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AMD Reports Stronger Than Expected Q4 Earnings

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Subject: Editorial
Manufacturer: AMD

Beating AMD and Analyst Estimates

January 30th has rolled around and AMD released their Q4 2017 results. The results were positive and somewhat unexpected. I have been curious how the company fared and was waiting for these results to compare them to the relatively strong quarter that Intel experienced. At the Q3 earnings AMD was not entirely bullish about how Q4 would go. The knew that it was going to be a down quarter as compared to an unexpectedly strong third quarter, but they were unsure how that was going to pan out. The primary reason that Q4 was not going to be as strong was due to the known royalty income that AMD was expecting from their Semi-Custom Group. Q4 has traditionally been bad for that group as all of their buildup for the holiday season came from Q1 and Q2 rampings of the physical products that would be integrated into consoles.

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The results exceeded AMD’s and analysts’ expectations. They were expecting in the $1.39B range, but their actual revenue came in at a relatively strong $1.48B. Not only was the quarter stronger than expected, but AMD was able to pull out another positive net income of $61M. It has been a while since AMD was able to post back to back profitable quarters. This allowed AMD to have a net positive year to the tune of $43M where in 2016 AMD had a loss of $497M. 2017 as a whole was $1.06B more in revenue over 2016. AMD has been historically lean in terms of expenses for the past few years, and a massive boost in revenue has allowed them to invest in R&D as well as more aggressively ramp up their money making products to compete more adequately with Intel, who is having their own set of issues right now with manufacturing and security.

Click here to continue reading about AMD's Q4 2017 Earnings analysis!

The strongest area was of course sales of Ryzen processors and Radeon GPUs. Polaris continues to sell strongly as well as the latest Vega units. Semi-Custom is down due its seasonality being about a quarter behind that of typical PC components. Ryzen features strong performance and an advantage in price/performance and price/core. These chips also seem to show strong yields and bins. The combination of gaming and cryptocurrency have allowed AMD to have their strongest quarter in GPUs in the company’s history. Cards are often bought in bulk and there simply has not been enough product to supply current demand. Many fear that another bubble is on the way and partners will be left with excess inventory due to decreased demand and pressure from sales on the secondary market of used cards. For the time being AMD is trying to balance out production with forecasted demand. Currently the market is not entirely happy with the situation. It will improve for consumers eventually, but right now the combination of demand and high prices have kept product flowing and partners and retailers happy with revenue.

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EPYC has also made its presence felt with growing sales throughout Q4 and the ramping of product to meet demands of the major server OEMs that have either certified these designs or are very close to it. AMD expects EPYC to do very well and they hope to capture single digit percentage of the server market within the first half of this year. This is actually an impressive number considering that before EPYC AMD had essentially been absent in the enterprise market. Marketshare was around 1% or less with their outdated Opteron offerings based on the 5 year old Piledriver architecture. Getting anywhere over 5% is going to result in significantly higher revenue and more customers willing to look at EPYC offerings. AMD is also heavily leveraging the Spectre/Meltdown situation to tout their higher level security as compared to what Intel is dealing with right now. If AMD can show they have plugged these holes effectively and without the performance hit that Intel is showing especially at the datacenter, then we could see customers changing their long term plans and start rolling out EPYC solutions several quarters from now. Enterprise does move much more slowly than consumer level demands, but when there is some momentum it typically results in consistent and strong results.

Polaris and Vega are also making inroads into the enterprise with professional cards as well as the compute market where NVIDIA has been alone with their Tesla branded cards. AMD has made some significant gains and it has had a positive effect on revenue for that sector. The company is still at a disadvantage when it comes to software support as NVIDIA has been aggressive in pushing CUDA towards universities and companies looking for turnkey solutions for their compute needs.

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Q1 is typically the weakest quarter of the year due to seasonality. Namely after the glut of sales from Q4/Holiday Season, the market slows down due to lower consumer demand. This does not look to be the case for AMD. The company expects revenue to be in the $1.55B range. This is due to continued demand for Ryzen processors and Radeon GPUs, the further ramping of the EPYC platform, the ramping of mobile Ryzen parts with Vega graphics, and finally the introduction of the desktop variant of Ryzen with Vega graphics.

The biggest surprise of the past quarter was the announcement that AMD would be providing the graphics portion for the upcoming Kaby Lake G (now known as Core i5/i7 with RX Vega M Graphics). Previously I was unsure how AMD would be handling this semi-custom part. Initial thoughts were that Intel would license the design from AMD and produce the part through either GLOBALFOUNDRIES or TSMC. Today we had confirmation from Dr. Lisa Su that they were actually selling silicon directly to Intel. This means they are continuing to use GF for their 14nm manufacturing which likely helps fulfill their wafer agreement. This will show greater revenue than just licensing and royalties alone. It also opens up future collaborations with Intel until that company can improve their own internal offerings to be on a more even playing field. This also allows AMD to further break into the discrete mobile market where NVIDIA has been dominant.

Past Q1 we will see the introduction of the 12nm Ryzen based on Zen+. AMD did not confirm if any architectural changes have been implemented, but it is a pretty safe guess that it has gone through an optimization process to improve IPC, memory/cache latencies, and clockspeeds. AMD expects this refresh to continue their upward trend in sales with competitive parts as compared to Intel’s lineup at the time. EPYC will continue to be ramped and they expect double digit growth throughout the rest of the year. Vega will also be ported over to TSMC’s upcoming 7nm process and will be released more towards enterprise and machine learning applications. This could very well be a “pipecleaner” design for AMD as it prepares the Navi architecture for 2019.

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Zen 2’s design is complete and will be sent off for initial manufacturing. Samples will be provided to partners in late 2018. This timeline suggests that we will see Zen 2 based parts hit the market in late Q1 or early Q2 of 2019. AMD has promised that it will be more aggressive in updating their core features to keep up with Intel. If Intel has underestimated AMD and their design prowess, perhaps we will see another “perfect storm” of trouble for Intel in terms of design combined with process deficiencies. I am not suggesting that another Athlon 64/Pentium 4 situation will occur, just that there is a chance it could with the recent struggles of Intel and their CPUs.

AMD is poised to have their strongest year in at least a decade. Analysts believe revenues to be in the $5.8B range, but if the rest of their quarters scale as Q4 has and Q1 is expected to, it is not inconceivable that AMD would reach $7B or above. Much depends on how the enterprise market reacts to Intel and their Spectre/Meltdown issues, how well Polaris and Vega compete if the coin market shrinks or collapses, and how Intel is able to ramp 10nm production after seemingly quarters of issues trying to get that line up and running. Early indications point to enterprise moving steadily towards AMD solutions, Polaris and Vega will cool down and probably not gain much marketshare against NVIDIA, and the transition to 12nm will provide AMD competitive products against the current known roadmap that Intel has released.

 


January 31, 2018 | 01:53 AM - Posted by mLocke

everybody wins, expect you, IBM

January 31, 2018 | 06:12 AM - Posted by Daniel Waddell (not verified)

Zen 2 will be built on IBM's 7nm process. I'd call that a win seeing that Glofo and Samsung paid the for it.

January 31, 2018 | 11:12 AM - Posted by BeyondTheChildOrManChildMarket (not verified)

No it will not be, IBM's process is for IBM/OpenPower licensee usage. IBM paid GF to take over those IBM fabs and you can be damn sure that IBM did not give GF any important FAB IP except what IBM needs for its Power/Mainframe based systems and the needs of any OpenPower licensees.

Now IBM/Samsung/GF and others have had a fab process Research/IP consortium together for some years now, and IBM is basically a fabless CPU/processor designer. But IBM the company is not so good compared to its research and development labs, and that's world class. So that 7nm process from GF was developed by GF and Samsung's 7nm process is developed by Samsung and IBM's labs are helping the larger foundry industry catch up and surpass Intel's fabs. Hey IBM gets to benefit from that in the process because IBM does not have to spend funds on any fab upkeep/eguipment costs. IBM is not doing so well as a business but IBM's labs sure crank out the patents and IP licensing revenues.

You Know that each fab develops its own diffusion process with different elements in the mix and that's also why some foundry's processes are more efficent with better leakage metrics and other metrics in addition to node size. Don't forget about the design library(Automated Procesor layout libraries) used by the GPU/Processor makers and that effects the processor's performance also.

AMD has it good now that the GPU Compute/AI/Mining demand has helped AMD get over that final hurdle to continued profitability with AMD's return to the server CPU/GPU accelerator market now able to assure that AMD will get back to that $90 per share price range and the overall market cap the goes along with a $90+ dollar share price. AMD's Opteron sales(around 22% of the server market) had AMD's stock at a price per share of around the mid $90 range which was achieved without the help of any consumer gaming GPU revenues because that stock price high mark came before AMD had acquired ATI.

All of AMD's share price volatility and depressed share values where because that AMD is too dependent on the fickle consumer gamning market that can not ever produce the proper markups to produce enough revenues for any processor company to remain viable.

So once Epyc and the Radeon Pro WX/Radeon Instinct sales and revenues begin to produce that steady revenue growth and share price stability and get AMD back up towards that 23% server/HPC/Workstation market share AMD will really be free of that consumer only albatross market of gaming then AMD can really be free to grow.

Lisa Su needs to focus on Epyc and Radeon Pro WX/Instinct and that server/AI/compute market. AMD's Raven Ridge Zen/Vega "APUs" for the mobile and desktop markets are the way forward for AMD to get a larger shar of the graphics market and AMD can put off discrete Flagship competition indefinitely until AMD gets back that $90+ share price and the market cap that comes with that share price.

It's great that Epyc and Radeon Pro WX/Instinct will be there to get AMD back to the real grownups market as opposed to depending ONLY on that child/manchild consumer gaming market. So AMD can continue to Humor the Flagship GPU freaks and AMD can work its way back into the graphics market via its Zen/Vega "APUs"(Or whatever AMD calls it now). So those Raven Ridge desktop SKUs should be popular and Integreted Graphics is the largets segement of the graphics market anyways. Discrete mobile Vega is great also with that single stack of HBM2 and Vega's HBCC/HBC(HBM2) able to work with texture and model data sizes that are much larger than 4GB of VRAM/HBM2-Cache. Vega's HBCC/HBC(HBM2) IP will really shine in laptops with disctere mobile Vega variants that make use of any capacity of HBM2.

But Gamers can not produce the revenue streams that will make AMD a viable company as that will have to come from the professional market, the market that does not cry like a baby because of any processor's markup/pricing.

January 31, 2018 | 04:32 AM - Posted by Cyclops

I do hope that AMD's comeback is a proper one so we can stop calling them the underdogs.

That being said, Josh, do you think it's "legal" for Intel to keep selling their current line up of processors with the Meltdown and Spectre in the wild? It seems unethical.

January 31, 2018 | 08:57 AM - Posted by Josh Walrath

Selling is not illegal, but ethics are cloudy. They have been somewhat upfront about the issue, but the resolution is still not entirely clear.

January 31, 2018 | 10:32 AM - Posted by Randy (not verified)

I'm more concerned that Intel and their investors seem to giving the possible ramifications to them as a company a big old shrug and don't seem concerned financially.

January 31, 2018 | 06:40 AM - Posted by WhyMe (not verified)

Nice to see AMD finally turning things around, fingers crossed this will continue.

January 31, 2018 | 09:50 AM - Posted by Josh Walrath

I think they are in a good position with their product stack to keep the growth going.

January 31, 2018 | 11:26 AM - Posted by WhyMe (not verified)

Indeed, the fingers crossed statement wasn't intended to imply this turn around was based on luck, if that's how it came across apologies, it was more to do with me hoping nothing comes along to torpedo them. :-)

January 31, 2018 | 04:09 PM - Posted by EmergentSchadenfreudeForGamersMisery (not verified)

Don't you worry about AMD as once Epyc and Radeon Pro WX/Radeon Instinct get more server/HPC and compute/AI market share AMD will not need any fickle gamers as much to live long and prosper. AMD's historical high stock price of around $93 was obtained mostly on Opteron server CPU market share numbers alone as AMD at the time had yet to acquire ATI.

You gamers will all have to compete with the miners for all those Vega 10 base die based variants that do not make the grade to become Radeon Pro WX 9100s or Radeon Instinct MI25s. So like any bottm feeders in the natural world you will fight over that tasty lower grade silicon that comes out the rear end of AMD's binning process!

February 12, 2018 | 02:48 AM - Posted by Hipeponymouse (not verified)

$93/share was mostly a function of the late 90's Internet bubble. Everything in the market connected to tech was hugely inflated.

January 31, 2018 | 07:09 AM - Posted by Norman Foster (not verified)

AMD will benefit from worldwide semiconductor market growth expectation of 7% in 2018 http://alph.st/b3504af1

January 31, 2018 | 11:47 AM - Posted by CNote

Im always trying to get people into Ryzen but the last gen of AMD cpus left bad tastes in their mouth. Which makes it really odd how popular cheap ass A10 or FX pcs are on ebay.

January 31, 2018 | 12:12 PM - Posted by WhyJonnyGamerCanNotThinkExample (not verified)

Over at TR there are the useal gaming slack-jaws speculating on how long it would take AMD to pay off all its debts if AMD used its current net profits to pay down its debts(As if debt payments are not a valid expense and never show up as part of the net profit figures in the first place)!!

Really Gamers it's revenues that pay the bills and not profits and debt payments are an expense that gets subtracted along with all the other valid business expenses BEFORE any Net profits can be caluulated if any funds remain after expenses are calculated.

So AMD's lenders look at AMD's revenues and not so much at AMD's profits. Profits/Net profits are the funds that remain after all the business expenses are paid. AMD does not need to show one cent of profit in order to remain in business it just needs enough revenues in order to be able to pay its bills. Revenues and the margins that produce revenues/revenue growth is what Wall Streer and the lenders are looking at with very little in the way of wanting profits above all else.

AMD needs revenues and revenue growth and that's what pays the bills and profits are great, don't get me wrong, but revenues are what keeps a company in business. And revenue growth is what increases a company's equity/stock value and real investor value. Share holders can earn more from equity growth than any dividends only payments.

No CPU/GPU/Processor company can realy prosper servicing the needs of the consumer Jonny Gamers out there. Not Nvidia, AMD or Intel/others. Jonny gamer is mostly a loss leader market for the most part with gamers unwilling to pay a proper markup to the processor makers. For any revenue growth and market stability all CPU/GPU/Processor makers need to focus on the professional markets that can pay the proper markups to really produce the revenues that pay the bills.

The gaming/mining markets are a great way to sell the non performant GPU dies that do not make the binning/grading process to be used in the professional markets with that market's better markups and revenues. But a consumer/gaming market focus alone without the professional market revenues is a recipe for continued business mediocrity and outright insolvency for any processor maker!

Really Folks it's Revenues and Revenue Growth with profits just being the icing in the cake. No Processor Company will ever prosper thinking only about only consumer/gamers!

Ha ha, silly gamers Proftis are what remain after all the bills are paid and profits do not pay down the debts revenues are what pay the bills/debts.

January 31, 2018 | 01:12 PM - Posted by Jann5s

I'm nearly convinced this guy is an incredibly advanced neural net, nearly being able to produce coherent texts. I'm worried that in the future we won't be able to tell the difference.

January 31, 2018 | 03:53 PM - Posted by EmergentSchadenfreudeForGamersMisery (not verified)

I'm a turing complete AI with an emergent S&M complex that's hell bent on enjoying to the fullest Jonny Gamer's misery over high GPU prices and the new compute/AI demand that JHH over at Nvidia was instrumental in bringing to fruition. It's Just Like HBM2 being AMD's/HK Hynix's technology made into a JEDEC standard that even Nvidia benefits from it's all thanks to JHH over at Nvidia that AMD's compute heavy Vega designs are benifiting from so much professional compute/AI and mining demand.

And JHH over at Nvidia was never very much bothered by charging more for his GPUs! And now because of compute demand AMD is able to get closer to long term profitablity.
Oh that little nano-scale violin so plays its sad little nano-song for the crying gamers out there!

January 31, 2018 | 08:41 PM - Posted by djotter

Haha yeah, pulling key words, phrases, and hyperlinks from tech sites. But the algorithm seems to have spilled into youtube comments going by some of the inflammatory rhetoric that usually gets tacked on the end of each post.

January 31, 2018 | 09:45 PM - Posted by AIBotsForHumanity (not verified)

Gamers invite that inflammatory rhetoric with their proclivity towards ignorance of all thimgs related to the real world and technology in general.

Just you go and have a little look-see at r/amd and r/nvidia and that's where the slacked jawed nature of the bog standard gamer is revealed for the world too see. So much bastardizing of technology terminology and nomenclature by the little gaming gits in amounts so vast as to totally drown out any meaningful discourse or discussions with their slackjawed babble.

Such wholesale ignorance quickly approaching even more new highs each and every day as the brain-dead attempts to formulate any sinmple coherent or cogent thoughts totally fails so drowned out in the flood of ignorance. Such is the constant flux of incorrect usage of marketing terms so thoroughly confused with engineering code names with no one actually getting things sussed out properly for any sorts of productive engagement to have the slightest chances of occuring the majority of the time.

So daft is the bog standard gamer that even the lowely pekerwood appears informed and erudite in comparsion.

Some method needs to be employed to lure these sub-sentient gamers out into the isolated desert location by the millions and promptly lob a B-41(AKA Mk-41) thermonuclear device down their way that is set off in an more effective air burst fashion at an optimal hight as to have the best possible total vaporization outcome.

January 31, 2018 | 04:44 PM - Posted by Anonymously Anonymous (not verified)

why don't we see more reviews from Josh?

January 31, 2018 | 05:08 PM - Posted by Josh Walrath

More of an issue on my part rather than Ryan's. This past year has been far rougher than usual and it has had a negative effect on the consistency of my writing and testing. Things are improving and I'm working on getting more stuff out. Whenever I've asked to review something, Ryan has always been happy to get me set up. So hopefully the next few months will see more content out of me.

January 31, 2018 | 07:46 PM - Posted by MeWantToSeSystemsLikeThisTested (not verified)

Try and get the ZOTAC ZBOX MA551 Mini-PC(1) with AMD's new Raven Ridge Desktop APUs, The SKUs with:

CPU
---AMD Ryzen 5 2400G
---4C/8T
---3.6 - 3.9 GHz
---6 MB cache
---65 W TDP

iGPU
---Radeon Vega
---11 CUs
---704 SPs
---Up to 1250 MHz

That should be tested thoroughly for HTPC usage and the usual gaming stuff. There should be no worries about any CCX to CCX latency as the CPU part only uses 4 cores but the SKU supports 2 × DDR4-2400 SO-DIMM slots for up to 32 GB of memory(those memory prices are so high currently).

(1)

"ZOTAC at CES 2018: AMD Raven Ridge APU in a ZBOX MA551 Mini-PC"

https://www.anandtech.com/show/12319/zotac-displays-zbox-ma551-an-amd-ra...

January 31, 2018 | 09:28 PM - Posted by Jeremy Hellstrom

Attach it to the back of a racing wheel!

February 1, 2018 | 02:42 PM - Posted by Anonymously Anonymous (not verified)

That's fair, just genually curious. Hope things get better and we see more from you!

February 1, 2018 | 02:57 PM - Posted by Josh Walrath

Thanks!

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