Advanced Micro Devices Inc. (NASDAQ:AMD)

The analysis of the turnover and period ratios over several quarters reveals distinct trends and shifts in the company's operational efficiency and liquidity management.

Inventory Turnover

This ratio shows a peak around early 2022 at 4.35 before gradually declining to 2.16 by March 2025. This decreasing trend suggests a slowing in inventory movement, potentially indicating excess stock or reduced sales velocity.

Receivables Turnover

The receivables turnover ratio increased sharply from 4.73 to a high of 6.68 between March 2020 and December 2020, indicating improved collection efficiency. However, from December 2020 onwards, the ratio exhibits volatility and an overall downward trend, falling to 4.16 in March 2025, which may imply a lengthening collection period or credit policy changes.

Payables Turnover

The ratio oscillates significantly, declining from 9.92 in March 2020 to lower values near 4.4-4.5 during 2022 and then rising again to 6.28 by March 2025. This fluctuation suggests changing payment practices, with the company at times extending payables to manage cash flow and at others paying more promptly.

Working Capital Turnover

Starting at 2.62 in early 2020, there is an initial increase to 3.78 by March 2021 followed by a decline to 2.0 by March 2025. This indicates a decrease in efficiency of working capital usage over time, possibly related to increased investment in current assets or slower turnover of assets.

Average Inventory Processing Period

The period remained below 100 days until early 2022, but from then on there is a steady increase up to 169 days by March 2025. This lengthening period aligns with the declining inventory turnover ratio and further supports the notion of slower inventory movement.

Average Receivable Collection Period

After improving significantly from 77 days to 55 days in late 2020, this period increases again reaching a peak of 109 days in late 2023, before moderating slightly to 72 days by March 2025. The overall pattern suggests initial efficiency gains in receivables collection followed by some deterioration.

Operating Cycle

The operating cycle decreases from 171 days in early 2020 to 143-144 days by late 2020, then extends sharply to over 240 days by early 2025. This lengthening cycle is driven mostly by inventory and receivables periods, indicating slower conversion of inventory and receivables into cash.

Average Payables Payment Period

The payment period increases from 37 days in early 2020 to a high of 92 days in early 2023, then declines to 58 days by March 2025. This suggests the company initially extended payment terms to suppliers but then reversed this trend to reduce payment delays.

Cash Conversion Cycle

The cash conversion cycle improves significantly from 134 days early 2020 down to 84 days by March 2021, reflecting improved liquidity and operational efficiency. Subsequently, it lengthens progressively reaching 183 days by March 2025, indicating that the company’s cash is tied up longer in the operating cycle, which may impact cash flow negatively.

Overall, the data indicate that the company experienced efficiency improvements in inventory management, receivables collection, and cash conversion during the initial pandemic period through early 2021. Post this period, there is a general trend of declining operational efficiency, marked by slower inventory turnover, longer collection periods, and a longer cash conversion cycle. This extended cash cycle suggests increased capital tied in operations, which could pressure liquidity and operational flexibility unless addressed through strategic actions.

Cost of Sales

The cost of sales demonstrates a generally increasing trend from March 2020 through March 2025. Beginning at 968 million USD in March 2020, the figure increases steadily with some fluctuations. Notably, there is a significant rise between March 2021 (1858 million USD) and March 2022 (3069 million USD). After peaking at 3776 million USD in December 2024, the cost dips slightly to 3702 million USD in March 2025. This upward progression indicates growth in production or procurement costs over the period, possibly due to increased sales volumes or rising input prices.

Inventories

Inventories show a pronounced and consistent upward trajectory over the analyzed period. Starting at 1056 million USD in March 2020, inventory levels more than sextuple by March 2025, reaching 6416 million USD. The growth is continuous, with some acceleration observed from late 2021 onwards, accelerating further from 2022 through 2025. This increase may reflect elevated production capacity, stockpiling in anticipation of higher demand, or slower inventory turnover rates.

Inventory Turnover

Inventory turnover ratios are available from December 2020 onwards and reflect a declining pattern. Beginning at 3.87, the turnover ratio decreases gradually to 2.16 by March 2025. This decline indicates that the company is selling and replacing its inventory less frequently over time. This trend, coupled with the rising inventory balances, suggests increasing inventory holding periods, which may signal inefficiencies in inventory management or shifts in demand patterns.

Overall Trends and Insights

The concurrent increase in both cost of sales and inventories, alongside a declining inventory turnover ratio, implies that while the company is scaling operations or production levels, it is also accumulating inventory at a rate that outpaces its sales velocity. This could potentially introduce risks related to excess stock, higher holding costs, or obsolescence. Monitoring these trends is advisable to ensure inventory levels remain aligned with sales demand. Furthermore, the rising cost of sales warrants analysis of margin impacts and cost management strategies to sustain profitability amidst these operational developments.

The financial data reveals several notable patterns in the quarterly net revenue and accounts receivable metrics over the observed periods. Net revenue demonstrated a consistent upward trajectory from early 2020 through late 2021, increasing from 1,786 million USD in March 2020 to a peak of 6,819 million USD by September 2024. Despite some fluctuations in early 2023, the general trend reflects strong growth with occasional periods of moderation. The decline observed in March 2025 to 7,438 million USD appears to be slightly lower compared to the previous quarter, suggesting a potential plateau or adjustment phase.

Accounts receivable, net, similarly showed an overall increase, rising from 1,691 million USD in March 2020 to a peak of 7,241 million USD by September 2024. This increase aligns closely with the growth pattern in net revenue, indicating expanding sales on credit terms. However, there are fluctuations where receivable balances decline slightly, such as the period ending March 2025, suggesting active credit management or collection efforts amidst growing sales volume.

The receivables turnover ratio provides insight into the efficiency of accounts receivable collection relative to net sales. The ratio peaked at 6.68 during December 2020, indicating faster collection cycles at that time. Following this peak, the ratio generally declined, reaching lower points near 3.36 by September 2024. This trend suggests that despite increasing revenues and receivables, the company’s ability to convert receivables into cash quickly weakened somewhat over time. Some recovery in turnover is seen in the last quarter, rising to 5.1, which may indicate improvements in working capital management.

Overall Revenue and Receivables Trend

Strong growth in net revenue and accounts receivable, peaking in late 2024, reflects expanding business operations and credit sales.

Receivables Turnover Dynamics

Initial high efficiency in receivables collection moderates over time, with turnover declining from over 6.6 to near 3.36, before slight recovery in the last period.

Liquidity and Credit Management Insight

The decreasing receivables turnover ratio amid rising receivables suggests potentially slower cash conversion, warranting attention to collection policies despite revenue growth.

The financial data reveals several notable trends in cost of sales, accounts payable, and payables turnover over the periods analyzed.

Cost of Sales

The cost of sales generally demonstrates an upward trend from March 2020 to March 2025, with intermittent fluctuations. Starting at $968 million in March 2020, it increased substantially until reaching a peak in June 2022 at $3,522 million. Thereafter, the values show some volatility, with slight decreases and increases, ending at $3,702 million in March 2025. Despite periodic dips, the overall trajectory indicates growth in costs associated with the core business operations.

Accounts Payable

Accounts payable exhibit a consistent increase from March 2020 ($840 million) through December 2022 ($2,956 million), suggesting a rising level of short-term liabilities in relation to purchases or services acquired on credit. Following this peak, there is variability with declines in some quarters, such as March 2024 ($1,856 million) and June 2025 ($2,206 million), interspersed with increases. The fluctuations indicate shifts in vendor payment strategies or operational financing cycles.

Payables Turnover

The payables turnover ratio, which measures the frequency of paying off suppliers, shows a declining trend over the observed timeframe. Higher ratios at earlier dates (e.g., 9.92 in September 2020) drop to lows around 3.98 in December 2023, reflecting a slower rate of paying off accounts payable. Although some recovery in the ratio occurs in the last few quarters, reaching 6.28 in March 2025, it remains lower than the initial high points. This may suggest extended payment terms or cash management adjustments.

In summary, the cost of sales expanded significantly over the five-year span, mirroring possible growth in operations or input costs. Accounts payable rose in tandem until late 2022, after which the amount payable shows variability. The payables turnover ratio’s decline suggests a lengthening of payment cycles, potentially indicating changes in supplier relationships or working capital management.

Working Capital

The working capital exhibits a generally increasing trend over the observed periods. Starting at 2,405 million USD in March 2020, it shows steady growth, reaching 4,343 million USD by December 2021. There is a significant jump in March 2022 to 7,788 million USD, followed by relatively stable values around 7,700 to 8,600 million USD through the end of 2022. From early 2023 onwards, the working capital resumes marked growth, closing at 13,892 million USD in March 2025. This upward trajectory indicates strengthening short-term financial health and possibly increased liquidity or asset accumulation over time.

Net Revenue

Net revenue displays substantial growth from March 2020 through June 2022, rising from 1,786 million USD to a peak of 6,550 million USD. After June 2022, revenue drops sharply to 5,565 million USD in September 2022 and remains relatively flat through early 2023 in the 5,300 to 5,800 million USD range. A recovery phase appears from March 2023 to December 2024 where revenue climbs again, peaking at 7,658 million USD, before a slight decline to 7,438 million USD in March 2025. Overall, the data reveals strong expansion punctuated by a mid-term decline and subsequent recovery period.

Working Capital Turnover

The working capital turnover ratio is only partially reported but shows notable shifts. Early reported ratios between September 2020 and December 2021 increase from 2.62 to 3.78, suggesting improved efficiency in using working capital to generate revenue during that period. However, from March 2022 onwards, the ratio declines gradually from 2.42 to 2.00 by March 2025. This downward trend indicates a reduced ability to convert working capital into net revenue efficiently, possibly reflecting increased working capital relative to sales or operational changes influencing turnover.

Summary Insights

The company demonstrates strong growth in working capital and net revenue over the analyzed quarters, with peaks and troughs particularly evident in revenue. The significant increase in working capital beginning 2022, alongside a decreasing turnover ratio, may indicate more conservative asset management or an accumulation of current assets not immediately translating into sales. The recovery in net revenue after mid-2022 suggests a resilient demand or successful strategic adjustments. The declining turnover ratio warrants attention, as it could point to less efficient use of working capital despite overall growth in liquidity and sales.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a declining trend over the analyzed periods. Starting around 3.87 at the beginning of 2020, it gradually increased to a peak of 4.35 in early 2022, indicating more efficient inventory management during that time frame. However, following this peak, a consistent decrease is observed through to the first quarter of 2025, reaching a low of approximately 2.16. This decline suggests a reduction in the rate at which inventory is sold and replaced, potentially indicating slower sales or overstocking issues in recent quarters.

Average Inventory Processing Period

The average inventory processing period, measured in days, moves inversely to the inventory turnover. Initially, it remained relatively stable around the mid-90-day range in early periods, then decreased modestly to 84 days in early 2022, aligning with the peak inventory turnover ratio. From there, it lengthened steadily, reaching a high of 169 days by the first quarter of 2025. This increase directly correlates with the decreasing inventory turnover ratio, implying that inventory remains in stock longer before sale or usage, which could raise holding costs and affect operational efficiency.

Overall Observations

The data suggests that the company experienced improved inventory efficiency leading up to early 2022, possibly due to better demand forecasting or accelerated sales cycles. Since then, the trend has reversed, indicating challenges in inventory management or demand. The extended inventory processing period and reduced turnover ratio in recent quarters may warrant attention to inventory control policies or market demand conditions to mitigate potential impacts on liquidity and profitability.

Receivables Turnover Ratio Trends

The receivables turnover ratio initially exhibited a rising trend from 4.73 to a peak of 6.68 between March 2020 and December 2020, indicating improved efficiency in collecting receivables during this period. Following this peak, the ratio experienced a general decline with some fluctuations, falling to a low of 3.36 by September 2024 before recovering to 5.1 by March 2025. This pattern suggests a period of less efficient receivable management or slower collections during 2022 and 2023, with signs of improvement beginning again toward early 2025.

Average Receivable Collection Period Trends

The average receivable collection period showed an inverse pattern relative to the turnover ratio, decreasing from 77 days in March 2020 to 55 days in December 2020, reflecting faster collection cycles. Subsequently, there was a general increase in the collection period, peaking at 109 days by September 2024, which indicates that it took longer to collect receivables during this timeframe. A reduction to 72 days by March 2025 suggests an improvement in credit collection processes towards the most recent quarter.

Overall Insights

The data reveals a period of strengthening receivables management efficiency through 2020, followed by a progressive easing in collection effectiveness during 2022-2024, which could imply challenges such as increased credit risk or softer demand impacting collections. The recent partial recovery in turnover and reduction in days outstanding may signal strategic initiatives or market improvements enhancing receivables management going into 2025.

The data indicates notable fluctuations and trends in the average inventory processing period, average receivable collection period, and the overall operating cycle over the observed quarters.

Average Inventory Processing Period

The inventory processing period demonstrated a generally increasing trend over time. Starting from 94 days, it showed minor fluctuations initially but then progressed steadily upward, reaching 169 days by the last observed quarter. This extension suggests a lengthening duration for inventory turnover, which could imply slower inventory movement or buildup of stock over the periods analyzed.

Average Receivable Collection Period

The receivable collection period exhibited variability with an overall upward movement toward the later quarters. Initially decreasing from 77 to 55 days, it then fluctuated in subsequent quarters. Notably, the period peaked at 109 days in one of the later quarters before decreasing again toward 72 days at the end of the timeline. The general rise in collection period towards the end suggests a longer time to collect receivables, which might have implications for cash flow management.

Operating Cycle

The operating cycle, which combines inventory and receivables periods, aligns with the trends seen in its components. It started at 171 days, and although there was a minor decrease early on, the cycle progressively extended over time, reaching 241 days by the final quarter. This increase indicates that the overall time for converting resources into cash has lengthened, potentially affecting the company's liquidity and operational efficiency.

In summary, both inventory processing and receivable collection periods have generally lengthened, contributing to an extended operating cycle. The rising trends in these metrics may highlight challenges in inventory turnover and receivables management, which should be examined further to optimize working capital efficiency.

The payables turnover ratio demonstrates significant variability over the observed periods. Initially absent from the earliest quarters, the ratio begins at 9.92 and subsequently declines to 6.38, before experiencing fluctuations between approximately 3.98 and 8.31. Notably, there is a downward trend starting in late 2021, reaching lows around 3.98 to 4.5, followed by recovery phases nearing 6.54 and 6.28 toward the end of the data series. This pattern suggests variability in the frequency with which payables are being settled, potentially reflecting changes in payment policies or supplier terms.

Correspondingly, the average payables payment period, expressed in number of days, exhibits an inverse relationship with the turnover ratio. Beginning with 37 days, the payment period lengthens considerably to peaks above 80 days between late 2021 and early 2023. Periods of elevated payment days coincide with lower turnover ratios, indicating slower payment cycles. More recent periods show some improvement with reductions to the range of approximately 56 to 63 days, though occasional increases to above 80 days occur, illustrating ongoing fluctuations in payment management.

Overall, the data reflects inconsistent payables management over the reported timeframe, with alternating intervals of faster and slower payment cycles. The observed trends may affect supplier relations and cash flow, warranting further investigation into the underlying operational factors and strategic payment decisions influencing these dynamics.

Payables Turnover Ratio Trends

Starts high at 9.92; declines and fluctuates between around 4 and 8; lowest points occur in late 2021 to mid-2023; partial recovery toward 6 in later periods.

Average Payables Payment Period Trends

Begins with short periods (~37 days); lengthens significantly to peaks above 80 days during 2021-2023; recent quarters show reduction to mid-50s to low-60s days with intermittent increases.

Relationship Between Metrics

Inverse correlation observed: as payables turnover ratio decreases, payment period lengthens, reflecting slower payments.

Implications

The variability suggests changes in payment behavior, possibly impacting supplier relationships and cash management strategies, indicating areas for potential operational efficiency improvements.

The analysis of the given quarterly financial data reveals several notable trends in the working capital management metrics over the observed periods.

Average Inventory Processing Period

The inventory processing period shows an overall upward trend from 94 days in the earlier recorded quarters to 169 days in the most recent quarter. After initial fluctuations, the period increased markedly from around 101 days at the end of 2022 to a peak of 169 days by the end of March 2025, indicating a longer duration for inventory turnover and potentially slower movement of stock over time.

Average Receivable Collection Period

This metric initially declines from 77 days to a low of 55 days between June and December 2020, suggesting improved efficiency in collecting receivables during that time. However, from 2021 onwards, the collection period becomes more variable and generally increases, reaching 109 days in June 2024 before slightly decreasing again. This pattern points to growing challenges or strategic changes in managing receivables, with occasional recovery towards the latest period.

Average Payables Payment Period

The payables payment period demonstrates significant variability, rising sharply from 37 days in March 2020 to peaks near 92 days in December 2022, before declining to 56 days by December 2023. It then fluctuates again between 56 and 87 days through the subsequent quarters. These movements suggest a changing approach to settling payables, with intervals of extended payment terms potentially aimed at optimizing cash flow.

Cash Conversion Cycle

The cash conversion cycle shows a general upward trajectory from 134 days at the starting point to 183 days at the end of the observed timeline. This increment, especially pronounced after late 2021, reflects an elongation of the time required to convert investments in inventory and receivables into cash. The increase aligns with longer inventory processing and receivable collection periods, partially offset by varying payables payment timing. The trend indicates a lengthening operating cycle, which might have implications for liquidity management.

Overall, the data suggest that the company’s working capital cycle has been extending over time, influenced mainly by slower inventory turnover and receivables collection periods. This development may impact cash flow and require careful monitoring to maintain operational efficiency. Variability in payables management appears to be a tool used to partially balance this effect.