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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 26, 2022
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
 
amd-20220326_g1.jpg
ADVANCED MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware94-1692300
(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 filerAccelerated 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 27, 2022: 1,620,507,904


INDEX
 
2

PART I. FINANCIAL INFORMATION
 
ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended
 March 26,
2022
March 27,
2021
 (In millions, except per share amounts)
Net revenue$5,887 $3,445 
Cost of sales2,883 1,858 
Amortization of acquisition-related intangibles186  
Total cost of sales3,069 1,858 
Gross profit2,818 1,587 
Research and development1,060 610 
Marketing, general and administrative597 319 
Amortization of acquisition-related intangibles293  
Licensing gain(83)(4)
Operating income951 662 
Interest expense(13)(9)
Other expense, net(42)(11)
Income before income taxes and equity income 896 642 
Income tax provision113 89 
Equity income in investee3 2 
Net income$786 $555 
Earnings per share
Basic$0.56 $0.46 
Diluted$0.56 $0.45 
Shares used in per share calculation
Basic1,393 1,213 
Diluted1,410 1,231 
See accompanying notes.
3

Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended
 March 26,
2022
March 27,
2021
 (In millions)
Net income $786 $555 
Other comprehensive income (loss), net of tax:
Net change in unrealized gains (losses) on cash flow hedges1 (11)
Total comprehensive income $787 $544 
See accompanying notes.
4

Advanced Micro Devices, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
March 26,
2022
December 25,
2021
 (In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents$4,740 $2,535 
Short-term investments1,792 1,073 
Accounts receivable, net3,677 2,706 
Inventories2,431 1,955 
Receivables from related parties4 2 
Prepaid expenses and other current assets725 312 
Total current assets13,369 8,583 
Property and equipment, net1,406 702 
Operating lease right-of-use assets416 367 
Goodwill23,083 289 
Acquisition-related intangibles26,832  
Investment: equity method 72 69 
Deferred tax assets32 931 
Other non-current assets1,705 1,478 
Total assets$66,915 $12,419 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,476 $1,321 
Payables to related parties205 85 
Accrued liabilities3,070 2,424 
Current portion of long-term debt, net312 312 
Other current liabilities518 98 
Total current liabilities5,581 4,240 
Long-term debt, net of current portion1,475 1 
Long-term operating lease liabilities370 348 
Deferred tax liabilities3,109 12 
Other long-term liabilities1,047 321 
Commitments and Contingencies (See Note 13)
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,629 and 1,232; shares outstanding: 1,620 and 1,207
16 12 
Additional paid-in capital56,925 11,069 
Treasury stock, at cost (shares held: 9 and 25)
(941)(2,130)
Accumulated deficit(665)(1,451)
Accumulated other comprehensive loss(2)(3)
Total stockholders’ equity 55,333 7,497 
Total liabilities and stockholders’ equity $66,915 $12,419 

See accompanying notes.
5

Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 Three Months Ended
 March 26,
2022
March 27,
2021
 (In millions)
Cash flows from operating activities:
Net income$786 $555 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization609 95 
Stock-based compensation 199 85 
Amortization of operating lease right-of-use assets19 12 
Amortization of inventory fair value adjustment89  
Loss on debt redemption, repurchase and conversion 6 
Loss on sale or disposal of property and equipment15 8 
Deferred income taxes(342)73 
(Gains) losses on equity investments, net44 8 
Other(2)(1)
Changes in operating assets and liabilities
Accounts receivable, net(672)(112)
Inventories(26)(254)
Receivables from related parties(1)3 
Prepaid expenses and other assets(260)33 
Payables to related parties121 (38)
Accounts payable4 466 
Accrued liabilities and other412 (41)
Net cash provided by operating activities995 898 
Cash flows from investing activities:
Purchases of property and equipment(71)(66)
Purchases of short-term investments
(100)(858)
Proceeds from maturity of short-term investments
964 200 
Cash received from acquisition of Xilinx2,366  
Other(1)2 
Net cash provided by (used in) investing activities3,158 (722)
Cash flows from financing activities:
Proceeds from sales of common stock through employee equity plans2 2 
Repurchases of common stock(1,914) 
Common stock repurchases for tax withholding on employee equity plans
(35)(10)
Other(1) 
Net cash used in financing activities(1,948)(8)
Net increase in cash, cash equivalents, and restricted cash2,205 168 
Cash, cash equivalents, and restricted cash at beginning of period2,535 1,595 
Cash, cash equivalents, and restricted cash at end of period$4,740 $1,763 
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid$67 $34 
Issuance of common stock to settle convertible debt$ $24 
6

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 $ 
Transfer of assets for acquisition of property and equipment$13 $34 
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities$7 $58 

See accompanying notes.
7

Advanced Micro Devices
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months Ended
March 26,
2022
March 27,
2021
(In millions)
Capital stock:
Common stock, par value
Balance, beginning of period$12 $12 
Issuance of common stock as consideration for acquisition4  
Balance, end of period$16 $12 
Additional paid-in capital
Balance, beginning of period$11,069 $10,544 
Common stock issued under employee equity plans2 2 
Stock-based compensation199 85 
Issuance of common stock to settle convertible debt 24 
Issuance of common stock as consideration for acquisition45,372  
Fair value of replacement share-based awards related to acquisition275  
Issuance of common stock warrants8 3 
Balance, end of period$56,925 $10,658 
Treasury stock
Balance, beginning of period$(2,130)$(131)
Repurchases of common stock(1,914) 
Common stock repurchases for tax withholding on employee equity plans
(35)(10)
Reissuance of treasury stock as consideration for acquisition3,138  
Balance, end of period$(941)$(141)
Accumulated deficit:
Balance, beginning of period$(1,451)$(4,605)
Cumulative effect of adoption of accounting standard (8)
Net income 786 555 
Balance, end of period$(665)$(4,058)
Accumulated other comprehensive income (loss):
Balance, beginning of period$(3)$17 
    Other comprehensive income (loss)1 (11)
Balance, end of period$(2)$6 
Total stockholders' equity$55,333 $6,477 
See accompanying notes.

8

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), as standalone devices or as incorporated into accelerated processing units (APUs), chipsets, discrete and integrated graphics processing units (GPUs), data center and professional GPUs, server and embedded processors, semi-custom System-on-Chip (SoC) products, microprocessor and SoC development services and technology, 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.
On February 14, 2022 (the Acquisition Date), the Company completed the acquisition of Xilinx, Inc. (Xilinx). See Note 4 - Business Combination for additional information.
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 March 26, 2022 shown in this report are not necessarily indicative of results to be expected for the full year ending December 31, 2022 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 25, 2021. Certain prior period amounts have been reclassified to conform to the current period presentation.
The Company uses a 52- or 53-week fiscal year ending on the last Saturday in December. The three months ended March 26, 2022 and March 27, 2021 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 and related carrying value adjustments, valuation and assessing potential impairment, if any, of goodwill and intangible assets, business combination accounting and deferred income tax assets.
Significant Accounting Policies. Except for the addition of business combination, impairment of long-lived and intangible assets, and Global Intangible Low-Taxed Income (GILTI) accounting policies to the Company’s significant accounting policies, there have been no material changes to the Company’s significant accounting policies in Note 2 - Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021.
Business Combination. The Company is required to use the acquisition method of accounting for business combinations. The acquisition method of accounting requires the Company to allocate the purchase consideration to the assets acquired and liabilities assumed from the acquiree based on their respective fair values as of the Acquisition Date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future revenue growth and margins, future changes in technology, expected cost and time to develop in-process research and development and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability. These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made. As a result,
9

during the measurement period of up to one year from the Acquisition Date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded in the Consolidated Statements of Operations.
Impairment of Long-Lived and Intangible Assets. Long-lived and Intangible assets to be held and used are reviewed for impairment if indicators of potential impairment exist. Impairment indicators are reviewed on a quarterly basis. Assets are grouped and evaluated for impairment at the lowest level of identifiable cash flows.
When indicators of impairment exist and assets are held for use, the Company estimates future undiscounted cash flows attributable to the related assets groups. 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. Factors affecting impairment of assets held for use include the ability of the specific assets to generate separately identifiable positive cash flows.
When assets are removed from operations and held for sale, the Company estimates impairment losses as the excess of the carrying value of the assets over their fair value. Market conditions are among the factors affecting impairment of assets held for sale. Changes in any of these factors could necessitate impairment recognition in future periods for assets held for use or assets held for sale.
Long-lived assets such as property and equipment and intangible assets are considered non-financial assets and are measured at fair value when indicators of impairment exist.
Global Intangible Low-Taxed Income (GILTI). In 2022, the Company elected to change its method of accounting for the United States GILTI tax from recording the tax impact in the period it is incurred to recognizing deferred taxes for temporary tax basis differences expected to reverse as GILTI tax in future years. The change is considered preferable based on the Company’s facts and circumstances as it provides better and more timely information of expected future income tax liabilities arising from temporary tax differences primarily associated with the Xilinx acquisition. As a result of the acquisition, the Company recorded $27.3 billion of identified intangible assets (refer to Note 4 - Business Combination), of which $16.9 billion are related to foreign operations which will be amortized to income from operations over the assets’ estimated useful lives, but for which the Company will not receive a tax deduction under GILTI. Recognition of deferred taxes for the future GILTI impact of this amount is considered preferable as it provides better information about potential future tax liabilities of the Company based on current transactions. This accounting policy change resulted in the recording of $863 million of deferred tax liabilities in connection with the Xilinx acquisition as disclosed in Note 11 - Income Taxes. In addition, for the three months ended March 26, 2022, it resulted in a decrease in income tax provision with a corresponding increase to net income of $71 million, and an increase in basic and diluted earnings per share of $0.05, as compared to the computation under the previous accounting policy. This accounting policy change had no material impact on the Company’s historical consolidated financial statements.
NOTE 3 – Supplemental Financial Statement Information
Accounts Receivable, net
As of March 26, 2022 and December 25, 2021, Accounts receivable, net included unbilled accounts receivable of $619 million and $329 million, respectively. Unbilled accounts receivables primarily represent 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
March 26,
2022
December 25,
2021
 (In millions)
Raw materials$112 $82 
Work in process1,966 1,676 
Finished goods353 197 
Total inventories$2,431 $1,955 
10

Prepaid Expenses and Other Current AssetsMarch 26,
2022
December 25,
2021
(In millions)
Prepaid supply agreements$449 $74 
Other276 238 
Total prepaid expenses and other current assets$725 $312 
Prepaid supply agreements relate to the short-term portion of payments made to vendors to secure long-term supply capacity.
Property and Equipment, net
March 26,
2022
December 25,
2021
 (In millions)
Land$120 $ 
Building and leasehold improvements562 206 
Equipment1,766 1,534 
Construction in progress144 96 
Property and equipment, gross2,592 1,836 
Accumulated depreciation(1,186)(1,134)
Total property and equipment, net$1,406 $702 
Other Non-Current Assets
March 26,
2022
December 25,
2021
(In millions)
Long-term prepaid supply agreements$798 $916 
Software and technology licenses, net516 328 
Other391 234 
Total other non-current assets$1,705 $1,478 
Accrued Liabilities
March 26,
2022
December 25,
2021
 (In millions)
Accrued marketing programs$964 $933 
Accrued compensation and benefits744 705 
Other accrued and current liabilities1,362 786 
Total accrued liabilities$3,070 $2,424 
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 March 26, 2022, the aggregate transaction price allocated to remaining performance obligations under contracts with an original expected duration of more than one year was $206 million, of which $148 million is expected to be recognized in the next 12 months. The revenue allocated to remaining performance obligations does not include amounts which have an original expected duration of one year or less.
Revenue recognized over time associated with custom products and development services accounted for approximately 24% and 22% of the Company’s revenue for the three months ended March 26, 2022 and March 27, 2021, respectively.
11

NOTE 4 – Business Combination
On February 14, 2022, the Company completed the acquisition of all issued and outstanding shares of Xilinx (the Merger), a leading provider of adaptive computing solutions, for a total purchase consideration of $48.8 billion ($46.4 billion, net of cash acquired of $2.4 billion). The acquisition of Xilinx expands the Company’s product portfolio to include adaptable hardware platforms that enable hardware acceleration and rapid innovation across a variety of technologies. With the acquisition of Xilinx, the Company now offers FPGAs, adaptive SoC products, and ACAP products. The purchase consideration consisted of $48.5 billion of fair value of 429 million shares of the Company’s common stock issued to Xilinx stockholders and $275 million of fair value of replacement equity awards attributable to services rendered pre-combination. As the transaction closed prior to the opening of markets on February 14, 2022, the fair value of the common stock issued to Xilinx stockholders was based on the closing price of the Company’s common stock on February 11, 2022 of $113.18 per share.
The financial results of Xilinx are included in the Company’s consolidated financial statements from the date of acquisition, February 14, 2022, through March 26, 2022, and are reported under the Xilinx segment.
The purchase consideration was preliminarily allocated as follows:
(In millions)
Cash and cash equivalents$2,366 
Short-term investments1,582 
Accounts receivable299 
Inventories539 
Prepaid expenses and other current assets61 
Property and equipment692 
Operating lease right-of-use assets61 
Acquisition-related intangibles27,308 
Deferred tax assets11 
Other non-current assets418 
Total Assets33,337 
Accounts payable116 
Accrued liabilities633 
Other current liabilities191 
Long-term debt1,474 
Long-term operating lease liabilities45 
Deferred tax liabilities4,346 
Other long-term liabilities533 
Total Liabilities7,338 
Fair value of net assets acquired25,999 
Goodwill22,794 
Total purchase consideration$48,793 
The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management. The fair values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained. The primary items pending are related to income tax matters. Any adjustments to the preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined.
Goodwill was primarily attributed to increased synergies expected to be achieved from the integration of Xilinx. None of the goodwill is expected to be deductible for income tax purposes. Goodwill is not amortized to earnings, but instead will be reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill arising from the Xilinx acquisition was allocated to the Xilinx segment.
12

Following are details of the purchase consideration allocated to acquired intangible assets:
Fair ValueWeighted-average estimated useful life
(In millions)(In years)
Developed technology (1)
$12,295 16 years
Customer relationships (2)
12,290 14 years
Customer backlog (3)
793 1 year
Corporate trade name (4)
65 1 year
Product trademarks (4)
895 12 years
Identified intangible assets subject to amortization26,338 
In-process research and development (IPR&D) not subject to amortization (5)
970 N/A
Total identified intangible assets acquired$27,308 
(1)The fair value of developed technology was determined using the income approach, specifically, the multi-period excess earnings method.
(2)Customer relationships represent the fair value of existing contractual relationships and customer loyalty determined based on existing relationships using the income approach, specifically, the with and without method.
(3)Customer backlog represents the fair value of non-cancellable customer contract orders using the income approach, specifically, the multi-period excess earnings method.
(4)Corporate trade name and product trademarks primarily relate to the Xilinx brand and product-related trademarks, respectively, and the fair values were determined by applying the income approach, specifically, the relief from royalty method.
(5)The fair value of IPR&D was determined using the income approach, specifically, the multi-period excess earnings method.
The fair value of the identified intangible assets subject to amortization will be amortized over the assets’ estimated useful lives based on the pattern in which the economic benefits are expected to be received to cost of sales and operating expenses.
IPR&D consists of projects that have not yet reached technological feasibility as of the Acquisition Date. Accordingly, we recorded an indefinite-lived intangible asset of $970 million for the fair value of these projects, which will initially not be amortized. Instead, these projects will be tested for impairment annually and whenever events or changes in circumstances indicate that these projects may be impaired. Once the project reaches technological feasibility, the Company will begin to amortize the intangible assets over their estimated useful life.
The Company also assumed unvested restricted stock units with estimated fair value of $1.2 billion, of which $275 million was included as a component of the purchase consideration and $951 million will be recognized as expense subsequent to the acquisition.
The Consolidated Statement of Operations include the following revenue and operating income attributable to the Xilinx segment from the date of acquisition, February 14, 2022, to March 26, 2022:
March 26,
2022
(In millions)
Revenue$559 
Operating income$233 
Operating income attributable to the Xilinx segment does not include amortization of acquisition-related intangibles, employee stock-based compensation expense and acquisition-related costs, which are included in the “All Other” segment.
Acquisition-related costs of $208 million were included in the Company’s Condensed Consolidated Statement of Operations and recorded under Cost of sales, Research and development, and Marketing, general and administrative expenses for the first fiscal quarter of 2022. The Company may incur additional acquisition-related costs in the future related to the acquisition.
13

Supplemental Unaudited Pro Forma Information
Following are the supplemental consolidated financial results of AMD and Xilinx on an unaudited pro forma basis, as if the acquisition had been consummated as of the beginning of the fiscal year 2021 (i.e., December 27, 2020). AMD’s fiscal year ends on the last Saturday in December of each year and Xilinx’s fiscal year ended on the Saturday nearest March 31 of each year. The unaudited pro forma information is presented on the basis of AMD’s fiscal year and combines the historical results of the fiscal periods of AMD and Xilinx. Since AMD’s and Xilinx’s fiscal year ends differed, AMD combined its statement of operations for the fiscal quarter ended March 26, 2022 with that of Xilinx for the three-month period beginning January 2, 2022 through March 26, 2022. Also, AMD combined its statement of operations for the fiscal quarter ended March 27, 2021 with that of Xilinx for the three months ended April 3, 2021.
Three Months Ended
March 26,
2022
March 27,
2021
(In millions)
Revenue$6,364 $4,296 
Net income (loss)$769 $(443)
The unaudited pro forma financial information presented is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition were completed at the beginning of fiscal year 2021 and are not indicative of the future operating results of the combined company. The pro forma results include adjustments related to purchase accounting, primarily amortization of acquisition-related intangible assets, fixed asset depreciation expense and expense from assumed stock-based compensation awards. The pro forma results also include amortization expense of acquired inventory fair value step-up of $184 million in the first quarter of fiscal year 2021 and no inventory fair value step-up expense in the first quarter of fiscal year 2022.
NOTE 5 – Acquisition-related Intangible Assets and Goodwill
Acquisition-related Intangible Assets
Acquisition-related intangibles as of March 26, 2022 were as follows:
Weighted-average Remaining Useful Life (In years)March 26, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
(In millions)
Developed technology16 years$12,295 $(95)$12,200 
Customer relationships14 years12,290 (277)12,013 
Customer backlog1 year793 (91)702 
Corporate trade name1 year65 (7)58 
Product trademarks12 years895 (9)886 
Identified intangible assets subject to amortization26,338 (479)25,859 
IPR&D not subject to amortizationN/A973 — 973 
Total acquisition-related intangible assets$27,311 $(479)$26,832 
Acquisition-related intangible asset balance as of March 27, 2021 was not material.
Acquisition-related intangible amortization expense was $479 million for the three months ended March 26, 2022.
14

Based on the carrying value of acquisition-related intangibles recorded as of March 26, 2022, 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 2022$3,000 
20232,780 
20242,260 
20252,040 
20261,941 
2027 and thereafter13,838 
Total$25,859 
Goodwill
The carrying amount of goodwill as of March 26, 2022 and March 27, 2021 was $23.1 billion and $289 million, respectively, and was allocated to reporting units within the following operating segments:
March 26,
2022
December 26,
2021
 (In millions)
Enterprise, Embedded and Semi-custom$289 $289 
Xilinx22,794  
Total$23,083 $289 
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 March 26, 2022 and March 27, 2021 amounted to $348 million and $246 million, respectively. As of March 26, 2022 and December 25, 2021, the amounts payable to the ATMP JV were $205 million and $85 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 March 26, 2022 and March 27, 2021 amounted to $4 million and $10 million, respectively. As of March 26, 2022 and December 25, 2021, the Company had receivables from the ATMP JV of $4 million and $2 million, respectively, included in Receivables from related parties on the Company’s condensed consolidated balance sheets.
During the three months ended March 26, 2022 and March 27, 2021, the Company recorded a gain of $3 million and $2 million in Equity income in investee on its condensed consolidated statements of operations, respectively. As of March 26, 2022 and December 25, 2021, the carrying value of the Company’s investment in the ATMP JV was $72 million and $69 million, respectively.
15

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 March 26, 2022 and December 25, 2021, 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 March 26, 2022, the Company recognized $83 million of licensing gain from a milestone achievement and royalty income and during the three months ended March 27, 2021, the Company recognized $4 million of licensing gain from royalty income, both associated with Licensed IP. As of both March 26, 2022 and December 25, 2021, 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 March 26, 2022 and December 25, 2021 consisted of the following:
March 26,
2022
December 25,
2021
(In millions)
2.95% Senior Notes Due 2024 (Xilinx 2024 Notes)$750 $ 
2.375% Senior Notes Due 2030 (Xilinx 2030 Notes)750  
7.50% Senior Notes Due August 2022 (7.50% Notes)
312 312 
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)
1 1 
Total debt (principal amount)1,813 313 
Unamortized debt discount and issuance costs(26) 
Total debt (net)1,787 313 
Less: current portion of long-term debt(312)(312)
Total long-term debt$1,475 $1 
Assumed Xilinx Notes
In connection with the acquisition of Xilinx, the Company assumed $1.5 billion in aggregate principal of Xilinx’s 2.95% and 2.375% Notes (Assumed Xilinx Notes) which were recorded at fair value as of the Acquisition Date. The difference between the fair value at the Acquisition Date and the principal outstanding of the Assumed Xilinx Notes will be amortized through interest expense over the remaining term of the debt. 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. The indentures governing the Assumed Xilinx Notes contain various covenants which limit the Company’s ability to, among other things, create certain liens on principal property or the capital stock of certain subsidiaries, enter into certain sale and leaseback transactions with respect to principal property, and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s assets to another person.
2.125% Notes
During the three months ended March 26, 2022, the activity on the 2.125% Notes was immaterial.
During the three months ended March 27, 2021, holders of the 2.125% Notes converted $25 million principal amount of notes in exchange for approximately 3 million shares of the Company’s common stock at the conversion price of $8.00 per share. The Company recorded a loss of $6 million from these conversions in Other expense, net on its condensed consolidated statements of operations.
16

Future Debt Payment Obligations
As of March 26, 2022, the Company’s future debt and related interest payment obligations were as follows:
PrincipalInterestTotal
 Fiscal Year(In millions)
2022$312 $64 $376 
2023 41 41 
2024750 29 779 
2025 18 18 
20261 18 19 
2027 and thereafter750 62 812 
Total$1,813 $232 $2,045 
Revolving Credit Facility
The Company is party to a $500 million unsecured revolving credit facility (the Revolving Credit Facility), including a $50 million swingline sub-facility and a $75 million sublimit for letters of credit pursuant to a credit agreement with a syndicate of banks. The Revolving Credit Facility expires in June 2024. Borrowings under the Revolving Credit Facility bear interest at either the LIBOR or the base rate at the Company’s option (in each case, as customarily defined) plus an applicable margin. As of March 26, 2022, there were no borrowings outstanding under the Revolving Credit Facility and the Company was in compliance with all required covenants. As of March 26, 2022, the Company had $14 million of letters of credit outstanding under the Revolving Credit Facility.
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.
Fair Value Hierarchy
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.
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Financial Instruments Recorded at Fair Value on a Recurring Basis
March 26, 2022December 25, 2021
(In millions)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents
Money market funds$2,289 $ $2,289 $4 $ $4 
Commercial paper 145 145  45 45 
U.S. Treasury and agency securities75 125 200    
Short-term investments
Commercial paper 559 559  880 880 
Time deposits and certificates of deposits 491 491  193 193 
Asset-backed and mortgage-backed securities 49 49    
U.S. Treasury and agency securities469 224 693    
Other non-current assets
Equity investments 22  22 66  66 
Deferred compensation plan investments90  90 72  72 
Total assets measured at fair value$2,945 $1,593 $4,538 $142 $1,118 $1,260 
During the three months ended March 26, 2022, the Company recognized a $44 million loss, in Other income (expense), due to a decrease in the fair value of an equity investment.
Deferred compensation plan investments are mutual fund investments held in a Rabbi trust established to maintain the Company’s executive deferred compensation plan.
The following is a summary of cash equivalents and short-term investments:
March 26, 2022
Cost/ Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
(in millions)
Asset-backed and mortgage-backed securities$50 $ $(1)$49 
Commercial paper704   704 
Money market funds2,289   2,289 
Time deposits and certificates of deposits491   491 
U.S. Treasury and agency securities895  (2)893 
$4,429 $ $(3)$4,426 
As of March 26, 2022, the Company did not have any 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:
March 26, 2022December 25, 2021
Amortized CostFair ValueAmortized CostFair Value
(In millions)(In millions)
Due within 1 year$2,090 $2,089 $1,118 $1,118 
Due in 1 year through 5 years1 1   
Due in 5 years and later49 47   
$2,140 $2,137 $1,118 $1,118 
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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:
 March 26, 2022December 25, 2021
 Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
 (In millions)
Current portion of long-term debt, net$312 $320 $312 $326 
Long-term debt, net of current portion$1,475 $1,451 $1 $15 
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
As of March 26, 2022, the Company had non-marketable securities in private companies of $137 million, which were classified as Level 3 assets. The Company’s investments in non-marketable securities of private 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. Such impairment losses or observable price adjustments were not material during the three months ended March 26, 2022. The balance of non-marketable securities in private companies as of March 27, 2021 was not material.
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 18 months and are designated as accounting hedges. As of March 26, 2022 and December 25, 2021, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was $1.3 billion and $894 million, respectively. The fair value of these contracts was not material as of March 26, 2022 and December 25, 2021.
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 March 26, 2022 and December 25, 2021, the notional value of these outstanding contracts was $539 million and $291 million, respectively. The fair value of these contracts was not material as of March 26, 2022 and December 25, 2021.
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NOTE 9 – Earnings Per Share
The following table sets forth the components of basic and diluted earnings per share:
Three Months Ended
March 26,
2022
March 27,
2021
(In millions, except per share amounts)
Numerator
Net income for basic earnings per share$786 $555 
Denominator
Basic weighted average shares1,393 1,213 
Effect of potentially dilutive shares:
        Employee equity plans and warrants17 18 
Diluted weighted average shares1,410 1,231 
Earnings per share:
Basic$0.56 $0.46 
Diluted$0.56 $0.45 
NOTE 10 – Common Stock and Employee Equity Plans
Common Stock
Shares of common stock outstanding were as follows:
Three Months Ended
March 26,
2022
March 27,
2021
(In millions)
Balance, beginning of period1,207 1,211 
Common stock issued for the acquisition of Xilinx429  
Common stock issued under employee equity plans1 1 
Common stock repurchases for tax withholding on equity awards(1) 
Issuance of common stock to settle convertible debt 3 
Repurchases of common stock(16) 
Balance, end of period1,620 1,215 

Stock Repurchase Program
In May 2021, the Company’s Board of Directors approved a stock repurchase program 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 March 26, 2022, the Company repurchased 15.8 million shares of its common stock under the Repurchase Program for $1.9 billion. As of March 26, 2022, $8.3 billion remains available for future stock repurchases under the Repurchase Program. The stock 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.
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Stock-based Compensation
Stock-based compensation expense was recorded in the Condensed Consolidated Statements of Operations as follows: 
Three Months Ended
March 26,
2022
March 27,
2021
(In millions)
Cost of sales$4 $1 
Research and development113 55 
Marketing, general and administrative82 29 
Total stock-based compensation expense before income taxes199 85 
Income tax benefit(43)(13)
Total stock-based compensation expense after income taxes$156 $72 
The Company recorded $25 million of acquisition-related stock-based compensation expense during the three months ended March 26, 2022 under post-acquisition service conditions.
Xilinx Replacement Awards
In connection with the Merger, the Company issued equity awards as replacement for assumed equity awards to Xilinx employees. The replacement awards include restricted stock units of approximately 12 million shares with a weighted average fair value of $103.35 per share and have terms that are substantially the same as the assumed Xilinx awards. The fair value of replacement awards related to services rendered up to the Acquisition Date was recognized as a component of the total purchase consideration while the remaining fair value of replacement awards attributable to post-combination services will be recognized as stock-based compensation expense over the remaining post-acquisition vesting period.
NOTE 11 – Income Taxes
The Company recorded an income tax provision of $113 million and $89 million for the three months ended March 26, 2022 and March 27, 2021, representing effective tax rates of 12.6% and 13.8%, 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 March 26, 2022 was primarily due to the geographic mix of income taxed in lower tax rate jurisdictions, research credits and the beneficial rate impact from the foreign-derived intangible income tax benefit (FDII), which was partially offset by the U.S. tax on GILTI.
The difference between the U.S. federal statutory tax rate of 21% and the Company's effective tax rate for the three months ended March 27, 2021 was primarily due to the excess tax benefits with respect to stock-based compensation and the beneficial rate impact from the FDII tax benefit.
As of March 26, 2022, the Company continues to maintain a valuation allowance for certain federal, state, and foreign tax attributes. The federal valuation allowance maintained is due to limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or dual consolidated loss rules. Certain state and foreign valuation allowance maintained is due to a lack of sufficient sources of taxable income.
During the quarter ended March 26, 2022, the liability for uncertain tax positions increased by $212 million primarily due to the utilization of certain tax attributes that may be subject to additional limitation.
As a result of the acquisition of Xilinx, the Company recorded $4.3 billion of net deferred tax liabilities primarily on the excess of book basis over the tax basis of the acquired intangible assets, including $863 million of GILTI net deferred tax liability. The Company also recorded $147 million of current tax payable as of the Acquisition Date. Additionally, the Company assumed $204 million of liability for uncertain tax positions and $321 million of long-term liability for transition-tax, which is payable over the next three years.
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NOTE 12 – 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 operating segments based on management’s judgment. During the three months ended March 26, 2022, the Company added Xilinx as a separate operating segment, consistent with the revised manner in which the Company’s CODM assesses the company’s financial performance and allocates resources.
The Company’s three operating segments are:
the Computing and Graphics (CG) segment, which primarily includes desktop and notebook microprocessors, accelerated processing units that integrate microprocessors and graphics, chipsets, discrete GPUs, data center and professional GPUs and development services.