AMD Announces Q3 Earnings: $71M In The Black
by Brett Howse on October 24, 2017 10:30 PM EST- Posted in
- CPUs
- AMD
- GPUs
- Financial Results
2017 has been a great year for the tech enthusiast, with the return of meaningful competition in the PC space. Today, AMD announced their third quarter earnings, which beat expectations, and put the company’s ledgers back in the black in their GAAP earnings. For the quarter, AMD had revenues of $1.64 billion, compared to $1.31 billion a year ago, which is a gain of just over 25%. Operating income was $126 million, compared to a $293 million loss a year ago, and net income was $71 million, compared to a net loss of $406 million a year ago. This resulted in earnings per share of $0.07, compared to a loss per share of $0.50 in Q3 2016.
| AMD Q3 2017 Financial Results (GAAP) | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $1643M | $1220M | $1307M | ||
| Gross Margin | 35% | 33% | 5% | ||
| Operating Income | +$126M | +$25M | -$293M | ||
| Net Income | +$71M | -$16M | -$406M | ||
| Earnings Per Share | +$0.07 | -$0.02 | -$0.50 | ||
AMD also provides Non-GAAP results, which can give a look at the underlying business. It’s especially important this quarter, because a year ago, AMD took a charge of $340 million for an amendment to their wafer supply agreement with GlobalFoundries. This impacted their GAAP results severely, but as a one-time charge, it can skew how the numbers look. AMD’s Non-GAAP results exclude charges for the wafer agreement, loss on debt redemption, stock based compensation, and several other factors. On a Non-GAAP basis, AMD had the same revenue of $1.64 billion, up 25%. Operating income up 121% to $155 million, and net income was up 307% to $110 million. Earnings per share came in at $0.10, up 233% from $0.03 a year ago.
| AMD Q3 2017 Financial Results (Non-GAAP) | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $1643M | $1222M | $1307M | ||
| Gross Margin | 33% | 33% | 31% | ||
| Operating Income | +$155M | +$49M | +$70M | ||
| Net Income | +$110M | +$19M | +$27M | ||
| Earnings Per Share | +$0.10 | +$0.02 | +$0.03 | ||
The good news for AMD is that even on a GAAP basis, they were profitable. They’ve made some tough decisions to get here, and on a GAAP basis for this quarter, they have a gross margin of 35%, which is right where they need to be.
The Computing and Graphics segment has been a key to these numbers, with some impressive launches this year, especially on the CPU side. Revenue for this segment was up 74% to $819 million, and AMD attributes this to strong sales of both Radeon GPUs and Ryzen desktop processors. Average Selling Price (ASP) was also up significantly thanks to Ryzen sales. AMD is still undercutting Intel on price, but they don’t have to almost give things away like they did the last couple of years. ASP of GPUs was also up significantly, and the proliferation of cryptocurrency likely played a large part in that. Operating income for the segment was an impressive $70 million, compared to an operating loss of $66 million last year.
| AMD Q3 2017 Computing and Graphics | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $819M | $659M | $472M | ||
| Operating Income | +$70M | +$7M | -$66M | ||
The Enterprise, Embedded, and Semi-Custom segment has been strong for AMD in the past, often providing the majority of the operating income for the company thanks to AMD’s success in the console market. This quarter has tended to be especially strong for the company as the console makers prepare for the holiday sales. This quarter, we’ve also got the lead-up to the Xbox One X, however revenue for this group is actually down year-over-year, about 1.3%, to $824 million. AMD attributes that to lower semi-custom SoC sales, which were mostly offset by IP related and EPYC processor revenues. We’ll have to wait and see how the console market plays out here, but it seems like it could finally be slowing down after several years of solid sales. Operating income for this segment also took a hit, down 38% to $84 million. They’ve also noted that gross margins overall were impacted by costs associated with the wafer agreements for “certain wafers purchased at another foundry” which likely means the TSMC wafers used for consoles.
| AMD Q3 2017 Enterprise, Embedded, and Semi-Custom | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $824M | $563M | $835M | ||
| Operating Income | $84M | $42M | $136M | ||
The All Other category had a operating loss of $28 million, compared to an operating loss of $363 million a year ago, which was mostly the wafer agreement charges.
It’s great to see AMD back, offering quality products at good prices. The hard work has clearly paid off, at least for the short term, and their earnings have borne this out. Looking ahead to next quarter, AMD is expecting a revenue decrease from this quarter of about 15%, plus or minus 3%, which would be about a 26% increase from Q4 2016.
Source: AMD Investor Relations
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Alexvrb - Wednesday, October 25, 2017 - link
You troll for free, so, I don't know if you should be talking smack about shills. There's a hilarious analogy about hookers there somewhere.Also, he doesn't strike me as a shill, and I can't find fault with his argument (although the libel part was pointless and unlikely).
HStewart - Wednesday, October 25, 2017 - link
To me "Legacy, declining industry" means desktop marketIt hard to say smartphones are desktop replacements.
But I think the real deal - is that people (non gamers and engineering types) have a computer that does the job enough and don't need to upgrade - some even don't need the power of real computer and all they need is something for email/surfing wave and a tablet like iPad or Android can be all they need.
Yojimbo - Wednesday, October 25, 2017 - link
They are big in gaming, and gaming is a growing industry. Desktop CPUs is a declining market, but they have had such small market share that it is a genuine growth opportunity for them. They are well-positioned for a piece of the VR market if and when it takes off, and who knows, maybe cryptocurrency will stick around for a while. They also have their toes in the water in data center and AI GPU acceleration, markets with huge growth opportunity. They have a lot of work to do to tap into that market, though.I am not bullish on AMD. One has to wonder at what cost AMD averted their debt crisis, invested heavily in reviving their CPU business, and became profitable. I think it may cost them GPU-related opportunities for some time to come. But it's not accurate to say they don't have
Yojimbo - Wednesday, October 25, 2017 - link
...growth opportunities in front of them if they manage to execute.blppt - Wednesday, October 25, 2017 - link
My guess is that AMD makes little to no profit supplying the chipsets/CPU/GPU for the PS4/XBONE, which is probably how they got the contract instead of Intel and/or Nvidia.Yojimbo - Tuesday, October 31, 2017 - link
The enterprise, embedded, and semi-custom segment of their earnings results over the past few years suggest otherwise. It's mostly been made up of console SoC sales over that time period, and has been profitable. They seem to be willing to take smaller margins than NVIDIA and Intel are, but they do well enough to make some profit. It's their computing and graphics segment that has been bleeding money. That includes their desktop and notebook CPU, GPU, and APU sales. The computing and graphics segment also includes their cryptocurrency GPU sales, which most likely is the biggest reason it's done much better the last two quarters. However, I do think that Ryzen must be giving them some lift over their pre-Ryzen CPU sales. At this point, I'm not convinced Vega has been much better for them in the high-end gaming GPU space than Fury was.HStewart - Wednesday, October 25, 2017 - link
I believe I heard that Majority of this debt is due in 2018 on 71million is small change for 1.4 millionI don't believe industry is declining unless you mean desktop computers - it involving especially in mobile market - so need for low power battery operated devices in big.
Even though phones take hunk out of computing market - they are not really
But it funny how this world can allow people and company to be in such debt and still put money into them.
twtech - Wednesday, October 25, 2017 - link
What is "legacy" about the industry that they're in? I would say that CPUs and GPUs for PCs is a mature market, but not one that has been replaced by anything.Nobody is doing real computing-related work on a phone. Servers and workstations still need CPUs and GPUs. Laptops need them too. Steam has 150 million registered users, meaning that it dwarfs all other platforms for gaming. AMD's target market isn't going away anytime soon.
It had become harder to justify upgrading your desktop's CPU every couple years recently, as the speed improvements had become more incremental, and keeping your old one for 5+ years became viable. Maybe with a core-count race though, that could change again.
Maybe AMD's resurgence could even be good for Intel, if it causes them to release higher core-count CPUs to the mass market, and developers respond by improving multithreading support in their applications and games.
Maleorderbride - Wednesday, October 25, 2017 - link
For what it's worth, they have a lower debt to asset ratio than Intel.Yojimbo - Wednesday, October 25, 2017 - link
"For what it's worth, they have a lower debt to asset ratio than Intel."Cash flow is what will determine if a company can pay down its debt. Intel has massive free cash flow. AMD does not, they've been more negative than positive in FCF the last few years.
If Intel or AMD needs to start cannibalizing their assets to pay for their debt they are in bad shape. Especially AMD. Intel has various non-core assets they could sell off and still keep their core business intact. I don't think AMD does. AMD already sold off their foundry business.