AMD is riding high under the leadership of its CEO Lisa Su, with increasing traction for its 7nm chipsets and product families. The latest addition in this family is its EPYC Rome processor for servers which will be officially launching on Aug 07, 2019. Although the revenues were down year-on-year (YoY), AMD’s expectation from datacenter CPU products is high in upcoming quarters based on the feedback from the initial usage. In addition, multiple partnership wins in different segments points that AMD is constantly improving in developing relations with customers-partners-suppliers alike, which was the bane for AMD’s demise a decade ago.
Counterpoint’s View on AMD’s Q2-2019 Earnings
- AMD is banking on its datacenter CPU offerings with EPYC Rome processor.
- AMD’s main competitor, Intel, has reported a decline in its datacenter segment. AMD is expected to grab more share and customers away from Intel in short to mid-term, leveraging superior technology and increasing customer wins.
- Key gaming customer wins, Microsoft and Sony, powering their gaming consoles with Ryzen Gen-2 CPU will drive the revenues in the semi-custom segment.
- Strategic partnership with Samsung will allow AMD to venture into mobile devices with its graphics solutions, as gaming smartphones get popular and flagship smartphones increase their graphics competency.
- Overall, client CPU, datacenter CPU, and datacenter GPU will drive the revenues for AMD.
Key Highlights from AMD:
Overall Financials
- Revenue at US$1.53 billion, down 13% YoY, however, up 20% quarter-on-quarter (QoQ), as per expectations.
- Gross margin was 41%, up 4 pp YoY, primarily driven by increased Ryzen and EPYC processor sales.
- Operating income was US$59 million compared to US$153 million a year ago. The decline was primarily due to lower revenue and higher operating expenses.
- Cash, cash equivalents, and marketable securities were US$1.1 billion at the end of the quarter.
Segment Financials
- Computing and Graphics segment revenue was US$940 million, down 13% YoY. Revenue was lower YoY primarily due to lower graphics channel sales, partially offset by increased client processor and datacenter GPU sales.
- Client processor average selling price (ASP) was up YoY, driven by Ryzen processor sales.
- GPU ASP increased YoY primarily driven by datacenter GPU sales.
- Enterprise, Embedded, and Semi-Custom segment revenue was US$591 million, down 12% YoY. The YoY revenue decrease was primarily due to lower semi-custom product revenue, partially offset by higher EPYC processor sales.
Product Launches
- AMD launched client and graphics processors based on advanced new architectures and 7nm process technology.
- AMD Ryzen Desktop Processors are available now with up to 12 cores and 24 threads based on the new “Zen 2” core architecture.
- AMD introduced RDNA, which provides up to 1.25X higher performance per-clock and up to 1.5X higher performance-per-watt compared to previous generation Graphics Core Next architecture.
- AMD Radeon™ RX 5700 series graphics cards, built on the new AMD RDNA gaming architecture.
Partnerships and Customers Wins
- AMD got two important customer wins in the gaming segment, powering Microsoft and Sony gaming consoles, with the Ryzen Zen-2 CPU core.
- Samsung and AMD announced a multi-year strategic partnership through which Samsung will license AMD graphics IP to advance graphics technologies and solutions for mobile applications, including smartphones.
- Apple announced an all-new Mac Pro featuring AMD Radeon Pro Vega II GPUs that deliver exceptional computational performance by harnessing the power of the 7nm process technology, “Vega” graphics architecture and AMD Infinity Fabric™ Link GPU interconnect technology.
- Acer announced the upcoming availability of the new Acer Nitro 5 and Swift 3 laptops, based on 2nd Gen AMD Ryzen Mobile processors, adding to the more than 40 new consumer and commercial notebooks based on the latest Ryzen Mobile and Ryzen Mobile PRO processors launched this year from all leading global OEMs.
- AMD announced that it is working with Cray, the U.S. Department of Energy, and Oak Ridge National Laboratory to build what is expected to be the world’s fastest supercomputer – Frontier. Based on future-generation high-performance custom AMD EPYC CPUs and Radeon Instinct GPUs optimized for artificial intelligence (AI), Frontier is expected to deliver greater than 1.5 exaflops of processing performance.
- 2nd Gen EPYC processors are advancing the use of AI across diverse research fields on Indiana University’s Cray Shasta™ supercomputer.
Future Guidance/Outlook
- Q3 2019 – US$1.8 billion revenue, expected to be driven by Ryzen, EPYC, and Radeon product sales. Gross margin at 43%.
- Full Year 2019 – AMD now expects revenue to increase a mid-single-digit percent over 2018 (5%-6%). Gross margin at 42%.
