Advanced Micro Devices Inc. (NASDAQ:AMD)

An examination of short-term operating activity ratios reveals several noteworthy trends over the observed period. Generally, a decline in efficiency metrics is apparent, particularly in the more recent quarters. Inventory management appears to be slowing, while the collection of receivables is becoming more protracted. Payables management demonstrates some fluctuation, and overall, the company’s working capital turnover is decreasing.

Inventory Turnover

Inventory turnover consistently decreased from 4.00 in March 2022 to 2.21 in December 2025. This indicates a lengthening of the time inventory is held, potentially due to slowing sales, overstocking, or obsolescence. The rate of decline accelerated in the latter half of the period.

Receivables Turnover

Receivables turnover exhibited a decline from 5.13 in March 2022 to 5.49 in December 2025, with a more pronounced decrease observed between September 2023 and March 2025. This suggests a lengthening of the average collection period and potentially more lenient credit terms or difficulties in collecting payments.

Payables Turnover

Payables turnover showed more variability. It decreased from 5.78 in March 2022 to 4.40 in December 2022, then increased to 6.54 in March 2024 before declining again to 5.97 in December 2025. This suggests fluctuating negotiation power with suppliers or changes in payment strategies.

Working Capital Turnover

Working capital turnover decreased steadily from 2.42 in March 2022 to 1.98 in December 2025. This indicates a decreasing efficiency in utilizing working capital to generate sales, potentially linked to the slower inventory and receivables turnover.

Average Inventory Processing Period

The average inventory processing period increased consistently from 91 days in March 2022 to 165 days in December 2025. This corroborates the declining inventory turnover and suggests a significant slowdown in the speed at which inventory is sold.

Average Receivable Collection Period

The average receivable collection period increased from 71 days in March 2022 to 67 days in December 2025, with a peak of 109 days in June 2024. This indicates a lengthening of the time it takes to collect payments from customers, potentially impacting cash flow.

Operating and Cash Conversion Cycles

Both the operating cycle and the cash conversion cycle exhibited increasing trends. The operating cycle rose from 162 days in March 2022 to 232 days in December 2025. The cash conversion cycle increased from 99 days to 171 days over the same period. These increases suggest a longer time frame between investing in inventory and receiving cash from sales.

Average Payables Payment Period

The average payables payment period fluctuated, increasing from 63 days in March 2022 to 92 days in July 2023, then decreasing to 61 days in December 2025. This variability suggests changes in supplier relationships or payment terms.

In summary, the observed trends suggest a deterioration in short-term operating efficiency. The lengthening inventory processing and receivable collection periods, coupled with the decreasing working capital turnover, warrant further investigation to identify the underlying causes and implement corrective measures.

The inventory turnover ratio demonstrates a consistent downward trend over the observed period, spanning from March 2022 to December 2025. Initially, the ratio fluctuated within a relatively narrow range before exhibiting a more pronounced decline in later periods. This suggests a lengthening of the sales cycle or an increase in the amount of inventory held relative to cost of sales.

Initial Period (Mar 26, 2022 – Jun 25, 2022)

The inventory turnover ratio began at 4.00 and increased slightly to 4.24. This indicates a reasonably efficient conversion of inventory into sales during this timeframe. Cost of sales increased from US$3,069 million to US$3,522 million, while inventories rose from US$2,431 million to US$2,648 million, suggesting sales growth was accompanied by a proportionate increase in inventory levels.

Declining Trend (Sep 24, 2022 – Dec 30, 2023)

From September 2022 through December 2023, the ratio experienced a steady decline from 3.62 to 2.44. Cost of sales remained relatively stable, fluctuating between US$3,196 million and US$3,257 million, while inventories increased significantly from US$3,771 million to US$4,991 million. This indicates that inventory levels were growing at a faster rate than sales, leading to a reduced turnover rate.

Continued Decline & Stabilization (Mar 30, 2024 – Dec 27, 2025)

The downward trend continued into the following periods, reaching a low of 2.16 in March 2025. Although cost of sales increased substantially, reaching US$4,693 million by December 2025, inventories increased at an even faster pace, rising from US$4,652 million to US$7,920 million. The ratio stabilized somewhat in the final two periods, at 2.27 and 2.21, suggesting the rate of inventory accumulation may be slowing, but remains significantly lower than the initial values observed.

Overall, the observed pattern suggests a potential issue with inventory management. The increasing inventory levels relative to cost of sales could indicate overstocking, obsolescence, or a slowdown in demand. Further investigation into the composition of inventory and the factors driving sales would be necessary to determine the underlying causes of this trend.

The receivables turnover ratio exhibits fluctuations over the observed period, generally indicating a decreasing trend in the efficiency of collecting receivables, though with some periods of improvement. Initial values demonstrate a relatively stable turnover, followed by a period of decline and subsequent partial recovery.

Initial Period (Mar 26, 2022 – Dec 31, 2022)

The receivables turnover ratio begins at 5.13 and shows a slight increase to 5.72. This suggests a consistent, though not dramatically improving, ability to convert receivables into cash during this timeframe. The ratio remains above 5.00, indicating a reasonably efficient collection process.

Decline and Stabilization (Apr 1, 2023 – Dec 30, 2023)

A noticeable decline is observed, with the ratio decreasing from 5.71 to 4.05. This suggests a lengthening of the collection period or a potential increase in the proportion of credit sales to slower-paying customers. The ratio stabilizes around the 4.00-4.22 range in the latter part of this period.

Recovery and Subsequent Fluctuations (Mar 30, 2024 – Dec 27, 2025)

The ratio experiences a recovery, rising to 5.10 by March 2024, then peaking at 5.79 in June 2024. However, this is followed by a decline to 5.16 and 5.49 in subsequent quarters. The final reported value, 5.49, indicates a return to levels comparable to those observed in the initial period, but with continued variability. The most recent values suggest a potential stabilization, but further monitoring is warranted.

Overall, while the receivables turnover ratio demonstrates some cyclicality, a general downward trend is apparent when comparing the beginning and end of the analyzed period. This could be indicative of evolving credit policies, changes in customer payment behavior, or shifts in the sales mix. The fluctuations observed require further investigation to determine the underlying causes and potential implications for cash flow management.

The accounts payable turnover ratio exhibits fluctuations over the observed period, generally indicating changes in the efficiency with which the company manages its short-term liabilities relative to its cost of sales. An initial period of relative stability is followed by a period of increased volatility, then a return to more moderate fluctuations.

Initial Stability & Decline (Mar 26, 2022 – Dec 31, 2022)

The payables turnover ratio begins at 5.78 and increases slightly to 5.97 before declining to 4.46 and remaining relatively stable at 4.40. This suggests a potential lengthening of the time taken to pay suppliers during this period, possibly due to increased negotiating power or a strategic decision to extend payment terms. The cost of sales increased during this period, while accounts payable increased at a faster rate.

Moderate Fluctuations (Apr 1, 2023 – Dec 30, 2023)

The ratio experiences a modest increase to 4.50, followed by a decrease to 3.98, then rises again to 4.73 and 5.05. This indicates some variability in payment practices, potentially influenced by seasonal factors or changes in supplier relationships. Cost of sales and accounts payable both increased during this period, but at different rates.

Peak & Subsequent Decline (Mar 30, 2024 – Jun 28, 2025)

A significant increase is observed, with the ratio reaching a peak of 6.54, followed by a decline to 5.75, 4.19, 5.30, 6.28, 5.03, 4.76, and finally 5.97. This suggests a period of accelerated payments to suppliers, followed by a return towards more typical levels. The largest increase in cost of sales occurs during this period, with accounts payable also increasing substantially.

Overall, the payables turnover ratio demonstrates a dynamic relationship with both cost of sales and accounts payable. While there are periods of relative stability, the ratio is subject to fluctuations, indicating potential shifts in the company’s payment strategies or changes in the timing of supplier invoices. The recent trend suggests a return to levels observed earlier in the period, after a period of increased turnover.

The working capital turnover ratio exhibits a generally declining trend over the observed period, though with some fluctuation. Initially, the ratio increased from March 2022 to September 2022, before entering a period of more consistent decline through December 2025.

Initial Trend (Mar 26, 2022 – Sep 24, 2022)

The working capital turnover ratio increased from 2.42 in March 2022 to 2.95 in September 2022. This suggests an improved efficiency in utilizing working capital to generate revenue during this period. The increase indicates that the company was becoming more effective at managing its short-term assets and liabilities in relation to its sales.

Subsequent Decline (Dec 31, 2022 – Dec 27, 2025)

Following the peak in September 2022, the ratio generally decreased, falling to 1.98 by December 2025. This decline suggests a decreasing efficiency in working capital utilization. While there are minor increases within this timeframe (e.g., September 2024), the overall trajectory is downward. This could indicate that the company is holding onto more working capital relative to its revenue, potentially due to slower sales growth, increased inventory levels, or changes in payment terms with suppliers or customers.

Recent Fluctuations (Mar 30, 2024 – Dec 27, 2025)

The period from March 2024 to December 2025 shows some volatility. The ratio moved from 2.07 to 2.16, then to 2.19, before declining to 1.98. These fluctuations suggest that short-term operational efficiencies were not consistently maintained. The final value of 1.98 represents the lowest point in the observed period.

Working Capital and Net Revenue Relationship

While working capital generally increased throughout the period, net revenue experienced more variability. The initial increase in the turnover ratio coincided with a period of revenue growth. However, as revenue growth slowed and then declined in some quarters, the turnover ratio followed suit, indicating a strong relationship between revenue generation and efficient working capital management.

In summary, the observed trend suggests a diminishing ability to efficiently convert working capital into sales revenue. Further investigation into the underlying drivers of this decline, such as changes in sales cycles, inventory management practices, or credit policies, would be beneficial.

The average inventory processing period has exhibited a consistent upward trend over the observed timeframe. Initially, the period stood at 91 days in March 2022, and has progressively increased to 165 days by December 2025. This indicates a lengthening in the time it takes to convert inventory into sales.

Overall Trend

A clear and sustained increase in the average inventory processing period is evident. The period increased by approximately 82% from March 2022 to December 2025, suggesting a growing inefficiency in inventory management or a shift in inventory composition towards slower-moving items.

Phases of Change

The increase wasn't linear. From March 2022 to June 2022, the period decreased from 91 to 86 days. However, this was followed by a period of increase, reaching 106 days by December 2022. The most significant acceleration in the upward trend occurred between April 2023 and December 2025, with the period rising from 120 days to 165 days.

Recent Performance

The most recent quarters show continued increases, though at a slightly moderated pace. The period moved from 157 days in March 2025 to 161 days in September 2025, and then to 165 days in December 2025. This suggests the lengthening trend is continuing, but potentially stabilizing at a higher level.

Correlation with Inventory Turnover

The observed trend in the average inventory processing period is inversely correlated with the inventory turnover ratio. As the inventory turnover ratio decreased from 4.00 in March 2022 to 2.21 in December 2025, the average inventory processing period increased. This confirms that a lower turnover rate directly contributes to a longer processing period.

The consistent increase in the average inventory processing period warrants further investigation to determine the underlying causes. Potential factors could include changes in product mix, supply chain disruptions, increased holding costs, or a decline in sales velocity. Addressing these factors could improve inventory efficiency and reduce associated costs.

The average receivable collection period exhibited fluctuations over the observed timeframe. Initially, the period demonstrated a slight decrease, followed by a period of relative stability, and then a notable increase before stabilizing and showing a slight decline towards the end of the period.

Initial Trend (Mar 26, 2022 – Dec 31, 2022)

The average receivable collection period began at 71 days and decreased to 64 days over the first three quarters. This suggests an improvement in the efficiency of collecting receivables during this period. The decrease, while present, was relatively modest.

Increase and Peak (Apr 1, 2023 – Dec 30, 2023)

From 72 days in the first quarter of 2023, the average collection period increased significantly, peaking at 90 days in the second quarter of 2024. This indicates a lengthening of the time required to collect receivables, potentially due to changes in credit terms, customer payment behavior, or collection efforts. The period remained elevated at 88 days in the subsequent quarter.

Stabilization and Decline (Mar 30, 2024 – Dec 27, 2025)

Following the peak, the average collection period began to decrease, falling to 67 days by the end of 2025. This suggests a return to more efficient collection practices or a normalization of customer payment patterns. The decline was not linear, with some fluctuations observed, but the overall trend is downward.

Overall Volatility

The average receivable collection period demonstrated a range of 36 days, from a low of 63 days to a high of 99 days. This indicates a moderate level of volatility in the company’s ability to collect its receivables. The fluctuations warrant further investigation to identify the underlying causes and potential mitigation strategies.

The observed changes in the average receivable collection period could have implications for the company’s cash flow and working capital management. A longer collection period ties up cash and increases the risk of bad debts, while a shorter period improves liquidity. Monitoring this metric and understanding the factors driving its fluctuations are crucial for maintaining financial health.

The operating cycle has demonstrated a generally increasing trend over the analyzed period, spanning from March 2022 to June 2025. Both components of the operating cycle – average inventory processing period and average receivable collection period – have contributed to this lengthening cycle. A more detailed examination of each component follows.

Average Inventory Processing Period

The average inventory processing period exhibited an upward trajectory throughout the observation window. Starting at 91 days in March 2022, it generally increased, reaching 165 days by December 2025. While fluctuations occurred, such as a slight decrease from 169 to 157 days between March and June 2025, the overall trend is clearly one of increasing time required to process inventory. The most significant increases occurred between April 2023 and March 2024, and again between September 2024 and December 2025.

Average Receivable Collection Period

The average receivable collection period also showed an increasing trend, though with more variability than the inventory processing period. Beginning at 71 days in March 2022, it rose to 67 days by December 2025. Notable increases were observed between June and September 2023, and again between March and June 2024. A decrease was noted between March and June 2025, falling from 72 to 63 days, but this did not reverse the overall upward trend. The period peaked at 109 days in June 2024.

Operating Cycle

The combined effect of the increasing inventory processing period and receivable collection period resulted in a lengthening operating cycle. The cycle began at 162 days in March 2022 and increased to 232 days by December 2025. The most substantial increase occurred between April 2023 and July 2023, rising from 184 to 207 days. The operating cycle reached its highest point at 265 days in June 2024, before decreasing slightly to 232 days by December 2025. The overall trend indicates a growing time span between the initial investment in inventory and the ultimate receipt of cash from sales.

In summary, the analyzed period reveals a consistent lengthening of the operating cycle, driven by increases in both the time to process inventory and the time to collect receivables. These trends suggest a potential need for review of inventory management practices and credit/collection policies.

The average payables payment period exhibited fluctuations over the observed timeframe. Initially, the period demonstrated a slight decrease, followed by a period of increase, and then a return to more moderate levels, concluding with a degree of variability.

Initial Trend (Mar 26, 2022 – Sep 24, 2022)

The average payables payment period began at 63 days and decreased to 61 days before increasing to 82 days. This suggests an initial efficiency in managing payments to suppliers, followed by a lengthening of the payment cycle. The increase to 82 days represents the highest value observed in the first half of the period.

Subsequent Fluctuations (Dec 31, 2022 – Dec 30, 2023)

Following the peak of 83 days, the period decreased to 72 days, indicating a potential return to more timely payments. However, this was followed by an increase to 87 days, suggesting renewed challenges in maintaining consistent payment practices. The period then decreased to 69 days.

Recent Performance (Mar 30, 2024 – Dec 27, 2025)

From March 30, 2024, the average payables payment period decreased to 58 days, representing the lowest value in the observed period. It then fluctuated between 73 and 77 days before concluding at 61 days. This recent period demonstrates a degree of instability, with the period oscillating around the 70-day mark.

Overall Observations

The average payables payment period has not demonstrated a consistent trend. While there have been periods of improvement, indicated by decreases in the number of days, these have been interspersed with periods of lengthening payment cycles. The period has generally remained within a range of 60 to 92 days, with the most recent values suggesting a return towards the lower end of that range.

The short-term operating activity, as measured by the cash conversion cycle and its components, exhibits notable fluctuations over the observed period. An overall lengthening of the cash conversion cycle is apparent, particularly in the latter half of the analyzed timeframe. This suggests a growing time between initial investment in inventory and the ultimate receipt of cash from sales.

Average Inventory Processing Period

The average inventory processing period demonstrates a consistent upward trend. Starting at 91 days in March 2022, it steadily increases, reaching 169 days in March 2025. This indicates that the company is taking progressively longer to convert raw materials into finished goods and ultimately sell them. The increase suggests potential inefficiencies in inventory management, slower sales, or a build-up of inventory in anticipation of future demand. A slight dip is observed in June 2025, but the period remains elevated compared to earlier periods.

Average Receivable Collection Period

The average receivable collection period shows more variability. It initially declines from 71 days to 64 days between March 2022 and December 2022, suggesting improved efficiency in collecting payments. However, it then rises significantly, peaking at 109 days in September 2024. This increase implies a slowdown in collecting receivables, potentially due to extended credit terms offered to customers, difficulties in customer payments, or a shift in the customer base. A subsequent decrease is noted, but the period remains higher than the initial values. The period concludes at 67 days in December 2025.

Average Payables Payment Period

The average payables payment period fluctuates throughout the period. It initially remains relatively stable, around 61-83 days, before decreasing to 56 days in March 2025. This suggests the company is, at times, taking advantage of extended payment terms from suppliers, and then subsequently shortening the payment period. The period concludes at 61 days in December 2025, returning to levels seen earlier in the observation window.

Cash Conversion Cycle

The cash conversion cycle generally trends upward, mirroring the increases in the inventory processing and receivable collection periods. It rises from 99 days in March 2022 to a peak of 183 days in March 2025. While a decrease is observed in June 2025 (147 days) and September 2025 (155 days), the cycle remains substantially longer than at the beginning of the period, concluding at 171 days in December 2025. This lengthening cycle indicates that the company is tying up more capital in its operating cycle, potentially impacting liquidity and requiring more financing to support its operations.

In summary, the observed trends suggest a deterioration in the efficiency of the company’s operating cycle. The increasing inventory processing and receivable collection periods are primary drivers of the lengthening cash conversion cycle. While the payables payment period offers some offset, it is insufficient to counteract the overall trend. Continued monitoring of these ratios is recommended to assess the sustainability of these trends and their potential impact on financial performance.