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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 1, 2023
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-07882
ADVANCED MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
Delaware | | | 94-1692300 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
2485 Augustine Drive
Santa Clara, California 95054
(Address of principal executive offices)
(408) 749-4000
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | AMD | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ☑ | | Accelerated filer | | ☐ | Non-accelerated filer | | ☐ |
Smaller reporting company | | ☐ | | Emerging growth company | | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of April 28, 2023: 1,610,361,870
INDEX
PART I. FINANCIAL INFORMATION
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ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions, except per share amounts) |
Net revenue | | | | | $ | 5,353 | | | $ | 5,887 | |
Cost of sales | | | | | 2,689 | | | 2,883 | |
Amortization of acquisition-related intangibles | | | | | 305 | | | 186 | |
Total cost of sales | | | | | 2,994 | | | 3,069 | |
Gross profit | | | | | 2,359 | | | 2,818 | |
| | | | | | | |
Research and development | | | | | 1,411 | | | 1,060 | |
Marketing, general and administrative | | | | | 585 | | | 597 | |
Amortization of acquisition-related intangibles | | | | | 518 | | | 293 | |
Licensing gain | | | | | (10) | | | (83) | |
Operating income (loss) | | | | | (145) | | | 951 | |
| | | | | | | |
Interest expense | | | | | (25) | | | (13) | |
Other income (expense), net | | | | | 43 | | | (42) | |
Income (loss) before income taxes and equity income | | | | | (127) | | | 896 | |
| | | | | | | |
Income tax provision | | | | | 13 | | | 113 | |
Equity income in investee | | | | | 1 | | | 3 | |
Net income (loss) | | | | | $ | (139) | | | $ | 786 | |
| | | | | | | |
Earnings (loss) per share | | | | | | | |
Basic | | | | | $ | (0.09) | | | $ | 0.56 | |
Diluted | | | | | $ | (0.09) | | | $ | 0.56 | |
Shares used in per share calculation | | | | | | | |
Basic | | | | | 1,611 | | | 1,393 | |
Diluted | | | | | 1,611 | | | 1,410 | |
See accompanying notes.
Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Net income (loss) | | | | | $ | (139) | | | $ | 786 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Net change in unrealized gains on cash flow hedges | | | | | 20 | | | 1 | |
Total comprehensive income (loss) | | | | | $ | (119) | | | $ | 787 | |
See accompanying notes.
Advanced Micro Devices, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| (In millions, except par value amounts) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 3,825 | | | $ | 4,835 | |
Short-term investments | 2,114 | | | 1,020 | |
Accounts receivable, net | 4,040 | | | 4,126 | |
Inventories | 4,235 | | | 3,771 | |
Receivables from related parties | 2 | | | 2 | |
Prepaid expenses and other current assets | 1,442 | | | 1,265 | |
Total current assets | 15,658 | | | 15,019 | |
Property and equipment, net | 1,500 | | | 1,513 | |
Operating lease right-of-use assets | 447 | | | 460 | |
Goodwill | 24,177 | | | 24,177 | |
Acquisition-related intangibles, net | 23,291 | | | 24,118 | |
Investment: equity method | 84 | | | 83 | |
Deferred tax assets | 67 | | | 58 | |
Other non-current assets | 2,410 | | | 2,152 | |
Total assets | $ | 67,634 | | | $ | 67,580 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 2,518 | | | $ | 2,493 | |
Payables to related parties | 353 | | | 463 | |
Accrued liabilities | 3,167 | | | 3,077 | |
| | | |
Other current liabilities | 539 | | | 336 | |
Total current liabilities | 6,577 | | | 6,369 | |
Long-term debt | 2,467 | | | 2,467 | |
Long-term operating lease liabilities | 381 | | | 396 | |
Deferred tax liabilities | 1,641 | | | 1,934 | |
Other long-term liabilities | 1,874 | | | 1,664 | |
Commitments and Contingencies (See Note 12) | | | |
Stockholders’ equity: | | | |
Capital stock: | | | |
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,646 and 1,645; shares outstanding: 1,609 and 1,612 | 16 | | | 16 | |
Additional paid-in capital | 58,331 | | | 58,005 | |
Treasury stock, at cost (shares held: 37 and 33) | (3,362) | | | (3,099) | |
Accumulated deficit | (270) | | | (131) | |
Accumulated other comprehensive loss | (21) | | | (41) | |
Total stockholders’ equity | 54,694 | | | 54,750 | |
Total liabilities and stockholders’ equity | $ | 67,634 | | | $ | 67,580 | |
See accompanying notes.
Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended |
| April 1, 2023 | | March 26, 2022 |
| (In millions) |
Cash flows from operating activities: | | | |
Net income (loss) | $ | (139) | | | $ | 786 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
Depreciation and amortization | 982 | | | 609 | |
Stock-based compensation | 309 | | | 199 | |
Amortization of operating lease right-of-use assets | 24 | | | 19 | |
Amortization of inventory fair value adjustment | 2 | | | 89 | |
| | | |
Loss on sale or disposal of property and equipment | 6 | | | 15 | |
Deferred income taxes | (308) | | | (342) | |
(Gains) losses on equity investments, net | (1) | | | 44 | |
Other | (2) | | | (2) | |
Changes in operating assets and liabilities | | | |
Accounts receivable, net | 86 | | | (672) | |
Inventories | (464) | | | (26) | |
Receivables from related parties | — | | | (1) | |
Prepaid expenses and other assets | (191) | | | (260) | |
Payables to related parties | (109) | | | 121 | |
Accounts payable | 73 | | | 4 | |
Accrued and other liabilities | 218 | | | 412 | |
Net cash provided by operating activities | 486 | | | 995 | |
Cash flows from investing activities: | | | |
Purchases of property and equipment | (158) | | | (71) | |
Purchases of short-term investments | (1,703) | | | (100) | |
Proceeds from maturity of short-term investments | 473 | | | 963 | |
Proceeds from sale of short-term investments | 145 | | | 1 | |
Cash received from acquisition of Xilinx | — | | | 2,366 | |
| | | |
Other | 6 | | | (1) | |
Net cash provided by (used in) investing activities | (1,237) | | | 3,158 | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Proceeds from sales of common stock through employee equity plans | 3 | | | 2 | |
Repurchases of common stock | (241) | | | (1,914) | |
Common stock repurchases for tax withholding on employee equity plans | (21) | | | (35) | |
Other | — | | | (1) | |
Net cash used in financing activities | (259) | | | (1,948) | |
Net increase (decrease) in cash and cash equivalents | (1,010) | | | 2,205 | |
Cash and cash equivalents at beginning of period | 4,835 | | | 2,535 | |
Cash and cash equivalents at end of period | $ | 3,825 | | | $ | 4,740 | |
| | | |
| | | |
| | | |
| | | |
| | | | | | | | | | | |
Advanced Micro Devices, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) |
| Three Months Ended |
| April 1, 2023 | | March 26, 2022 |
| (In millions) |
Supplemental cash flow information: | | | |
| | | |
Non-cash investing and financing activities: | | | |
Purchases of property and equipment, accrued but not paid | $ | 69 | | | $ | 67 | |
| | | |
Issuance of common stock and treasury stock for the acquisition of Xilinx | $ | — | | | $ | 48,514 | |
Fair value of replacement share-based awards related to acquisition of Xilinx | $ | — | | | $ | 275 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
See accompanying notes.
Advanced Micro Devices
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Capital stock: | | | | | | | |
Common stock, par value | | | | | | | |
Balance, beginning of period | | | | | $ | 16 | | | $ | 12 | |
Issuance of common stock as consideration for acquisition | | | | | — | | | 4 | |
Balance, end of period | | | | | $ | 16 | | | $ | 16 | |
Additional paid-in capital | | | | | | | |
Balance, beginning of period | | | | | $ | 58,005 | | | $ | 11,069 | |
Common stock issued under employee equity plans | | | | | 4 | | | 2 | |
Stock-based compensation | | | | | 309 | | | 199 | |
| | | | | | | |
Issuance of common stock as consideration for acquisition | | | | | — | | | 45,372 | |
Fair value of replacement share-based awards related to acquisition | | | | | — | | | 275 | |
Issuance of common stock warrants | | | | | 13 | | | 8 | |
| | | | | | | |
Balance, end of period | | | | | $ | 58,331 | | | $ | 56,925 | |
Treasury stock | | | | | | | |
Balance, beginning of period | | | | | $ | (3,099) | | | $ | (2,130) | |
Repurchases of common stock | | | | | (242) | | | (1,914) | |
Common stock repurchases for tax withholding on employee equity plans | | | | | (21) | | | (35) | |
Reissuance of treasury stock as consideration for acquisition | | | | | — | | | 3,138 | |
Balance, end of period | | | | | $ | (3,362) | | | $ | (941) | |
| | | | | | | |
Accumulated deficit: | | | | | | | |
Balance, beginning of period | | | | | $ | (131) | | | $ | (1,451) | |
| | | | | | | |
Net income (loss) | | | | | (139) | | | 786 | |
Balance, end of period | | | | | $ | (270) | | | $ | (665) | |
| | | | | | | |
Accumulated other comprehensive income (loss): | | | | | | | |
Balance, beginning of period | | | | | $ | (41) | | | $ | (3) | |
Other comprehensive income | | | | | 20 | | | 1 | |
Balance, end of period | | | | | $ | (21) | | | $ | (2) | |
| | | | | | | |
Total stockholders' equity | | | | | $ | 54,694 | | | $ | 55,333 | |
See accompanying notes.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – The Company
Advanced Micro Devices, Inc. is a global semiconductor company. References herein to AMD or the Company mean Advanced Micro Devices, Inc. and its consolidated subsidiaries. AMD’s products include x86 microprocessors (CPUs) and graphics processing units (GPUs), as standalone devices or as incorporated into accelerated processing units (APUs), chipsets, data center and professional GPUs, embedded processors, semi-custom System-on-Chip (SoC) products, microprocessor and SoC development services and technology, data processing units (DPUs), Field Programmable Gate Arrays (FPGAs), Adaptive SoC products, and Adaptive Compute Acceleration Platform (ACAP) products. From time to time, the Company may also sell or license portions of its intellectual property (IP) portfolio.
NOTE 2 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of AMD have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the three months ended April 1, 2023 shown in this report are not necessarily indicative of results to be expected for the full year ending December 30, 2023 or any other future period. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and stockholders’ equity. All such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Certain immaterial prior period amounts have been reclassified to conform to current period presentation.
The Company uses a 52- or 53-week fiscal year ending on the last Saturday in December. The three months ended April 1, 2023 and March 26, 2022 each consisted of 13 weeks.
Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results are likely to differ from those estimates, and such differences may be material to the financial statements. Areas where management uses judgment include, but are not limited to, revenue allowances, inventory valuation, valuation of goodwill and long-lived assets, and income taxes.
Significant Accounting Policies. There have been no material changes to the Company’s significant accounting policies in Note 2 - Basis of Presentation and Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
NOTE 3 – Supplemental Financial Statement Information
Accounts Receivable, net
As of April 1, 2023 and December 31, 2022, Accounts receivable, net included unbilled accounts receivable of $1.1 billion. Unbilled accounts receivable primarily represents work completed on 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.
| | | | | | | | | | | |
Inventories | April 1, 2023 | | December 31, 2022 |
| (In millions) |
Raw materials | $ | 241 | | | $ | 231 | |
Work in process | 3,129 | | | 2,648 | |
Finished goods | 865 | | | 892 | |
Total inventories | $ | 4,235 | | | $ | 3,771 | |
| | | | | | | | | | | |
Prepaid Expenses and Other Current Assets | April 1, 2023 | | December 31, 2022 |
| (In millions) |
Prepaid supply agreements | $ | 867 | | | $ | 673 | |
Other | 575 | | | 592 | |
Total prepaid expenses and other current assets | $ | 1,442 | | | $ | 1,265 | |
Prepaid supply agreements relate to the short-term portion of payments made to vendors to secure long-term supply capacity.
| | | | | | | | | | | |
Property and Equipment, net | April 1, 2023 | | December 31, 2022 |
| (In millions) |
Land | $ | 120 | | | $ | 120 | |
Building and leasehold improvements | 653 | | | 594 | |
Equipment | 2,173 | | | 2,163 | |
Construction in progress | 147 | | | 143 | |
Property and equipment, gross | 3,093 | | | 3,020 | |
Accumulated depreciation | (1,593) | | | (1,507) | |
Total property and equipment, net | $ | 1,500 | | | $ | 1,513 | |
| | | | | | | | | | | |
Accrued Liabilities | April 1, 2023 | | December 31, 2022 |
| (In millions) |
Accrued marketing programs | $ | 672 | | | $ | 876 | |
Accrued compensation and benefits | 708 | | | 701 | |
Customer program liabilities | 1,006 | | | 859 | |
Other accrued and current liabilities | 781 | | | 641 | |
Total accrued liabilities | $ | 3,167 | | | $ | 3,077 | |
Revenue
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 April 1, 2023, the aggregate transaction price allocated to remaining performance obligations under contracts with an original expected duration of more than one year was $346 million, of which $263 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 29% and 21% of the Company’s revenue for the three months ended April 1, 2023 and March 26, 2022, respectively.
NOTE 4 – Segment Reporting
Management, including the Chief Operating Decision Maker (CODM), who is the Company’s Chief Executive Officer, reviews and assesses operating performance using segment net revenue and operating income (loss). These performance measures include the allocation of expenses to the reportable segments based on management’s judgment.
The Company’s four reportable segments are:
•the Data Center segment, which primarily includes server microprocessors (CPUs) and graphics processing units (GPUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs) and Adaptive System-on-Chip (SoC) products for data centers;
•the Client segment, which primarily includes CPUs, accelerated processing units (APUs) that integrate CPUs and GPUs, and chipsets for desktop and notebook personal computers;
•the Gaming segment, which primarily includes discrete GPUs, semi-custom SoC products and development services; and
•the Embedded segment, which primarily includes embedded CPUs and GPUs, APUs, FPGAs and Adaptive SoC products.
From time to time, the Company may also sell or license portions of its IP portfolio.
In addition to these reportable segments, the Company has an All Other category, which is not a reportable segment. This category primarily includes certain expenses and credits that are not allocated to any of the reportable segments because the CODM does not consider these expenses and credits in evaluating the performance of the reportable segments. This category primarily includes amortization of acquisition-related intangibles, employee stock-based compensation expense, acquisition-related costs and licensing gain. Acquisition-related costs primarily include transaction costs, depreciation related to the Xilinx fixed assets fair value step-up adjustment, certain compensation charges, and contract termination costs.
The following table provides a summary of net revenue and operating income by segment:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Net revenue: | | | | | | | |
Data Center | | | | | $ | 1,295 | | | $ | 1,293 | |
Client | | | | | 739 | | | 2,124 | |
Gaming | | | | | 1,757 | | | 1,875 | |
Embedded | | | | | 1,562 | | | 595 | |
Total net revenue | | | | | $ | 5,353 | | | $ | 5,887 | |
Operating income (loss): | | | | | | | |
Data Center | | | | | 148 | | | $ | 427 | |
Client | | | | | (172) | | | 692 |
Gaming | | | | | 314 | | 358 |
Embedded | | | | | 798 | | 277 |
All Other(1) | | | | | (1,233) | | | (803) | |
Total operating income (loss) | | | | | $ | (145) | | | $ | 951 | |
| | | | | |
(1) | For the three months ended April 1, 2023, all other operating losses primarily included $823 million of amortization of acquisition-related intangibles, $309 million of stock-based compensation expense and $111 million of acquisition-related costs. For the three months ended March 26, 2022, all other operating losses primarily included $479 million of amortization of acquisition-related intangibles, $199 million of stock-based compensation expense and $208 million of acquisition-related costs.
|
NOTE 5 – Acquisition-related Intangible Assets and Goodwill
Xilinx Acquisition
On February 14, 2022, the Company completed the acquisition of Xilinx, Inc. (Xilinx), a leading provider of adaptive computing solutions, for a total purchase consideration of $48.8 billion. The acquisition of Xilinx expands the Company’s product portfolio, which now includes FPGAs, Adaptive SoC products and ACAP products. The Company allocated the purchase price to $27.3 billion of identified intangible assets and $1.3 billion of net liabilities, with the excess purchase price of $22.8 billion recorded as goodwill.
Pensando Acquisition
On May 26, 2022, the Company completed the acquisition of Pensando Systems, Inc. (Pensando), a leader in next-generation distributed computing, for a total purchase consideration of $1.7 billion. The acquisition of Pensando and its leading distributed services platform expands the Company’s ability to offer leadership solutions for cloud, enterprise, and edge customers. The Company allocated the purchase price to $349 million of identified intangible assets and $208 million of other net assets, with the excess purchase price of $1.1 billion recorded as goodwill.
Acquisition-related Intangible Assets
Acquisition-related intangibles were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| (In millions) | | (In millions) |
Developed technology | $ | 12,360 | | | $ | (948) | | | $ | 11,412 | | | $ | 12,360 | | | $ | (738) | | | $ | 11,622 | |
Customer relationships | 12,324 | | | (2,464) | | | 9,860 | | | 12,324 | | | (1,973) | | | 10,351 | |
Customer backlog | 809 | | | (806) | | | 3 | | | 809 | | | (712) | | | 97 | |
Corporate trade name | 65 | | | (65) | | | — | | | 65 | | | (57) | | | 8 | |
Product trademarks | 914 | | | (88) | | | 826 | | | 914 | | | (68) | | | 846 | |
Identified intangible assets subject to amortization | 26,472 | | | (4,371) | | | 22,101 | | | 26,472 | | | (3,548) | | | 22,924 | |
IPR&D not subject to amortization | 1,190 | | | — | | | 1,190 | | | 1,194 | | | | | 1,194 | |
Total acquisition-related intangible assets | $ | 27,662 | | | $ | (4,371) | | | $ | 23,291 | | | $ | 27,666 | | | $ | (3,548) | | | $ | 24,118 | |
Acquisition-related intangible amortization expense was $823 million and $479 million for the three months ended April 1, 2023 and March 26, 2022, respectively.
Based on the carrying value of acquisition-related intangibles recorded as of April 1, 2023, and assuming no subsequent impairment of the underlying assets, the estimated annual amortization expense for acquisition-related intangibles is expected to be as follows:
| | | | | |
Fiscal Year | (In millions) |
Remainder of 2023 | $ | 1,981 | |
2024 | 2,286 | |
2025 | 2,061 | |
2026 | 1,951 | |
2027 | 1,844 | |
2028 and thereafter | 11,978 | |
Total | $ | 22,101 | |
NOTE 6 – Related Parties — Equity Joint Ventures
ATMP Joint Ventures
The Company holds a 15% equity interest in two joint ventures (collectively, the ATMP JV) with affiliates of Tongfu Microelectronics Co., Ltd, a Chinese joint stock company. The Company has no obligation to fund the ATMP JV. The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV.
The ATMP JV provides assembly, testing, marking and packaging (ATMP) services to the Company. The Company assists the ATMP JV in its management of certain raw material inventory. 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 condensed consolidated statements of operations.
The Company’s purchases from the ATMP JV during the three months ended April 1, 2023 and March 26, 2022 amounted to $367 million and $348 million, respectively. As of April 1, 2023 and December 31, 2022, the amounts payable to the ATMP JV were $353 million and $463 million, respectively, and are included in Payables to related parties on the Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three months ended April 1, 2023 and March 26, 2022 amounted to $1 million and $4 million, respectively. As of both April 1, 2023 and December 31, 2022, the Company had receivables from the ATMP JV of $2 million, included in Receivables from related parties on the Company’s condensed consolidated balance sheets.
During the three months ended April 1, 2023 and March 26, 2022, the Company recorded a gain of $1 million and $3 million, respectively, in Equity income in investee on its condensed consolidated statements of operations. As of April 1, 2023 and December 31, 2022, the carrying value of the Company’s investment in the ATMP JV was $84 million and $83 million, respectively.
THATIC Joint Ventures
The Company holds equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third-party Chinese entity. As of both April 1, 2023 and December 31, 2022, 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 the three months ended April 1, 2023, the Company recognized $10 million of licensing gain from royalty income associated with Licensed IP. During the three months ended March 26, 2022, the Company recognized $83 million of licensing gain from a milestone achievement and royalty income associated with Licensed IP. As of both April 1, 2023 and December 31, 2022, 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. The Company is complying with U.S. law pertaining to the Entity List designation.
NOTE 7 – Debt and Revolving Credit Facility
Debt
The Company’s total debt as of April 1, 2023 and December 31, 2022 consisted of the following:
| | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| (In millions) |
2.95% Senior Notes Due 2024 (2.95% Notes) | $ | 750 | | | $ | 750 | |
2.125% Convertible Senior Notes Due 2026 (2.125% Notes) | — | | | 1 | |
2.375% Senior Notes Due 2030 (2.375% Notes) | 750 | | | 750 | |
3.924% Senior Notes Due 2032 (3.924% Notes) | 500 | | | 500 | |
4.393% Senior Notes Due 2052 (4.393% Notes) | 500 | | | 500 | |
Total debt (principal amount) | 2,500 | | | 2,501 | |
Unamortized debt discount and issuance costs | (33) | | | (34) | |
| | | |
| | | |
Total long-term debt | $ | 2,467 | | | $ | 2,467 | |
Assumed Xilinx Notes
In connection with the acquisition of Xilinx, the Company assumed $1.5 billion in aggregate principal of Xilinx’s 2.95% Notes and 2.375% Notes (together, the Assumed Xilinx Notes). The Assumed Xilinx Notes are general unsecured senior obligations of the Company with semi-annual fixed interest payments due on June 1 and December 1.
3.924% Senior Notes Due 2032 and 4.393% Senior Notes Due 2052
On June 9, 2022, the Company issued $1.0 billion in aggregate principal amount of 3.924% Notes and 4.393% Notes. The 3.924% Notes and 4.393% Notes are general unsecured senior obligations of the Company. The interest is payable semi-annually on June 1 and December 1 of each year, commencing on December 1, 2022. The 3.924% and 4.393% Notes are governed by the terms of an indenture dated June 9, 2022 between the Company and US Bank Trust Company, National Association as trustee. As of April 1, 2023, the outstanding aggregate principal amount of the 3.924% Notes and 4.393% Notes was $1.0 billion.
The Company may redeem some or all of the 3.924% Notes and 4.393% Notes prior to March 1, 2032 and December 1, 2051, respectively, at a price equal to the greater of the present value of the principal amount and future interest through the maturity of the 3.924% Notes or 4.393% Notes or 100% of the principal amount plus accrued and unpaid interest. Holders have the right to require the Company to repurchase all or a portion of the 3.924% Notes or 4.393% Notes in the event that the Company undergoes a change of control as defined in the indenture, at a repurchase price of 101% of the principal amount plus accrued and unpaid interest. Additionally, an event of default may result in the acceleration of the maturity of the 3.924% Notes and 4.393% Notes.
2.125% Notes
During the three months ended April 1, 2023 and March 26, 2022, the activity on the 2.125% Notes was immaterial.
Future Debt Payment Obligations
As of April 1, 2023, the Company’s future principal debt payment obligations were as follows:
| | | | | |
Fiscal Year | (In millions) |
Remainder of 2023 | $ | — | |
2024 | 750 | |
2025 | — | |
2026 | — | |
2027 | — | |
2028 and thereafter | 1,750 | |
Total | $ | 2,500 | |
Revolving Credit Facility
The Company has $3.0 billion available under a revolving credit agreement (Revolving Credit Agreement) that expires on April 29, 2027. As of April 1, 2023, the Company had no outstanding borrowings under the Revolving Credit Agreement. Revolving loans under the Revolving Credit Agreement can be either Secure Overnight Financing Rate (SOFR) Loans or Base Rate Loans (each as defined in the Revolving Credit Agreement) at the Company's option. Each SOFR Loan will bear interest at a rate per annum equal to the applicable SOFR plus a margin between 0.625% and 1.250%. Each Base Rate Loan will bear interest equal to the Base Rate plus a margin between 0.000% and 0.250%. The Revolving Credit Agreement also contains a sustainability-linked pricing component which provides for interest rate and facility fee reductions or increases based on the Company meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions. The Revolving Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default applicable to the Company and its subsidiaries. As of April 1, 2023, the Company was in compliance with these covenants.
Commercial Paper
On November 3, 2022, the Company established a commercial paper program, under which the Company may issue unsecured commercial paper notes up to a maximum principal amount outstanding at any time of $3 billion with a maturity of up to 397 days from the date of issue. The commercial paper will be sold at a discount from par or, alternatively, will be sold at par and bear interest at rates that will vary based on market conditions at the time of issuance. As of April 1, 2023, the Company had no commercial paper outstanding.
NOTE 8 – 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.
Financial Instruments Recorded at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
(In millions) | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 | | Total |
Cash equivalents | | | | | | | | | | | |
Money market funds | $ | 2,624 | | | $ | — | | | $ | 2,624 | | | $ | 3,017 | | | $ | — | | | $ | 3,017 | |
Commercial paper | — | | | 149 | | | 149 | | | — | | | 224 | | | 224 | |
U.S. Treasury and agency securities | 248 | | | — | | | 248 | | | — | | | — | | | — | |
Time deposits and certificate of deposits | — | | | 65 | | | 65 | | | — | | | 159 | | | 159 | |
Short-term investments | | | | | | | | | | | |
Commercial paper | — | | | 814 | | | 814 | | | — | | | 441 | | | 441 | |
| | | | | | | | | | | |
Asset-backed and mortgage-backed securities | — | | | 38 | | | 38 | | | — | | | 39 | | | 39 | |
U.S. Treasury and agency securities | 868 | | | — | | | 868 | | | 466 | | | — | | | 466 | |
Foreign government securities | — | | | 394 | | | 394 | | | — | | | 74 | | | 74 | |
Other non-current assets | | | | | | | | | | | |
Time deposits and certificates of deposits | — | | | 10 | | | 10 | | | — | | | 9 | | | 9 | |
Equity investments | 8 | | | — | | | 8 | | | 8 | | | — | | | 8 | |
Deferred compensation plan investments | 98 | | | — | | | 98 | | | 90 | | | — | | | 90 | |
Total assets measured at fair value | $ | 3,846 | | | $ | 1,470 | | | $ | 5,316 | | | $ | 3,581 | | | $ | 946 | | | $ | 4,527 | |
Deferred compensation plan investments are primarily mutual fund investments held in a Rabbi trust established to maintain the Company’s executive deferred compensation plan.
The following is a summary of cash equivalents and short-term investments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Cost/ Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | | Cost/ Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| (in millions) | | (in millions) |
Asset-backed and mortgage-backed securities | $ | 41 | | | $ | — | | | $ | (3) | | | $ | 38 | | | $ | 42 | | | $ | — | | | $ | (3) | | | $ | 39 | |
Commercial paper | 967 | | | — | | | (4) | | | 963 | | | 669 | | | — | | | (4) | | | 665 | |
Money market funds | 2,624 | | | — | | | — | | | 2,624 | | | 3,017 | | | — | | | — | | | 3,017 | |
Time deposits and certificates of deposits | 65 | | | — | | | — | | | 65 | | | 159 | | | — | | | — | | | 159 | |
U.S. Treasury and agency securities | 1,122 | | | — | | | (6) | | | 1,116 | | | 471 | | | — | | | (5) | | | 466 | |
Foreign government securities | 395 | | | — | | | (1) | | | 394 | | | 74 | | | — | | | — | | | 74 | |
| $ | 5,214 | | | $ | — | | | $ | (14) | | | $ | 5,200 | | | $ | 4,432 | | | $ | — | | | $ | (12) | | | $ | 4,420 | |
As of April 1, 2023, the Company did not have material available-for-sale debt securities which had been in a continuous unrealized loss position of more than twelve months.
The contractual maturities of investments classified as available-for-sale are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| (In millions) | | (In millions) |
Due within 1 year | $ | 2,474 | | | $ | 2,464 | | | $ | 1,224 | | | $ | 1,218 | |
Due in 1 year through 5 years | 87 | | | 85 | | | 159 | | | 156 | |
Due in 5 years and later | 39 | | | 37 | | | 41 | | | 38 | |
| $ | 2,600 | | | $ | 2,586 | | | $ | 1,424 | | | $ | 1,412 | |
Financial Instruments Not Recorded at Fair Value
The Company carries its financial instruments at fair value except for its debt. The carrying amounts and estimated fair values of the Company’s debt are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value |
| (In millions) | | (In millions) |
| | | | | | | |
| | | | | | | |
Long-term debt | $ | 2,467 | | | $ | 2,345 | | | $ | 2,467 | | | $ | 2,281 | |
The estimated fair value of the Company’s long-term debt is based on Level 2 inputs of quoted prices for the Company’s debt and comparable instruments in inactive markets.
The fair value of the Company’s accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing terms.
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
The Company’s investments in non-marketable securities in privately-held companies are recorded using a measurement alternative that adjusts the securities to fair value when the Company recognizes an observable price adjustment or an impairment. As of April 1, 2023 and December 31, 2022, the Company had non-marketable securities in privately-held companies of $135 million and $137 million, respectively, that are recorded under Other non-current assets in the balance sheet. Impairment losses or observable price adjustments were not material during the three months ended April 1, 2023 and December 31, 2022.
Hedging Transactions and Derivative Financial Instruments
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. Dollar. These contracts generally mature within 24 months and are designated as accounting hedges. As of April 1, 2023 and December 31, 2022, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was $1.7 billion and $1.9 billion, respectively. The fair value of these contracts, recorded as a liability, was $5 million and $27 million as of April 1, 2023 and December 31, 2022, respectively.
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. Dollar. These forward contracts generally mature within 3 months and are not designated as accounting hedges. As of April 1, 2023 and December 31, 2022, the notional value of these outstanding contracts was $486 million and $485 million, respectively. The fair value of these contracts was not material as of April 1, 2023 and December 31, 2022.
NOTE 9 – Earnings (Loss) Per Share
The following table sets forth the components of basic and diluted earnings (loss) per share:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions, except per share amounts) |
Numerator | | | | | | | |
Net income (loss) for basic earnings per share | | | | | $ | (139) | | | $ | 786 | |
Denominator | | | | | | | |
Basic weighted average shares | | | | | 1,611 | | | 1,393 | |
Potentially dilutive shares from employee equity plans and warrants | | | | | — | | | 17 | |
Diluted weighted average shares | | | | | 1,611 | | | 1,410 | |
Earnings (loss) per share: | | | | | | | |
Basic | | | | | $ | (0.09) | | | $ | 0.56 | |
Diluted | | | | | $ | (0.09) | | | $ | 0.56 | |
Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.
NOTE 10 – Common Stock and Employee Equity Plans
Common Stock
Shares of common stock outstanding were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Balance, beginning of period | | | | | 1,612 | | | 1,207 | |
Common stock issued in the acquisition of Xilinx | | | | | — | | | 429 | |
Common stock issued under employee equity plans | | | | | 1 | | | 1 | |
Common stock repurchases for tax withholding on equity awards | | | | | (1) | | | (1) | |
| | | | | | | |
Repurchases of common stock | | | | | (3) | | | (16) | |
Balance, end of period | | | | | 1,609 | | | 1,620 | |
Stock Repurchase Program
In May 2021, the Company’s Board of Directors approved a stock repurchase program authorizing repurchases of up to $4 billion of the Company’s common stock (Existing Repurchase Program). In February 2022, the Company’s Board of Directors approved a new stock repurchase program in addition to the Existing Repurchase Program to purchase up to $8 billion of outstanding common stock in the open market (collectively referred to as the “Repurchase Program”).
During the three months ended April 1, 2023, the Company returned $241 million to shareholders through the repurchase of 3.0 million shares of its common stock under the Repurchase Program. As of April 1, 2023, $6.3 billion remains available for future stock repurchases under the Repurchase Program. The 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
Stock-based compensation expense recorded in the Condensed Consolidated Statements of Operations was as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Cost of sales | | | | | $ | 8 | | | $ | 4 | |
Research and development | | | | | 214 | | | 113 | |
Marketing, general and administrative | | | | | 87 | | | 82 | |
Total | | | | | $ | 309 | | | $ | 199 | |
During the three months ended April 1, 2023 and March 26, 2022, the Company recorded $4 million and $25 million of acquisition-related stock-based compensation expense under post-acquisition service conditions.
NOTE 11 – Income Taxes
The Company recorded an income tax provision of $13 million and $113 million for the three months ended April 1, 2023, and March 26, 2022, respectively, representing effective tax rates of (10.3)% and 12.6%, respectively.
The difference between the U.S. federal statutory tax rate of 21% and the Company's effective tax rate for the three months ended April 1, 2023 and March 26, 2022, was primarily due to a higher mix of income taxed in lower tax rate jurisdictions, research credits and the beneficial rate impact from the foreign-derived intangible income (FDII) tax benefit.
The lower tax provision for the three months ended April 1, 2023 was primarily due to the year-to-date pre-tax loss, which was more than offset by the impact of discrete interest and penalties on liabilities for uncertain tax positions.
The determination of the Company’s income taxes for the three months ended April 1, 2023 was based on applying the Company’s estimated annual effective tax rate to the year-to-date pre-tax book income adjusted for discrete tax items, such as excess tax benefits from stock-based compensation.
As of April 1, 2023, the Company continues to maintain valuation allowances 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 allowances maintained are due to a lack of sufficient sources of taxable income.
As of April 1, 2023 and December 31, 2022, the Company had long-term income tax liabilities of $1.3 billion recorded under Other long-term liabilities in the balance sheet.
NOTE 12 – Commitments and Contingencies
Commitments
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, technology and IP licenses. Purchase commitments include obligations made under noncancellable purchase orders and contractual obligations requiring minimum purchases or for which cancellation would lead to significant penalties.
Total future unconditional purchase commitments as of April 1, 2023 were as follows: | | | | | |
Fiscal Year | (In millions) |
Remainder of 2023 | $ | 4,424 | |
2024 | 1,558 | |
2025 | 355 | |
2026 | 219 | |
2027 | 86 | |
2028 and thereafter | 186 | |
Total unconditional purchase commitments | $ | 6,828 | |
On an ongoing basis, the Company works with suppliers on timing of payments and deliveries of purchase commitments, taking into account business conditions.
Contingencies
During the quarterly period ended April 1, 2023, there were no material legal proceedings. 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 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.
| | | | | |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The statements in this report include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements and should not be relied upon as predictions of future events, as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” “anticipates,” or the negative of these words and phrases, other variations of these words and phrases or comparable terminology. The forward-looking statements relate to, among other things: possible impact of future accounting rules on AMD’s condensed consolidated financial statements; demand for AMD’s products; the growth, change and competitive landscape of the markets in which AMD participates; international sales will continue to be a significant portion of total sales in the foreseeable future; that AMD’s cash, cash equivalents and short-term investment balances and cash flows from operations together with the availability under that certain revolving credit facility (the Revolving Credit Agreement) and commercial paper program will be sufficient to fund AMD’s operations including capital expenditures and purchase commitments over the next 12 months and beyond; AMD’s ability to obtain sufficient external financing on favorable terms, or at all; AMD’s expectation that based on management’s current knowledge, the potential liability related to AMD’s current litigation will not have a material adverse effect on its financial position, results of operation or cash flows; anticipated ongoing and increased costs related to enhancing and implementing information security controls; all unbilled accounts receivables are expected to be billed and collected within 12 months; revenue allocated to remaining performance obligations that are unsatisfied which will be recognized in the next 12 months; and a small number of customers will continue to account for a substantial part of AMD’s revenue in the future. For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements, see “Part II, Item 1A—Risk Factors” and the “Financial Condition” section set forth in “Part I, Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or MD&A, and such other risks and uncertainties as set forth below in this report or detailed in our other Securities and Exchange Commission (SEC) reports and filings. We assume no obligation to update forward-looking statements.
References in this Quarterly Report on Form 10-Q to “AMD,” “we,” “us,” “management,” “our” or the “Company” mean Advanced Micro Devices, Inc. and our consolidated subsidiaries.
AMD, the AMD Arrow logo, Alveo, EPYC, Radeon, Ryzen, Versal, Xilinx, Zynq Ultrascale and combinations thereof are trademarks of Advanced Micro Devices, Inc. Microsoft and Xbox are trademarks or registered trademarks of Microsoft Corporation in the United States and other jurisdictions. PlayStation is a registered trademark or trademark of Sony Interactive Entertainment, Inc. Other names are for informational purposes only and are used to identify companies and products and may be trademarks of their respective owners. “Zen” is a codename for an AMD architecture and is not a product name.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as of December 31, 2022 and December 25, 2021, and for each of the three years for the period ended December 31, 2022 as filed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Overview and Recent Developments
We are a global semiconductor company primarily offering:
•server microprocessors (CPUs) and graphics processing units (GPUs), data processing units (DPUs), Field Programmable Gate Arrays (FPGAs) and Adaptive System-on-Chip (SoC) products for data centers;
•CPUs, accelerated processing units (APUs) that integrate CPUs and GPUs, and chipsets for desktop and notebook personal computers;
•discrete GPUs, semi-custom SoC products and development services; and
•embedded CPUs, GPUs, APUs, FPGAs, and Adaptive SoC products.
From time to time, we may also sell or license portions of our intellectual property (IP) portfolio.
In this section, we will describe the general financial condition and the results of operations of Advanced Micro Devices, Inc. and its wholly-owned subsidiaries (collectively, “us,” “our” or “AMD”), including a discussion of our results of operations for the three months ended April 1, 2023 compared to the prior year period and an analysis of changes in our financial condition.
Net revenue for the three months ended April 1, 2023 was $5.4 billion, a 9% decrease compared to the prior year period. The decrease in net revenue was driven mainly by a 65% decrease in Client segment revenue primarily due to shipping below consumption to reduce downstream inventory, as well as a 6% decrease in Gaming segment revenue primarily due to a decline in gaming graphics sales. The decrease was partially offset by a 163% increase in Embedded segment revenue driven mainly by the inclusion of a full quarter of Xilinx embedded product sales in the first quarter of 2023 as compared to a partial quarter of Xilinx embedded product sales in the first quarter of 2022, which was measured from February 14, 2022, the date of the Xilinx acquisition (Xilinx Acquisition Date).
Gross margin for the three months ended April 1, 2023 was 44% compared to gross margin of 48% for the prior year period. The decrease in gross margin was primarily due to lower Client segment performance and higher amortization of acquisition-related intangible assets.
Operating loss for the three months ended April 1, 2023 was $145 million compared to operating income of $951 million for the prior year period. Net loss for the three months ended April 1, 2023 was $139 million compared to net income of $786 million for the prior year period. The decrease in operating and net income was primarily due to Client segment performance and higher amortization of acquisition-related intangible assets.
During the first quarter of 2023, we launched two new AMD Ryzen™ X3D desktop processors, the Ryzen 9 7900X3D and Ryzen 9 7950X3D processors with 3D V-Cache technology. We introduced the AMD EPYC™ 9004 Series processors, designed to provide technology and features for embedded networking, security/firewall and storage systems in cloud and enterprise computing, as well as industrial edge servers. We also launched the AMD Alveo™ MA35D media accelerator featuring two 5 nanometer, ASIC-based video processing units to power live interactive streaming services at scale. We also expanded our Zynq™ UltraScale™ RFSoC digital front-end portfolio with two additional devices. These RFSoCs will enable the expansion and deployment of 4G/5G radios where lower cost, power and spectrum-efficient radios are required to address increased wireless connectivity.
As of April 1, 2023 and December 31, 2022, our cash, cash equivalents and short-term investments were $5.9 billion.
During the three months ended April 1, 2023, we generated $486 million of cash from operating activities, and returned $241 million to shareholders through the repurchase of 3 million shares of our common stock under our Board authorized stock repurchase program. As of April 1, 2023, $6.3 billion remains available for future stock repurchases under the repurchase program. Our 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.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenue, inventories, 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. Although actual results have historically been reasonably consistent with management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.
Management believes there have been no significant changes for the three months ended April 1, 2023 to the items that we disclosed as our critical accounting estimates in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Results of Operations
Our operating results tend to vary seasonally. Historically, our net revenue has been generally higher in the second half of the year than in the first half of the year, although market conditions and product transitions could impact this trend.
The following table provides a summary of net revenue and operating income (loss) by segment:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | | April 1, 2023 | | March 26, 2022 |
| | | | | (In millions) |
Net revenue: | | | | | | | |
Data Center | | | | | $ | 1,295 | | | $ | 1,293 | |
Client | | | | | 739 | | | 2,124 | |
|