Advanced Micro Devices, Inc.

Company Overview

Business Model: Advanced Micro Devices, Inc. (AMD) drives innovation in high-performance and AI computing, offering a broad portfolio of AI-optimized CPUs, GPUs, networking, and software solutions. The Company's technology powers experiences across cloud and AI infrastructure, embedded systems, AI PCs, and gaming. AMD provides full-stack solutions, including semi-custom System-on-Chip (SoCs), adaptive SoCs, and accelerated processing units (APUs), enabling customers to transform data into breakthroughs with speed and scale. Revenue is primarily generated from product sales, with some IP licensing and development services.

Market Position: AMD is strategically positioned to lead in the AI computing era, leveraging its compute engines, intellectual property, software enablement, and deep expertise. The Company was the first to integrate a dedicated neural processing unit (NPU) on the same SoC as an x86 CPU for AI PCs, establishing a differentiated technology footprint. AMD is the market share leader in semi-custom game console products. Its investments in technologies like the custom-ready chiplet platform and AMD Infinity Fabric™ switch aim to maintain leadership as a custom-design silicon provider.

Recent Strategic Developments:

• Pervasive AI Strategy: Accelerated growth in the Data Center segment, with strong demand for AI accelerator products.
• Key Product Launches (2025):
  • Data Center: AMD Instinct™ MI350X Series GPUs, 5th Gen AMD EPYC™ family of server processors, AMD Pensando™ "Pollara" 400 AI NICs, "Vulcano" AI NICs, and "Helios" AI rack-scale platform solution previewed.
  • Client & Gaming: AMD Ryzen™ AI 300 Series processors (with next-gen NPU for Microsoft Copilot+ PCs), AMD Radeon™ RX 9000 Series graphics cards (based on AMD RDNA™ 4 architecture), Radeon AI PRO R9000 Series graphics cards, Ryzen™ Threadripper™ 9000 Series processors, Ryzen Z2 Series for handheld gaming.
  • Embedded: AMD EPYC Embedded 9005, 4005, and 2005 Series processors, AMD Ryzen Embedded 9000 Series processors, Versal™ Premium Series Gen 2 adaptive compute devices.
• Strategic Acquisitions (2025): Acquired ZT Group Int’l, Inc. (ZT Systems) for $3.2 billion in cash and 8.3 million shares, retaining the ZT Design Business to accelerate AI infrastructure design and deployment. Subsequently sold the ZT Manufacturing Business to Sanmina Corporation for $2.4 billion in cash and 1.2 million shares of Sanmina common stock, with potential for up to $450 million in contingent cash consideration. Also made other strategic acquisitions to advance software capabilities (compiler, AI expertise), photonics/co-packaged optics solutions, and high-speed inference/reasoning-based AI technologies.
• Strategic Partnerships: Entered a multiyear product purchase agreement with OpenAI OpCo, LLC (OpenAI) to deploy 6 gigawatts of AMD GPUs, with the first gigawatt powered by AMD Instinct MI450 series products. Issued a warrant to OpenAI to purchase up to 160 million shares of common stock based on purchase milestones and stock performance.
• Segment Reorganization: Combined Client and Gaming segments into one reportable segment in Q1 2025, with prior period data retrospectively adjusted.

Geographic Footprint: AMD maintains global operations, with headquarters in Santa Clara, California, and significant operations in Austin, Texas; San Jose, California; Shanghai, China; Markham, Ontario, Canada; Longmont, Colorado; Dublin, Ireland; Singapore; and Bengaluru and Hyderabad, India. International sales constituted 67% of net revenue in 2025. The Company utilizes third-party wafer foundries in Taiwan (Taiwan Semiconductor Manufacturing Company Limited, United Microelectronics Corporation), the United States, Europe, and South Korea (Samsung Electronics Co., Ltd.), and assembly, test, mark, and packaging (ATMP) partners primarily in the Asia-Pacific region (Tongfu Microelectronics Co., Ltd. JVs, Siliconware Precision Industries Ltd., King Yuan Electronics Company).

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 50%
• Operating Margin: 10.7%
• Net Margin: 12.5%

Investment in Growth (2025):

• R&D Expenditure: $8.1 billion (23.4% of revenue)
• Capital Expenditures: $974 million
• Strategic Investments: $1.8 billion cash used in acquisitions (net of cash acquired), primarily for ZT Systems and Silo AI Oy.

Business Segment Analysis

Data Center

Financial Performance (2025):

• Revenue: $16.6 billion (+32% YoY)
• Operating Income: $3.6 billion (vs. $3.5 billion in 2024)
• Key Growth Drivers: Strong demand for 5th generation AMD EPYC™ processors and AMD Instinct™ MI350 Series GPUs. Growth was partially offset by approximately $440 million of net inventory and related charges due to U.S. government export controls on AMD Instinct™ MI308 Data Center GPU products.

Product Portfolio:

• Server CPUs: AMD EPYC™ Series processors (x86 architecture), including 5th generation AMD EPYC family.
• Data Center GPUs: AMD Instinct™ family (MI200, MI300, MI325, MI350 series based on AMD CDNA™ architecture), next-generation AMD Instinct MI355X GPUs, AMD Radeon™ PRO V families for visual cloud.
• FPGAs and Adaptive SoCs: Virtex™, Kintex™, Artix™, Spartan™ FPGA products, Zynq™ and Versal™ adaptive SoCs, Alveo™ accelerator cards.
• Networking Products: AMD Pensando™ DPUs, AMD Pensando “Pollara” 400 AI NICs, “Vulcano” AI NICs, AMD Solarflare™ portfolio for low latency.
• Platform Solutions: "Helios" AI rack-scale platform solution incorporating CPUs, GPUs, and Networking.

Market Dynamics:

• Addresses computational, visual data processing, and AI workload acceleration needs.
• Requires high performance, energy-efficient, scalable, and adaptable compute engines.
• Faces competition from Intel Corporation, Nvidia Corporation, Altera, smaller fabless silicon companies, Arm®-based CPU providers, and internal customer development.

Client and Gaming

Financial Performance (2025):

• Revenue: $14.6 billion (+51% YoY)
• Operating Income: $2.9 billion (vs. $1.2 billion in 2024)
• Key Growth Drivers: Strong demand for AMD Ryzen™ processors, semi-custom game consoles SoCs, and Radeon™ gaming GPUs. Client revenue increased by 51% driven by a 31% increase in unit shipments and a 15% increase in average selling price of processors. Gaming revenue increased by 51% due to higher semi-custom revenue and strong demand for Radeon™ gaming GPUs.

Product Portfolio:

• Client Products:
  • Desktop CPUs: AMD Ryzen™ and AMD Ryzen Threadripper™ processors (Ryzen 9000 Series with "Zen 5" cores, X3D models with 2nd gen AMD 3D V-Cache™ technology, Ryzen G Series).
  • Notebook CPUs: AMD Ryzen AI 300 Series processors (with next-gen NPU, "Zen 5" architecture, AMD RDNA™ 3.5 graphics), Ryzen AI 400 series, Ryzen AI Halo reference platform, Ryzen AI Max+392 and Ryzen AI Max+388, AMD Ryzen 8000 Series, Ryzen Z1/Z2 Series for handheld gaming.
  • Commercial CPUs: AMD Ryzen PRO offerings (Ryzen AI PRO 300 Series, Ryzen AI 400 PRO Series, Ryzen PRO 200 Series, Ryzen PRO 8000G Series, Ryzen Threadripper PRO CPU).
  • Chipsets: Full suite of chipset products for AMD Ryzen and AMD Ryzen Threadripper platforms.
• Gaming Products:
  • Semi-Custom Products: SoCs powering Sony PlayStation® 5, Microsoft® Xbox Series S™ and X™ game consoles, and Valve Steam Machine PC.
  • Discrete Desktop and Notebook GPUs: AMD Radeon RX discrete GPU processors (Radeon RX 9000 Series based on AMD RDNA™ 4 architecture), supported by AMD software: Adrenalin Edition™ and FSR “Redstone” gaming technologies.
  • Professional GPUs: AMD Radeon PRO family (Radeon AI PRO R9000 Series).

Market Dynamics:

• Client market encompasses global personal computing (desktops, notebooks) with focus on performance, efficiency, AI capabilities, and security.
• Gaming market focuses on immersive visualization and AI/ML workloads across PCs, game consoles, and cloud gaming.
• Competition primarily from Intel Corporation (CPUs, APUs, integrated/discrete graphics) and Nvidia Corporation (discrete GPUs). Also, Arm-based microprocessors are an emerging competitive factor.

Embedded

Financial Performance (2025):

• Revenue: $3.5 billion (-3% YoY)
• Operating Income: $1.2 billion (vs. $1.4 billion in 2024)
• Key Growth Drivers: Revenue decreased as certain end market demand remained mixed.

Product Portfolio:

• Embedded CPUs and APUs: AMD EPYC embedded processor series (9005, 4005, 2005 Series), AMD Ryzen Embedded 9000 Series processors, Ryzen AI Embedded P100 and X100 Series, existing AMD EPYC Embedded CPUs and AMD Ryzen Embedded Series processors (V-Series, R-Series).
• FPGAs and Adaptive SoCs: AMD UltraScale+™, UltraScale™ 7 Series, Zynq™ SoC, Zynq UltraScale+ Multi-Processing System-on-a-Chip (MPSoC), Zynq UltraScale+ RFSoC, Zynq RFSoC DFE, AMD Versal™ portfolio (HBM, Premium, Prime, AI Core, AI Edge, RF Series, Premium Series Gen 2).
• Development Boards, Kits and Configuration Products: Development kits for FPGAs and adaptive SoCs, AMD Kria™ SOMs and starter kits (Kria K24 SOM, Kria KD240 Drives Starter Kit).

Market Dynamics:

• Addresses computing needs in aerospace and defense, automotive, industrial, vision and healthcare, communications infrastructure, test and measurement, emulation and prototyping, audio, video and broadcasting, and data center.
• Requires varying performance levels, low power, small form factors, 24x7 operations, high-performance graphics, and support for various operating systems.
• Competition from Altera, Lattice Semiconductor Corporation, Microsemi Corporation, ASSP vendors (Broadcom Corporation, Marvell Technology Group, Ltd., Analog Devices, Texas Instruments Incorporated, NXP Semiconductors N.V., Qualcomm Incorporated, NVIDIA), ASIC market, and Intel Corporation (embedded CPUs).

Capital Allocation Strategy

Shareholder Returns (2025):

• Share Repurchases: $1.3 billion (12.4 million shares) under the Repurchase Program.
• Dividend Payments: Not mentioned, the Company does not expect to pay dividends in the near future.
• Future Capital Return Commitments: $9.4 billion remained available for future stock repurchases under the Repurchase Program as of December 27, 2025.

Balance Sheet Position (as of December 27, 2025):

• Cash and Equivalents: $5.5 billion
• Total Debt (principal amount): $3.3 billion
• Net Cash Position: $2.2 billion
• Debt Maturity Profile: $875 million due in 2026, $625 million due in 2028, $750 million due in 2030, $1.0 billion due in 2031 and thereafter.

Cash Flow Generation (2025):

• Operating Cash Flow (continuing operations): $6.5 billion
• Free Cash Flow: Not explicitly stated, but operating cash flow was $6.5 billion and capital expenditures were $974 million.
• Cash Conversion Metrics: Inventory increased by $2.2 billion to support Data Center product ramp.

Operational Excellence

Production & Service Model: AMD operates a fabless model, outsourcing wafer fabrication, board-level graphics product manufacturing, and assembly, test, mark, and packaging (ATMP) services.

• Wafer Foundries: Taiwan Semiconductor Manufacturing Company Limited (TSMC) for HPC, FPGA, adaptive SoC products (7nm and smaller nodes), and newer IC products. GLOBALFOUNDRIES Inc. (GF) for HPC products (12nm and 14nm nodes). United Microelectronics Corporation (UMC) and Samsung Electronics Co., Ltd. for programmable logic devices.
• ATMP Services: Outsourced to partners in the Asia-Pacific region, including joint ventures with Tongfu Microelectronics Co., Ltd., Siliconware Precision Industries Ltd. (SPIL), and King Yuan Electronics Company (KYEC).

Supply Chain Architecture: Key Suppliers & Partners:

• Wafer Foundries: TSMC, GLOBALFOUNDRIES Inc., UMC, Samsung Electronics Co., Ltd.
• ATMP Partners: Tongfu Microelectronics Co., Ltd. (through JVs), SPIL, KYEC.
• Materials/Components: Limited number of suppliers for certain equipment, materials, substrates (e.g., memory, printed circuit boards, interposers, capacitors).
• Manufacturing Partners: Third-party manufacturers for board-level graphics products.

Facility Network:

• Headquarters: Santa Clara, California.
• Significant Operations: Austin, Texas; San Jose, California; Shanghai, China; Markham, Ontario, Canada; Longmont, Colorado; Dublin, Ireland; Singapore; Bengaluru and Hyderabad, India.
• Manufacturing/R&D/Distribution: Approximately 6.8 million square feet globally (5.4 million leased, 1.4 million owned) for R&D, engineering, administrative, and warehouse use. R&D activities are conducted in the United States with additional design and development engineering teams in various countries.

Operational Metrics:

• The Company focuses on designing new integrated circuits (ICs) with improved performance and performance-per-watt in advanced semiconductor manufacturing processes, logic and interface IP, advanced packaging technologies, and heterogeneous integration technologies.
• Investments in software development platforms (AMD Vivado™ Design Suite, Vitis™ unified software platform, Vitis AI™ unified software platform) enhance developer productivity.

Market Access & Customer Relationships

Go-to-Market Strategy: AMD sells its products through a multi-channel approach:

• Direct Sales: Enterprise sales force targeting hyperscale data centers, PC Original Equipment Manufacturers (OEMs), Original Design Manufacturers (ODMs), system integrators, and semi-custom customers.
• Channel Partners: Independent distributors, sales representatives, Add-in-Board (AIB) manufacturers, Value Added Resellers (VARs), and Integrated Solution Vendors (ISVs) for Alveo products.
• Co-marketing Programs: Cooperative advertising and marketing programs with customers and third parties, including market development funds.

Customer Portfolio:

• Data Center Segment: Hyperscale data centers, OEMs, ODMs, system integrators, and independent distributors.
• Client and Gaming Segment: PC OEMs, independent distributors, ODMs (for chipsets), AIB manufacturers, independent game console and portable gaming device manufacturers, and contract manufacturers for AMD branded graphics cards.
• Embedded Segment: Customers across aerospace and defense, automotive, industrial, vision and healthcare, communications infrastructure, test and measurement, emulation and prototyping, audio, video and broadcasting, and data center markets.
• Customer Concentration: One customer accounted for approximately 11% of total consolidated accounts receivable as of December 27, 2025. No single customer accounted for at least 10% of consolidated net revenue in fiscal years 2025 and 2024. One Client and Gaming segment customer accounted for 18% of consolidated net revenue in fiscal year 2023.

Geographic Revenue Distribution (2025):

• United States: $11.4 billion
• China (including Hong Kong): $7.8 billion
• Taiwan: $5.2 billion
• Singapore: $4.3 billion
• Other regions: $6.1 billion
• International sales represented 67% of total net revenue in 2025.

Competitive Intelligence

Market Structure & Dynamics

The markets for AMD's products are highly competitive, rapidly evolving, and cyclical. Key drivers include rapid technological change, evolving standards, shifting customer preferences, product obsolescence, and frequent product launches. The growth of AI is intensifying pressure on the semiconductor industry for timely design, manufacturing, and delivery of high-performance computing and AI infrastructure solutions.

Competitive Positioning Matrix (2025)

Direct Competitors

• Data Center: Intel Corporation (CPUs, DPUs, AI NICs), Nvidia Corporation (GPUs, DPUs, AI NICs), Altera (FPGAs, adaptive SoCs), smaller fabless silicon companies (proprietary accelerator solutions), Arm®-based CPU providers, and internal development by some customers.
• Client and Gaming: Intel Corporation (CPUs, APUs, integrated graphics, gaming-focused discrete GPUs), Nvidia Corporation (discrete GPUs), and Arm-based microprocessor providers.
• Embedded: Altera, Lattice Semiconductor Corporation, Microsemi Corporation (FPGAs), ASSP vendors (Broadcom Corporation, Marvell Technology Group, Ltd., Analog Devices, Texas Instruments Incorporated, NXP Semiconductors N.V., Qualcomm Incorporated, NVIDIA), ASIC market, and Intel Corporation (embedded CPUs).

Emerging Competitive Threats:

• Further adoption and growth of the Arm ecosystem in consumer, commercial, and data center markets.
• Increased internal development of data center microprocessor and accelerator products by customers.
• New entrants and disruptive technologies in the rapidly evolving AI and high-performance computing sectors.

Competitive Response Strategy: AMD's strategy involves continuous investment in research and development to deliver next-generation processors, FPGAs, adaptive SoCs, accelerators, SOMs, and AI NICs, along with associated software. The Company focuses on full-stack innovation across compute, networking, systems architecture, and software, leveraging its open AI software stack (ROCm™ platform) and strategic acquisitions to enhance capabilities and market reach.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Highly competitive and rapidly evolving markets, driven by technological change, evolving standards, shifting customer preferences, product obsolescence, and frequent product launches.
• Semiconductor Industry Cyclicality: The industry is highly cyclical, experiencing severe downturns, fluctuations in supply and demand, price erosion, and inventory adjustments.
• Demand for Products: Demand depends on market conditions in end industries (Data Center, Client, Gaming, Embedded). Uncertainty in generative AI adoption, data center buildout delays, and capital access for AI infrastructure could impact demand. Client and Gaming segment is sensitive to PC market adoption of AI PCs and volatility in the cryptocurrency mining market.
• Timely Product Introduction: Success depends on timely introduction of products with competitive features and performance, coinciding with industry transitions. Delays or failure to meet evolving needs can lead to loss of market share.
• Loss of Significant Customer: Dependence on a small number of customers for a substantial portion of revenue and receivables poses a risk if a key customer reduces purchases or faces operational impairment.
• Economic and Market Uncertainty: Global or regional economic conditions (inflation, interest rates, recession, trade policy changes) can negatively impact consumer confidence, spending, and customer purchases, affecting revenue and cash flow.
• Intellectual Property Protection: Inability to adequately protect technology and IP through patents, copyrights, trade secrets, and trademarks could lead to competitive disadvantage and significant expenses.
• Currency Exchange Rate Fluctuations: Costs, assets, and liabilities denominated in foreign currencies expose the Company to exchange rate movements, potentially affecting profitability and cash flows.

Operational & Execution Risks

• Third-Party Manufacturing Reliance: Dependence on third-party wafer foundries (TSMC, GLOBALFOUNDRIES Inc., UMC, Samsung Electronics Co., Ltd.) and ATMP partners (Tongfu Microelectronics Co., Ltd. JVs, SPIL, KYEC) for timely, sufficient, and high-quality production. Supply constraints, capacity prioritization by manufacturers, or disruptions could materially affect the business.
• Essential Equipment and Materials Availability: Reliance on a limited number of suppliers for critical equipment, materials, and substrates (e.g., memory, PCBs, interposers), with potential for shortages, price increases, or supply disruptions.
• Manufacturing Yields: Failure to achieve expected manufacturing yields can increase per-unit costs, impact gross margin, and harm customer relationships.
• Semi-Custom SoC Product Success: Revenue from semi-custom SoCs depends on customer product incorporation and market success, over which AMD has limited control.
• Security Vulnerabilities: Products may have security vulnerabilities, leading to data loss, performance issues, reputational damage, and potential litigation.
• IT Outages, Data Loss, Cyberattacks: Reliance on IT systems and third-party providers, vulnerable to cyberattacks, data breaches, and system disruptions, risking intellectual property compromise, operational disruption, and financial harm.
• Ordering and Shipment Uncertainties: Sales based on purchase orders and customer forecasts, which may not accurately predict demand, leading to excess or obsolete inventory, write-downs, and supply-demand mismatches.
• Third-Party IP and Component Reliance: Dependence on third-party IP for product design and development, and on third-party companies for motherboards, software, memory, and other computer platform components.
• Software Vendor Support: Reliance on Microsoft Corporation and other software vendors to design and develop software compatible with AMD's products.
• Distributor and AIB Partner Reliance: Dependence on third-party distributors and AIB partners for market access, with risks of termination, competition from rival products, and credit losses.
• Internal Business Processes and Information Systems: Reliance on internal IT systems, with risks from modifications, upgrades, and security breaches.
• Product Compatibility: Risk of products not being fully compatible with industry-standard software and hardware.
• Defective Products: Products may contain defects, leading to recalls, replacement costs, revenue loss, and reputational damage.
• Supply Chain Efficiency: Challenges in maintaining supply chain efficiency to meet specific customer demands and timeframes.
• Gray Market Sales: Inability to control gray market sales, leading to customer dissatisfaction, brand protection risks, and adverse impact on demand and margins.
• Climate Change: Increasing frequency and severity of natural disasters and climate-related events could disrupt operations, supply chains, and customer/supplier operations, impacting water/energy availability and increasing costs.

Financial & Regulatory Risks

• Government Actions and Regulations: Subject to U.S. and foreign laws, including export controls (e.g., EAR, ITAR, restrictions on MI308 products to China, AI Diffusion Rule), import tariffs, and trade protection measures, which can limit sales, increase costs, and impact competitive position.
• Deferred Tax Assets: Inability to realize deferred tax assets (tax credit carryforwards) could adversely affect results of operations.
• Tax Liabilities: Exposure to potential tax liabilities due to changes in tax rules, interpretations, or unfavorable audit assessments (e.g., OECD Pillar One/Two, OBBBA).
• Litigation: Party to various legal actions (federal securities laws, corporate governance, product liability, IP infringement, environmental matters), with potential for substantial costs, damages, or sales prohibitions.
• Environmental Laws: Subject to stringent environmental laws and regulations (materials use, pollutants, waste disposal, remediation, conflict minerals, forced labor), leading to compliance costs and liabilities (e.g., Superfund sites).
• Corporate Responsibility Expectations: Evolving expectations from stakeholders regarding ESG matters could result in additional costs, reputational harm, and loss of customers.
• Responsible Use of AI: Risks and challenges associated with the responsible use of AI, including legal, social, and ethical concerns, potential for misuse, and new regulations (e.g., EU AI Act), leading to reputational, competitive, and financial harm.
• Debt Covenants: Agreements governing notes and revolving credit facility impose restrictions and require compliance with financial covenants.
• Guarantees and Commercial Commitments: May be required to satisfy financial obligations under guarantees (e.g., data center lease obligations) and other commercial commitments.

Geopolitical & External Risks

• Worldwide Operations: Subject to political, legal, and economic risks, and natural disasters in various global operating regions.
• Geopolitical Tensions: Conflicts (Ukraine-Russia, Israel-Hamas, Venezuela) and geopolitical changes (China-Taiwan) could disrupt operations, supply chains, and product delivery.
• Global Health Outbreaks: Public health issues, epidemics, and pandemics (e.g., COVID-19) can adversely affect employees, business operations, and supply chains.

Innovation & Technology Leadership

Research & Development Focus: AMD's R&D activities are centered on designing and developing next-generation products with a strong emphasis on AI.

• Core Technology Areas: Processors (CPU, GPU), FPGAs, adaptive SoCs, accelerators (adaptive, graphics, DPU), System-on-Modules (SOMs), and AI Network Interface Cards (AI NICs).
• Design & Manufacturing: Focus on designing secure integrated circuits (ICs) with improved performance and performance-per-watt in advanced semiconductor manufacturing processes, logic and interface IP, advanced packaging technologies, and heterogeneous integration technologies.
• Software Development: Significant investment in software, including design automation tools for hardware, embedded software, a comprehensive AI stack, and optimized software tools and libraries (e.g., AMD ROCm™ platform) to extend platform reach to software and AI developers.

Intellectual Property Portfolio (as of December 27, 2025):

• Patent Strategy: Approximately 7,200 issued patents in the United States and 2,200 patent applications pending in the United States. Worldwide, the Company holds approximately 12,600 issued patents and 6,300 patent applications pending.
• Licensing Programs: Engages in numerous cross-licensing and technology exchange agreements with other companies and acquires licenses from external parties for certain technologies, IP cores, devices, and proprietary/open-source software.

Technology Partnerships:

• Collaborates with industry leaders on process technology, design tools, intellectual property, software, and other industry consortia for early-stage R&D.
• Actively contributes to numerous industry open-source software initiatives and industry consortia across a broad range of technologies.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company focuses on leadership progression, with the majority of new leaders promoted from within. It offers manager and leadership development programs and educational assistance.

Board Composition: The Board of Directors considers cybersecurity risk as part of its risk oversight function, delegating oversight to the Audit and Finance Committee. The Committee receives quarterly reports from management on cybersecurity risks and reports to the full Board.

Human Capital Strategy

Workforce Composition (as of December 27, 2025):

• Total Employees: Approximately 31,000 employees globally.
• Geographic Distribution: Global workforce with operations in the United States, Canada, Europe, Australia, Latin America, and Asia.
• Skill Mix: Focus on developing engineering talent, expanding mentoring opportunities, and career development programs for engineering professionals.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Invests in competitive salaries, incentives, and benefits to attract and retain talent in the technology industry, especially in AI and machine learning.
• Retention Metrics: Conducts an annual global workforce survey to measure culture, engagement, and workplace experience, with results reviewed by the Board and acted upon by senior leadership.
• Employee Value Proposition: Strong pay-for-performance culture, flexible and inclusive benefits, and options for in-person, hybrid, and remote work.

Diversity & Development:

• Diversity Metrics: Fosters a diverse workforce and inclusive workplace, encouraging diverse perspectives.
• Development Programs: Offers manager and leadership development programs, specialized development programs, educational assistance (tuition reimbursement), and an enterprise-wide mentoring program.
• Culture & Engagement: Values employee voice through annual surveys, executive roundtables, town halls, and global team meetings.

Environmental & Social Impact

Environmental Commitments:

• Climate Strategy: Subject to current and future climate-related regulations, contract terms, and lawsuits. Increased regulations on carbon taxes, greenhouse gas emissions, and energy taxes are anticipated to result in greater costs.
• Supply Chain Sustainability: Engages with suppliers on ESG requirements and responsible sourcing, including conflict minerals and prohibiting forced labor.
• Contamination Remediation: Named as a responsible party at three Superfund Sites in Sunnyvale, California, with an estimated environmental liability of approximately $5.9 million recorded as of December 27, 2025.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed in the provided text.
• Product Impact: Not explicitly detailed in the provided text.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Operating results tend to vary seasonally, with net revenue historically higher in the second half of the year than in the first half, though market conditions and product transitions can impact these trends.
• Economic Sensitivity: The semiconductor industry is highly cyclical and sensitive to global economic conditions (e.g., inflation, interest rates, recession). Demand for AI accelerators is strong but depends on the unknown near-term and long-term trajectory of generative AI solutions. Client and Gaming segment revenue depends on the adoption rate of AI PCs and is affected by the volatility of the cryptocurrency mining market.
• Industry Cycles: The growth of AI is creating pressure on the semiconductor industry for timely design, manufacture, and delivery of products.

Planning & Forecasting:

• Inventory levels are based in part on customer estimates of demand, which may not accurately predict future purchases.
• Short product lifecycles and extended manufacturing lead times increase the risk of mismatches between supply and demand.
• Customers may change inventory practices on short notice, and delays in receiving components can affect demand for AMD's products.

Regulatory Environment & Compliance

Regulatory Framework:

• Industry-Specific Regulations: Subject to U.S. and foreign laws, including export control (Export Administration Regulations (EAR), International Traffic and Arms Regulations (ITAR)), customs, intellectual property, data privacy and security (GDPR, CCPA/CPRA), climate, environmental, health and safety, cybersecurity, tax, employment, competition, anti-trust, anti-corruption, anti-bribery, conflict minerals, corporate governance, financial disclosures, and AI.
• International Compliance: Multi-jurisdictional requirements and harmonization challenges, particularly with evolving regulations like the EU AI Act.

Trade & Export Controls:

• Export Restrictions: U.S. government restrictions on exporting certain products and technologies to specific countries (e.g., China, Russia, Belarus, D5 countries). This impacts AMD Instinct™ MI308 products, leading to inventory charges and requiring licenses for sales to certain China-based customers.
• Sanctions Compliance: Compliance with U.S. Entity List designations (e.g., THATIC and THATIC JV) and other sanctions, which can limit business with certain customers or suppliers.
• Tariffs & Trade Protection: Exposure to import tariffs, trade protection measures, and retaliatory actions from foreign governments, which can increase costs and reduce demand.

Legal Proceedings:

• As of December 27, 2025, there were no material legal proceedings.
• The Company is a defendant or plaintiff in various actions arising in the normal course of business, including potential product liability claims, consumer class actions, and intellectual property litigation.
• Subject to environmental matters, including being a responsible party at three Superfund sites in Sunnyvale, California.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: (2.5%) in 2025, compared to 19% in 2024.
• Geographic Tax Planning: Benefits from a Development and Expansion Incentive (DEI) in Singapore, reducing the local tax rate on Singapore income to 5% through 2031.
• Tax Reform Impact:
  • One Big Beautiful Bill Act (OBBBA) (enacted July 2025): Primarily impacted the 2025 tax provision by accelerating expensing of domestic R&D activities, decreasing income eligible for Foreign-Derived Intangible Income (FDII), reducing deferred tax assets, and lowering current income tax liability. Also resulted in a remeasurement of Global Intangible Low-Taxed Income (GILTI) deferred tax balances.
  • OECD Global Minimum Tax (Pillar Two): Many countries have implemented Pillar Two legislation effective in 2024. The OECD released a "side-by-side" package in January 2026 introducing new safe harbors and an exemption for U.S.-based multinational companies from parts of the global minimum tax framework. The impact to AMD from Pillar Two was immaterial for 2024 and 2025.
• Deferred Tax Assets: Total deferred tax assets, net of valuation allowance, were $4.2 billion as of December 27, 2025. A valuation allowance of $1.3 billion is maintained for certain state and foreign tax attributes.
• Unrecognized Tax Benefits: Gross unrecognized tax benefits were $806 million as of December 27, 2025, with $571 million impacting the effective tax rate if recognized.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Maintains property, casualty, and other insurance, with coverage varying by type, availability, and cost. Policies may have large deductibles and broad exclusions.
• Risk Transfer Mechanisms: Employs a foreign currency hedging strategy using derivative financial instruments (forward contracts) to mitigate foreign currency exchange rate risk, with contracts generally maturing within 24 months.
• Subsequent Event (Post-Dec 27, 2025): Entered into an agreement to guarantee a commercial partner's data center lease obligations, with a maximum gross exposure of $4.1 billion, which will reduce over 15 years or upon third-party sale of capacity. The fair value of this guarantee liability is not expected to be material.