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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  • HStewart - Thursday, October 25, 2018 - link

    Of course we have Raju from AMD and now in Intel. Reply
  • Targon - Thursday, October 25, 2018 - link

    Intel executives are doing a good job at making people badmouth their own company. Did Intel CPU performance go up significantly between 2013 and 2017, or was it largely stagnant? It took Ryzen in order to wake Intel up and start actually trying to do anything.

    AMD purchased ATI just prior to the recession which caused the entire stock market to go down significantly. If the timing had been a year later in 2008 after the recession hit, the purchase price would have been a lot lower. These things happen in business, but AMD survived it. Lisa Su has done an amazing job of setting a direction for the company, get the CPU business back to being properly competitive again at the high end, and then use the resulting money to get the graphics division back on track(expectation of 2020 for when the next true all-new GPU architecture will come out from AMD).

    You are only deceiving yourself if you think that AMD isn't on the verge of going from continually struggling to being seen as a true leader.
    Reply
  • just4U - Wednesday, October 24, 2018 - link

    I am actually quite fine with the AMD side of the GPU market. You can finally pick up Vega cards at a half ways decent price and their multi purpose. The 580 is still excellent for gaming as well.. and again is coming in at reasonable prices. Looking thru local stock, there isn't a lot there but at least you can walk in to a store and buy one.

    Amd should be looking at their next gen as Nvidia has it's top guns out already and many are not happy with the pricing.. but with many gamers already having some pretty good graphic setups right now there isn't a lot to be all that thrilled about (upgrade wise) so .. whatever it is what it is. If your on a old system nows the time to get that much needed upgrade.
    Reply
  • Yojimbo - Thursday, October 25, 2018 - link

    Oooh, AMD stuffed the channel.

    Now the Q2 discrete GPU market share from Jon Peddie Research makes sense. How come NVIDIA knew 3 months ago that cryptocurrency demand had dried up and AMD only discovered it now? AMD gave themselves a stellar Q2 by pushing forward revenue from Q3 and Q4. Wonder what sort of insider trading has gone on at AMD over the past 3 months.
    Reply
  • Lord of the Bored - Thursday, October 25, 2018 - link

    nVidia didn't see as big a boom from the buttcoin diggers as AMD in the first place, because AMD cards are actually better at buttdigging. During the peak of the buttdigger craze, I could still find green video cards at inflated prices, but every red card of even remotely decent specs was just empty shelf space. Reply
  • Yojimbo - Thursday, October 25, 2018 - link

    NVIDIA had roughly 50% of the revenue from crypto. The reason NVIDIA cards had greater availability is because NVIDIA had more liquidity because they owned 80% of the gaming market. They could be more certain they'd sell through the cards if crypto evaporared so they didn't have to be so conservative with their production.

    Regardless, it's not that important. The ethereum global hashrate shows when crypto demand dried up. And when it dried up it dried up for both NVIDIA and AMD.
    Reply
  • Yojimbo - Thursday, October 25, 2018 - link

    Oh, and another thing that shows pretty clearly that AMD is trying to he sneaky here. Even if AMD actually still saw strong crypto demand in Q2, the fact that NVIDIA's demand completely dried up in Q2 should make it impossible for them to be surprised by crypto drying up for them in Q3. Reply
  • neblogai - Thursday, October 25, 2018 - link

    Where are you getting 'AMD is trying to be sneaky'? Their Q3 results are as expected, only with better gross margin:
    'For the third quarter of 2018, AMD expects revenue to be approximately $1.7 billion, plus or minus $50 million (/it is 1653M), ... GAAP gross margin to increase to approximately 38 percent (/increased to 40%), driven by the sales growth of Ryzen and EPYC products, partially offset by lower sales of GPU products in the blockchain market'.
    And- it they produced more Polaris chips than needed- then that will not go to waste, as they are not releasing a replacement for them for another ~9months at least. And, a lot of their SKUs are still very much overpriced in many markets of the world, meaning- there is not enough of them being delivered.
    Reply
  • silverblue - Thursday, October 25, 2018 - link

    And yet, despite meeting or exceeding expectations, AMD's share price has tanked by a quarter within less than 24 hours, with what Business Insider describes as "AMD is getting smoked after revenue misses, guidance falls short". They must've been reading something different to the rest of us. Reply
  • silverblue - Thursday, October 25, 2018 - link

    To clarify, I'm referring to the revenue "miss" and not the guidance. Reply

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