AMD Reports Q2 2017 Results

Subject: Editorial | July 25, 2017 - 10:48 PM |
Tagged: Vega, Threadripper, ryzen, RX, Results, quarterly earnings, Q2 2017, EPYC, amd

The big question that has been going through the minds of many is how much marketshare did AMD take back and how would that affect the bottom line?  We know the second half of that question, but it is still up in the air how much AMD has taken from Intel.  We know that they have, primarily due to the amount of money that AMD has made.  Now we just need to find out how much.

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Q2 revenue surpassed the expectations of both the Street and what AMD had predicted.  It was not a mind-blowing quarter, but it was a solid one for what has been a slowly sinking AMD.  The Q2 quarter is of course very important for AMD as it is the first full quarter of revenue from Ryzen parts as well as the introduction of the refreshed RX 500 series of GPUs.

The Ryzen R7 and R5 parts have been well received by press and consumers alike.  While it is not a completely overwhelming product in every aspect as compared to Intel’s product stack, it does introduce an incredibly strong dollar/thread value proposition.  Consumers can purchase an 8 core/16 thread part with competitive clock speeds and performance for around $300 US.  That same price point from Intel will give a user better single threaded and gaming performance, but comes short at 4 cores/8 threads.

The latest RX series of GPUs are slightly faster refreshes of the previous RX 400 series of cards and exist in the same price range of those previous cards.  These have been popular with AMD enthusiasts as they deliver solid performance for the price.  They are also quite popular with the coin miners due to the outstanding hash rate that they offer at their respective price points as compared to NVIDIA GPUs.

AMD ended up reporting GAAP revenue of $1.22B with a net income of -$16M.  Non-GAAP net income came in at a positive $19M.  This is a significant boost from Q1 figures which included a revenue of $984M and a net income of -$73M.  The tail end of Q1 did include some Ryzen sales, but not nearly enough to offset the losses that they accumulated.  These beat out the Street numbers by quite a bit, hence the uptick in AMD’s share price after hours.

The server/semi-custom group did well, but is still down some 5% as compared to last year.  This is primarily due to seasonal weaknesses with the consoles.  Microsoft will be ramping up production of their Xbox One X and AMD will start to receive royalties from that production later this year.  AMD has seen its marketshare in the data and server market tumble from years past to where it is at 1% and below.  AMD expects to change this trend with EPYC and has recorded the initial revenue from EPYC datacenter processor shipments.

We cannot emphasize enough how much the CPU/GPU group has grown over the past year.  Revenue from that group has increased by 51% since last year.  We do need to temper that with the reality that at that time AMD had not released the new RX series of GPUs nor did they have Ryzen.  Instead, it was all R5/R7 3x0 and Fury products as well as the FX CPUs based on Piledriver and Excavator cores.  It would honestly be hard for things to get worse than that point of time  Still, a 51% improvement with Ryzen and the RX 5x0 series of chips is greater than anyone really expected.  We must also consider that Q2 is still one of the slowest quarters in a year.

AMD expects next quarter to grow well beyond expectations.  The company is estimating that revenue will grow by 23%, plus or minus 3%.  If this holds true, AMD will be looking at a $1.5B quarter.  Something that has not been seen for some time (especially post foundry split).  The product stack that they will continue to introduce is quite impressive.  AMD will continue with the Ryzen R7 and R5 parts, but will also introduce the first R3 parts for the budget market.  RX Vega will be introduced next week at Siggraph.  Threadripper will be released to the wild as well as the x399 chipset.  EPYC is already shipping and they expect that product to grow steadily.  Ryzen Pro and then the mobile APUs will follow up later in the 2nd half of the year.  Semi-custom will get a boost when Microsoft starts shipping Xbox One X consoles.

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What a change a year makes.  Lisa Su and the gang have seemingly turned the boat around with a lot of smart moves, a lot of smart people, and a lot of effort.  They are not exactly at Easy Street yet, but they are moving in the right direction.  Ryzen has been a success with press and consumers and sets them on a level plane with Intel in overall performance and power.  The RX series continues to be popular and selling well (especially with miners).  AMD still has not caught up with demand for those parts, but I get the impression that they are being fairly conservative there by not flooding the market with RX chips in case coin mining bottoms out again.  The demand there is at least making miners and retailers happy, though could be causing some hard feelings among AMD enthusiasts who just want a gaming card at a reasonable price.

AMD continues to move forward and has recorded an impressive quarter.  Next quarter, if it falls in line with expectations, should help return AMD to profitability with some real momentum moving forward in selling product to multiple markets where it has not been a power for quite some time.  The company has been able to tread water for the past few years, but has planned far enough ahead to actually release competitive products at good prices to regain marketshare and achieve profitability again.  2017 has been a good year for AMD, and it looks to continue to Q3 and Q4.

 
Source: AMD

July 26, 2017 | 12:37 AM - Posted by Clmentoz (not verified)

And yet responses across the web have folks stating that because AMD has no profit, AMD most assuredly will not be able to pay it's debts. Revenues are what pays the bills, revenues are what service the debts and profits(If Any) are what remain after that business quarter's bills are paid.

It's accounting 101 that most folks on the web forums do not appear to be able to wrap their brains around. And those thinking that AMD will not be able to pay its bills without profits do not understand how accounting works.

AMD has cash reserves to manage any quarter to quarter negative balance sheets. But AMD's revenues are going up relative to the same period the previous year and AMD has been able to invest a little more in R&D. It's entirely possible for a company to not show much profit or negative numbers for a few quarters and still stay in business, as long as there is revenue growth and cash reserves to help cover any quarter's negative balance sheets. AMD as long as it's seen as having that revenue growth and not too large of any quarter to quarter negative balance sheets will survive just fine.

AMD as a corporation can issue more stock, it can arrange more loans, it can renegotiate it's long term debts, and exercise other financing options to keep as close to break-even in the long term as can be manageable. And as long as AMD is increasing its revenues and getting more market share in it's traditional markets and/or doing the same in any new markets, AMD will do fine towards turning profitable each and every business quarter mostly from now on.

Once AMD's Epyc workstation/server market sales have had a few revenue producing quarters that have passed, then there will be even more “high-teens” double digit revenue growth quarters to consider as AMD's current Workstation/Server market share is very near to zero. More attention needs to be focused on AMD's Radeon Pro WX and Radeon Instinct revenues as they rise along with each percentage point of AMD's Epyc CPU Workstation/Server market share increases.

The professional markets are where AMD will see the most revenue growth for both CPUs and GPUs(Professional GPU/AI) revenue growth. CPU and GPU gaming markets are always going to be a back and forth with some good quarters and some bad quarters. But the consumer PC market is still in a state of decline relative to the Professional CPU/GPU market and the new GPU/AI market as well as the specialized AI/ASIC market that is just getting started.

Currently AMD’s consumer/GPU gaming market sales have an inordinate amount of influence on AMD’s quarter to quarter revenue figures. But that consumer GPU only market influence is about to be dwarfed by AMD’s Epyc and Professional GPU market numbers. Even AMD’s consumer CPU market numbers are going to help push any inordinate amount of AMD’s consumer GPU market influence relative to AMD’s total revenues down with AMD getting more of its necessary revenue growth from other than gaming GPU revenues. That will forever take away any of those volatile swings in AMD’s stock value that are caused by the GPU gaming markets, or the coin mining, inordinate influence on AMD’s total quarter to quarter revenue volatility.

The same market that AMD needs to focus on, the Workstation/Server Professional CPU, GPU/GPU AI markets, and new markets, are the very same markets that are giving Nvidia its best new revenues quarter to quarter growth figures. Nvidia’s gaming GPU revenue figures, though still the largest part of its total revenue figures, are not showing the same rapid quarter to quarter growth as Nvidia’s professional GPU/AI GPU, or automotive market, revenue growth figures that are showing so much new revenue growth increases over consecutive business quarters.

AMD needs those Epyc CPU and Professional GPU/GPU-AI revenues for their longer term and steady revenue growth numbers. AMD’s new Ryzen-Pro business oriented desktop PC/Laptops products represent more of the steady types of revenue producing sources that help reduce any dependency on any gaming GPU only market’s uncertain and volatile revenue streams. Nvidia stays relatively stable with continuous growth because Nvidia has that large professional GPU/GPU-AI market share, and is getting that new more stable market revenue in the automotive computing market.

July 26, 2017 | 10:51 AM - Posted by quest4glory

Do you have a blog?

July 26, 2017 | 01:09 PM - Posted by guest4MarketSanity (not verified)

Do you have a blog?

July 27, 2017 | 01:10 AM - Posted by quest4glory

Do you have a blog same guy with a different account?

July 27, 2017 | 02:07 PM - Posted by quest4highermargins (not verified)

Guy with the same account! Do you have a blog that is dedicated to asking others if they have a blog?

July 27, 2017 | 06:20 PM - Posted by Jeremy Hellstrom

Are we all just blogs?

July 26, 2017 | 03:17 AM - Posted by pdjblum

"live long and prosper" AMD

you guys rock

July 26, 2017 | 05:15 AM - Posted by JohnGR

If I am not mistaking, this is the first time AMD releases it's financials BEFORE Intel. I remember Intel releasing first and AMD following two days latter. This must be the first time that AMD publishes first, either to make a statement "we are at the front seat now", either to avoid any turbulence in share price from Intel's - probably - not so stellar results in CPU sales for PCs.

July 26, 2017 | 11:03 AM - Posted by DeOdVue (not verified)

It's surprised me as well. And definitely a smart moved by AMD team.

This is how I see as back then:
INTEL- down will dragged AMD down before they would up.

Now:
AMD - UP while INTEL - down (unassumingly) would drove them up more.

Nice Moved!

{@}
^(^

Cheer!

July 26, 2017 | 05:21 AM - Posted by zorg

This is great news for the competition - and to support this I'd buy the New X-BOX and will build an extra small itx system with an AMD cpu for the sake of pure enjoyment of building.

July 26, 2017 | 05:29 PM - Posted by pdjblum

ditto that

i got the new asrock mini itx b350 and will probably go with the ryzen 1700

i haven't built a system in a long time, so this is very exciting

TR is very tempting given the awesome price for such an insane platform, but i don't need that kind of power, but would love all those pci lanes

July 26, 2017 | 10:33 AM - Posted by PJ (not verified)

AMD's stock price more than tripled last year and that's considered "slowly sinking"? SMH

July 26, 2017 | 10:47 AM - Posted by Josh Walrath

CPU/GPU has not had an operating profit for 3 years until this past quarter. 3 years!  Debt has remained constant and cash on hand has been decreasing over that time.  I think most people would look at those bottom lines as think, "Yeah, they are slowly sinking."  Share price in this case is speculation on the increase in the value of the company once it has competitive products in hand, which they released this past quarter.

July 26, 2017 | 03:36 PM - Posted by Clmentoz (not verified)

AMD's cash reserves have been going up and down over those 3 years (1), and their revenues are what matters most, namely revenue growth. AMD's share prices have two factors to deal with, one rational and the other irrational. The rational share price on any stock is mostly based on revenues/revenue growth from business quarter to business quarter and the yearly revenue growth figures, with some extra 3 to 5 year figures included to better gauge revenue variability. Then there is the irrational consumer market influence exemplified by any gaming market revenues, or any consumer only product market revenue sources, where demand is highly volatile business quarter to business quarter and purchases of GPUs/CPUs are not solely based on any purely rational comparisons or decision making processes.

AMD’s major stock volatility issues are directly related to AMD’s increased dependency on any consumer only product revenue streams for the majority percentage of AMD’s total revenues. Once AMD lost most of its Opteron/Server market share as a significant source of its total revenues AMD was placed in a precarious state of business revenue enhancement and business revenue stability quarter to quarter and also yearly.

AMD’s two previous management teams prior to Rory Read(He was only there temporarily as an emergency turnaround specialist CEO until AMD was stabilized and AMD’s BOD could choose a long term CEO) made some terrible engineering and business decisions with regards to AMD’s x86 micro-architecture and AMD’s need to remain focused on its Opteron business revenues first and foremost for CPU designs. AMD’s acquisition of ATI was both good and bad. Bad in that fact that AMD spent too much for ATI and Good in the fact that AMD’s APU designs are the direct result of that ATI IP that AMD has made relatively good use of over the following years since ATI was purchased.

Epyc’s sales are going to bring back the rational revenue streams, along the with the Vega(WX/instinct) professional GPU GPGPU/AI SKU sales, that provide a more rational source of higher margin workstation/server/HPC sales revenues and will put a permanent stop for AMD those very irrational Consumer/Gaming market’s volatile revenue swings that are not healthy for any business to be subject to, or dependent on, over the long term. The consumer gaming GPU market is very likely the most irrational of all consumer based markets in terms of revenue/revenue stability for any company to be totally dependent on as a significant source of that company’s total revenues, and this applies for any processing hardware maker.

In accounting 101, and business economics, the one thing they tell you over and over is to keep on the books the Net Profits as low as possible and the revenue/equity growth high. Net profits are what is Taxed while investments to secure future revenue/equity growth are not taxed at all/not taxed as much as compared to net profits.

(1)

"Annual Financials for Advanced Micro Devices Inc."

http://www.marketwatch.com/investing/stock/amd/financials/balance-sheet

July 27, 2017 | 05:59 AM - Posted by GoLongAMD (not verified)

Glad my AMD stock is up. Get rekt bears!

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