Advanced Micro Devices Inc. (NASDAQ:AMD)

The analysis of key financial ratios over multiple quarters reveals distinct trends in the company's profitability and leverage metrics.

Return on Assets (ROA)

The ROA demonstrated strong performance initially, reaching a peak of approximately 35.59% in Q3 2021. However, a significant decline followed, dropping sharply to 1.95% by Q4 2022. This decline reflects a reduction in asset efficiency or profitability during this period. From early 2023 onwards, the ROA began to recover gradually, rising from a marginally negative value in Q2 2023 to 4.3% by Q3 2025, suggesting improvements in asset utilization and profitability over the medium term.

Financial Leverage

The company's financial leverage ratio remained relatively stable throughout the observed period, fluctuating narrowly between 1.2 and 1.66. Initially, from Q1 2021 to Q4 2021, leverage increased slightly, peaking at 1.66, but then decreased to around 1.2 by early 2023 and maintained this level with minor variations until Q3 2025. This stability indicates a consistent use of debt relative to equity, with no significant shifts in the capital structure.

Return on Equity (ROE)

The ROE mirrored the trajectory of ROA with strong initial values, peaking at 55.62% in Q3 2021. Following this peak, there was a marked decline, dropping to a low of 0.72% by Q1 2023, including a brief negative value in Q2 2023. After this trough, the ROE showed a steady recovery trend, increasing to 5.44% by Q3 2025. The pattern suggests that the company's ability to generate returns for shareholders diminished significantly but has been improving in recent quarters.

Overall, the data reflects a period of high profitability in 2021 followed by a downturn in 2022 and early 2023, impacting both asset and equity returns. Despite this, financial leverage remained stable, indicating that the fluctuation in returns was not primarily driven by changes in the capital structure. Subsequent quarters show a gradual recovery in profitability measures, suggesting a possible return to improved financial health and operational efficiency.

Net Profit Margin

The net profit margin demonstrated a strong performance in the early periods, peaking above 26% in late 2021. However, it experienced a significant downward trend starting in the first quarter of 2022, reaching a low point close to zero by mid-2023. Following this trough, a gradual recovery is observable, with margins progressively improving through 2025, eventually surpassing 10%. This indicates a period of contraction followed by a steady rebound in profitability.

Asset Turnover

Asset turnover showed a relatively stable and moderate increase overall. Initially strong at above 1.1, it sharply declined in early 2022 to around 0.28, maintaining low levels through mid-2023. From mid-2023 onward, asset turnover slowly increased and showed a consistent rising trend, reaching approximately 0.42 by late 2025. This suggests an initial reduction in asset utilization efficiency, followed by a progressive enhancement in asset productivity over time.

Financial Leverage

Financial leverage remained fairly stable across the periods, fluctuating narrowly around the range of 1.2 to 1.66, with a mild decrease after 2021. The leverage ratio settled near 1.2 in the more recent years, indicating consistent use of debt relative to equity without substantial swings. This stability implies prudent financial management regarding capital structure.

Return on Equity (ROE)

The return on equity paralleled the trend observed in net profit margin. Initially very strong, peaking above 55% in late 2021, it experienced a steep decline to below 1% by mid-2023, even dipping into slightly negative territory. Starting from early 2024, ROE began to recover gradually, rising steadily to above 5% by late 2025. This trajectory suggests significant pressure on shareholder returns during the mid-period, followed by a cautious but clear recovery phase.

The analysis of the quarterly financial ratios reveals several noteworthy trends in the company's profitability, efficiency, and leverage over the observed periods.

Tax Burden

The tax burden ratio demonstrates fluctuations with notable peaks and troughs. Initially, the ratio declines from 1.64 to around 0.86, indicating a decrease in the company's effective tax rate or tax-related expenses relative to earnings. A significant spike to 41.6 is observed in one quarter, which likely reflects an anomaly or extraordinary event, then the ratio stabilizes around the 1.2 to 1.6 range for the remaining periods. Recently, the tax burden seems to have settled near levels slightly above 1, indicating moderate tax expenses.

Interest Burden

The interest burden remains relatively stable and close to 1.0 for most quarters, indicating consistent interest expenses relative to earnings before interest and taxes. There is a steep dip to 0.05 in one quarter, suggesting either a one-time reduction in interest expense or possibly an accounting adjustment. Following this dip, a gradual recovery is seen with the ratio converging back toward 0.94–0.97, indicating controlled interest costs in recent periods.

EBIT Margin

EBIT margin exhibits a general decline from a strong level of above 20% in early periods to below 1% and even negative margins in two quarters, suggesting periods of operational challenges or increased costs. Subsequently, a gradual recovery trend is noticeable, with margins improving steadily from below 1% to above 10% by the last quarter analyzed. This indicates a restoration of operating profitability over the longer term.

Asset Turnover

The asset turnover ratio experiences a sharp decline early in the data, dropping from above 1.3 to around 0.28–0.35. This suggests either increased asset base outpacing revenue growth or declining sales efficiency. Post-decline, the ratio stabilizes and demonstrates a slow but consistent upward trend, improving from about 0.32 to over 0.4, which signals improving asset utilization efficiency in generating sales.

Financial Leverage

Financial leverage shows minor fluctuations mostly between 1.2 and 1.6 with no drastic changes. A slight decreasing trend is present after an initial peak around 1.66, settling near 1.2 to 1.3 in later quarters. This indicates stable use of debt relative to equity without significant increases in financial risk associated with leverage.

Return on Equity (ROE)

ROE demonstrates a sharp decline from very high levels above 40% down to near zero and even slightly negative values in one quarter, reflecting significantly reduced profitability attributable to shareholders during that time. After the low point, ROE gradually improves but remains much lower compared to the initial period, culminating at roughly 5.44%. This behavior mirrors the trends in EBIT margin and asset turnover, implying the impact of operational performance and efficiency on overall shareholder returns.

Overall, the financial data reflects a period of operational and profitability challenges followed by a recovery phase. Key indicators such as EBIT margin and ROE declined significantly before showing improvement, while asset turnover and financial leverage remained relatively stable with a minor recovery in efficiency. Tax and interest burdens exhibit variability but generally indicate controlled expenses outside of exceptional quarters. The company appears to be recovering operationally and financially over the recent periods, yet profitability remains below peak historical levels.

Net Profit Margin

The net profit margin demonstrates a significant declining trend from a peak of approximately 26.72% in September 2021 to a low of -0.11% in July 2023. This indicates considerable downward pressure on profitability over this period. Starting from this low point, a gradual recovery is observed through subsequent quarters, reaching around 10.32% by September 2025. This pattern suggests initial challenges in maintaining profit levels, followed by a consistent improvement in cost control or revenue generation efficiencies.

Asset Turnover

Asset turnover experienced a notable decline from approximately 1.33 in September 2021 to a trough near 0.32 in mid-2023, reflecting lower efficiency in generating sales from the asset base. Since then, the ratio shows a slow but steady recovery to about 0.42 by September 2025. Although the asset turnover ratio remains well below early 2021 levels, the gradual upward trend implies progressive improvement in asset utilization.

Return on Assets (ROA)

ROA closely mirrors the trends observed in net profit margin and asset turnover. It peaks at roughly 35.59% in September 2021, then declines sharply to negative territory (-0.04%) in July 2023, denoting a period of poor asset profitability. Following this low point, ROA steadily improves to around 4.3% by September 2025. This recovery highlights the company's movement towards restoring effective asset-based returns, though the levels remain significantly below earlier highs.

Overall Analysis

The company experienced a period of strong financial performance up through late 2021, as evidenced by high net profit margin, asset turnover, and ROA. This was followed by a marked decline across all three metrics, reaching the lowest points by mid-2023. The decline may reflect operational difficulties, external market pressures, or other challenges affecting profitability and efficiency. From mid-2023 onward, all metrics exhibit a gradual and consistent improvement trajectory. These trends suggest ongoing efforts to enhance profitability and asset efficiency are yielding positive results, although the company has not yet returned to the profitability and efficiency levels seen earlier in the period analyzed.

The company’s financial data over the observed periods reveal notable fluctuations and trends across key profitability and efficiency metrics.

Tax Burden Ratio

The tax burden ratio exhibited considerable volatility throughout the periods. Initially, it showed a declining trend from approximately 1.64 down to around 0.86 between early 2021 and early 2022, indicating potential changes in the effective tax rate or tax-related adjustments. Subsequently, it experienced a pronounced spike reaching as high as 41.6 in mid-2023, suggesting an extraordinary tax impact or accounting anomaly during that quarter. Following this peak, the ratio normalized to values near 1.0, maintaining relative stability with slight decreases towards the most recent periods.

Interest Burden Ratio

This ratio demonstrated consistent stability, predominantly remaining close to 0.98–0.99 in the initial phases. There was a mild drop to 0.93 at the end of 2022, followed by a significant dip to 0.05 in mid-2023, indicating a one-time substantial event affecting interest expenses or income. Thereafter, the ratio gradually recovered and stabilized around 0.83 to 0.97 in more recent quarters, reflecting a relatively steady interest expense relative to operating income in the current context.

EBIT Margin (%)

The EBIT margin showed a declining trajectory overall. The margin peaked at above 22% in the last quarter of 2021 but progressively declined to a low of approximately -1% to 1% in the first three quarters of 2023, indicating periods of low or negative operating profitability. From late 2023 onwards, a gradual recovery is observed, with the margin increasing steadily to above 10% by the third quarter of 2025. This suggests a turnaround in operational efficiency and cost management over the later periods.

Asset Turnover Ratio

There was an initial upward trend in asset turnover from 1.14 to about 1.33 in late 2021, followed by an abrupt decline to a range of 0.28 to 0.35 throughout 2022. This lower level persisted, showing only gradual improvement over the subsequent quarters, rising towards 0.42 by the third quarter of 2025. The initial drop may imply increased asset base or reduced sales efficiency, with a slow restoration of utilization seen more recently.

Return on Assets (ROA) (%)

The ROA mirrored the fluctuations seen in operating margin and asset turnover. It started strong at about 29% in early 2021 and rose to above 35% by late 2021. However, it sharply declined to below 2% during 2022 and remained subdued with marginal negative values around mid-2023. A gradual recovery trend is evident from late 2023 onward, with ROA reaching approximately 4.3% by late 2025. This pattern indicates significant headwinds impacting asset profitability in the mid-periods, followed by a slow return to positive asset returns.

Overall, the data depicts an environment of operational challenges and financial strain particularly during the 2022 to mid-2023 periods, characterized by reduced profitability, asset efficiency, and unusual tax and interest burden fluctuations. Subsequent periods show a trend towards recovery and normalization in key financial ratios, suggesting improved operational performance and financial management.

The analysis of the recent quarterly financial data reveals several notable trends across key profitability and burden ratios.

Tax Burden

The tax burden ratio has demonstrated considerable volatility throughout the observed periods. Early quarters in 2021 show ratios ranging from 1.64 down to 0.86, indicating a declining tax burden at first. However, a sharp spike to 41.6 is observed in a mid-2023 quarter, which likely represents an anomaly or a significant one-time tax event. Aside from this outlier, the tax burden generally decreases towards the end of the period, moving from around 1.68 to approximately 1.04, suggesting some effective tax planning or reduced tax liabilities in more recent quarters.

Interest Burden

The interest burden has remained relatively stable over time, mostly near or above 0.9 except for a pronounced dip to 0.05 seen during one quarter in early 2023, indicating an outlier where interest expenses were minimal or possibly eliminated temporarily. Apart from this, the ratio shows a slight upward trend towards the last quarters, closing near 0.96 to 0.97. This consistency implies effective management of interest expenses relative to earnings, with no major financing cost disruptions.

EBIT Margin

The EBIT margin has experienced a significant decline over the analyzed timeframe. Initially, the margin was robust, peaking at above 22% in late 2021. This metric then followed a downward trajectory, with a sharp reduction into early 2023, hitting negative levels in one quarter, which may reflect operational challenges or increased costs pressures during that period. From early 2023 onwards, the EBIT margin gradually recovers, reaching above 10% by late 2025, indicating a phase of turnaround or operational improvements.

Net Profit Margin

The net profit margin aligns with the pattern observed in the EBIT margin. It starts strong in 2021 with values above 25%, then declines consistently through 2022 into early 2023, even turning slightly negative in one quarter. Subsequent quarters show recovery and gradual growth, exceeding 10% towards the end of the period. This trend suggests that profitability after all expenses suffered a significant downturn but has since improved, reflecting enhanced profitability and cost management in recent quarters.

In summary, the company faced a period of declining profitability and abnormal tax fluctuations around early to mid-2023, likely from operational or one-off factors. Both EBIT and net profit margins show signs of recovery in the later quarters, while interest burden remains stable aside from one exceptional low point. The tax burden exhibits volatility but trends downward post-outlier, indicating some improvement on this front. Overall, the financial data signals a recovery phase following a challenging interval.