Another Strong Quarter for the Giant
This afternoon Intel released their Q4 2017 financial results. The quarter was higher in revenue than was expected by analysts. The company made $17.1B US in revenue and recorded a non-GAAP net of $1.08 a share. On the surface it looks like Intel had another good quarter that was expected by the company and others alike. Underneath the surface these results have shown a few more interesting things about the company as well as the industry it exists in.
We have been constantly hearing about how the PC market is weak and it will start to negatively affect those companies who's primary products go into these machines. Intel did see a 2% drop in revenue year on year from their Client Computing Group, but it certainly did not look to be a collapse. We can also speculate that part of the drop is from a much more competitive AMD and their strong performing Ryzen processors. These indications point to the PC market still being pretty stable and robust, even though it isn't growing at the rate it once had.
The Data Center Group was quite the opposite. It grew around 20% over the same timespan. Intel did not provide more detail but it seems that datacenters and cloud computing are still growing at a tremendous rate. With the proliferation of low power devices yet increased computing needs, data centers are continuing to expand and purchase the latest and greatest CPUs from Intel. So far AMD's EPYC has not been rolled out aggressively so far, but 2H 2018 should shed a lot more light on where this part of the market is going.
Subject: Editorial | October 25, 2017 - 12:43 PM | Josh Walrath
Tagged: Vega, Threadripper, sony, ryzen, Q3, microsoft, EPYC, earnings, amd, 2017
Expectations for AMD’s Q3 earnings were not exactly sky high, but they were trending towards the positive. It seems that AMD exceeded those expectations. The company announced revenue of $1.64 billion, up significantly from the expected $1.52 billion that was the consensus on The Street.
The company also showed a $71 million (GAAP), $110 million (non-GAAP) net for the quarter, which is a 300% increase from a year ago. The reasons for this strong quarter are pretty obvious. Ryzen has been performing well on the desktop since its introduction last Spring and sales have been steady with a marked increase in ASPs. The latest Vega GPUs are competitive in the marketplace, but it does not seem as though AMD has been able to provide as many of these products as they would like. Add into that the coin mining effect on prices and stocks of these latest AMD graphics units. Perhaps a bigger boost to the bottom line is the introduction of the Epyc and Threadripper CPUs to the mix.
Part of this good news is the bittersweet royalties from the console manufacturers. Both Sony and Microsoft have refreshed their consoles in the past year, and Microsoft is about to release the new Xbox One X to consumers shortly. This has provided a strong boost to AMD’s semi-custom business, but these boosts are also strongly seasonal. The downside to this boost is of course when orders trail off and royalty checks take a severe beating. Consoles have a longer ramp up due to system costs and integration as compared to standalone CPUs or video cards. Microsoft and Sony ordered production of these new parts several quarters ago, so revenue from those royalties typically show up a quarter sooner than when actual product starts shipping. So the lion’s share of royalties are paid up in Q3 so that there is adequate supply of consoles in the strong Q4/Holiday season. Since Q1 of the next year is typically the softest quarter, the amount of parts ordered by Sony/Microsoft is slashed significantly to make sure that as much of the Holiday orders are sold and not left in inventory.
Ryzen continues to be strong due to multiple factors. It has competitive single and multi-core performance in a large variety of applications as compared to Intel’s latest. It has a much smaller die size than previous AMD parts such as Bulldozer/Piledriver/Phenom II, so they can fit more chips on a wafer and thereby lower overall costs while maximizing margins. Their product mix is very good from the Ryzen 3 to the Ryzen 7 parts, but is of course still missing the integrated graphics Ryzen parts that are expected either late this year or early next. Overall Ryzen has made AMD far more competitive and the marketplace has rewarded the company.
Vega is in an interesting spot. There have been many rumors about how the manufacturing costs of the chip (GPU and HBM) along with board implementations are actually being sold for a small loss. I find that hard to believe, but my gut here does not feel like AMD is making good margins on the product either. This could account for what is generally seen as lower than expected units in the market as well as correspondingly higher prices than expected. The Vega products are competitive with NVIDIA’s 1070 and 1080 products, but in those products we are finally seeing them start to settle down closer to MSRP with adequate supplies available for purchase. HBM is an interesting technology with some very acute advantages over standard GDDR-5/X. However, it seems that both the cost and implementation of HBM at this point in time is still not competitive with having gone the more traditional route with memory.
There is no doubt that AMD has done very well this quarter due to its wide variety of parts that are available to consumers. The news is not all great though and AMD expects to see Q4 revenues down around 15%. This is not exactly unexpected due to the seasonal nature of console sales and the resulting loss of royalties in what should be a strong quarter. We can still expect AMD to ship plenty of Ryzen parts as well as Vega GPUs. We can also surmise that we will see a limited impact of the integrated Ryzen/Vega APUs and any potential mobile parts based on those products as well.
Q3 was a surprise for many, and a pleasant one at that. While the drop in Q4 is not unexpected, it does sour a bit of the news that AMD has done so well. The share price of AMD has taken a hit due to this news, but we will start to see a clearer picture of how AMD is competing in their core spaces as well as what kind of uptick we can expect from richer Epyc sales throughout the quarter. Vega is still a big question for many, but Holiday season demand will likely keep those products limited and higher in price.
AMD’s outlook overall is quite positive and we can expect a refresh of Zen desktop parts sometime in 1H 2018 due to the introduction of GLOBALFOUNDRIES 12nm process which should give a clock and power uplift to the Zen design. There should be a little bit of cleanup in the Zen design much as Piledriver was optimized from Bulldozer. Add in the advantages of the new process and we should see AMD more adequately compete with Coffee Lake products from Intel which should be very common by then.
Subject: Editorial | February 9, 2017 - 06:59 PM | Josh Walrath
Tagged: TSMC, Samsung, Results, quadro, Q4, nvidia, Intel, geforce, Drive PX2, amd, 2017, 2016
It is most definitely quarterly reports time for our favorite tech firms. NVIDIA’s is unique with their fiscal vs. calendar year as compared to how AMD and Intel report. This has to do when NVIDIA had their first public offering and set the fiscal quarters ahead quite a few months from the actual calendar. So when NVIDIA announces Q4 2017, it is actually reflecting the Q4 period in 2016. Clear as mud?
Semantics aside, NVIDIA had a record quarter. Gross revenue was an impressive $2.173 billion US. This is up slightly more than $700 million from the previous Q4. NVIDIA has shown amazing growth during this time attributed to several factors. Net income (GAAP) is at $655 million. This again is a tremendous amount of profit for a company that came in just over $2 billion in revenue. We can compare this to AMD’s results two weeks ago that hit $1.11 billion in revenue and a loss of $51 million for the quarter. Consider that AMD provides CPUs, chipsets, and GPUs to the market and is the #2 x86 manufacturer in the world.
The yearly results were just as impressive. FY 2017 featured record revenue and net income. Revenue was $6.91 billion as compare to FY 2016 at $5 billion. Net income for the year was $1.666 billion with comparison to $614 million for FY 2016. The growth for the entire year is astounding, and certainly the company had not seen an expansion like this since the early 2000s.
The core strength of the company continues to be gaming. Gaming GPUs and products provided $1.348 billion in revenue by themselves. Since the manufacturing industry was unable to provide a usable 20 nm planar product for large, complex ASICs companies such as NVIDIA and AMD were forced to innovate in design to create new products with greater feature sets and performance, all the while still using the same 28 nm process as previous products. Typically process shrinks accounted for the majority of improvements (more transistors packed into a smaller area with corresponding switching speed increases). Many users kept cards that were several years old due to there not being a huge impetus to upgrade. With the arrival of the 14 nm and 16 nm processes from Samsung and TSMC respectively, users suddenly had a very significant reason to upgrade. NVIDIA was able to address the entire market from high to low with their latest GTX 10x0 series of products. AMD on the other hand only had new products that hit the midrange and budget markets.
The next biggest area for NVIDIA is that of the datacenter. This has seen tremendous growth as compared to the other markets (except of course gaming) that NVIDIA covers. It has gone from around $97 million in Q4 2016 up to $296 million this last quarter. Tripling revenue in any one area is rare. Gaming “only” about doubled during this same time period. Deep learning and AI are two areas that required this type of compute power and NVIDIA was able to deliver a comprehensive software stack, as well as strategic partnerships that provided turnkey solutions for end users.
After datacenter we still have the visualization market based on the Quadro products. This area has not seen the dramatic growth as other aspects of the company, but it remains a solid foundation and a good money maker for the firm. The Quadro products continue to be improved upon and software support grows.
One area that promises to really explode in the next three to four years is the automotive sector. The Drive PX2 system is being integrated into a variety of cars and NVIDIA is focused on providing a solid and feature packed solution for manufacturers. Auto-pilot and “co-pilot” modes will become more and more important in upcoming models and should reach wide availability by 2020, if not a little sooner. NVIDIA is working with some of the biggest names in the industry from both automakers and parts suppliers. BMW should release a fully automated driving system later this year with their i8 series. Audi also has higher end cars in the works that will utilize NVIDIA hardware and fully automated operation. If NVIDIA continues to expand here, eventually it could become as significant a source of income as gaming is today.
There was one bit of bad news from the company. Their OEM & IP division has seen several drops over the past several quarters. NVIDIA announced that the IP licensing to Intel would be discontinued this quarter and would not be renewed. We know that AMD has entered into an agreement with Intel to provide graphics IP to the company in future parts and to cover Intel in potential licensing litigation. This was a fair amount of money per quarter for NVIDIA, but their other divisions more than made up for the loss of this particular income.
NVIDIA certainly seems to be hitting on all cylinders and is growing into markets that previously were unavailable as of five to ten years ago. They are spreading out their financial base so as to avoid boom and bust cycles of any one industry. Next quarter NVIDIA expects revenue to be down seasonally into the $1.9 billion range. Even though that number is down, it would still represent the 3rd highest quarterly revenue.