AMD Announces Q3 FY 2018 Earnings: Improving Margins, But Dogged By Crypto Decline
by Brett Howse on October 24, 2018 8:50 PM EST- Posted in
- CPUs
- AMD
- Fiscal Results
This afternoon, AMD announced their third quarter earnings for the 2018 fiscal year, and while there are a couple of issues they’ll have to work through, this quarter was another strong one from the company. Revenue was up 4% year-over-year to $1.65 billion, and possibly more importantly, AMD achieved a gross margin of 40%, which is up 4% from a year ago. That’s a big win for the company which struggled with margins over the last several years, dipping to as low as 29% in Q4 2014. Operating income was up 26% to $150 million, and net income was up 67% to $102 million. This resulted in earnings per share of $0.09, up 50% from a year ago.
| AMD Q3 2018 Financial Results (GAAP) | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $1653M | $1756M | $1584M | ||
| Gross Margin | 40% | 37% | 36% | ||
| Operating Income | $150M | $153M | $119M | ||
| Net Income | $102M | $116M | $61M | ||
| Earnings Per Share | $0.09 | $0.11 | $0.06 | ||
AMD attributes the growth in gross margin to the launches of new products like Ryzen and EPYC, but also due to IP related revenue, which accounted for half of the gross margin increase. While that revenue stream may not last, even without it, 38% puts them in a much better position than they have been previously.
Looking at their segments, Computing and Graphics saw revenues climb 12% year-over-year to $938 million, and the segment had operating income of $100 million, up 37% from a year ago. Strong Ryzen desktop and mobile sales were actually offset though by lower GPU revenues with the fall of the cryptocurrency market. AMD says that blockchain revenue for this quarter was negligible, and it’s unlikely to grow with the current state of cryptocurrency. What this does lead to though is AMD having a glut of products in the channel where crypto sales haven’t happened, which is likely to impact upcoming quarters.
| AMD Q3 2018 Computing and Graphics | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $938M | $1086M | $835M | ||
| Operating Income | $100M | $117M | $73M | ||
AMD’s other major segment is Enterprise, Embedded, and Semi-Custom, which helped them with the lean years thanks to AMD wins in both the Xbox and PlayStation. Revenue for this segment was $715 million, down 4.5% from a year ago. Operating income was $86 million, up 16.2%. The lower revenue is due to lower semi-custom product and IP related revenue, which isn’t surprising given how long the consoles have been on the market. This was offset though by increase server sales with EPYC, and the additional EPYC sales also helped with the margins, thanks to enterprise offering much better returns than consumer plays. AMD has also said their Radeon Instinct line of datacenter graphics products also were a key factor to their income growth this year.
| AMD Q3 2018 Enterprise, Embedded, and Semi-Custom | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $715M | $670M | $749M | ||
| Operating Income | $86M | $69M | $74M | ||
Looking ahead to next quarter, AMD expects revenue to be $1.45 billion, plus or minus $50 million, and non-GAAP gross margin to be 41%.
Source: AMD Investor Relations
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Lord of the Bored - Wednesday, October 24, 2018 - link
Just looked it up. Intel has over 23 billion in debt at present. That appears to be ten times more than AMD.Granted, Intel has a lot more income, too. Which is why analysts look at the debt-to-equity ratio, not the actual debt. Reply
lemans24 - Wednesday, October 24, 2018 - link
Last quarter, Intel's debt to equity ratio was 0.41...Amd debt to equity ratio was 1.58 which basically means AMD is 4 times more riskier as regards their debt.Intel is ridiculously more financially stronger than AMD that they really do not have to lower their chip prices at all regardless of what AMD does!!!
Basically AMD even with their superior Zen architecture, is really no competitive financial threat to Intel until they start selling their Epyc chips into the billions (yes...at least 2 billion) Reply
Lord of the Bored - Thursday, October 25, 2018 - link
I wouldn't state it as strongly as that(Intel HAS been responding aggressively to Zen, offering much more bang for significantly less buck almost immediately after the Ryzen launch, though their current supply issues are pushing prices back towards pre-Zen levels), but I don't fundamentally disagree.I didn't look up debt-to-equity because I had already read more about business finance than I cared to, but was pretty sure AMD's ratio was a lot worse(it would pretty much have to be). This was about pointing and laughing at HStewart, who was presenting Intel's situation as AMD's and declaring it a crippling weakness. It was not professional financial consultation. Reply
HStewart - Thursday, October 25, 2018 - link
First of as AMD being superior architecture, that is an opinion and not a fact.Intel is financially stronger because company does not put all it eggs in one basket like AMD with Zen and Vega. AMD long term debt is bigger than most believe - if I read fight the financials - they owe more than the company is worth. If Zen does not do significantly better - AMD is history. Reply
t.s - Thursday, October 25, 2018 - link
Yes, I absolutely un-genuinely agree! What is more superior than Intel architecture; that one arch to rule them all! And yes again. AMD put their their eggs in one basket. Mind you, eggs. egg(s <- here, here)! On the opposite, the mighty Intel put their eggs in different basket. What could gone wrong with Intel? Nope! Nada! Neva! ReplyHStewart - Thursday, October 25, 2018 - link
You have a choice if you don't like Intel architecture, you can use ARM or SPARKMost people think of Intel as just PC - x86 technology and forgot about all the other products they have including, solid state memory, programable logic memory, misc chipsset in many areas include 5G and many other including working with ARM for neural networks which ARM needs Reply
PeachNCream - Thursday, October 25, 2018 - link
Intel architecture...you mean x86-64? AKA AMD64? ReplyLord of the Bored - Friday, October 26, 2018 - link
Eggs and baskets, that is an opinion and not a fact. ReplyTheJian - Friday, October 26, 2018 - link
AMD wouldn't have had a problem at all if they'd charge HIGHER prices, and quit killing margins by attaching crap that blows the cost or causes shortages. They have killed multiple HIGH end products with HBM/HBM2. STOP, for the love of GOD, STOP using HBM unless you can actually prove it SERIOUSLY improves perf. Otherwise go cheap and massively easy to pump out quantity just in case you need them. GDDR5x would have solved most of AMD's problem with the last 2 vid launches and raised margins while selling MORE units due to no shortages of hbm/hbm2.CPU side, if you have a product that wins, charge like it WINS. Otherwise get used to 40% margins instead of ever understanding what 60+ looks like. I can't understand why they don't get selling HIGH is better than selling low. Why do you think in ANY shortage Intel moves production to HEDT/SERVER, screw bottom end users? Because 80% of the NET INCOME is TOP END stuff. IE, in vid cards that money is made above $250 (probably 300 now as we keep moving it up, myself spent $509 1070ti, first over $300 EVER, quite a jump for me). On Intel side, most is made from HEDT and up and the top consumer chips ($280+). The rest is pretty much just salvage so you don't lose all those hard earned TOP END dollars. AMD needs to stop pricing like they're trying to get us into bed...LOL. Quit trying to get us to like you. PRICE LIKE INTEL/NVDA if you're on top! OR, $18 stock price down from $34 in a month. You should be making 300-500mil a Q and more once Zen2 7nm stuff hits server/desktops. If you get that pricing wrong too, you deserve to make nothing and hopefully get bought so someone with real management skills can price their way to REAL competition financially! You know, with a billion a year NET or more! Reply
Manch - Thursday, October 25, 2018 - link
Shut up Stewie. Reply