| 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; AMD's strategy and expected benefits; the growth, change and competitive landscape of the markets in which AMD participates; the expectation that international sales will continue to be a significant portion of total sales in the foreseeable future; the expectation that AMD's cash, cash equivalents, short-term investments and cash flows from operations along with our revolving credit facility and our commercial paper program will be sufficient to fund AMD's operations, capital expenditures, commitments and strategic activities over the next 12 months and beyond; AMD's ability to access capital markets; 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 positions, results of operations or cash flows; anticipated ongoing and increased costs related to enhancing and implementing information security controls; the expectation that revenue allocated to remaining performance obligations that are unsatisfied will be recognized in the next 12 months; that a small number of customers will continue to account for a substantial part of AMD's revenue and receivables in the future; the expected implications from the development of the legal and regulatory environment relating to emerging technologies, such as SI; AMD's expectation to utilize the cloud service capacity in its operations or assign the capacity; AMD's ability to achieve its corporate responsibility initiatives; compliance costs associated with new or developing sustainability laws and requirements; expected future SI technology trends, developments and growth; the expected timing and benefits of pending acquisitions; the extent of impact of export restrictions imposed by the U.S. on our business; AMD's future investment commitments and commencement of future payments under leases for data center and general corporate purposes, and equity investments; the potential impact of changes in AMD's stock price and other assumptions on the fair value of customer warrants and AMD's GAAP earnings; and AMD's expectation to fund stock repurchases through cash generated from operations. 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, AMD Instinct, EPYC, Radeon, Ryzen, Xilinx and combinations thereof are trademarks of Advanced Micro Devices, 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 27, 2025 and December 28, 2024, and for each of the three years for the period ended December 27, 2025 as filed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2025.
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Overview and Recent Developments
We are a global semiconductor company primarily offering:
•Artificial Intelligence (AI) accelerators, microprocessors (CPUs) for servers, graphics processing units (GPUs), accelerated processing units (APUs), data processing units (DPUs), AI Network Interface Cards (AI NICs), Field Programmable Gate Arrays (FPGAs) and adaptive System-on-Chip (SoC) products for data centers;
•CPUs, APUs, chipsets for desktops and notebooks, discrete GPUs, semi-custom SoC products and development services; and
•embedded CPUs, APUs, FPGAs, System on Modules (SOMs), 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, "we", "us," "our", "AMD" or the "Company"), including a discussion of our results of operations for the three and nine months ended September 26, 2026 compared to the prior year period and an analysis of changes in our financial condition.
Net revenue for the three months ended September 26, 2026 was $13.4 billion, a 45% increase compared to the prior year period. The increase in net revenue was driven by an increase in Data Center segment revenue primarily driven by the strong demand for our AMD EPYC™ processors and the launch of our AMD Instinct™ MI450 Series GPUs, and an increase in Embedded segment revenue as demand strengthened across end markets, partially offset by a decrease in our Client and Gaming segment revenue primarily due to lower demand for semi-custom products.
Gross margin for the three months ended September 26, 2026 was 54% compared to gross margin of 52% for the prior year period, a 2 percentage point increase primarily driven by a favorable product mix, including higher Data Center segment revenue.
Operating income for the three months ended September 26, 2026 was $2.8 billion compared to operating income of $1.3 billion for the prior year period. The increase in operating income was due to higher gross profit, partially offset by higher operating expenses. Net income for the three months ended September 26, 2026 was $2.4 billion compared to net income of $1.2 billion for the prior year period. The increase in net income was primarily driven by higher operating income.
As of September 26, 2026, our cash, cash equivalents and short-term investments were $15.8 billion compared to $10.6 billion as of December 27, 2025. During the nine months ended September 26, 2026, we generated $6.5 billion of cash from operating activities and we returned $221 million to stockholders through the repurchase of common stock under our stock repurchase program (Repurchase Program).
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In August and September 2026, we entered into definitive agreements to acquire Taalas Inc. and World Labs Technologies, Inc. to strengthen our model research and inference capabilities and development of future super intelligence (SI) hardware, software and systems. The acquisitions are expected to close in the fourth quarter of fiscal year 2026, subject to regulatory approvals and customary closing conditions.
In August 2026, we issued $4.75 billion in aggregate principal amount of senior notes, with proceeds intended for general corporate purposes, including the repayment of debt. We also repaid in full the $875 million aggregate principal amount of our 4.212% Senior Notes as the notes matured in September 2026.
We have entered and may continue to enter into commercial arrangements to support our operations and anticipated growth, as well as the development of the broader SI infrastructure ecosystem by customers and commercial partners and expand access to our AI technologies. These arrangements include long-term capacity purchase agreements, cloud compute capacity commitments, leases (including leases for general corporate purposes and data center leases), lease guarantees and other credit support and financing arrangements. Under our cloud compute capacity arrangements, we have committed, and expect to continue to commit in the future, to purchase GPU compute capacity from cloud service providers (CSPs) either to the extent it is not successfully placed with third-party customers, or for capacity we reserved and may sell or assign to third parties. We entered into data center leases which we expect to assign or sublease to commercial partners, and provided credit support to certain commercial partners in the form of guarantees of their lease and debt obligations in the event of their default. See Note 8 - Financial Instruments, Note 10 - Leases and Note 11 - Commitments and Contingencies in Part 1, Item 1 of this Form 10-Q.
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 ongoing basis, including those related to our revenue, inventories, goodwill, long-lived and intangible assets, business combination accounting, warrants issued to customers 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.
Warrants Issued to Customers. Fair value is based on the estimated probability of the customers meeting the technical and commercial conditions required for exercisability and on market-based assumptions. The estimate of the probability of meeting the technical and commercial conditions by the customers requires significant judgment in evaluating commercial, technical, market and third-party execution considerations. Market-based assumptions include our stock price, Monte Carlo simulation assumptions such as expected volatility, and historical correlation of our stock price returns with a market index. The warrant liability is dependent on our estimate of customers' total probable purchases which requires judgment.
There were no other significant changes for the three and nine months ended September 26, 2026 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 27, 2025.
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Results of Continuing Operations
Each of the Client and Gaming businesses do not qualify as a separate reportable operating segment, however, we continue to separately disclose revenues for each business. 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 | Nine Months Ended | ||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Data Center | $ | 8,546 | $ | 4,341 | $ | 21,039 | $ | 11,255 | |||||||||||||||
| Client and Gaming | |||||||||||||||||||||||
| Client | 2,949 | 2,750 | 8,896 | 7,543 | |||||||||||||||||||
| Gaming | 773 | 1,298 | 2,272 | 3,067 | |||||||||||||||||||
| Total Client and Gaming | 3,722 | 4,048 | 11,168 | 10,610 | |||||||||||||||||||
| Embedded | 1,109 | 857 | 2,959 | 2,504 | |||||||||||||||||||
| Total net revenue | $ | 13,377 | $ | 9,246 | $ | 35,166 | $ | 24,369 | |||||||||||||||
Cost of sales and operating expenses: | |||||||||||||||||||||||
Data Center | $ | 5,664 | $ | 3,267 | $ | 14,455 | $ | 9,404 | |||||||||||||||
Client and Gaming | 3,149 | 3,181 | 9,438 | 8,480 | |||||||||||||||||||
Embedded | 656 | 574 | 1,782 | 1,618 | |||||||||||||||||||
| All other | 1,076 | 954 | 3,193 | 2,925 | |||||||||||||||||||
Total cost of sales and operating expenses | $ | 10,545 | $ | 7,976 | $ | 28,868 | $ | 22,427 | |||||||||||||||
Operating income (loss): | |||||||||||||||||||||||
| Data Center | $ | 2,882 | $ | 1,074 | $ | 6,584 | $ | 1,851 | |||||||||||||||
| Client and Gaming | 573 | 867 | 1,730 | 2,130 | |||||||||||||||||||
| Embedded | 453 | 283 | 1,177 | 886 | |||||||||||||||||||
| All other | (1,076) | (954) | (3,193) | (2,925) | |||||||||||||||||||
| Total operating income (loss) | $ | 2,832 | $ | 1,270 | $ | 6,298 | $ | 1,942 | |||||||||||||||
Data Center
Data Center net revenue of $8.5 billion for the three months ended September 26, 2026 increased by 97%, compared to net revenue of $4.3 billion for the prior year period. Data Center net revenue of $21.0 billion for the nine months ended September 26, 2026 increased by 87%, compared to net revenue of $11.3 billion for the prior year period. The increase in both periods was primarily driven by strong demand for our AMD EPYC processors and AMD Instinct GPUs.
Data Center operating income was $2.9 billion for the three months ended September 26, 2026, compared to operating income of $1.1 billion for the prior year period. Data Center operating income was $6.6 billion for the nine months ended September 26, 2026, compared to operating income of $1.9 billion for the prior year period. The increase in operating income in both periods was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.
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Client and Gaming
Client and Gaming net revenue of $3.7 billion for the three months ended September 26, 2026 decreased by 8%, compared to net revenue of $4.0 billion for the prior year period. Client and Gaming net revenue of $11.2 billion for the nine months ended September 26, 2026 increased by 5%, compared to net revenue of $10.6 billion for the prior year period.
Client net revenue of $2.9 billion for the three months ended September 26, 2026 increased by 7% compared to net revenue of $2.8 billion for the prior year period, primarily driven by a 6% increase in unit shipments of client processors and a 1% increase in average selling price of client processors. Client net revenue of $8.9 billion for the nine months ended September 26, 2026 increased by 18% compared to net revenue of $7.5 billion for the prior year period, primarily driven by a 21% increase in unit shipments of client processors, partially offset by a 2% decrease in average selling price of client processors. The increase in unit shipments in both periods was primarily driven by AMD RyzenTM mobile processors. The decrease in average selling price in the nine months period was primarily due to a shift in mix of Ryzen processor sales, including lower AMD Ryzen desktop processors sales.
Gaming net revenue of $0.8 billion for the three months ended September 26, 2026 decreased by 40% compared to net revenue of $1.3 billion for the prior year period. Gaming net revenue of $2.3 billion for the nine months ended September 26, 2026 decreased by 26% compared to net revenue of $3.1 billion for the prior year period. The decrease in both periods was primarily due to lower semi-custom revenue.
Client and Gaming operating income was $573 million for the three months ended September 26, 2026, compared to operating income of $867 million for the prior year period. The decrease in operating income was primarily due to lower revenue. Client and Gaming operating income was $1.7 billion for the nine months ended September 26, 2026, compared to operating income of $2.1 billion for the prior year period. The decrease in operating income was primarily due to higher cost of sales and operating expenses.
Embedded
Embedded net revenue of $1.1 billion for the three months ended September 26, 2026 increased by 29%, compared to net revenue of $857 million for the prior year period. Embedded net revenue of $3.0 billion for the nine months ended September 26, 2026 increased by 18%, compared to net revenue of $2.5 billion for the prior year period. Net revenue increased in both periods as demand strengthened across end markets.
Embedded operating income was $453 million for the three months ended September 26, 2026, compared to operating income of $283 million for the prior year period. Embedded operating income was $1.2 billion for the nine months ended September 26, 2026, compared to operating income of $886 million for the prior year period. The increase in operating income in both periods was primarily driven by higher revenue, partially offset by higher cost of sales and operating expenses.
All Other
All Other operating loss of $1.1 billion for the three months ended September 26, 2026 increased by 13% compared to All Other operating loss of $954 million for the prior year period. All Other operating loss of $3.2 billion for the nine months ended September 26, 2026 increased by 9%, compared to All Other operating loss of $2.9 billion for the prior year period. The increase in both periods was primarily due to higher stock-based compensation expense as a result of higher headcount, partially offset by a lower amortization of acquisition-related intangibles.
International Sales
International sales, based on billing location of customers who purchased directly from us, were 57% and 64% of net revenue for the three months ended September 26, 2026 and September 27, 2025, respectively, and 66% and 67% of net revenue for the nine months ended September 26, 2026 and September 27, 2025, respectively. We expect that international sales will continue to be a significant portion of total sales in the foreseeable future. Substantially all of our sales transactions were denominated in U.S. dollars.
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Gross Margin and Expenses
The following is a summary of certain consolidated statement of operations data for the periods indicated:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 26, 2026 | September 27, 2025 | September 26, 2026 | September 27, 2025 | |||||||||||||||||||||||
In millions, except percentages | ||||||||||||||||||||||||||
| Net revenue | $ | 13,377 | $ | 9,246 | $ | 35,166 | $ | 24,369 | ||||||||||||||||||
| Cost of sales | 5,910 | 4,206 | 15,559 | 12,023 | ||||||||||||||||||||||
| Amortization of acquisition-related intangibles | 257 | 260 | 778 | 771 | ||||||||||||||||||||||
| Gross profit | 7,210 | 4,780 | 18,829 | 11,575 | ||||||||||||||||||||||
| Gross margin | 54 | % | 52 | % | 54 | % | 47 | % | ||||||||||||||||||
| Research and development | 2,803 | 2,139 | 7,728 | 5,761 | ||||||||||||||||||||||
| Marketing, general and administrative | 1,298 | 1,069 | 3,952 | 2,946 | ||||||||||||||||||||||
| Amortization of acquisition-related intangibles | 277 | 302 | 851 | 926 | ||||||||||||||||||||||
Interest expense | (62) | (37) | (136) | (95) | ||||||||||||||||||||||
| Other income (expense), net | (902) | 82 | (139) | 219 | ||||||||||||||||||||||
| Income tax provision (benefit) | (555) | 153 | (65) | (558) | ||||||||||||||||||||||
| Income from discontinued operations, net of tax | - | 71 | 3 | 175 | ||||||||||||||||||||||
Gross Margin
Gross margin was 54% and 52% for the three months ended September 26, 2026 and September 27, 2025, respectively, where the increase was driven by a favorable product mix, including higher Data Center segment revenue. Gross margin was 54% and 47% for the nine months ended September 26, 2026 and September 27, 2025, respectively, where the increase was driven by the absence of inventory and related charges associated with the U.S. government export control on AMD Instinct MI308 Data Center GPU products that was recorded in the prior year period and a favorable product mix, including higher Data Center segment revenue.
Expenses
Research and Development (R&D) Expenses
R&D expenses of $2.8 billion for the three months ended September 26, 2026 increased by $0.7 billion, or 31%, compared to $2.1 billion for the prior year period. R&D expenses of $7.7 billion for the nine months ended September 26, 2026 increased by $2.0 billion, or 34%, compared to $5.8 billion for the prior year period. The increase in both periods was primarily due to higher employee-related costs from an increase in headcount as we continue to expand our data center silicon, systems and software capabilities.
Marketing, General and Administrative (MG&A) Expenses
MG&A expenses of $1.3 billion for the three months ended September 26, 2026 increased by $0.2 billion, or 21%, compared to $1.1 billion for the prior year period. MG&A expenses of $4.0 billion for the nine months ended September 26, 2026 increased by $1.0 billion, or 34%, compared to $2.9 billion for the prior year period. The increase in both periods was primarily due to an increase in go-to-market activities to support our revenue growth.
Amortization of Acquisition-Related Intangibles
Amortization of acquisition-related intangibles of $534 million for the three months ended September 26, 2026 decreased by $28 million, or 5%, compared to $562 million for the prior year period. Amortization of acquisition-related intangibles of $1.6 billion for the nine months ended September 26, 2026 decreased by $68 million, or 4%, compared to $1.7 billion for the prior year period. The decrease in both periods was primarily due to certain acquisition-related intangibles that were fully amortized in the prior fiscal year.
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Interest Expense
Interest expense for the three and nine months ended September 26, 2026 was $62 million and $136 million, respectively. Interest expense for the three and nine months ended September 27, 2025 was $37 million and $95 million, respectively. The increase for both periods was primarily due to the issuance of the August 2026 Notes, partially offset by the repayment of the $875 million aggregate principal amount of our 4.212% Senior Notes.
Other Income (Expense), Net
Other income (expense), net primarily consists of change in fair value of warrant liability, interest income, gains and losses from investments, and foreign currency transaction gains and losses.
Other income (expense), net for the three months ended September 26, 2026 was $(902) million, a decrease of $984 million, compared to $82 million for the prior year period. Other income (expense), net for the nine months ended September 26, 2026 was $(139) million, a decrease of $358 million, compared to $219 million for the prior year period. The decrease in both periods was primarily driven by the change in fair value of warrant liability of $1.1 billion.
Income Taxes
We determine income taxes for interim reporting periods by applying our estimated annual effective tax rate to the year-to-date results and adjusted for tax items discrete to each period.
For the three and nine months ended September 26, 2026, we recorded an income tax benefit from continuing operations of $555 million and $65 million representing an effective tax rate of (29.6)% and (1.1)%, respectively. The tax benefit for both periods reflected the income tax benefit from foreign-derived deduction eligible income (FDDEI) and R&D tax credits. In addition, the tax benefit for the three and nine months ended September 26, 2026 also included a discrete tax benefit related to stock-based compensation of $772 million and $918 million, respectively.
For the three and nine months ended September 27, 2025, we recorded an income tax provision from continuing operations of $153 million and an income tax benefit of $558 million representing an effective tax rate of 11.5% and (26.7)%, respectively. The tax provision (benefit) for both periods reflected the income tax benefit from foreign-derived intangible income (FDII) and R&D tax credits, partially offset by the tax rate detriment from foreign earnings, as well as a discrete tax benefit related to stock-based compensation. In addition, the tax benefit for the nine months ended September 27, 2025 also included a discrete tax benefit of $853 million related to the release of uncertain tax positions pertaining to the reasonable cause relief for dual consolidated losses approved by the Internal Revenue Service (IRS) in April 2025.
Results of Discontinued Operations
Net income from discontinued operations for the nine months ended September 26, 2026 of $3 million included tax provision adjustments. Net income from discontinued operations for the three and nine months ended September 27, 2025 of $71 million and $175 million include the results of operations of the ZT Manufacturing Business, that was divested in October 2025. See Note 5 - Acquisitions and Divestitures in Part 1, Item 1 of this Form 10-Q.
FINANCIAL CONDITION
Liquidity and Capital Resources
As of September 26, 2026 and December 27, 2025, our cash, cash equivalents and short-term investments were $15.8 billion and $10.6 billion, respectively. We also have a $5.0 billion unsecured revolving credit facility that expires in 2031 and a commercial paper program under which we may issue up to $5.5 billion of unsecured commercial paper notes with maturities of up to 397 days. We had no borrowings outstanding under either program as of September 26, 2026.
Material Cash Requirements
As of September 26, 2026, the aggregate principal amount of our debt was $7.1 billion, compared to $3.3 billion as of December 27, 2025, reflecting our issuance of senior notes in four tranches with an aggregate principal amount of $4.75 billion in August 2026, partially offset by the repayment of $875 million aggregate principal amount of our 4.212% Senior Notes due 2026 (4.212% Senior Notes) at maturity. Our outstanding debt matures between 2028 and 2052, with none due within the next 12 months.
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In addition to our debt obligations, we have entered and may continue to enter into commercial arrangements to support our operations and anticipated growth as well as the development of the broader SI infrastructure ecosystem by our customers and commercial partners and expand access to our AI technologies. These arrangements include long-term capacity purchase agreements, cloud compute capacity commitments, leases (including leases for general corporate purposes and data center leases), lease guarantees and other credit support and financing arrangements.
As of September 26, 2026, unconditional commitments related to our operations were $48.8 billion, of which $33.4 billion is expected to be paid in the remainder of fiscal year 2026 and fiscal year 2027. We had future payments of $0.2 billion under leases for our operations that have not yet commenced and investment commitments of up to $5.1 billion. Commitments for cloud compute capacity arrangements that are intended to support the broader SI infrastructure development and expand access to our technologies were $6.2 billion, of which $1.5 billion is expected to be paid in the remainder of fiscal year 2026 and fiscal year 2027. Future payments under data center leases not yet commenced that we expect to assign or sublease to commercial partners were $13.3 billion, and the maximum potential amount of future payments under our guarantees was $8.5 billion. Remaining payments under leases recognized on our condensed consolidated balance sheet, including data center leases related to the development of SI infrastructure, were $2.7 billion. We have subleased certain of these data center leases to commercial partners and expect to receive $0.9 billion under these noncancellable subleases through 2036. In addition to these commitments, we invested $1.0 billion in an equity offering of a public company in October 2026.
Unconditional commitments related to our operations consist primarily of obligations to purchase wafers, substrates, memory and other components and assembly, test, mark and packaging services for manufacturing. It also includes cloud compute capacity used for our internal research and development and various licenses and service agreements. Leases for our operations that have not yet commenced are expected to commence beginning in the first quarter of fiscal year 2027. Our equity investment commitments are subject to certain conditions and are expected to be funded through fiscal year 2028.
Commitments that are intended to support the development of the broader SI infrastructure and expanding access to our technologies consist of cloud compute capacity and data center leases not yet commenced, both of which are made available to third parties, as well as guarantees. Under cloud compute capacity arrangements, we commit to purchase GPU compute capacity from CSPs, either to the extent it is not placed by third-party customers, or for capacity we reserve and may sell or assign to third parties. Accordingly, our commitments represent maximum amounts, which are reduced as third-party customers pay for the capacity. We expect to assign or sublease data center leases not yet commenced to commercial partners. Our guarantees provide credit support for certain commercial partners' lease and debt obligations and would require payment only in the event of their default. As of September 26, 2026, no commercial partner was in default and no amounts had been paid under these guarantees.
See Note 8 - Financial Instruments, Note 10 - Leases and Note 11 - Commitments and Contingencies in Part 1, Item 1 of this Form 10-Q for additional information.
We expect to fund our operations, capital expenditures, commitments and strategic activities over the next 12 months and beyond through our cash, cash equivalents, short-term investments and cash flows from operations, together with borrowing capacity under our revolving credit facility and commercial paper program, which we believe will be sufficient for these needs. We may also access the capital markets to supplement our liquidity.
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Cash Flows
Our operating, investing and financing activities for the nine months ended September 26, 2026 compared to the prior year period are as described below:
| Nine Months Ended | |||||||||||
| September 26, 2026 | September 27, 2025 | ||||||||||
| (In millions) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Net cash provided by operating activities of continuing operations | $ | 6,523 | $ | 4,189 | |||||||
| Net cash provided by operating activities of discontinued operations | - | 920 | |||||||||
| Operating activities | 6,523 | 5,109 | |||||||||
| Net cash used in investing activities of continuing operations | (6,415) | (3,962) | |||||||||
| Net cash used in investing activities of discontinued operations | (243) | (30) | |||||||||
| Investing activities | (6,658) | (3,992) | |||||||||
| Financing activities of continuing operations | 1,983 | (103) | |||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 1,848 | $ | 1,014 | |||||||
Operating Activities
Our working capital cash inflows and outflows from operations are primarily cash collections from our customers, payments for inventory purchases and payments for employee-related expenditures.
Net cash provided by operating activities of continuing operations was $6.5 billion in the nine months ended September 26, 2026, primarily due to our net income of $6.1 billion, adjusted for non-cash and non-operating charges of $4.0 billion and net cash outflows of $3.6 billion from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities included a $3.5 billion increase in inventory primarily to support the continued ramp of Data Center products in advanced process technology nodes, $2.9 billion increase in accounts receivable driven primarily by higher revenue, a $2.1 billion increase in prepaid expenses and other assets primarily due to prepayments of supply agreements, partially offset by a $4.5 billion increase in accounts payable primarily due to timing of payment obligations and higher inventory purchases.
Net cash provided by operating activities of continuing operations was $4.2 billion in the nine months ended September 27, 2025, primarily due to our net income of $2.6 billion, adjusted for non-cash and non-operating charges of $3.4 billion and net cash outflows of $1.8 billion from changes in our operating assets and liabilities. The primary driver of the change in operating assets and liabilities was a $1.6 billion increase in inventory primarily to support the continued ramp of Data Center products in advanced process technology nodes. Net cash provided by operating activities of the ZT Manufacturing Business, classified as discontinued operations, was $920 million.
Investing Activities
Net cash used in investing activities of continuing operations was $6.4 billion for the nine months ended September 26, 2026, which primarily consisted of purchases of short-term investments of $6.8 billion, purchases of property and equipment of $1.8 billion, and purchases of long-term investments of $1.1 billion, partially offset by $3.4 billion of proceeds from the maturity and sale of short-term investments. Net cash used in investing activities of discontinued operations was $0.2 billion, which represents payment for customary net working capital adjustments related to the divestiture of the ZT Manufacturing Business.
Net cash used in investing activities of continuing operations was $4.0 billion for the nine months ended September 27, 2025, which primarily consisted of cash used in acquisitions, net of cash acquired, of $1.7 billion, the purchases of short-term investments of $2.1 billion, purchases of property and equipment of $752 million, and purchases of strategic investments of $432 million, partially offset by $1.0 billion of proceeds from the maturity and sale of short-term investments. Net cash used in investing activities of the ZT Manufacturing Business, classified as discontinued operations, was $30 million due to purchases of equipment.
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Financing Activities
Net cash provided by financing activities of continuing operations was $2.0 billion for the nine months ended September 26, 2026, which primarily consisted of net proceeds of approximately $4.7 billion from the issuance of the August 2026 Notes partially offset by stock repurchases for tax withholding on employee equity plans of $1.8 billion, repayment of $0.9 billion aggregate principal amount of our 4.212% Senior Notes as the notes matured in September 2026.
Net cash used in financing activities of continuing operations was $103 million for the nine months ended September 27, 2025, which primarily consisted of stock repurchases pursuant to the Repurchase Program of $1.3 billion and stock repurchases for tax withholding on employee equity plans of $447 million partially offset by cash received from the issuance of senior notes of $1.5 billion. There was no net cash provided by financing activities of discontinued operations for the nine months ended September 27, 2025.