What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-03 compared with 2021-01-29 · 246 added, 311 removed, 892 unchanged (38% of the section changed)

13 unchanged sentences

Interest expense ( 34 ) ( 47 ) ( 94 )

Other expense, net ( 47 ) ( 165 ) —

Income before income taxes and equity income (loss) 1,275 372 330

Other income (expense), net 55 ( 47 ) ( 165 )

Income before income taxes and equity income 3,669 1,275 372

Income tax provision (benefit) 513 ( 1,210 ) 31

Equity income (loss) in investee 5 — ( 2 )

Equity income in investee 6 5 —

Net income $ 3,162 $ 2,490 $ 341

14 unchanged sentences

Net change in unrealized gains (losses) on cash flow hedges ( 20 ) 17 8

Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2016-01, Financial Instruments — — 2

Total comprehensive income $ 3,142 $ 2,507 $ 349

24 unchanged sentences

Accrued liabilities 2,424 1,796

Current portion of long-term debt, net 312 —

Other current liabilities 98 75

Total current liabilities 4,240 2,417

Long-term debt, net 330 486

Long-term debt, net of current portion 1 330

Long-term operating lease liabilities 348 201

13 unchanged sentences

Accumulated deficit ( 1,451 ) ( 4,605 )

Accumulated other comprehensive income 17 —

Accumulated other comprehensive income (loss) ( 3 ) 17

Total stockholders’ equity 7,497 5,837

8 unchanged sentences

Balance, beginning of period $ 12 $ 12 $ 10

Common stock issued under employee equity plans — — 1

Issuance of common stock upon warrant exercise — — 1

8 unchanged sentences

Issuance of treasury stock to partially settle debt — — 4

Issuance of warrants 5 5 —

Issuance of common stock warrants 17 5 5

Balance, end of period $ 11,069 $ 10,544 $ 9,963

1 unchanged sentence

Balance, beginning of period $ ( 131 ) $ ( 53 ) $ ( 50 )

Repurchases of common stock ( 1,762 ) — —

Common stock repurchases for tax withholding on employee equity plans ( 237 ) ( 78 ) ( 6 )

3 unchanged sentences

Balance, beginning of period $ ( 4,605 ) $ ( 7,095 ) $ ( 7,436 )

Cumulative effect of adoption of accounting standard ( 8 ) — —

Net income 3,162 2,490 341

Cumulative effect adjustment to accumulated deficit related to the adoption of ASU 2016-01, Financial Instruments — — 2

Balance, end of period $ ( 1,451 ) $ ( 4,605 ) $ ( 7,095 )

18 unchanged sentences

Loss on debt redemption, repurchase and conversion 7 54 176

Loss on sale/disposal of property and equipment 33 42 27

Impairment of technology licenses — — 45

Loss on sale or disposal of property and equipment 34 33 42

Deferred income taxes 308 ( 1,223 ) ( 7 )

Gain on equity investments, net ( 56 ) ( 2 ) ( 1 )

Other ( 7 ) 8 ( 1 )

13 unchanged sentences

Collection of deferred proceeds on sale of receivables — — 25

Other ( 7 ) — 2

Net cash used in investing activities ( 686 ) ( 952 ) ( 149 )

4 unchanged sentences

Proceeds from sales of common stock through employee equity plans 104 85 74

Repurchases of common stock ( 1,762 ) — —

Common stock repurchases for tax withholding on employee equity plans

1 unchanged sentence

Other — ( 1 ) ( 1 )

Net cash provided by financing activities 6 43 28

Net increase (decrease) in cash and cash equivalents, and restricted cash 125 387 ( 108 )

Net cash (used in) provided by financing activities ( 1,895 ) 6 43

Net increase in cash and cash equivalents, and restricted cash 940 125 387

Cash, cash equivalents and restricted cash at beginning of year 1,595 1,470 1,083

12 unchanged sentences

Issuance of treasury stock to partially settle debt $ — $ — $ 7

Deferred proceeds on sale of receivables $ — $ — $ 25

Non-cash activities for leases:

12 unchanged sentences

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.

AMD’s products include x86 microprocessors (CPUs), as standalone devices or as incorporated into accelerated processing units (APUs), chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, server and embedded processors, semi-custom SoC products, microprocessor and SoC development services and technology for game consoles.

From time to time, the Company may also sell or license portions of its intellectual property (IP) portfolio.

NOTE 2 – Summary of Significant Accounting Policies

1 unchanged sentence

The Company uses a 52- or 53-week fiscal year ending on the last Saturday in December.

Fiscal 2020, 2019 and 2018 ended December 26, 2020, December 28, 2019 and December 29, 2018, respectively.

Fiscal 2021, 2020 and 2019 ended on December 25, 2021, December 26, 2020 and December 28, 2019, respectively.

Fiscal 2021, 2020 and 2019 each consisted of 52 weeks.

33 unchanged sentences

Sales of semi-custom products are not subject to a right of return.

Custom products arrangements involve a single performance obligation.

Custom products arrangements generally involve a single performance obligation.

There are no variable consideration estimates associated with custom products.

10 unchanged sentences

Accordingly, revenue is recognized at a point in time when the customer has the ability to benefit from the license.

There are no variable consideration estimates associated with either combined development and intellectual property arrangements or for standalone arrangements involving either the sale or licensing of IP.

Total revenue recognized over time associated with custom products and development services accounted for approximately 18 %, 19 % and 29 % of the Company’s revenue in 2020, 2019 and 2018, respectively.

There are no variable consideration estimates associated with either combined development and IP arrangements or for standalone arrangements involving either the sale or licensing of IP.

Customers are generally required to pay for products and services within the Company’s standard contractual terms, which are typically net 30 to 60 days.

26 unchanged sentences

Classification of marketable securities as current is based on the Company’s intent and belief in its ability to sell these securities and use the proceeds from sale in operations within 12 months.

Investments in Available-for-sale Debt Securities

The Company classifies its investments in debt securities at the date of acquisition as available-for-sale.

Available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included, net of tax, in accumulated other comprehensive income (loss), a component of stockholders’ equity.

If an available-for-sale debt security’s fair value is less than its amortized cost basis, then the Company evaluates whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses.

Unrealized gains and losses not attributable to credit losses are included, net of tax, in accumulated other comprehensive income (loss), a component of stockholders’ equity.

The cost of securities sold is determined based on the specific identification method.

Accounts Receivable

Accounts receivable are primarily comprised of trade receivables presented net of rebates, price protection and an allowance for doubtful accounts.

Accounts receivable are primarily comprised of trade receivables presented net of rebates, price protection and an allowance for credit loss.

Accounts receivable also include unbilled receivables, which primarily represent work completed on development services recognized as revenue but not yet invoiced to customers and semi-custom products under non-cancellable purchase orders that have no alternative use to the Company at contract inception, for which revenue has been recognized but not yet invoiced to customers.

3 unchanged sentences

From this, the Company may require letters of credit, bank or corporate guarantees or advance payments if deemed necessary.

The Company maintains an allowance for doubtful accounts, consisting of known specific troubled accounts as well as an amount based on overall estimated

potential uncollectible accounts receivable based on historical experience and review of their current credit quality.

The Company maintains an allowance for credit loss, consisting of known specific troubled accounts as well as an amount based on overall estimated potential uncollectible accounts receivable based on historical experience and review of their current credit quality.

The Company does not believe the receivable balance from its customers represents a significant credit risk.

Investments in Available-for-sale Debt Securities

The Company classifies its investments in debt securities at the date of acquisition as available-for-sale.

Unrealized gains and losses not attributable to credit losses are included, net of tax, in accumulated other comprehensive income (loss), a component of stockholders’ equity.

The cost of securities sold is determined based on the specific identification method.

Property and Equipment

1 unchanged sentence

Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets.

Estimated useful lives are as follows:

equipment uses two to six years , and leasehold improvements are measured by the shorter of the remaining terms of the leases or the estimated useful economic lives of the improvements.

The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement.

When the Company determines the arrangement is a lease, or contains a lease, at lease inception, it then determines whether the lease is an operating lease or a finance lease.

Operating and finance leases result in the Company recording a right-of-use (ROU) asset and lease liability on its balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Estimated useful lives of equipment is two to six years , and leasehold improvements are measured by the shorter of the remaining terms of the leases or the estimated useful economic lives of the improvements.

Operating and finance leases are recorded as right-of-use (ROU) assets and lease liabilities on the Company’s balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating and finance lease ROU assets and liabilities are initially recognized based on the present value of lease payments over the lease term.

In determining the present value of lease payments, the Company uses the implicit interest rate if readily determinable or when the implicit interest rate is not readily determinable, the Company uses its incremental borrowing rate.

The incremental borrowing rate is not a commonly quoted rate and is derived through a combination of inputs including the Company’s credit rating and the impact of full collateralization.

The incremental borrowing rate is based on the Company’s collateralized borrowing capabilities over a similar term of the lease payments.

In determining the present value of lease payments, the Company uses the implicit interest rate if readily determinable.

When the implicit interest rate is not readily determinable, the Company uses its incremental borrowing rate, which is based on its collateralized borrowing capabilities over a similar term of the lease payments.

The Company utilizes the consolidated group incremental borrowing rate for all leases as the Company has centralized treasury operations.

The operating lease ROU asset also includes any lease payments made and excludes any lease incentives.

Specific lease terms may include options to extend or terminate the lease when the Company believes it is reasonably certain that it will exercise that option.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

As allowed by the guidance, the Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset.

The Company has elected the accounting policy to not recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset.

Operating leases are included in operating lease ROU assets, other current liabilities, and long-term operating lease liabilities on the Company’s consolidated balance sheets.

17 unchanged sentences

The Company estimates the grant-date fair value of RSUs that involve a market condition using the Monte Carlo simulation model.

The Company estimates the grant-date fair value of stock to be issued under the Employee Stock Purchase plan (ESPP) using the Black-Scholes model.

Compensation expense is recognized over the vesting period of the applicable award using

the straight-line method, except for the compensation expense related to RSUs with performance or market conditions (PRSUs), which are recognized ratably for each vesting tranche from the service inception date to the end of the requisite service period.

The Company estimates the grant-date fair value of stock to be issued under the Company’s Employee Stock Purchase plan (ESPP) using the Black-Scholes model.

Compensation expense is recognized over the vesting period of the applicable award using the straight-line method, except for the compensation expense related to RSUs with performance or market conditions (PRSUs), which are recognized ratably for each vesting tranche from the service inception date to the end of the requisite service period.

Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

2 unchanged sentences

The assessment requires significant judgment and is performed in each of the applicable taxing jurisdictions.

In addition, the Company recognizes tax benefits from uncertain tax positions only if it expects that its tax positions are more likely than not that they will be sustained, based on the technical merits of the positions, on examination by the jurisdictional tax authority.

In addition, the Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that they will be sustained, based on the technical merits of the positions, on examination by the jurisdictional tax authority.

The Company recognizes any accrued interest and penalties to unrecognized tax benefits as interest expense and income tax expense, respectively.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

This standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

The Company adopted this standard in the first quarter of 2020 using the modified retrospective adoption method.

This standard did not have an impact on the consolidated financial statements upon adoption.

Income Taxes.

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019-12, I ncome Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies various aspects of accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted this standard in the first quarter of 2021 using the modified retrospective adoption method through a cumulative-effect adjustment to accumulated deficit as of the beginning of the period.

The adoption of this new standard resulted in the recognition of an $8.4 million deferred tax liability associated with book-tax differences in foreign equity method investments.

Recently Issued Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

This standard simplifies the accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity by eliminating some of the models that require separating embedded conversion features from convertible instruments.

The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and enhances disclosures about the terms of convertible instruments and contracts in an entity’s own equity.

The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted, and can be adopted through either a modified retrospective method with a cumulative effect adjustment to opening retained earnings or a full retrospective method.

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its consolidated financial statements.

1 unchanged sentence

Short-term Investments

As of December 26, 2020, the Company had $ 400 million of time deposits and $ 295 million of commercial paper.

As of December 28, 2019, the Company had $ 37 million of commercial paper.

2021 December 26,

(In millions)

Commercial paper $ 880 $ 295

Time deposits 193 400

Total short-term investments $ 1,073 $ 695

Accounts Receivable, net

As of December 25, 2021 and December 26, 2020, Accounts receivable, net included unbilled accounts receivable of $ 329 million and $ 123 million, respectively.

Unbilled accounts receivables primarily represent work completed for 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.

2021 December 26,

17 unchanged sentences

(In millions)

Prepaid long-term supply agreements $ 916 $ —

Software and technology licenses, net 328 229

1 unchanged sentence

Total other non-current assets $ 1,478 $ 373

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

Accrued Liabilities

1 unchanged sentence

(In millions)

Accrued marketing programs $ 933 $ 839

Accrued compensation and benefits 705 513

Accrued marketing programs and advertising expenses 839 454

Other accrued and current liabilities 786 444

Total accrued liabilities $ 2,424 $ 1,796

Unearned Revenue

Unearned revenue represents consideration received or due from customers in advance of the Company satisfying its performance obligations.

The unearned revenue is associated with any combination of development services, IP licensing and product revenue.

Changes in unearned revenue were as follows:

2020 December 28,

(In millions)

Beginning balance $ 2 $ 11

Unearned revenue 22 43

Revenue recognized during the period ( 9 ) ( 52 )

Ending balance $ 15 $ 2

Revenue allocated to remaining performance obligations that are unsatisfied (or partially unsatisfied) as of December 26, 2020 was $ 337 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, IP licensing and product revenue.

The Company expects to recognize $ 174 million of revenue allocated to remaining performance obligations in the next 12 months.

The revenue allocated to remaining performance obligations did not include amounts which have an original expected duration of one year or less.

Revenue allocated to remaining performance obligations that are unsatisfied (or partially unsatisfied) include amounts received from customers and amounts that will be invoiced and recognized as revenue in future periods for development services, IP licensing and product revenue.

As of December 25, 2021, the aggregate transaction price allocated to remaining performance obligations under contracts with an original expected duration of more than one year was $ 197 million , of which $ 126 million is expected to be recognized 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 23 % , 18 % and 19 % of the Company’s revenue in 2021, 2020 and 2019, respectively.

NOTE 4 – Related Parties—Equity Joint Ventures

6 unchanged sentences

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 consolidated statement of operations.

The Company’s purchases from the ATMP JV during 2020 and 2019 amounted to $ 831 million and $ 660 million, respectively.

The Company’s purchases from the ATMP JV during 2021 and 2020 amounted to $ 1.1 billion and $ 831 million, respectively.

As of December 25, 2021 and December 26, 2020, the amounts payable to the ATMP JV were $ 85 million and $ 78 million, respectively, and are included in Payables to related parties on the Company’s consolidated balance sheets.

The Company’s resales to the ATMP JV during 2020 and 2019 amounted to $ 28 million and $ 56 million, respectively.

The Company’s resales to the ATMP JV during 2021 and 2020 amounted to $ 28 million for each year .

As of December 25, 2021 and December 26, 2020, the Company had receivables from ATMP JV of $ 2 million and $ 10 million, respectively, included in Receivables from related parties on the Company’s consolidated balance sheets.

During 2020, the Company recorded a gain of $ 5 million in Equity income (loss) in investee on its consolidated statements of operations.

During 2019, the Company did no t record any gain or loss in Equity income (loss) in investee.

During 2018, the Company recorded a $ 2 million loss in Equity income (loss) in investee, which included certain expenses incurred by the Company on behalf of the ATMP JV.

As of December 26, 2020 and December 28, 2019, the carrying value of the Company’s investment in the ATMP JV were approximately $ 63 million and $ 58 million, respectively.

During 2021, the Company recorded a gain of $ 6 million in Equity income in investee on its consolidated statement of operations.

During 2020, the Company recorded a gain of $ 5 million in Equity income in investee on its consolidated statement of operations.

During 2019, the Company did not record any gain or loss in Equity income in investee.

As of December 25, 2021 and December 26, 2020, the carrying value of the Company’s investment in the ATMP JV was approximately $ 69 million and $ 63 million, respectively.

THATIC Joint Ventures

1 unchanged sentence

(THATIC), a third-party Chinese entity.

The Company holds a majority interest in one of the joint ventures and a minority interest in the other.

The Company is not a primary beneficiary of the THATIC JV and, as such, the Company does not consolidate either of these entities and accounts for its equity interests in the THATIC JV under the equity method of accounting.

The Company’s share in the net losses of the THATIC JV is not recorded in the Company’s consolidated statements of operations since the Company is not obligated to fund the THATIC JV’s losses in excess of the Company’s investment in the THATIC JV, which was zero as of both December 26, 2020 and December 28, 2019.

In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV for a total of $ 293 million in license fees payable over several years upon achievement of certain milestones.

The Company also expects to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such Licensed IP.

The Company classifies Licensed IP income and royalty income, associated with the February 2016 agreement, as licensing gain within operating income.

In March 2017, the Company entered into a development and intellectual property agreement (Development and IP) with the THATIC JV, and also expects to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such agreement.

The Company classifies Development and IP income and royalty income, associated with the March 2017 agreement, as revenue once earned.

As of December 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 2021, the Company recognized $ 12 million of licensing gain from royalty income under the agreement.

The Company recognized $ 60 million as licensing gain associated with the Licensed IP during 2019.

During 2018, the Company recognized $ 86 million of IP-related revenue upon completion of all technology milestones under the Development and IP agreement.

As of December 26, 2020, the Company had no receivables from the THATIC JV.

The Company’s receivable from the THATIC JV was $ 13 million as of December 28, 2019, included in Receivables from related parties on its consolidated balance sheets.

As of December 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.

2 unchanged sentences

NOTE 5 – Goodwill

The carrying amount of goodwill as of both December 26, 2020 and December 28, 2019 was $ 289 million, which was all allocated to reporting units within the Company’s Enterprise, Embedded and Semi-Custom segment.

In the fourth quarters of 2020 and 2019, the Company conducted its annual impairment tests of goodwill and concluded that there was no goodwill impairment with respect to its reporting units.

The carrying amount of goodwill as of December 25, 2021 and December 26, 2020 was $ 289 million, which was allocated to reporting units within the Company’s Enterprise, Embedded and Semi-Custom segment.

During the fourth quarter of 2021 and 2020, the Company conducted its annual impairment tests of goodwill and concluded that there was no goodwill impairment with respect to its reporting units.

NOTE 6 – Debt and Revolving Credit Facility

5 unchanged sentences

Total debt (principal amount) 313 338

Unamortized debt discount for 2.125 % Notes

Unamortized debt issuance costs for 2.125 % Notes

Unamortized debt issuance costs for 7.50 % Notes

Total long-term debt (net) $ 330 $ 486

Unamortized debt discount and issuance costs — ( 8 )

Total debt (net) 313 330

current portion of long-term debt ( 312 ) —

Total long-term debt, net of current portion $ 1 $ 330

2.125 % Convertible Senior Notes Due 2026

2 unchanged sentences

The interest is payable semi-annually in March and September of each year, commencing in March 2017.

During 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 consolidated statements of operations.

As of December 25, 2021, the outstanding aggregate principal amount of the 2.125 % Notes was $ 1 million .

The 2.125 % Notes mature on September 1, 2026.

However, as outlined in the indenture governing the 2.125 % Notes, holders of the 2.125 % Notes may convert them at their option during certain time periods and upon the occurrence of one of the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day (equivalent to an initial conversion price of approximately $ 8.00 per share of common stock);

(2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

(3) upon the occurrence of specified corporate events.

On or after June 1, 2026 and until the close of business on the business day immediately preceding the maturity date, holders may convert their notes at any time regardless of the foregoing circumstances.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock at the Company’s election.

The event described in (1) above was met during the fourth calendar quarter of 2020 and, as a result, the 2.125 % Notes are convertible at the option of the holder from January 1, 2021 and remain convertible until March 31, 2021.

During 2020, holders of the 2.125 % Notes converted $ 225 million principal amount of these notes, for which the Company issued approximately 28 million shares of the Company’s common stock at the conversion price of $ 8.00 per share.

The Company recorded a loss of $ 54 million from these conversions in Other expense, net on its consolidated statements of operations.

The Company’s current intent is to deliver shares of its common stock upon conversion of the 2.125 % Notes.

8 unchanged sentences

Contractual interest expense $ — $ 4

Interest cost related to amortization of debt issuance costs $ — $ 1

Interest cost related to amortization of the debt discount $ — $ 6

16 unchanged sentences

Revolving Credit Facility

On June 7, 2019, the Company entered into a secured revolving credit facility for up to $ 500 million (the Revolving Credit Facility) pursuant to a credit agreement by and among the Company, as borrower, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent (the Credit Agreement).

The Revolving Credit Facility consists of a $ 500 million, five-year secured revolving loan facility, including a $ 50 million swingline subfacility and a $ 75 million sublimit for letters of credit.

Prior to the third quarter ended September 26, 2020, obligations under the Credit Agreement were secured by a lien on substantially all the Company’s property, other than intellectual property.

During the third quarter ended September 26, 2020, as a result of upgrades of the Company’s debt ratings, the security requirements under the Credit Agreement were terminated and the liens on the Company’s collateral were released.

The Credit Agreement also provides the ability to increase the Revolving Credit Facility or incur incremental term loans or other incremental equivalent.

The Company’s available borrowings under the Revolving Credit Facility are also subject to reduction.

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.

The Credit Agreement contains customary affirmative and negative covenants, as well as a total leverage covenant.

The Credit Agreement also contains customary events of default.

On April 6, 2020, the Company borrowed $ 200 million under the Credit Agreement via the LIBOR rate loan option at an annual interest rate of 2.37 %.

The Company repaid the $ 200 million borrowing plus interest on July 6, 2020.

As of December 26, 2020, the Company had $ 13 million of letters of credit outstanding under the Credit Agreement and the Company was in compliance with all required covenants under the Credit Agreement.

As of December 25, 2021, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants.

As of December 25, 2021, the Company had $ 14 million of letters of credit outstanding under the Revolving Credit Facility.

Future Payments on Total Debt

1 unchanged sentence

(Principal only)

(In millions)

Year (In millions)

NOTE 7 – Financial Instruments

Fair Value Measurements

The Company’s financial instruments are measured and recorded at fair value on a recurring basis, except for non-marketable equity investments in privately-held companies.

These equity investments are generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred.

Fair Value Hierarchy

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities.

The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Financial Instruments Recorded at Fair Value on a Recurring Basis

As of December 26, 2020 and December 28, 2019, the Company had $ 295 million and $ 37 million of commercial paper, respectively, included in Short-term investments on the Company’s consolidated balance sheets.

The commercial paper is classified within Level 2 as its fair value estimates were based on quoted prices for comparable instruments .

In addition, as of December 26, 2020 and December 28, 2019, the Company also had approximately $ 46 million and $ 30 million, respectively, of investments in mutual funds held in a Rabbi trust established for the Company’s deferred compensation plan, which were included in Other non-current assets on the Company’s consolidated balance sheets.

As of December 28, 2019, the Company also had approximately $ 4 million of investments in money market funds, used as collateral for letters of credit deposits, which were included in Other current assets on the Company’s consolidated balance sheets.

These money market funds and mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets.

Their amortized cost approximates the fair value for all periods presented.

The Company is restricted from accessing these investments.

December 25, 2021 December 26, 2020

(In millions) Level 1 Level 2 Total Level 1 Level 2 Total

Cash equivalents

Money market funds $ 4 $ — $ 4 $ 1 $ — $ 1

Commercial paper — 45 45 — — —

Short-term investments

Commercial paper — 880 880 — 295 295

Time deposits — 193 193 — 400 400

Other non-current assets

Equity investments 66 — 66 — — —

Deferred compensation plan investments 72 — 72 46 — 46

Total assets measured at fair value $ 142 $ 1,118 $ 1,260 $ 47 $ 695 $ 742

The Company did not have any financial instruments measured at fair value on a recurring basis within Level 3 fair value measurements as of December 25, 2021 or December 26, 2020.

During the year ended December 25, 2021, the Company recognized a $ 64 million gain recorded in Other income in the consolidated statements of operations due to an increase in the fair value of an equity investment.

Deferred compensation plan investments are mutual fund investments held in a Rabbi trust established to maintain the Company’s executive deferred compensation plan.

Financial Instruments Not Recorded at Fair Value

6 unchanged sentences

(In millions)

Long-term debt, net $ 330 $ 642 $ 486 $ 1,823

Current portion of long-term debt, net $ 312 $ 326 $ — $ —

Long-term debt, net of current portion 1 15 330 642

The estimated fair value of the Company’s long-term debt are based on Level 2 inputs as the fair value is based on quoted prices for the Company’s debt and comparable instruments in inactive markets.

3 unchanged sentences

Hedging Transactions and Derivative Financial Instruments

Cash Flow Hedges Designated as Accounting Hedges and Foreign Currency Forward Contracts not Designated as Accounting Hedges

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.

2 unchanged sentences

The fair value of these contracts was not material as of December 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.

5 unchanged sentences

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

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

Gains (losses) on cash flow hedges:

1 unchanged sentence

Beginning balance $ 17 $ — $ ( 8 )

Net unrealized gains (losses) arising during

the period 18 2 ( 19 )

Net unrealized gains (losses) arising during the period 5 18 2

Net losses (gains) reclassified into income during the period ( 25 ) ( 1 ) 6

4 unchanged sentences

The Company places its investments with high credit quality financial institutions.

At the time an investment is made, investments in commercial paper of industrial firms and financial institutions are rated A1, P1 or better.

At the time an investment is made, investments in commercial paper of industrial firms and financial institutions are rated A1, P1, F1 or better.

The Company invests in tax-exempt securities including municipal notes and bonds and bonds that are rated A, A2 or better and repurchase agreements, each of which have securities of the type and quality listed above as collateral.

The Company believes that concentrations of credit risk with respect to trade receivables are limited because a large number of geographically diverse customers make up the Company’s customer base, thus diluting the trade credit risk.

The Company’s top three customers with the highest accounts receivable balances each accounted for approximately 18 %, 17 % and 6 %, respectively, of the total consolidated accounts receivable balance as of December 26, 2020 and 15 %, 9 % and 8 %, respectively, of the total consolidated accounts receivable balance as of December 28, 2019.

The Company’s top three customers with the highest accounts receivable balances each accounted for approximately 20 %, 15 % and 9 % of the total consolidated accounts receivable balance as of December 25, 2021 and 18 %, 17 % and 6 %, of the total consolidated accounts receivable balance as of December 26, 2020.

However, the Company does not believe the receivable balance from these customers represents a significant credit risk based on past collection experience and review of their current credit quality.

The Company is exposed to credit losses from nonperformance by counterparties on foreign currency hedge contracts.

These counterparties are large global institutions, and to date, no such counterparty has failed to meet its financial obligations to the Company.

NOTE 10 – Earnings Per Share

4 unchanged sentences

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

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions, except per share amounts)

11 unchanged sentences

Diluted $ 2.57 $ 2.06 $ 0.30

Potential shares from employee equity plans and the impact from the conversion of the 2.125 % Notes up to the conversion date, totaling 22 million for 2020, were not included in the earnings per share calculation because their inclusion would have been anti-dilutive.

Potential shares from employee equity plans, the impact from the conversion of the 2.125 % Notes up to the conversion date and the assumed conversion of the remaining outstanding 2.125 % Notes, totaling 93 million and 105 million shares for 2019 and 2018, respectively, were not included in the earnings per share calculation because their inclusion would have been anti-dilutive.

Potential shares from employee equity plans and the impact from the conversion of the 2.125 % Notes up to the conversion date, totaling 2 million and 22 million shares for 2021 and 2020, respectively, were not included in the earnings per share calculation because their inclusion would have been anti-dilutive.

NOTE 11 – Common Stock and Stock-Based Compensation

5 unchanged sentences

Common stock issued under employee equity plans 12 14 20

Repurchases of common stock ( 17 ) — —

Common stock repurchases for tax withholding on equity awards ( 2 ) ( 1 ) —

3 unchanged sentences

Balance, end of period 1,207 1,211 1,170

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 year ended December 25, 2021, the Company repurchased 16.7 million shares of its common stock under the Repurchase Program for $ 1.8 billion.

As of December 25, 2021, $ 2.2 billion remained available for future stock repurchases under this program.

This 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

1 unchanged sentence

On April 29, 2004, the Company’s stockholders approved the 2004 Equity Incentive Plan, as amended and restated (the 2004 Plan).

In the fourth quarter of 2017, the Company introduced the 2017 Employee Stock Purchase Plan, as amended and restated (the 2017 Plan).

In the fourth quarter of 2017, the Company introduced the 2017 ESPP, as amended and restated (the 2017 Plan).

Under the 2004 Plan, stock options generally vest and become exercisable over a three-year period from the date of grant and expire within seven years after the grant date.

7 unchanged sentences

Time-based RSUs are awards that can be granted to any employee, director or consultant and that obligate the Company to issue a specific number of shares of the Company’s common stock in the future if the vesting terms and conditions are satisfied.

The purchase price for the shares is $ 0.00 per share.

PRSUs can be granted to certain of the Company’s senior executives.

8 unchanged sentences

Stock-based compensation expense was allocated in the consolidated statements of operations as follows:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

7 unchanged sentences

The weighted-average estimated fair value of employee stock options granted for the years ended December 25, 2021, December 26, 2020 and December 28, 2019 was $ 46.07 , $ 38.49 and $ 13.31 per share, respectively, using the following assumptions:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

Expected volatility 51.77 % 57.87 % 52.60 % - 56.51 %

51.51 % - 60.46 %

Risk-free interest rate 0.69 % 0.18 % 1.53 % - 2.51 %

2.20 % - 2.83 %

Expected dividends — % — % — %

1 unchanged sentence

The Company uses a combination of the historical volatility of its common stock and the implied volatility for publicly traded options on the Company’s common stock as the expected volatility assumption.

The risk-free interest rate is

based on the rate for a U.S.

The risk-free interest rate is based on the rate for a U.S.

Treasury zero-coupon yield curve with a term that approximates the expected life of the option grant at the date closest to the option grant date.

16 unchanged sentences

The following table summarizes time-based RSU activity and related information:

of Shares Weighted-

Fair Value Aggregate Intrinsic Value Weighted-Average Remaining Contractual Life

of Shares Weighted- Average Grant-Date Fair Value Aggregate Intrinsic Value Weighted-Average Remaining Contractual Life

(In millions except share price)

7 unchanged sentences

The weighted-average grant date fair values of PRSUs granted during 2021, 2020 and 2019 were $ 153.89 , $ 122.95 and $ 50.00 , respectively, using the following assumptions:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

Expected volatility 57.75 % 55.74 % - 60.10 %

60.54 % - 62.52 %

63.77 % - 67.97 %

Risk-free interest rate 0.43 % 0.14 % - 1.41 %

1.56 % - 2.49 %

2.06 % - 2.82 %

Expected dividends — % — % — %

5 unchanged sentences

The following table summarizes PRSU activity and related information:

of Shares Weighted-

Fair Value Aggregate Intrinsic Value Weighted-Average Remaining Contractual Life

of Shares Weighted-Average

Grant-Date Fair Value Aggregate Intrinsic Value Weighted-Average Remaining Contractual Life

(In millions except share price)

7 unchanged sentences

The weighted-average grant date fair value for the ESPP during 2021, 2020 and 2019 was $ 27.27 , $ 20.97 and $ 9.96 per share, respectively, using the following assumptions:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

Expected volatility 36.90 % - 39.39 %

19 unchanged sentences

Income before income taxes consists of the following:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

2 unchanged sentences

The income tax provision (benefit) consists of:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

8 unchanged sentences

The table below displays the reconciliation between statutory federal income taxes and the total income tax provision (benefit).

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

Statutory federal income tax expense at 21% $ 772 $ 269 $ 78

State taxes ( 6 ) 1 1

Foreign withholding taxes (refund) 10 22 ( 29 )

State taxes (benefit) 1 ( 6 ) 1

Foreign withholding taxes 7 10 22

Foreign rate detriment / (benefit) 71 ( 3 ) 2

3 unchanged sentences

Tax Reform Act — — ( 13 )

Foreign Derived Intangible Income deduction ( 147 ) — —

Other 9 ( 6 ) —

Income tax provision (benefit) $ 513 $ ( 1,210 ) $ 31

The Company recorded an income tax provision of $ 513 million in 2021 and an income tax benefit of $ 1.2 billion in 2020, representing effective tax rates of 14 % and ( 95 )% respectively.

The income tax provision of $ 513 million was a result of higher income in the U.S.

and increase in foreign taxes, partially offset by $ 147 million of foreign-derived intangible income benefit, $ 78 million of research and development tax credits, and $ 125 million of excess tax benefit for stock-based compensation net of non-deductible officers’ compensation.

The income tax benefit in 2020 was primarily due to $ 1.3 billion of tax benefit from the valuation allowance release in the U.S.

2 unchanged sentences

income taxes accrued in the prior year.

The income tax provision in 2018 was primarily due to a $ 36 million refund of withholding tax from a foreign jurisdiction related to a legal settlement from 2010, partially offset by $ 13 million of U.S.

income taxes resulting from the Tax Reform Act, a $ 7 million tax provision in foreign locations and $ 7 million of withholding taxes on cross-border transactions.

Deferred income taxes reflect the net tax effects of tax carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the balances for income tax purposes.

5 unchanged sentences

Accruals and reserves not currently deductible 631 514

Acquired intangibles and goodwill — 50

Employee benefits not currently deductible 164 122

Federal and state tax credit carryovers 319 569

2 unchanged sentences

Lease liability 124 72

Other 149 105

Total deferred tax assets 2,853 2,998

2 unchanged sentences

Deferred tax liabilities:

Acquired intangibles and goodwill ( 50 ) ( 1 )

Right-of-use assets ( 110 ) ( 62 )

5 unchanged sentences

The movement in the deferred tax valuation allowance was as follows:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

2 unchanged sentences

Net (deductions) recoveries +

10 485 ( 119 )

Balance at end of year $ 1,735 $ 1,576 $ 2,867

8 unchanged sentences

Net deferred tax assets $ 919 $ 1,234

Through the end of 2020, the Company demonstrated consistent and continued profitability over the preceding three-year period.

The Company’s ability to sustain and grow its such profitability is supported by the continued positive momentum of its consumer and commercial products including its newly released desktop, mobile and graphics processors, greater market acceptance for its server products, the successful adoption of its new game console processor products, and its continued leadership in the development of HPC products.

In assessing the realizability of the deferred tax assets, the Company considered the highly dynamic and competitive landscape of its industry, the continued performance and market acceptance of its new products, and the impact of such market acceptance on forecasts of future profitability.

As a result, in the fourth quarter of 2020, the Company concluded that its history of profitable operating results, including the current period results, along with increasingly favorable forecasts of continued future profitability, provided sufficient positive evidence supporting the realizability of a certain amount of its U.S.

deferred tax assets and, accordingly, the release of the related valuation allowance previously recorded against these deferred tax assets, resulting in a tax benefit of $ 1.3 billion in the fourth quarter of 2020.

The Company continues to maintain a valuation allowance of approximately $ 1.6 billion for certain federal, state, and foreign tax attributes.

The federal valuation allowance maintained is due to current limitations, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules.

The state and foreign valuation allowance maintained is due to lack of sufficient sources of income.

Through the end of fiscal year 2021, the Company continued to maintain a valuation allowance of approximately $ 1.7 billion for certain federal, state, and foreign tax attributes.

The federal valuation allowance maintained is due to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules.

Certain state and foreign valuation allowance maintained is due to lack of sufficient sources of future taxable income.

The Company’s United States federal and state net operating losses carryforwards as of December 25, 2021, were $ 1.9 billion and $ 265 million, respectively.

Net operating losses may be subject to limitations by the Internal Revenue Code and similar provisions.

The United States federal net operating losses will expire between 2034 and 2037, and the state net operating losses will expire at various dates through 2039.

7 unchanged sentences

A reconciliation of the Company's gross unrecognized tax benefits was as follows:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

7 unchanged sentences

The amount of unrecognized tax benefits that would impact the effective tax rate was $ 215 million, $ 77 million and $ 17 million as of December 25, 2021, December 26, 2020 and December 28, 2019, respectively.

The Company had no material amounts of accrued interest and accrued penalties related to unrecognized tax benefits as of December 26, 2020, December 28, 2019 and December 29, 2018.

The Company had $39 million of accrued penalties and interest related to unrecognized tax benefits as of December 25, 2021.

The Company had no material amounts of accrued interest and accrued penalties related to unrecognized tax benefits as of December 26, 2020 and December 28, 2019.

It is possible the Company may have tax audits close in the next 12 months that could materially change the balance of the uncertain tax benefits;

11 unchanged sentences

The Company has the following two reportable segments:

• the Computing and Graphics segment, which primarily includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs and development services.

• 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.

• the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded processors, semi-custom 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.

1 unchanged sentence

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.

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 (loss) by segment for 2021, 2020 and 2019.

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

8 unchanged sentences

The following table provides items included in All Other category:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

2 unchanged sentences

Acquisition-related costs ( 42 ) ( 14 ) —

Impairment of technology licenses — — ( 45 )

Loss contingency on legal matter — — ( 12 )

2 unchanged sentences

The following table summarizes sales to external customers by geographic regions based on billing location of the customer:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

8 unchanged sentences

The following table summarizes sales to major customers that accounted for at least 10% of the Company’s consolidated net revenue for the respective years:

2020 2019 2018

December 25, 2021 December 26, 2020 December 28, 2019

Customer A 14 % * 12 %

1 unchanged sentence

Less than 10%

Sales to customers A and B consisted of products from the Company’s Enterprise, Embedded and Semi-Custom segment.

Sales to customer A consisted of products primarily from the Enterprise, Embedded and Semi-Custom segment and sales to customer B consisted of products primarily from the Computing and Graphics segment.

The following table summarizes Property and equipment, net by geographic areas:

6 unchanged sentences

Total property and equipment, net $ 702 $ 641

NOTE 15 – Other Expense, Net

The following table summarizes the components of Other expense, net:

2020 2019 2018

NOTE 15 – Other Income (Expense), Net

The following table summarizes the components of Other income (expense), net:

December 25, 2021 December 26, 2020 December 28, 2019

(In millions)

1 unchanged sentence

Loss on debt redemption, repurchase and conversion ( 7 ) ( 54 ) ( 176 )

Other ( 1 ) ( 4 ) ( 6 )

Other expense, net $ ( 47 ) $ ( 165 ) $ —

Gains on equity investments, net 56 2 1

Other expense ( 2 ) ( 3 ) ( 5 )

Other income (expense), net $ 55 $ ( 47 ) $ ( 165 )

NOTE 16 – Commitments and Guarantees

1 unchanged sentence

The Company has entered into operating and finance leases for its corporate offices, data centers, research and development facilities and certain equipment.

The leases expire at various dates through 2028, some of which include options to extend the lease for up to five years.

The leases expire at various dates through 2031, some of which include options to extend the lease for up to ten years.

For 2021, 2020 and 2019, the Company recorded $ 71 million , $ 59 million and $ 56 million, respectively, of operating lease expense, including short-term lease expense.

1 unchanged sentence

For 2021 and 2020, cash paid for operating leases included in operating cash flows was $ 67 million and $ 55 million, respectively.

The Company’s finance leases and short-term leases are immaterial.

The Company’s finance and short-term leases are immaterial to the Company’s consolidated financial statements.

Supplemental information related to leases is as follows:

Weighted-average remaining lease term – operating leases 5.56 years

Weighted-average remaining lease term in years – operating leases 6.10

Weighted-average discount rate – operating leases 3.70 %

8 unchanged sentences

Certain other operating leases contain provisions for escalating lease payments subject to changes in the consumer price index.

Purchase and Other Contractual Obligations

The Company’s purchase obligations primarily include the Company’s obligations to purchase wafers and substrates from third parties.

The Company also had other contractual obligations, primarily included in Other long-term liabilities and Accrued liabilities on its consolidated balance sheets, which primarily consisted of $ 149 million of payments due under certain software and technology licenses and IP licenses that will be paid through 2025.

Total future unconditional purchase obligations as of December 26, 2020 were as follows:

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 December 25, 2021 were as follows:

Year (In millions)

20 unchanged sentences

On March 20, 2014, a purported shareholder derivative lawsuit captioned Wessels v.

Read, et al., Case No.

1:14 cv-262486 (Wessels) was filed against the Company (as a nominal defendant only) and certain of its directors and officers in the Santa Clara County Superior Court of the State of California.

2 unchanged sentences

On April 27, 2015, a similar purported shareholder derivative lawsuit captioned Christopher Hamilton and David Hamilton v.

Barnes, et al.

Barnes, et al., Case No.

5:15-cv-01890 (Hamilton) was filed against the Company (as a nominal defendant only) and certain of its directors and officers in the United States District Court for the Northern District of California.

5 unchanged sentences

The Wessels, Hamilton and Ha shareholder derivative lawsuits were stayed pending resolution of a class action lawsuit captioned Hatamian v.

AMD, et al., C.A.

3:14-cv-00226 filed against the Company in the United States District Court for the Northern District of California (the Hatamian Lawsuit).

1 unchanged sentence

On October 9, 2017, the parties signed a definitive settlement agreement resolving the Hatamian Lawsuit and submitted it to the Court for approval.

Under the terms of this agreement, the settlement was funded entirely by certain of the

Company’s insurance carriers and the defendants continued to deny any liability or wrongdoing.

Under the terms of this agreement, the settlement was funded entirely by certain of the Company’s insurance carriers and the defendants continued to deny any liability or wrongdoing.

On March 2, 2018, the court approved the settlement and entered a final judgment in the Hatamian Lawsuit.

On January 30, 2018, the Wessels and Hamilton plaintiffs amended their complaints.

On February 2, 2018, the Ha plaintiff also filed an amended complaint.

On February 22, 2018, the Company filed motions to dismiss the Hamilton and Ha plaintiffs’ amended complaints.

On April 2, 2018, the Company filed a demurrer seeking to dismiss the Wessels amended complaint.

On July 23, 2018, the Santa Clara Superior Court sustained the Company’s demurrer in the Wessels case, dismissing all claims in that matter with prejudice.

The Wessels plaintiff filed a Notice of Appeal on September 27, 2018.

On October 4, 2018, the Federal Court issued an order dismissing the Hamilton and Ha amended complaints.

The Hamilton plaintiffs filed a Notice of Appeal on October 8, 2018, and the Ha plaintiffs filed a Notice of Appeal on October 15, 2018.

On November 19, 2018, the Hamilton and Ha plaintiffs filed a motion seeking summary reversal of the order dismissing their claims.

The Company opposed this motion on December 13, 2018, and the Court denied it on February 25, 2019.

The California Court of Appeal affirmed this decision on August 27, 2020 and issued its remittitur on September 9, 2020, which foreclosed further appeals in the state court litigation.

On October 4, 2018, the district court issued an order dismissing the Hamilton and Ha amended complaints and both plaintiffs appealed.

On March 16, 2020, the Ninth Circuit affirmed the district court’s dismissal of the Ha complaint and the time to seek further appeals has since expired.

On the same day, the Ninth Circuit also reversed and remanded the district court’s dismissal of the Hamilton complaint for further consideration of defendants’ motion to dismiss.

Following supplemental briefing, that motion to dismiss remains pending.

On August 27, 2020, the California Court of Appeal affirmed the district court’s dismissal of the Wessels complaint and the time to seek further appeals has since expired.

Based upon information presently known to management, the Company believes that the potential liability, if any, will not have a material adverse effect on its financial condition, cash flows or results of operations.

Since January 19, 2018, three putative class action complaints have been filed against the Company in the United States District Court for the Northern District of California:

(1) Diana Hauck et al.

AMD, Inc., Case No.

5:18-cv-0047, filed on January 19, 2018;

(2) Brian Speck et al.

5:18-cv-0744, filed on February 4, 2018;

and (3) Nathan Barnes and Jonathan Caskey-Medina, et al.

5:18-cv-00883, filed on February 9, 2018.

On April 9, 2018, the court consolidated these cases and ordered that Diana Hauck et al.

serve as the lead case.

On June 13, 2018, six plaintiffs (from California, Louisiana, Florida, and Massachusetts) filed a consolidated amended complaint alleging that the Company failed to disclose its processors’ alleged vulnerability to Spectre.

Plaintiffs further allege that the Company’s processors cannot perform at their advertised processing speeds without exposing consumers to Spectre, and that any “patches” to remedy this security vulnerability will result in degradation of processor performance.

The plaintiffs seek damages under several causes of action on behalf of a nationwide class and four state subclasses (California, Florida, Massachusetts, Louisiana) of consumers who purchased the Company’s processors and/or devices containing AMD processors.

The plaintiffs also seek attorneys’ fees, equitable relief, and restitution.

Pursuant to the court’s order directing the parties to litigate only eight of the causes of action in the consolidated amended complaint initially, the Company filed a motion to dismiss on July 13, 2018.

On October 29, 2018, after the plaintiffs voluntarily dismissed one of their claims, the court granted the Company’s motion and dismissed six causes of action with leave to amend.

The plaintiffs filed their amended consolidated complaint on December 6, 2018.

On January 3, 2019, the Company again moved to dismiss the subset of claims currently at issue.

On April 4, 2019, the court granted the Company’s motion and dismissed all claims currently at issue with prejudice.

On May 6, 2019, the court granted the parties’ stipulation and request under Fed.

54(b) to enter a partial final judgment and certify for appeal the court’s April 4, 2019 dismissal order, and on that same date, the plaintiffs voluntarily dismissed without prejudice their remaining claims pursuant to an agreement whereby, subject to certain terms and conditions, the Company agreed to toll the statute of limitations and/or statute of repose.

On May 30, 2019, the plaintiffs filed a Notice of Appeal with the U.S.

Court of Appeals for the Ninth Circuit.

Briefing has completed for the appeal.

On May 15, 2020, the Ninth Circuit affirmed the district court’s ruling dismissing the subset of claims currently at issue against the Company.

On August 14, 2020, the district court dismissed the remaining claims with prejudice.

Following supplemental briefing, the district court entered an order on April 5, 2021 dismissing with prejudice all claims in the Hamilton action as precluded by the decision in the Wessels case.

Quarterhill Inc.

5 unchanged sentences

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.

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;

2 unchanged sentences

(formerly WiLAN Inc.).

On November 16, 2018, AMD filed answers in the Collabo and Aquila cases and filed a motion to dismiss in the Polaris case.

On January 25, 2019, the Company filed amended answers and counterclaims in the Collabo and Aquila cases.

On July 22, 2019, the Company’s motion to dismiss in the Polaris case was denied.

On August 23, 2019, the Court held a claim construction hearing in each case.

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 Appeals 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.

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.

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.

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.

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.

1:19-cv-02149).

Monterey Research alleges that the Company infringes six U.S.

13 unchanged sentences

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.

In November and December 2021 and January 2022, the USPTO issued five final written decisions in the inter partes reviews cancelling all challenged claims of five patents in suit.

On August 12, 2021, Monterey filed two patent infringement complaints in the United States District Court for the Western District of Texas (Case.

6:21-cv-00839 and Case.

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.

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).On November 15, 2021, the Company filed a motion to dismiss the complaint.

On December 8, 2021, Monterey filed its response.

On December 20, 2021, the Company filed a motion to transfer the case to Austin division.

City of Pontiac Police and Fire Retirement System Litigation

5 unchanged sentences

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.

Xilinx Acquisition Litigation

7 unchanged sentences

656971/2020 (N.Y.

The lawsuit alleges that the Board of Directors of Xilinx breached their fiduciary duties to Xilinx shareholders in connection with the Proposed Transaction

by allegedly failing to obtain fair, adequate and maximum consideration for Xilinx shareholders in connection with the Proposed Transaction and by not disclosing certain material information about the Proposed Transaction in the Registration Statement.

Ct.) (“Nunez”).

The lawsuit alleges that the Board of Directors of Xilinx breached their fiduciary duties to Xilinx shareholders in connection with the Proposed Transaction by allegedly failing to obtain fair, adequate and maximum consideration for Xilinx shareholders in connection with the Proposed Transaction and by not disclosing certain material information about the Proposed Transaction in the Registration Statement.

The lawsuit asserts a single claim against the Company, alleging that it aided and abetted the Xilinx directors’ breach of their fiduciary duties.

2 unchanged sentences

Xilinx, Case No.

1:20-cv-10595 (S.D.N.Y.).

1:20-cv-10595 (S.D.N.Y.) (“Shumacher”).

The lawsuit alleges that Xilinx and its Board of Directors disseminated a false and misleading Registration Statement that omitted material information regarding the Proposed Transaction, thereby violating Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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Advanced Micro Devices, Case No.

1:20-cv-10894 (S.D.N.Y).

1:20-cv-10894 (S.D.N.Y) (“Vazirani”).

The lawsuit alleges that the Company and its Board of Directors disseminated a false and misleading Registration Statement that omitted material information regarding the Proposed Transaction, thereby violating Sections 14(a) and 20(a) of the Exchange Act.

The lawsuit seeks to enjoin or rescind any transaction with Xilinx as well as certain other equitable relief, unspecified damages and attorneys’ fees and costs.

On March 22, 2021, the Nunez complaint was voluntarily dismissed, and on March 25, 2021, the Vazirani complaint was voluntarily dismissed.

The Shumacher complaint was voluntarily dismissed on April 9, 2021.

Future Link Systems Litigation

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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 June 3, 2021, the Company filed a motion to transfer the case to Austin, Texas.

On October 14, 2021, the Court issued an order construing certain terms in the asserted patents.

On November 22, 2021, the case was reassigned to the Austin division.

On January 5, 2022, the Company filed a motion to strike Future Link System’s infringement contentions, and Future Link Systems filed a response on January 19, 2022.

On January 14, 2022, the USPTO instituted an IPR trial for one of the three patents in suit.

On December 21, 2021, Future Link Systems LLC filed a lawsuit alleging infringement of two patents related to power management.

The Company was served with the complaint on December 28, 2021.

On December 28, 2021, Future Link Systems LLC filed a complaint at the United States International Trade Commission alleging infringement of the same two power management patents.

Several of the Company’s customers were also named as respondents.

On January 26, 2022, the USITC announced that it would institute the investigation.

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.

Environmental Matters

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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.

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 18 - 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.

On October 26, 2020, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Thrones Merger Sub, Inc., the Company’s wholly owned subsidiary (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 the Company’s common stock 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.

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The Company will be required to pay a termination fee equal to $ 1.0 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).

The closing of the Merger is subject to customary conditions, including regulatory approval and approval by the stockholders of both the Company and Xilinx.

The Merger is currently expected to close by the end of calendar year 2021.

On April 7, 2021, the Company’s stockholders voted to approve all the proposals relating to the Merger at a special meeting of stockholders.

Xilinx stockholders also voted to approve their respective proposals relating to the Merger at a Xilinx special meeting held on the same day.

The closing of the Merger is subject to customary conditions, including regulatory approval.

The Merger is currently expected to close in the first quarter of 2022.

NOTE 19 - Subsequent Events

Subsequent to December 25, 2021, through the date of issuance of these consolidated financial statements (the “issuance date”), the Company repurchased $ 1.0 billion of its common stock under the Repurchase Program.

As of the issuance date, $ 1.2 billion remained available for future stock repurchases under the Repurchase Program.

Report of Independent Registered Public Accounting Firm

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 26, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated January 29, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 3, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Valuation

Description of the Matter At December 25, 2021, the Company’s net inventory balance was $1,955 million.

As discussed in Note 2 of the consolidated financial statements, the Company adjusts the inventory carrying value to the lower of actual cost or the estimated net realizable value after completing ongoing reviews of on-hand inventory quantities in excess of forecasted demand, by considering recent historical activity as well as anticipated or forecasted demand.

Auditing management’s inventory carrying value adjustments involved significant judgment because the estimates are based on a number of factors that are affected by market, industry, and competitive conditions outside the Company's control.

In particular, in estimating inventory carrying value adjustments, management developed assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles.

As discussed in Note 2 of the consolidated financial statements, the Company adjusts the inventory carrying value to the lower of actual cost or the estimated net realizable value after completing ongoing reviews of on-hand inventory quantities exceeding forecasted demand, by considering recent historical activity as well as anticipated or forecasted demand.

Auditing management’s inventory carrying value adjustments involved significant judgment because the estimates are based on several factors that are affected by market, industry, and competitive conditions outside the Company's control.

In estimating inventory carrying value adjustments, management developed assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's inventory carrying value adjustment determination process, including the basis for developing above described assumptions and management’s judgments.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's inventory carrying value adjustment determination process, including the basis for developing the above-described assumptions and management’s judgments.

Our audit procedures included, among others, testing the reasonableness of management’s key assumptions and judgments and testing the accuracy and completeness of the underlying data used to determine the amount of inventory carrying value adjustments.

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We also assessed the accuracy of forecasts underlying management's estimates by comparing management’s historical forecasts to actual results, evaluated industry and market factors and performed sensitivity analyses over the significant assumptions used by management to evaluate necessary changes in the inventory carrying value adjustments.

Deferred Tax Asset Valuation Allowance

Description of the Matter As discussed in Note 13 to the consolidated financial statements, at December 26, 2020, the Company carried deferred tax assets of $1,420 million, net of a $1,576 million valuation allowance.

Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Once established, the valuation allowance is released when, based on the weight of all available evidence, management concludes that related deferred tax assets are more likely than not to be realized.

In 2020, management concluded sufficient positive evidence exists to release a portion of the valuation allowance related to U.S.

deferred tax assets, resulting in an income tax benefit of $1,301 million in 2020.

Auditing management's analysis of the realizability of the deferred tax assets was complex and highly judgmental because the assessment process involves significant judgment and subjective evaluation of assumptions that may be affected by future operations of the Company, market or economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s evaluation of the nature of its tax attributes and projections of the future reversal of existing taxable temporary differences and future taxable income.

We evaluated the Company's assessment of the realizability of its U.S.

deferred tax assets and the resultant release of valuation allowance.

Our audit procedures included, among others, evaluation of the nature of the Company’s tax attributes, application of the technical tax guidance related to attributes subject to additional limitation, projections of the future reversal of existing taxable temporary differences and assumptions used by the Company to assess reliability of its projected future taxable income.

We compared the projections of future taxable income with the actual results of prior periods and assessed management's consideration of current industry and economic trends.

We also compared the projections of future taxable income with other forecasted financial information prepared by the Company.

Further, we tested the completeness and accuracy of the underlying data used in the Company’s projections.

We involved our tax professionals with specialized skills and knowledge to evaluate the Company’s assessment of the scheduling of the reversal of existing temporary taxable differences and carryforward amounts and the carryforward lives of its deferred tax assets, and whether the estimated future sources of taxable income were of the appropriate character to utilize the deferred tax assets in the relevant time period.

/s/ Ernst & Young LLP

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San Jose, California

January 29, 2021

February 3, 2022

Report of Independent Registered Public Accounting Firm

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 25, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 26, 2020 and December 28, 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 26, 2020, and the related notes and our report dated January 29, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 25, 2021 and December 26, 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 25, 2021, and the related notes and our report dated February 3, 2022 expressed an unqualified opinion thereon .

Basis for Opinion

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San Jose, California

January 29, 2021

Supplementary Financial Information (unaudited)

The Company uses a 52- or 53-week fiscal year ending on the last Saturday in December.

All quarters of 2020 and 2019 consisted of 13 weeks.

(In millions, except per share amounts)

Dec 26 Sep 26 June 27 Mar 28 Dec 28 Sep 28 June 29 Mar 30

Net revenue $ 3,244 $ 2,801 $ 1,932 $ 1,786 $ 2,127 $ 1,801 $ 1,531 $ 1,272

Cost of sales 1,793 1,571 1,084 968 1,178 1,024 910 751

Gross profit 1,451 1,230 848 818 949 777 621 521

Research and development 573 508 460 442 395 406 373 373

Marketing, general and administrative 308 273 215 199 206 185 189 170

Licensing gain — — — — — — — ( 60 )

Operating income 570 449 173 177 348 186 59 38

Interest expense ( 9 ) ( 11 ) ( 14 ) ( 13 ) ( 18 ) ( 24 ) ( 25 ) ( 27 )

Other income (expense), net ( 15 ) ( 37 ) 1 4 ( 125 ) ( 36 ) 3 ( 7 )

Income before income taxes 546 401 160 168 205 126 37 4

Income tax provision (benefit) (1)

( 1,232 ) 12 4 6 35 7 2 ( 13 )

Equity income (loss) in investee 3 1 1 — — 1 — ( 1 )

Net income $ 1,781 $ 390 $ 157 $ 162 $ 170 $ 120 $ 35 $ 16

Earnings per share

Basic $ 1.48 $ 0.33 $ 0.13 $ 0.14 $ 0.15 $ 0.11 $ 0.03 $ 0.01

Diluted $ 1.45 $ 0.32 $ 0.13 $ 0.14 $ 0.15 $ 0.11 $ 0.03 $ 0.01

Shares used in per share calculation

Basic 1,205 1,184 1,174 1,170 1,140 1,097 1,084 1,044

Diluted 1,226 1,215 1,227 1,224 1,188 1,117 1,109 1,094

(1) During the fourth quarter of 2020, the Company recognized a $ 1.3 billion income tax benefit upon the release of a portion of the valuation allowance on U.S.

deferred tax assets.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

February 3, 2022

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data