What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-04 compared with 2025-02-05 · 141 added, 106 removed, 139 unchanged (64% of the section changed)

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Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024.

Beginning in the first quarter of fiscal year 2025, we combined the Client and Gaming segments into one reportable segment to align with how we manage our business.

All prior period segment data were retrospectively adjusted.

In 2025, we delivered strong annual revenue growth with net revenue increasing 34% to $34.6 billion, compared to $25.8 billion in 2024.

This growth was driven by the performance of our Data Center and Client segments.

Data Center net revenue of $12.6 billion increased by 94% compared to $6.5 billion in 2023, driven by higher sales of our AMD Instinct™ GPUs and AMD EPYC™ CPUs.

Client segment net revenue of $7.1 billion in 2024 increased by 52% compared to $4.7 billion in 2023, primarily due to higher sales of our AMD Ryzen™ mobile and desktop processors.

The increase in annual net revenue was partially offset by a decrease in net revenue in our Gaming and Embedded segments.

Gaming net revenue of $2.6 billion decreased by 58% compared to $6.2 billion in 2023.

The decrease in net revenue was primarily due to lower semi-custom product revenue.

Embedded net revenue of $3.6 billion decreased by 33% compared to net revenue of $5.3 billion in 2023, as customers normalized their inventory levels.

During the year, we successfully launched multiple leadership products and made significant progress executing our AI strategy.

One of our priorities in 2024 was to accelerate growth in our Data Center segment.

The demand for our Data Center AI accelerator products was very strong led by large hyperscale cloud customers deploying our AMD Instinct MI300X GPU accelerators.

During the year, we unveiled an accelerated AMD Instinct accelerator roadmap to deliver an annual cadence of leadership AI solutions.

To further expand our high-performance server CPU portfolio, we launched our 5th Gen AMD EPYC™ processors, formerly codenamed “Turin,” built with our latest “Zen 5” core architecture designed to deliver leadership performance and efficiency.

We took a major step in our AI PC roadmap with the launch of AMD Ryzen AI 300 Series processors that combine leadership compute capabilities based on our “Zen 5” architecture and an industry-leading neural processing unit (NPU) powered by our XDNA 2 architecture for next-generation AI PCs.

We added to our Ryzen family of desktop CPUs with the Ryzen 9000 series processors for laptop and desktop PCs that deliver leadership performance in gaming, productivity and content creation.

In our Gaming segment, we extended our multigenerational partnership with Sony as they introduced the PlayStation® 5 Pro, which features a new AMD semi-custom SoC designed to deliver increases in graphics and ray tracing performance to enable AI-driven upscaling.

We expanded our adaptive computing portfolio with differentiated solutions with the launch of the new Versal™ Series Gen 2 devices, including the new Versal AI Edge Series Gen 2 and Versal Prime Series Gen 2 adaptive SoCs, which bring preprocessing, AI inference, and postprocessing together in a single device for end-to-end acceleration of AI-driven embedded systems.

To execute our AI strategy, we brought together multiple AI teams across AMD to drive development of a comprehensive software ecosystem spanning our full product portfolio.

We made several key optimizations and introduced new features in the latest AMD ROCm™ software that increased performance in key generative AI workloads, expanded support and optimization for additional frameworks and libraries, and simplified the overall developer experience.

We also made strategic investments to further expand our AI software capabilities with the acquisition of Silo AI Oy (Silo AI), an AI lab based in Finland.

The acquisition of Silo AI enables customers to accelerate development and deployment of AI models on AMD hardware.

Silo AI has also developed a software stack used to train multiple state-of-the-art large language models (LLMs) on AMD Instinct accelerators that can accelerate the development of highly-performant AMD training solutions.

We also focused on extending our data center infrastructure capabilities by entering into an agreement in August 2024 to acquire ZT Group Int’l, Inc.

(ZT Systems), a provider of AI and general purpose compute infrastructure for hyperscale computing companies.

We believe that with the acquisition of ZT Systems, we can accelerate time to market for our leadership AI training and inferencing solutions.

The acquisition is expected to close in the first half of fiscal year 2025, subject to certain regulatory approvals and other customary closing conditions.

We intend to seek a strategic partner to acquire ZT Systems' manufacturing business.

Gross margin, as a percentage of net revenue, was 49% for 2024, compared to 46% in 2023.

The increase in gross margin was primarily due to a favorable shift in revenue mix with higher Data Center and Client revenues, lower Gaming revenue, partially offset by the impact of lower Embedded revenue.

Operating income for 2024 was $1.9 billion compared to operating income of $401 million for 2023.

The increase in operating income was primarily driven by higher revenue, partially offset by increased R&D investments.

Net income for 2024 was $1.6 billion compared to $854 million in the prior year.

The increase in net income was primarily driven by higher revenue.

This growth was driven by the performance of our Data Center and Client and Gaming segments.

Data Center net revenue of $16.6 billion increased by 32% compared to $12.6 billion in 2024, primarily driven by strong demand for our 5th generation AMD EPYC™ processors and AMD Instinct™ MI350 Series GPUs.

Client and Gaming segment net revenue of $14.6 billion in 2025 increased by 51% compared to $9.6 billion in 2024, primarily driven by strong demand for our AMD Ryzen™ processors, semi-custom game consoles SoCs and Radeon™ gaming GPUs.

The increase in annual net revenue was partially offset by a decrease in net revenue in our Embedded segment.

Embedded net revenue of $3.5 billion decreased by 3% compared to net revenue of $3.6 billion in 2024, as certain end market demand remained mixed.

Gross margin of 50% increased by 1% compared to 49% in 2024, primarily due to product mix partially offset by approximately $440 million of net inventory and related charges associated with the U.S.

government export control on AMD Instinct™ MI308 Data Center GPU products.

Cash, cash equivalents and short-term investments as of December 27, 2025 were $10.6 billion, compared to $5.1 billion at the end of 2024.

Our aggregate principal amount of total debt as of December 27, 2025 was $3.3 billion, compared to $1.8 billion as of December 28, 2024.

We repaid our 2.95% Senior Notes due 2024 with a principal amount of $750 million in June 2024.

During the twelve months ended December 28, 2024, we returned a total of $862 million to shareholders through the repurchase of 5.9 million shares of common stock under our stock repurchase program.

In 2025, we returned a total of $1.3 billion to shareholders through the repurchase of 12.4 million shares of common stock under our stock repurchase program.

As of December 27, 2025, $9.4 billion remained available for future stock repurchases under this program.

The stock repurchase program does not obligate us to acquire any common stock, has no termination date and may be suspended or discontinued at any time.

During 2025, we launched multiple leadership products and made significant progress executing our AI strategy.

A priority in 2025 was accelerating growth in the Data Center segment.

Demand for our data center AI GPU products was strong as large hyperscale customers, OEMs and ODMs deployed our AMD Instinct MI350X Series GPUs.

We advanced our AMD AI GPU roadmap to deliver an annual cadence of leadership for AMD Instinct solutions, beginning with the AMD Instinct MI350 Series GPUs in 2025.

Beyond GPUs, we launched the 5th Gen AMD EPYC family of server processors in 2025, which deliver leadership performance and capabilities for a wide range of data center workloads, including AI.

We also expanded the data center portfolio with new networking solutions, including the AMD Pensando™ “Pollara” 400 AI NICs and “Vulcano” AI NICs, which deliver high-speed connectivity across GPU clusters providing high-performance, AI-ready, flexible solutions for scale-out networking.

In addition, we previewed our Helios AI rack-scale platform solution that incorporates all of our data center products (CPUs, GPUs and Networking) to address the growing AI compute requirements.

Table of Conten t s

Across Client and Gaming, we continued to strengthen our leadership with expanding enterprise adoption and a growing portfolio of AMD Ryzen processors.

For gamers, creators and developers, we brought to market AMD Radeon 9000 Series GPUs and Radeon AI PRO 9700 GPUs based on the AMD RDNA 4 graphics architecture to market along new high-performance Ryzen Threadripper™ 9000 Series processors.

Our x86 Embedded portfolio continued to expand in 2025 with the introduction of three new AMD EPYC embedded processor series:

AMD EPYC Embedded 9005 Series, EPYC Embedded 4005 Series and EPYC Embedded 2005 Series.

We also made strategic investments through acquisitions to further advance our software capabilities including compiler and AI expertise in machine learning, inference and performance optimization, and enable highly optimized solutions across the stack;

to scale our ability to support and develop a variety of photonics and co-packaged optics solutions across next-gen AI systems;

and to bring deep expertise in high-speed inference and reasoning-based AI technologies for large-scale deployments, reinforcing our enterprise AI software stack.

To execute our AI strategy, we brought in multiple AI teams across AMD to drive development of a comprehensive software ecosystem spanning our full product portfolio.

We delivered key optimizations and expanded framework and library support in the latest version of AMD ROCm™ software, improving performance for generative AI workloads and simplifying the developer experience across training and inference.

In March 2025, we completed the acquisition of ZT Systems for $3.2 billion in cash and 8.3 million shares of our common stock.

We retained select intellectual property and employees associated with the design operations (ZT Design Business), and in October 2025, we sold the ZT data center infrastructure manufacturing business (ZT Manufacturing Business) to Sanmina Corporation (Sanmina) for $2.4 billion in cash, subject to certain purchase price adjustments, and 1.2 million shares of Sanmina common stock.

We are eligible to receive additional contingent cash consideration of up to $450 million from Sanmina to the extent certain conditions are met.

Sanmina will also be our preferred partner for manufacturing capabilities in building complex AI solutions.

Following the close of the sale of the ZT Manufacturing Business to Sanmina, we retained certain intellectual property and former employees of ZT Systems (ZT Design Business) and settled the contingent consideration liability with the former ZT shareholders and warrant holders.

In October 2025, we entered into a product purchase agreement with OpenAI OpCo, LLC, (OpenAI) to deploy 6 gigawatts of AMD GPUs, with the deployment of the first gigawatt of capacity powered by our AMD Instinct MI450 series products.

Concurrent with the agreement, we issued to OpenAI a warrant to purchase up to an aggregate of 160 million shares of AMD’s common stock at an exercise price of $0.01 per share.

The warrant shares will vest in tranches based on certain AMD Instinct GPU purchase milestones by OpenAI, or its affiliates, or indirectly through third parties, and achievement of specified AMD stock price targets and stock performance.

Each vested tranche is further subject to the fulfillment of certain other technical and commercial conditions prior to exercise.

Subject to certain conditions, the warrant is exercisable through October 5, 2030.

None of the warrant shares met the vesting or exercise conditions and the warrant had no impact to our financial statements for the year ended December 27, 2025.

During the second quarter of fiscal year 2025, the Company recorded approximately $800 million of inventory and related charges on AMD Instinct MI308 Data Center GPU products due to new U.S.

export restrictions on certain semiconductors to China.

We applied for and were granted some licenses by the U.S.

government that allow us to ship MI308 products to certain China-based customers.

During the fourth quarter of fiscal year 2025, we began shipping products and reversed approximately $360 million of the inventory and related charges recorded earlier in the year.

government officials have expressed an expectation that the U.S.

government will receive 15% of the revenue generated from licensed MI308 sales to China;

however, to date, the U.S.

government has not published a regulation establishing such requirement.

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

Table of Conten t s

Critical Accounting Estimates

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The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts in our Consolidated Financial Statements.

We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, goodwill, long-lived and intangible assets, and income taxes.

We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, business combinations, goodwill, long-lived and intangible assets, and income taxes.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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Revenue contracts with our customers include variable amounts which we evaluate under ASC 606-10-32-8 through 14 in order to determine the net amount of consideration to which we are entitled and which we recognize as revenue.

We determine the net amount of consideration to which we are entitled by estimating the most likely amount of consideration we expect to receive from the customer after adjustments to the contract price for rights of return and rebates to our original equipment manufacturers (OEM) customers and rights of return, rebates and price protection on unsold merchandise to our distributor customers.

We determine the net amount of consideration to which we are entitled by estimating the most likely amount of consideration we expect to receive from the customer after adjustments to the contract price for rights of return and rebates to our original equipment manufacturer (OEM) and original design manufacturer (ODM) customers and rights of return, rebates and price protection on unsold merchandise to our distributor customers.

We base our determination of necessary adjustments to the contract price by reference to actual historical activity and experience, including actual historical returns, rebates and credits issued to OEM and distributor customers adjusted, as applicable, to include adjustments, if any, for known events or current economic conditions, or both.

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however, these estimates are subject to management’s judgment and actual provisions could be different from our estimates and current provisions, resulting in future adjustments to our revenue and operating results.

Table of Conten t s

Inventory Valuation.

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If in any period we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, related revenue would be recorded with a lower or no offsetting charge to cost of sales resulting in a net benefit to our gross margin in that period.

Overall, our estimates of inventory carrying value adjustments have been materially consistent with actual results.

Business Combinations.

We allocate the fair value of purchase consideration for acquisitions meeting the requirement of business combinations to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

Such valuations require management to make significant estimates and assumptions, especially with respect to assets and liabilities held for sale, intangible assets and contingent consideration.

Significant estimates and inputs used in valuing acquired assets and liabilities held for sale, developed technology, and other identifiable intangible assets include, but are not limited to, expected future revenue, future changes in technology, useful lives, risk-adjusted discount rates and time and costs to recreate certain assets.

Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over their useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized.

Goodwill is the excess of the aggregate of the consideration transferred over the identifiable assets acquired and liabilities assumed in connection with business combinations.

Our reporting units are at the operating segment level.

Our goodwill is contained within four reporting units:

Data Center, Client, Gaming and Embedded.

Our goodwill is contained within three reporting units:

Data Center, Client and Gaming, and Embedded.

We perform our goodwill impairment analysis as of the first day of the fourth quarter of each year and, if certain events or circumstances indicate that an impairment loss may have been incurred, on a more frequent basis.

The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment, which occurs when the carrying value of a reporting unit exceeds its fair value.

Significant judgment is required in estimating the fair value of our reporting units to determine if the fair values of those units exceed their carrying values and an impairment to goodwill is required when a quantitative goodwill impairment test is performed.

We typically obtain the assistance of third-party valuation specialists to help in determining the fair value of our reporting units.

Significant judgment is required in estimating the fair value of our reporting units to determine if the fair values of those units exceed their carrying values.

We may obtain the assistance of third-party valuation specialists to help in determining the fair value of our reporting units.

Changes in operating plans or adverse changes in the business or in the macroeconomic environment in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of our reporting units’ goodwill.

Based on our annual qualitative impairment test, we concluded it is not more likely than not that the carrying value of each reporting unit exceeded its fair value.

Based on our annual qualitative impairment test, we concluded that it is not more likely than not that the carrying value of each reporting unit exceeded its fair value.

Long-Lived and Intangible Assets.

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In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the asset group or based on appraisals.

Table of Conten t s

Income Taxes .

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and (iv) future taxable income exclusive of reversing temporary differences and carryforwards.

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 allowances are maintained due to a lack of sufficient sources of future taxable income.

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Historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact these trends.

The following table provides a summary of net revenue and operating income (loss) by segment for 2024 and 2023:

Table of Conten t s

The following table provides a summary of net revenue, cost of sales and operating expenses, and operating income (loss) by segment for 2025 and 2024:

2025 December 28,

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Data Center $ 16,635 $ 12,579

Client and Gaming

Client 10,640 7,054

Gaming 3,910 2,595

Total Client and Gaming

Embedded 3,454 3,557

Total net revenue $ 34,639 $ 25,785

Cost of sales and operating expenses:

$ 13,032 $ 9,097

Client and Gaming

Total cost of sales and operating expenses

$ 30,945 $ 23,885

Operating income (loss):

Data Center $ 3,603 $ 3,482

Client 897 (46)

Gaming 290 971

Client and Gaming 2,855 1,187

Embedded 1,243 1,421

All Other (4,190) (4,419)

(4,007) (4,190)

Total operating income

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Data Center net revenue of $16.6 billion in 2025 increased by 32%, compared to net revenue of $12.6 billion in 2024.

The increase was primarily driven by higher sales of AMD Instinct GPUs and AMD EPYC CPUs.

The increase was primarily driven by strong demand for our AMD EPYC™ processors and AMD Instinct™ GPU accelerators.

Data Center operating income was $3.6 billion in 2025, compared to operating income of $3.5 billion in 2024.

The increase in operating income was primarily due to higher revenue, partially offset by higher R&D investment.

Client net revenue of $7.1 billion in 2024 increased by 52%, compared to net revenue of $4.7 billion in 2023, primarily due to a 34% increase in unit shipments and a 13% increase in average selling price driven by strong demand for AMD mobile and desktop Ryzen processors.

Client operating income was $897 million in 2024, compared to operating loss of $46 million in 2023.

The increase in operating income was primarily due to higher revenue, partially offset by higher operating expenses.

Gaming net revenue of $2.6 billion in 2024 decreased by 58%, compared to net revenue of $6.2 billion in 2023.

The decrease in net revenue was primarily due to lower semi-custom product revenue.

Gaming operating income was $290 million in 2024, compared to operating income of $971 million in 2023.

The decrease in operating income was primarily driven by lower revenue.

The increase in operating income was primarily due to higher revenue, partially offset by higher cost of sales, approximately $440 million of net inventory and related charges associated with the U.S.

government export control on AMD Instinct™ MI308 Data Center GPU products and higher operating expenses.

Client and Gaming

Client and Gaming net revenue of $14.6 billion in 2025 increased by 51%, compared to net revenue of $9.6 billion in 2024.

Client net revenue of $10.6 billion in 2025 increased by 51%, compared to net revenue of $7.1 billion in 2024, primarily driven by a 31% increase in unit shipments of processors and a 15% increase in average selling price of processors, reflecting strong demand for AMD desktop and mobile Ryzen processors.

Gaming net revenue of $3.9 billion in 2025 increased by 51%, compared to net revenue of $2.6 billion in 2024.

The increase was primarily driven by higher semi-custom revenue and strong demand of our Radeon™ gaming GPUs.

Client and Gaming operating income was $2.9 billion in 2025, compared to operating income of $1.2 billion in 2024.

The increase in operating income was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.

Table of Conten t s

Embedded net revenue of $3.5 billion in 2025 decreased by 3%, compared to net revenue of $3.6 billion in 2024.

The decrease in net revenue was primarily due to lower demand as customers continued to normalize their inventory levels.

Net revenue decreased as certain end market demand remained mixed.

Embedded operating income was $1.2 billion in 2025, compared to operating income of $1.4 billion in 2024.

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All Other operating loss of $4.2 billion in 2024 primarily consisted of $2.4 billion of amortization of acquisition-related intangibles and $1.4 billion of stock-based compensation expense.

Comparison of Gross Margin, Expenses, Licensing Gain, Interest Expense, Other Income (expense) and Income Taxes

International Sales

International sales as a percentage of net revenue were 67% in 2025 and 66% in 2024.

We expect that international sales will continue to be a significant portion of total sales in the foreseeable future.

Substantially all of our sales transactions are denominated in U.S.

Comparison of Gross Margin, Expenses, Interest Expense, Other Income (expense) and Income Taxes

The following is a summary of certain Consolidated Statement of Operations data for 2025 and 2024:

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Amortization of acquisition-related intangibles 1,223 1,448

Restructuring charges

Licensing gain (48) (34)

Interest expense (131) (92)

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Income tax provision (benefit)

Gross margin as a percentage of net revenue was 49% in 2024 compared to 46% in 2023.

The increase in gross margin was due to a favorable shift in revenue mix of higher Data Center and Client revenues, lower Gaming revenue, partially offset by the impact of lower Embedded revenue.

Income from discontinued operations, net of tax

Gross margin of 50% increased by 1% compared to 49% in 2024, primarily due to product mix, partially offset by approximately $440 million of net inventory and related charges associated with the U.S.

government export control on AMD Instinct™ MI308 Data Center GPU products.

Research and Development Expenses

Research and development expenses of $6.5 billion in 2024 increased by $584 million, or 10%, compared to $5.9 billion in 2023.

The increase was primarily due to higher employee-related costs due to an increase in headcount in support of our AI strategy.

Research and development expenses of $8.1 billion in 2025 increased by $1.6 billion, or 25%, compared to $6.5 billion in 2024.

The increase was primarily due to higher employee-related costs from an increase in headcount in support of our continued focus on our AI strategy.

Marketing, General and Administrative Expenses

Marketing, general and administrative expenses of $2.8 billion in 2024 increased by $431 million, or 18%, compared to $2.4 billion in 2023.

Marketing, general and administrative expenses of $4.1 billion in 2025 increased by $1.4 billion, or 52%, compared to $2.7 billion in 2024.

The increase was primarily due to an increase in go-to-market activities to support our revenue growth.

Table of Conten t s

Amortization of Acquisition-Related Intangibles

Amortization of acquisition-related intangibles of $2.4 billion for 2024 decreased by $417 million, or 15%, compared to $2.8 billion in 2023.

The decrease was primarily due to certain acquisition-related intangibles being fully amortized in the prior fiscal year.

Restructuring Charges

We recognized $ 186 million of restructuring charges in 2024 due to the implementation of a restructuring plan (the 2024 Restructuring Plan).

The 2024 Restructuring Plan was focused on driving efficiencies across the business and aligning resources with our largest growth opportunities in the AI and enterprise markets.

Licensing Gain

We hold equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd.

(THATIC), a third-party Chinese entity.

We recognized $48 million and $34 million of licensing gain from royalty income associated with the licensed IP to the THATIC JV, in 2024 and 2023, respectively.

Amortization of acquisition-related intangibles of $2.3 billion for 2025 decreased by $140 million, or 6%, compared to $2.4 billion in 2024, primarily due to a lower balance of amortizable acquisition-related intangibles compared to the prior year.

Interest Expense

Interest expense of $92 million in 2024 decreased by $14 million compared to $106 million in 2023, primarily due to repayment of the 2.95% Senior Notes due in June 2024.

Interest expense of $131 million in 2025 increased by $39 million compared to $92 million in 2024, primarily due to the issuance of $1.5 billion in aggregate principal amount of 4.212% Notes and 4.319% Notes in March 2025.

Other Income (expense), net

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

Other income (expense), net was $181 million in 2024 compared to $197 million of Other income, net in 2023.

The change was primarily due to a decrease in interest income from lower balances held in short-term investments compared to the prior year.

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

Other income (expense), net of $577 million in 2025 increased by $396 million compared to $181 million in 2024, primarily due to higher unrealized gains from long-term investments compared to the prior year.

Income Tax Provision (Benefit)

We recorded an income tax provision of $381 million in 2024 and an income tax benefit of $346 million in 2023, representing effective tax rates of 19% and (68%), respectively.

The increase in income tax provision in 2024 was primarily due to higher pre-tax income and a $373 million tax effect from an intercompany integration transaction.

We recorded an income tax benefit of $103 million and an income tax provision of $381 million in 2025 and 2024, respectively, representing effective tax rates of (2.5%) and 19%, respectively.

The decrease in income tax provision in 2025 was primarily driven by an $853 million benefit related to the release of uncertain tax positions pertaining to the reasonable cause relief for dual consolidated losses approved by the Internal Revenue Service (IRS) in April 2025, whereas the income tax provision in 2024 included $373 million tax effect from an intercompany integration transaction.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law.

For fiscal year 2025, the primary impact of the OBBBA to our tax provision was the accelerated expensing of domestic R&D activities which decreased our income eligible for FDII, reduced our deferred tax assets, and reduced our current income tax liability.

Other OBBBA changes did not have a material impact on the financial statements.

Global Minimum Tax

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Although many countries have already introduced Pillar Two legislation applicable to us effective in 2024, certain jurisdictions in which we operate have not adopted corresponding legislation to date.

For 2024, the impact to us associated with Pillar Two was immaterial.

We continue to evaluate the impact of proposed and enacted legislative changes to our effective tax rate and cash flows as new guidance becomes available.

International Sales

International sales as a percentage of net revenue were 66% in 2024 and 65% in 2023.

We expect that international sales will continue to be a significant portion of total sales in the foreseeable future.

Substantially all of our sales transactions are denominated in U.S.

For 2024 and 2025, the impact to us associated with Pillar Two was immaterial.

In January 2026, the OECD released a "side-by-side" package introducing new safe harbors and providing an exemption for U.S.-based multinational companies from parts of the global minimum tax framework.

We continue to evaluate the impact of proposed and enacted legislative changes to our effective tax rate and cash flows as new guidance becomes available in each country.

Discontinued Operations

Net income from discontinued operations for 2025 was $66 million, net of tax expense of $54 million.

This includes the results of operations of the ZT Manufacturing Business and the change in fair value of contingent consideration liability of $121 million.

FINANCIAL CONDITION

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As of December 27, 2025, our cash, cash equivalents and short-term investments were $10.6 billion compared to $5.1 billion as of December 28, 2024.

The percentage of cash and cash equivalents held domestically was 90% as of December 28, 2024, and 77% as of December 30, 2023.

Table of Conten t s

Our operating, investing and financing cash flow activities for 2025 and 2024 were as follows:

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Net cash provided by (used in):

Net cash provided by operating activities of continuing operations $ 6,493 $ 3,041

Net cash provided by operating activities of discontinued operations 1,216 —

Operating activities 7,709 3,041

Net cash (used in) provided by investing activities of continuing operations (6,851) (1,101)

Net cash provided by investing activities of discontinued operations 1,318 —

Investing activities (5,533) (1,101)

Financing activities (431) (2,062)

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

$ 1,745 $ (122)

In March and October 2025, we paid a total of $2.0 billion in cash, net of cash acquired, and issued 9.1 million shares of our common stock in the acquisition of ZT Systems.

In October 2025, upon completion of the sale of the ZT Manufacturing Business to Sanmina Corporation (Sanmina), we received a total of $1.4 billion in cash, net of cash divested, and 1.2 million shares of Sanmina common stock valued at $154 million.

We are eligible to receive additional cash consideration of up to $450 million to the extent certain conditions are met following the close of the sale through 2028 (Sanmina Earn-out).

As of December 27, 2025, our aggregate principal debt was $3.3 billion, with short-term and long-term debt obligations of $874 million and $2.3 billion, respectively.

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

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We also have a commercial paper program to issue unsecured commercial paper notes up to a maximum principal amount outstanding, at any time, of $3.0 billion, with a maturity of up to 397 days from the date of issue.

We did not issue any commercial paper during the year ended December 28, 2024.

Our aggregate principal debt obligations were $1.8 billion as of December 28, 2024.

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

As of December 28, 2024, we had unconditional purchase commitments of approximately $5.0 billion, of which $4.5 billion are in fiscal year 2025.

Our contractual obligations and purchase commitments relate primarily to our obligations to purchase wafers and substrates from third parties and future payments related to certain software and technology licenses and IP licenses.

On an ongoing basis, we work with our suppliers on the timing of payments and deliveries of purchase commitments, taking into account business conditions.

See Note 17 – Commitments and Guarantees.

On August 17, 2024, we agreed to acquire ZT Systems.

Upon closing of the acquisition, we will pay approximately $3.4 billion in cash and 8,335,852 shares of AMD common stock and to the extent certain conditions are met, we will pay an additional $300 million of cash and up to 740,964 shares of AMD common stock.

The acquisition is expected to close in the first half of fiscal year 2025, subject to certain regulatory approvals and other customary closing conditions.

We intend to seek a strategic partner to acquire ZT Systems' manufacturing business.

We believe our cash, cash equivalents, short-term investments and cash flows from operations along with our revolving credit facility and commercial paper program will be sufficient to fund operations, including capital expenditures, purchase commitments, and acquisitions over the next 12 months and beyond.

We had no commercial paper outstanding as of December 27, 2025.

As of December 27, 2025, we had unconditional commitments of approximately $12.2 billion, of which $8.5 billion are in fiscal year 2026.

Our contractual obligations and purchase commitments relate primarily to our obligations to purchase wafers and substrates from third parties and future payments related to multi-year cloud service provider arrangements, and certain software and technology licenses.

We work continually with our suppliers on the timing of payments and deliveries of purchase commitments, taking into account business conditions.

We also have commitments for leases that have commenced for approximately $940 million and leases that have not yet commenced for $1.3 billion.

See Note 12 – Commitments and Contingencies for contractual obligations and purchase commitments and Note 10 - Leases for lease obligations.

We believe our cash, cash equivalents, short-term investments and cash flows from operations along with our revolving credit facility and commercial paper program will be sufficient to fund operations, including capital expenditures, purchase and lease commitments, and strategic activities over the next 12 months and beyond.

We believe we will be able to access the capital markets should we require additional funds.

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Our working capital cash inflows and outflows from operations consist primarily of cash collections from our customers, payments for inventory purchases and payments for employee-related expenditures.

Net cash provided by operating activities of continuing operations was $6.5 billion in 2025, primarily due to our net income of $4.3 billion in 2025, adjusted for non-cash adjustments of $4.6 billion and net cash outflows of $2.4 billion from changes in our operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities included a $2.2 billion increase in inventory primarily to support the continued ramp of Data Center products in advanced process technology nodes.

Net cash provided by operating activities of the ZT Manufacturing Business, classified as discontinued operations, was $1.2 billion.

Table of Conten t s

Net cash provided by operating activities was $3.0 billion in 2024, primarily due to our net income of $1.6 billion in 2024, adjusted for non-cash adjustments of $3.5 billion and net cash outflows of $2.1 billion from changes in our operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities included a $1.9 billion increase in accounts receivable driven primarily by higher revenue in the last month of 2024 compared to the last month of 2023, and a $1.5 billion increase in inventories driven primarily by a build of inventory to support the ramp of new products in advanced process nodes.

Net cash provided by operating activities was $1.7 billion in 2023, primarily due to our net income of $854 million in 2023, adjusted for non-cash adjustments of $3.9 billion and net cash outflows of $3 billion from changes in our operating assets and liabilities.

The primary drivers of the changes in operating assets and liabilities included a $1.3 billion increase in accounts receivable driven primarily by higher revenue in the last month of 2023 compared to the last month of 2022, and a $580 million increase in inventories driven primarily by a build of inventory to support the ramp of new products in advanced process nodes.

Investing Activities

Net cash used in investing activities was $1.1 billion in 2024, which primarily consisted of cash used for purchases of short-term investments of $1.5 billion, $636 million for purchases of property and equipment, and cash used in acquisitions, net of cash acquired of $548 million, partially offset by proceeds from maturities of short-term investments of $1.4 billion and sale of short-term investments of $616 million.

Net cash used in investing activities was $1.4 billion in 2023, which primarily consisted of cash used for purchases of short-term investments of $3.7 billion, $546 million for purchases of property and equipment, and cash used in acquisitions, net of cash acquired of $131 million, partially offset by proceeds from maturities of short-term investments of $2.7 billion and the sale of short-term investments of $300 million.

Net cash used in investing activities of continuing operations was $6.9 billion in 2025, which primarily consisted of $5.5 billion of cash used for purchases of short-term investments, $1.8 billion of cash used in acquisitions, net of cash acquired and $1.0 billion for purchases of property and equipment, partially offset by $1.8 billion proceeds from maturities of short-term investments.

Net cash provided by investing activities of discontinued operations in 2025 was $1.3 billion, primarily from the sale of the ZT Manufacturing Business.

Net cash used in investing activities was $1.1 billion in 2024, which primarily consisted of cash used for purchases of short-term investments of $1.5 billion, purchases of property and equipment of $636 million, and cash used in acquisitions, net of cash acquired of $548 million, partially offset by proceeds from maturities of short-term investments of $1.4 billion and sale of short-term investments of $616 million.

Financing Activities

Net cash used in financing activities of continuing operations was $431 million in 2025, which primarily consisted of $1.3 billion of common stock repurchases under the Repurchase Program and $607 million of stock repurchases for tax withholding on employee equity plans, partially offset by $1.5 billion of net cash received from issuance of debt, net of repayments , and $285 million of proceeds from the issuance of common stock under our employee equity plans.

There was no net cash provided by financing activities of discontinued operations for the year ended December 27, 2025.

Net cash used in financing activities was $2.1 billion in 2024, which primarily consisted of common stock repurchases of $862 million under the Repurchase Program, repurchases to cover tax withholding on employee equity plans of $728 million, and repayment of the 2.95% Notes of $750 million, partially offset by proceeds from the issuance of common stock under our employee equity plans of $279 million.

Net cash used in financing activities was $1.1 billion in 2023, which primarily consisted of common stock repurchases of $985 million under the Repurchase Program and repurchases to cover tax withholding on employee equity plans of $427 million, partially offset by proceeds from the issuance of common stock under our employee equity plans of $268 million.

Off-Balance Sheet Arrangements

As of December 28, 2024, we had no off-balance sheet arrangements.

As of December 27, 2025, we did not have any off-balance sheet arrangements that have had, or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

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What changed 10-K

Item 7. Management’s Discussion and Analysis