acquisition-related and other costs. All Other operating loss of $1.2 billion for the prior year period primarily consisted of $823 million of amortization of acquisition-related intangibles, $309 million of stock-based compensation expense, and $111 million of acquisition-related and other costs.

Current wording

All Other operating loss of $985 million for the three months ended June 29, 2024 primarily consisted of $603 million of amortization of acquisition-related intangibles and $346 million of stock-based compensation expense. All Other operating loss of $1.1 billion for the prior year period primarily consisted of $693 million of amortization of acquisition-related intangibles and $348 million of stock-based compensation expense.

Previous wording

International sales as a percentage of net revenue were 60% and 68% for the three months ended March 30, 2024 and April 1, 2023, 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.

Current wording

International sales as a percentage of net revenue were 60% and 66% for the three months ended June 29, 2024 and July 1, 2023, respectively. International sales as a percentage of net revenue were 60% and 67% for the six months ended June 29, 2024 and July 1, 2023, 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.

Previous wording

Research and development expenses of $1.5 billion for the three months ended March 30, 2024 increased by $114 million, or 8%, compared to $1.4 billion for the prior year period. The increase was primarily due to an increase in employee-related costs due to an increase in headcount to support increased investment in AI.

Current wording

Research and development expenses of $1.6 billion for the three months ended June 29, 2024 increased by $140 million, or 10%, compared to $1.4 billion for the prior year period. Research and development expenses of $3.1 billion for the six months ended June 29, 2024 increased by $254 million, or 9%, compared to $2.9 billion for the prior year period. The increase in both periods was primarily due to higher employee-related costs from an increase in headcount in support of our continued focus on our AI strategy.

Previous wording

Marketing, general and administrative expenses of $620 million for the three months ended March 30, 2024 increased by $35 million, or 6%, compared to $585 million for the prior year period, primarily due to an increase in go-to market activities.

Current wording

Marketing, general and administrative expenses of $650 million for the three months ended June 29, 2024 increased by $103 million, or 19%, compared to $547 million for the prior year period. Marketing, general and administrative expenses of $1.3 billion for the six months ended June 29, 2024 increased by $138 million, or 12%, compared to $1.1 billion for the prior year period. The increase in both periods was primarily due to an increase in go-to market activities.

Previous wording

Amortization of acquisition-related intangibles of $622 million for the three months ended March 30, 2024 decreased by $201 million, or 24%, compared to $823 million for the prior year period. The decrease was primarily due to certain acquisition-related intangibles being fully amortized in the prior fiscal year.

Current wording

Amortization of acquisition-related intangibles of $603 million for the three months ended June 29, 2024 decreased by $90 million, or 13%, compared to $693 million for the prior year period. Amortization of acquisition-related intangibles of $1.2 billion for the six months ended June 29, 2024 decreased by $291 million, or 19%, compared to $1.5 billion for the prior year period. The decrease was primarily due to certain acquisition-related intangibles that were fully amortized in the prior fiscal year.

Previous wording

For the three months ended March 30, 2024, we recorded an income tax benefit of $52 million representing an effective tax rate of (73.2)%. 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. In addition, the tax benefit reflected discrete income tax benefits of $61 million, primarily related to stock-based compensation.

Current wording

For the three and six months ended June 29, 2024, we recorded an income tax provision of $41 million and income tax benefit of $11 million representing an effective tax rate of 13.4% and (2.9)%, respectively. 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. The tax provision for the three months ended June 29, 2024 reflected a discrete tax expense of $21 million, primarily related to interest and penalties accrued for uncertain tax positions, partially offset by the tax effects of stock-based compensation. The tax benefit for the six months ended June 29, 2024 reflected a discrete tax benefit of $40 million, primarily related to stock-based compensation.

Previous wording

For the three months ended April 1, 2023, we recorded an income tax provision of $13 million representing an effective tax rate of (10.3)%. The difference between the U.S. federal statutory tax rate of 21% and our estimated annual effective tax rate was primarily due to a higher mix of income taxed in lower tax rate jurisdictions, R&D tax credits, and beneficial rate impact from FDII tax benefit. In addition, the tax provision reflected discrete tax expense related to interest and penalties accrued for uncertain tax position.

Current wording

For the three months and six months ended July 1, 2023, we recorded an income tax benefit of $23 million and $10 million representing an effective tax rate of (511.4)% and 8.0%, respectively. 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 FDII and R&D tax credits. The tax benefit for the three months ended July 1, 2023 reflected a discrete tax benefit of $34 million that had a disproportionate impact on the effective tax rate because the pre-tax income was close to breakeven for the period. The tax benefit for the six months ended July 1, 2023 reflected a discrete tax benefit of $12 million which was not material to the total expense or the effective tax rate.

Previous wording

As of March 30, 2024 and December 30, 2023, our cash, cash equivalents and short-term investments were $6.0 billion and $5.8 billion, respectively. The percentage of cash, cash equivalents and short-term investments held domestically as of March 30, 2024 and December 30, 2023 were 86% and 77%, respectively.

Current wording

As of June 29, 2024 and December 30, 2023, our cash, cash equivalents and short-term investments were $5.3 billion and $5.8 billion, respectively. The percentage of cash, cash equivalents and short-term investments held domestically as of June 29, 2024 and December 30, 2023 were 88% and 77%, respectively.

Previous wording

Our operating, investing and financing activities for the three months ended March 30, 2024 compared to the prior year period are as described below:

Current wording

Our operating, investing and financing activities for the six months ended June 29, 2024 compared to the prior year period are as described below:

Previous wording

We have $3.0 billion available under an unsecured revolving credit agreement (Revolving Credit Agreement) that expires on April 29, 2027. No funds were drawn from this credit facility during the three months ended March 30, 2024. We also have a commercial paper program where we may 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 did not issue any commercial paper during the three months ended March 30, 2024.

Current wording

We have $3.0 billion available under an unsecured revolving credit facility that expires on April 29, 2027. We also have $3.0 billion available under our commercial paper program.

Previous wording

As of March 30, 2024, our principal debt obligations were $2.5 billion. Our 2.95% Notes with a principal amount of $750 million are due in June 2024.

Current wording

As of June 29, 2024, our principal debt obligations were $1.75 billion. Our 2.95% Notes with a principal amount of $750 million were repaid in June 2024 and our remaining debt will mature starting in 2030.

Previous wording

As of March 30, 2024, we had unconditional purchase commitments of approximately $4.0 billion, of which $3.3 billion are for the remainder of fiscal year 2024. On an ongoing basis, we work with our suppliers on the timing of payments and deliveries of purchase commitments, taking into account business conditions.

Current wording

As of June 29, 2024, we had unconditional purchase commitments of approximately $3.9 billion, of which $3.1 billion are for the remainder of fiscal year 2024. On an ongoing basis, we work with our suppliers on the timing of payments and deliveries of purchase commitments, taking into account business conditions.

Previous wording

We believe our cash, cash equivalents, short-term investments and cash flows from operations along with our Revolving Credit Agreement and commercial paper program will be sufficient to fund operations, including capital expenditures, purchase commitments and debt payments, 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.

Current wording

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, including capital expenditures, and purchase commitments, over the next 12 months and beyond. We believe we will be able to access the capital markets should we require additional funds. However, we cannot assure that such funds will be available on favorable terms, or at all.

Previous wording

Net cash provided by operating activities was $521 million in the three months ended March 30, 2024, primarily due to our net income of $123 million, adjusted for non-cash and non-operating charges of $1.2 billion and net cash outflows of $760 million from changes in our operating assets and liabilities. The primary drivers of the change in operating assets and liabilities was a $636 million decrease in accounts payable driven primarily by the timing of payments and inventory receipts, and a $368 million increase in inventory primarily to support the continued ramp of Data Center and Client products in advanced process nodes.

Current wording

Net cash provided by operating activities was $1.1 billion in the six months ended June 29, 2024, primarily due to our net income of $388 million, adjusted for non-cash and non-operating charges of $2.1 billion and net cash outflows of $1.4 billion from changes in our operating assets and liabilities. The primary drivers of the change in operating assets and liabilities was a $710 million increase in inventory primarily to support the continued ramp of Data Center and Client products in advanced process nodes, and a $373 million increase in accounts receivable due to timing of customer payments.

Previous wording

Net cash provided by operating activities was $486 million in the three months ended April 1, 2023, primarily due to our net loss of $139 million, adjusted for non-cash and non-operating charges of $1.0 billion and net cash outflows of $387 million from changes in our operating assets and liabilities. The primary driver of the change in operating assets and liabilities was a $464 million increase in inventory primarily in anticipation of the ramp of Data Center and Client products in advanced process nodes.

Current wording

Net cash provided by operating activities was $865 million in the six months ended July 1, 2023, primarily due to our net loss of $112 million, adjusted for non-cash and non-operating charges of $1.9 billion and net cash outflows of $1.0 billion from changes in our operating assets and liabilities. The primary driver of the change in operating assets and liabilities was a $796 million increase in inventory primarily to support the continued ramp of Data Center and Client products in advanced process technology nodes, and a $237 million increase in prepaid expenses and other assets primarily driven by the purchase of technology licenses, partially offset by a $309 million increase in accounts payable due to the timing of payments.

Previous wording

Net cash used in investing activities was $135 million for the three months ended March 30, 2024 which primarily consisted of cash used in the purchases of short-term investments of $433 million and purchases of property and equipment of $142 million, partially offset by $443 million of proceeds from the maturity and sale of short-term investments.

Current wording

Net cash provided by investing activities was $251 million for the six months ended June 29, 2024 which primarily consisted of $1.2 billion of proceeds from the maturity and sale of short-term investments, partially offset by cash used in the purchases of short-term investments of $565 million and purchases of property and equipment of $296 million.

Previous wording

Net cash used in investing activities was $1.2 billion for the three months ended April 1, 2023 which primarily consisted of cash used in the purchases of short-term investments of $1.7 billion and purchases of property and equipment of $158 million, partially offset by $618 million of proceeds from the maturity and sale of short-term investments.

Current wording

Net cash used in investing activities was $1.7 billion for the six months ended July 1, 2023 which primarily consisted of cash used in the purchases of short-term investments of $2.8 billion and purchases of property and equipment of $283 million, partially offset by $1.4 billion of proceeds from the maturity and sale of short-term investments.

Previous wording

Net cash used in financing activities was $129 million for the three months ended March 30, 2024, which primarily consisted of repurchases for tax withholding on employee equity plans of $129 million.

Current wording

Net cash used in financing activities was $1.2 billion for the six months ended June 29, 2024, which primarily consisted of repayment of the 2.95% Notes of $750 million, common stock repurchase of $356 million, and repurchases for tax withholding on employee equity plans of $226 million.

Previous wording

Net cash used in financing activities was $259 million for the three months ended April 1, 2023, which primarily consisted of common stock repurchases of $241 million.

Current wording

Net cash used in financing activities was $184 million for the six months ended July 1, 2023, which primarily consisted of common stock repurchases of $241 million and repurchases for tax withholding on employee equity plans of $87 million, partially offset by a cash inflow of $144 million from issuance of common stock under our employee equity plans.