Advanced Micro Devices Inc. (NASDAQ:AMD)

The common-size income statement reveals significant shifts in profitability and cost structure over the five-year period. Net revenue is consistently represented as 100%, allowing for a clear comparison of expense and income items as a percentage of sales. A notable trend is the fluctuation in operating income, alongside evolving cost management strategies.

Gross Profit

Gross profit as a percentage of net revenue initially declined from 48.25% in 2021 to 44.93% in 2022, before recovering to 46.12% in 2023 and further increasing to 49.35% in 2024 and 49.52% in 2025. This suggests improving cost of goods sold management in the later years of the period, partially offset by increased amortization of acquisition-related intangibles.

Cost of Sales & Amortization

Cost of sales, including amortization of acquisition-related intangibles, demonstrates a complex pattern. While initially decreasing from 51.75% to 48.94% in 2022, it increased to 53.88% in 2023 before declining to 50.65% and 50.48% in 2024 and 2025 respectively. The amortization of acquisition-related intangibles as a separate line item increased significantly from 6.14% in 2022 to 8.90% in 2023, then decreased to 5.62% and 3.53% in 2024 and 2025, indicating a potential phasing out of significant amortization expenses related to past acquisitions.

Operating Expenses

Research and development (R&D) expenses consistently increased as a percentage of net revenue, rising from 17.31% in 2021 to 23.36% in 2025. Marketing, general, and administrative (MG&A) expenses also exhibited an upward trend, increasing from 8.74% to 11.96% over the same period. These increases suggest a growing investment in innovation and operational infrastructure. Restructuring charges appeared in 2024, representing 0.72% of net revenue.

Operating Income

Operating income experienced substantial volatility. It decreased dramatically from 22.20% in 2021 to 5.36% in 2022, then further to 1.77% in 2023. A recovery began in 2024, reaching 7.37%, and continued into 2025, with operating income rising to 10.66%. This fluctuation likely reflects the combined impact of gross margin changes, increased operating expenses, and potentially, non-recurring items.

Non-Operating Items

Interest expense remained relatively stable, fluctuating between 0.36% and 0.47% of net revenue. Interest income increased from 0.05% to 0.91% in 2023, before decreasing to 0.62% in 2025. Gains (losses) on long-term investments were variable, with a gain in 2021 and a loss in 2022, followed by minimal impact in 2023 and a small loss in 2024, then a gain in 2025. Other income (expense), net, showed a positive trend, increasing from 0.33% to 1.67% over the period.

Net Income

Net income mirrored the trends in income from continuing operations, net of tax, fluctuating from 19.24% in 2021 to 5.59% in 2022, 3.77% in 2023, 6.36% in 2024, and finally reaching 12.51% in 2025. The addition of income from discontinued operations, net of tax, in 2025 (0.19%) contributed marginally to the overall net income percentage.

Overall, the period demonstrates a challenging period of adjustment followed by a recovery in profitability. The increasing investment in R&D and MG&A suggests a strategic focus on future growth, while the management of cost of sales and amortization expenses appears to be improving in the later years. The volatility in operating income highlights the sensitivity of the business to various internal and external factors.