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 | October 15, 2014 - 12:39 PM | Josh Walrath
Tagged: revenue, Results, quarterly, Q3, Intel, haswell, Broadwell, arm, amd, 22nm, 2014, 14nm
Yesterday Intel released their latest quarterly numbers, and they were pretty spectacular. Some serious milestones were reached last quarter, much to the dismay of Intel’s competitors. Not everything is good with the results, but the overall quarter was a record one for Intel. The company reported revenues of $14.55 billion dollars with a net income of $3.31 billion. This is the highest revenue for a quarter in the history of Intel. This also is the first quarter in which Intel has shipped 100 million processors.
The death of the PC has obviously been overstated as the PC group had revenue of around $9 billion. The Data Center group also had a very strong quarter with revenues in the $3.7 billion range. These two groups lean heavily on Intel’s 22 nm TriGate process, which is still industry leading. The latest Haswell based processors are around 10% of shipping units so far. The ramp up for these products has been pretty impressive. Intel’s newest group, the Internet of Things, has revenues that shrank by around 2% quarter over quarter, but it has grown by around 14% year over year.
Not all news is good news though. Intel is trying desperately to get into the tablet and handheld markets, and so far has had little traction. The group reported revenues in the $1 million range. Unfortunately, that $1 million is offset by about $1 billion in losses. This year has seen an overall loss for mobile in the $3 billion range. While Intel arguably has the best and most efficient process for mobile processors, it is having a hard time breaking into this ARM dominated area. There are many factors involved here. First off there are more than a handful of strong competitors working directly against Intel to keep them out of the market. Secondly x86 processors do not have the software library or support that ARM has in this very dynamic and fast growing section. We also must consider that while Intel has the best overall process, x86 processors are really only now achieving parity in power/performance ratios. Intel still is considered a newcomer in this market with their 3D graphics support.
Intel is quite happy to take this loss as long as they can achieve some kind of foothold in this market. Mobile is the future, and while there will always be the need for a PC (who does heavy duty photo editing, video editing, and immersive gaming on a mobile platform?) the mobile market will be driving revenues from here on out. Intel absolutely needs to have a presence here if they wish to be a leader at driving technologies in this very important market. Intel is essentially giving away their chips to get into phones and tablets, and eventually this will pave the way towards a greater adoption. There are still hurdles involved, especially on the software side, but Intel is working hard with developers and Google to make sure support is there. Intel is likely bracing themselves for a new generation of 20 nm and 16 nm FinFET ARM based products that will start showing up in the next nine months. The past several years has seen Intel push mobile up to high priority in terms of process technology. Previously these low power, low cost parts were relegated to an N+1 process technology from Intel, but with the strong competition from ARM licensees and pure-play foundries Intel can no longer afford that. We will likely see 14 nm mobile parts from Intel sooner as opposed to later.
Intel has certainly shored up a lot of their weaknesses over the past few years. Their integrated 3D/GPU support has improved in leaps and bounds over the years, their IPC and power consumption with CPUs is certainly industry leading, and they continue to pound out impressive quarterly reports. Intel is certainly firing on all cylinders at this time and the rest of the industry is struggling to keep up. It will be interesting to see if Intel will keep up with this pace, and it will be imperative for the company to continue to push into mobile markets. I have never counted Intel out as they have a strong workforce, a solid engineering culture, and some really amazingly smart people (except Francois… he is just slightly above average- he is a GT-R aficionado after all).
Next quarter appears to be more of the same. Intel is expecting revenue in the $14.7 billion, plus or minus $500 million. This continues along with the strong sales of PC and server parts for Intel that helps buoy them to these impressive results. Net income and margins again look to appear similar to what this past quarter brought to the table. We will see the introduction of the latest 14 nm Broadwell processors, which is an important step for Intel. 14 nm development and production has taken longer than people expected, and Intel has had to lean on their very mature 22 nm process longer than they wanted to. This has allowed a few extra quarters for the pure-play foundries to try to catch up. Samsung, TSMC, and GLOBALFOUNDRIES are all producing 20 nm products with a fast transition to 16/14 nm FinFET by early next year. This is not to say that these 16/14nm FinFET products will be on par with Intel’s 14 nm process, but it at least gets them closer. In the near term though, these changes will have very little effect on Intel and their product offerings over the next nine months.