Advanced Micro Devices Inc. (NASDAQ:AMD)

The analysis of the company's quarterly financial data reveals several notable trends in operational efficiency and liquidity management over the observed periods.

Inventory Turnover

The inventory turnover ratio initially increased from 3.87 to a peak of 4.35, indicating improved efficiency in inventory management. However, from early 2022 onwards, a consistent decline is observed, dropping to approximately 2.16 by the end of the latest period, suggesting a slower rate of inventory movement and potential overstocking or reduced sales velocity.

Receivables Turnover

Receivables turnover showed an upward trend through 2020 and 2021, reaching 6.68 at the end of 2020, indicating faster collection of credit sales. Post-2021, the ratio generally declined, with minor fluctuations, hitting a low of 3.36 at one point before recovering somewhat to 5.79 in the most recent period. This trend suggests occasional delays in collecting receivables and potential tightening of credit policies recently.

Payables Turnover

Payables turnover showed significant volatility, with a high of 9.92 early on, followed by a sharp decrease and subsequent fluctuations between approximately 3.98 and 8.31. The general trend indicates increasingly longer payment periods to suppliers over time, evidenced by the drop in turnover, which can reflect strategic cash management or strained supplier relations.

Working Capital Turnover

This ratio remained relatively stable in the early periods but peaked around 3.78 before declining steadily to around 2.0 in the most recent quarters. The decrease suggests that the company is generating less revenue per unit of working capital employed, potentially indicating less efficient utilization of current assets and liabilities.

Average Inventory Processing Period

The days inventory outstanding increased from approximately 84 days to a maximum near 169 days, corroborating the declining inventory turnover ratio. This rise indicates that inventory is being held longer before sale, which could impact cash flow and increase holding costs.

Average Receivable Collection Period

After improving to as low as 55 days, the average receivables period lengthened substantially to nearly 109 days before improving again to about 63 days in the latest quarter. The fluctuations suggest varying efficiency in collections, with recent improvements possibly reflecting enhanced credit control or collection efforts.

Operating Cycle

The operating cycle lengthened consistently from approximately 143 days to a peak around 265 days, indicating that the total time to convert inventory and receivables into cash has increased. This extended cycle may signal deteriorating working capital efficiency and potential liquidity challenges.

Average Payables Payment Period

The average payment period exhibited considerable expansion from 37 days early on to peaks exceeding 90 days, with some subsequent reductions. Longer payment periods can be a strategy to preserve cash but may affect supplier relationships if extended beyond typical industry norms.

Cash Conversion Cycle

The cash conversion cycle showed initial improvement from 134 days down to 84 days, but subsequently lengthened significantly to highs around 179 days before a recent reduction to 147 days. This pattern reflects varying effectiveness in managing the timing between disbursing cash for inventory and collecting cash from customers, which directly impacts liquidity.

Overall, the data indicates a trend toward longer operating and cash conversion cycles, reduced inventory and working capital turnover, and fluctuating receivables and payables management. These patterns suggest challenges in maintaining operational efficiency and cash flow conversion, with some recent signs of improvement in collection periods and cash cycle management. Continued focus on refining working capital strategies may be beneficial to enhance financial performance and liquidity position.

The cost of sales exhibits a generally increasing trend over the periods analyzed. Starting from $968 million in March 2020, it rises steadily with occasional fluctuations, reaching a notable peak of $4626 million by June 2025. Despite some decreases, such as from $3522 million in June 2022 to $3211 million in September 2022, the overall trajectory indicates sustained growth in costs associated with sales.

Inventories also demonstrate a consistent upward trend throughout the observed periods. Beginning at $1056 million in March 2020, inventory values increase steadily, with a few periods of slower growth, ultimately reaching $6677 million in June 2025. This continuous accumulation of inventories suggests a scale-up in stock levels, possibly in anticipation of higher demand or longer supply chains.

The inventory turnover ratio data, available from December 2020 onward, reveals a declining pattern. Initially recorded at 3.87, the ratio peaks slightly above 4 in some quarters, such as September 2021 (4.1) and December 2021 (4.15), indicating a relatively efficient conversion of inventory into sales during that interval. However, from 2022 forward, the turnover gradually decreases, descending from 3.62 in December 2021 to around 2.16 by March 2025. This declining ratio suggests a slowing in the rate at which inventory is sold and replenished, which could imply rising inventory levels relative to sales or potential challenges in inventory management efficiency over time.

In summary, while cost of sales and inventories both increase steadily, the efficiency measure represented by the inventory turnover ratio diminishes. The combined trends may point to increased production and inventory holding but with a reduced velocity of inventory utilization, which could affect working capital dynamics and operational efficiency if the trend persists.

Cost of Sales

Steady increase from $968 million to a peak of $4626 million over the analyzed periods, with minor fluctuations.

Inventories

Continuous growth from $1056 million to $6677 million, indicating an ongoing buildup of stock levels.

Inventory Turnover Ratio

Declining trend from 3.87 to approximately 2.16, marking decreased efficiency in inventory usage relative to sales.

Net Revenue

Net revenue demonstrated a generally upward trend throughout the observed periods, increasing from $1,786 million in March 2020 to a peak of $7,658 million in December 2024. There were notable rises especially in late 2021 through early 2022, reaching $6,550 million in June 2022. Some fluctuations were observed in late 2022 and early 2023, with revenues slightly decreasing to $5,353 million in April 2023. Subsequent quarters showed a recovery and continued growth trend, hitting another peak in December 2024.

Accounts Receivable, Net

Accounts receivable increased persistently from $1,691 million in March 2020 to a high of $7,241 million in September 2024. This increase generally parallels the rise in net revenue, indicating an expanding business volume. However, in certain quarters such as late 2024 and into 2025, accounts receivable decreased from their peak, aligning with a slight dip in net revenue, possibly reflecting improved collections or changes in sales terms.

Receivables Turnover Ratio

The receivables turnover ratio exhibited fluctuations across the reported quarters, initially ranging around 4.73 to 6.68 between late 2020 and late 2021. The ratio experienced a declining trend starting in mid-2022, reaching the lowest point of 3.36 in September 2024. This decline suggests a slower collection process relative to revenue, despite the growth in accounts receivable. Toward the end of the dataset, the ratio rebounded to 5.79 by June 2025, indicating improved efficiency in receivables management.

Overall Analysis

The upward trajectory in net revenue signals robust business growth during the period analyzed. The concurrent rise in accounts receivable reflects the scaling in sales volume but also indicates increased capital tied up in credit sales. The decline in receivables turnover ratio mid-period highlights a potential challenge in maintaining efficient collections, possibly impacting liquidity. The subsequent recovery in turnover ratio suggests that measures may have been taken to enhance credit management or collections policies, improving the cash conversion cycle in recent quarters.

The cost of sales has exhibited a generally increasing trend over the reported periods, starting at $968 million in March 2020 and reaching $4,626 million by June 2025. There are fluctuations within this upward trajectory; notable peaks occur around June 2022 and December 2024, while some quarters, such as December 2022 and April 2023, show a slight decrease compared to immediately preceding periods.

Accounts payable have similarly increased from $840 million in March 2020 to $3,080 million in June 2025. However, the pattern reveals some volatility, with occasional declines, such as between July 2023 and December 2023, and in the first quarter of 2025. The increase in accounts payable generally follows the rise in the cost of sales but with varying intensity, indicating changes in payment terms or supplier credit management.

The payables turnover ratio demonstrates fluctuations without a clear linear trend. The ratio started at 9.92 in September 2020, decreased to a low of around 3.98 in April 2023, and experienced several increases and decreases thereafter, ending at 5.03 in June 2025. This indicates variability in how quickly liabilities are being settled relative to cost of sales, with periods of faster and slower turnover that could reflect operational adjustments or changes in supplier payment negotiations.

Cost of Sales

Exhibits a strong upward trend over the five-year period, indicating increasing production or procurement expenses, consistent with business growth or inflationary pressures.

Accounts Payable

Also trending upward but with more volatility, suggesting fluctuating supplier credit terms or changes in working capital management aligned with cost increases.

Payables Turnover Ratio

Shows irregular fluctuations, reflecting inconsistent payment pacing to suppliers relative to costs incurred, which may result from strategic changes or external business environment factors.

The financial data reveals distinct trends in working capital, net revenue, and working capital turnover over the given periods.

Working Capital

The working capital demonstrates a generally consistent upward trajectory. Starting from $2,405 million in March 2020, it increases steadily with minor fluctuations until a peak of $14,676 million in June 2025. Notable increments occur around early 2022 and remain relatively high with stable growth thereafter, indicating strengthening liquidity and potentially increased operational flexibility or asset base expansion.

Net Revenue

Net revenue exhibits a pattern of growth mixed with some volatility. From $1,786 million in March 2020, revenue grows substantially to $7,685 million by June 2025, showing overall positive momentum. Key growth phases include early 2021 and mid-2024, although some quarters reflect dips or slower growth, such as in late 2022 and early 2024. Despite occasional dips, the long-term trend suggests improving sales performance or higher demand.

Working Capital Turnover

The working capital turnover ratio, representing the efficiency of using working capital to generate revenue, shows a variable pattern. Initial data points are missing; from the values available starting in September 2020, the ratio fluctuates between approximately 2.0 and 3.78. The highest ratio around December 2021 (3.78) indicates the company utilized its working capital most efficiently during that period. Subsequently, the ratio trends downward, settling around 2.0 towards mid-2025. This decline suggests slowing efficiency in working capital usage or an increasing amount of working capital relative to revenue generation in recent periods.

In general, the company shows growth in working capital and net revenue over the periods, while working capital turnover demonstrates some inefficiency emerging in later years. The increase in working capital without a corresponding rise in turnover implies the company might be investing more in assets or holding higher levels of current assets relative to sales expansion.

Inventory Turnover

The inventory turnover ratio shows a clear declining trend from the initial available data point of 3.87 in March 2021 to 2.32 by June 2025. After fluctuating slightly around the range of 3.05 to 4.35 during 2021 and early 2022, the ratio began a more consistent decrease starting mid-2022, indicating that inventory is being sold and replenished less frequently over time.

Average Inventory Processing Period

The average inventory processing period, which measures the number of days inventory remains before being sold, exhibits a steadily increasing trend over the observed periods. Beginning at 94 days in March 2021, it initially decreased somewhat through late 2021 but then reversed to a continuous rise from approximately March 2022 onward. By June 2025, the period had extended to 157 days, indicating inventory is staying longer in stock before sale.

Trend Analysis and Insights

The inverse relationship between inventory turnover and the average processing period is consistent throughout the data, as expected. The decreasing turnover ratio alongside the increasing days inventory is held suggests a slow-down in inventory movement. This shift could reflect changes in demand patterns, supply chain challenges, or management decisions to hold more stock.

The elongation of the inventory processing period beyond 150 days in 2024 and 2025 points to a potentially growing inventory backlog or a strategic accumulation of stock that may affect liquidity and operational efficiency. The decline in turnover ratio to approximately two times per year in the later periods further underscores this trend.

Overall, the available data indicates a gradual but notable decrease in inventory efficiency over the time frame, warranting further investigation into the underlying causes and potential impacts on working capital management.

The receivables turnover ratio demonstrates notable fluctuations over the observed periods, beginning at 4.73 and generally increasing to a peak of 6.68 by December 2020. This indicates an improvement in the efficiency of collecting receivables during that timeframe. Following this peak, the ratio declines steadily, reaching a low of 3.36 by September 2024, which suggests a reduced efficiency in receivables collection. However, the ratio recovers towards the end of the period, rising back to 5.79 by June 2025.

The average receivable collection period, expressed in days, inversely mirrors the turnover ratio as it represents the duration taken to collect receivables. It decreases from 77 days to a minimum of 55 days by September and December 2020, indicating faster collection. Subsequently, this metric lengthens significantly, reaching as high as 109 days in September 2024, reflecting slower collections. By June 2025, the collection period shortens again to 63 days, aligning with the trend in the turnover ratio.

Receivables Turnover Ratio

Shows an initial improvement in receivables management, peaking in late 2020, followed by a declining trend indicating possible challenges in collection efficiency through 2024, with a recovery beginning in early 2025.

Average Receivable Collection Period

Decreases initially, corresponding with an improvement in turnover ratio, then increases substantially during 2022 to 2024, suggesting slower cash inflows from receivables, before improving again by mid-2025.

The inverse relationship between these two metrics is consistent and highlights varying efficiency in collections over time. The periods of improved turnover and shorter collection days imply stronger liquidity positions, whereas the periods of decline may warrant closer analysis to identify underlying causes such as changes in credit policies or customer payment behaviors.

The financial data reveal notable trends in the company's working capital management over the observed periods, specifically in terms of inventory processing, receivable collection, and overall operating cycle durations.

Average Inventory Processing Period

This metric shows a generally increasing trend over the quarters presented. After a starting absence of data, the days decreased slightly from 96 to 84 during the mid-2020 to early 2022 period, suggesting some efficiency in inventory management initially. However, from early 2022 onwards, the average inventory processing days elongated significantly, climbing from 91 days to a peak of 169 days in mid-2025 before slightly receding to 157 days. This increase indicates a growing length of time that inventory remains in stock, which could imply slower inventory turnover or potential challenges in sales or production efficiency.

Average Receivable Collection Period

The average receivable collection period exhibits some volatility but remains generally elevated with an initial reduction from 77 days down to 55 days around late 2020, suggesting improved efficiency in collecting receivables during that timeframe. Subsequently, the figures fluctuated, rising to as high as 109 days in late 2024. The increases after mid-2022 point to potentially extended credit terms offered to customers or delays in customer payments, which could impact cash inflows negatively.

Operating Cycle

The operating cycle, combining inventory processing and receivable collection periods, starts relatively stable around 171 days in early 2020, decreases to a low of 143 days by late 2020, then progressively lengthens to a high of 265 days by late 2024. These prolonged cycles in the later periods suggest increased working capital requirements, leading to extended times to convert inventory and receivables into cash. The gradual lengthening operating cycle may reflect operational or market pressures, possibly indicating reduced efficiency or changing business conditions affecting the cash conversion process.

The analysis of the payables turnover ratio and average payables payment period over the reported quarters reveals discernible fluctuations and trends in the company’s payment behavior towards its suppliers.

Payables Turnover Ratio

The payables turnover ratio exhibited a declining trend starting from the earliest available data point at 9.92, dropping sharply to 6.38 and fluctuating thereafter within a range from approximately 3.98 to 8.31. The ratio mostly remained below 7.5 after the initial high value, with some recovery peaks noted around 6.54 and 6.28 in more recent quarters. This suggests a general lengthening in the duration the company takes to pay its creditors, reflecting potential changes in cash management strategies or supplier payment terms.

Average Payables Payment Period

The average payables payment period shows an inverse relationship to the payables turnover ratio, as expected. Starting from a relatively low figure of 37 days, it escalated significantly to a peak region around 92 days in the quarters ending in early 2023. Subsequently, the period fluctuated, with some decline to about 56 days but again increasing to levels near or above 70 days towards the latest quarters. These variations indicate an inconsistent but overall trend towards extending payment timeframes, possibly signaling strategic use of payables to manage short-term liquidity or responses to supplier negotiation dynamics.

Overall Insight

The data reflects a shift over time towards slower payments to suppliers, which impacts both the turnover ratio and average payment period in a consistent manner. Such patterns could imply deliberate working capital management adjustments amidst changing business conditions. The volatility seen in more recent quarters may point to adjustments in operational or financial policies, or could be influenced by external economic factors affecting payment cycles.

The data reveals distinct trends in the working capital management metrics over the observed periods. The average inventory processing period demonstrates a gradual increase beginning from 94 days in early 2020, peaking at 169 days around late 2024, followed by a slight reduction to 157 days in mid-2025, indicating a lengthening of inventory turnover duration over time with some recent improvement.

In terms of the average receivable collection period, values initially decline from 77 days to around 55 days by late 2020, suggesting improved efficiency in collecting receivables. However, subsequent periods show fluctuations with increases reaching up to 109 days in late 2024 before falling again to 63 days by mid-2025. This pattern indicates variability in collection performance with periods of elongation followed by recovery.

The average payables payment period exhibits a rising trend beginning at 37 days in early 2020, increasing to a peak of 92 days around late 2022, followed by volatility and a general declining trend to 58 days by mid-2025. This suggests initial lengthening in payment durations to suppliers, potentially as a liquidity management strategy, with later normalization toward shorter payment cycles.

The cash conversion cycle, representing the net time between cash outflows and inflows, decreases from 134 days to 84 days between early 2020 and early 2022, reflecting enhanced operational efficiency. Nevertheless, it reverses course afterward, climbing steadily to 183 days by late 2024, before dropping to 147 days in mid-2025. This indicates a recent extension in the overall cash flow cycle, potentially driven by the elongation in inventory processing and receivables collection, despite some shifts in payables.