Advanced Micro Devices, Inc. (AMD) Cash Flow Statement

The OCF/NI ratio has consistently exceeded 1.0 in most quarters, with a notable spike to 4.24 in 2024Q1 when net income was depressed by acquisition-related costs. This suggests that reported earnings are well-backed by cash generation, and the gap between net income and operating cash flow is minimal, reflecting low accruals. The improvement in cash conversion aligns with the company's scaling revenue and operating leverage, as seen in the income statement analysis.

The FCF trajectory shows a clear inflection point starting in 2025Q3, with FCF margins consistently above 20% in the last three quarters, except for a dip in 2026Q2. This growth is driven by robust operating cash flow, which has outpaced net income, and disciplined capital expenditure. The FCF margin now approaches that of peers like QCOM (23.6%) but remains below NVDA's 47%, indicating room for further expansion as data center revenue scales.

The rise in capital intensity suggests AMD is investing in testers, packaging, and possibly substrate capacity to support its MI300 accelerator ramp. While this is a modest increase, it remains below the levels seen in foundry-heavy peers, consistent with AMD's fabless model. The elevated CapEx in 2026Q2 may indicate a strategic push to secure supply chain capacity, which could pressure near-term FCF but is likely necessary to meet data center demand.

The negative working capital changes in most quarters suggest that AMD is building inventory ahead of product launches or experiencing delayed collections, which is typical for a semiconductor company with long lead times. The positive swing in 2026Q1 and 2025Q2 indicates efficient collection and inventory drawdown, possibly reflecting strong sell-through of data center products. Investors should monitor inventory levels, as a buildup could signal demand softening, but current trends appear aligned with revenue growth.

Buybacks have been consistent, with notable spikes in 2025Q1 and 2025Q2, possibly to offset dilution from employee stock compensation. The absence of dividends suggests management is prioritizing reinvestment in R&D and strategic acquisitions, such as the Xilinx integration. The $1.7B acquisition outflow in 2025Q2 likely relates to earn-out payments or milestone payments, indicating ongoing integration costs. This deployment strategy is typical for a high-growth tech company, but investors should watch for potential increases in buyback activity if FCF continues to expand.

The cumulative gap of $7.9B between operating cash flow and net income is largely attributable to non-cash charges like depreciation and amortization, which totaled $7.6B over the period, and stock-based compensation of $4.0B. This divergence suggests that reported earnings understate the company's cash-generating ability, a positive signal for valuation. However, the gap also reflects the heavy use of acquisition-related amortization, which will continue to depress GAAP earnings but not cash flow, making cash-based metrics more relevant for assessing AMD's true profitability.