Continuing our look at tech industry financial results, AMD this afternoon is celebrating setting some new records in its Q2’2020 financial results. Enjoying a continuing turn-around in its fortunes t hanks in big part to its Zen series of CPU architectures and resulting products, the company has just closed the books on the first year of sales of its Zen 2-based desktop processors, with EPYC following close behind. At this point AMD is now setting quarterly revenue records, and the company is expecting to grow its revenue further over the coming months.

For the second quarter of 2020, AMD reported $1.93B in revenue, a 26% jump over the same quarter a year ago. As a result, Q2’2020 was AMD’s best quarter ever, built on the back of record notebook and server revenue. Overall, all of AMD’s metrics have improved in a year-over-year basis, with net income up $122M (349%) to $157M, while the company’s all-important gross margin improved by 3 points to 44%. In fact the only real knock that can be made on AMD’s quarter is that they didn’t pass their Q1’2020 net income or gross margin, which was due to increased semi-custom shipments, which aren’t as profitable for the company.

AMD Q2 2020 Financial Results (GAAP)
  Q2'2020 Q2'2019 Q1'2020
Revenue $1.93B $1.53B $1.79B
Gross Margin 44% 41% 46%
Operating Income $173M $59M $177M
Net Income $157M $35M $162M
Earnings Per Share $0.13 $0.03 $0.14

Once again the flag bearer for AMD is their Computing and Graphics segment, which encompasses their desktop and notebook CPU sales, as well as their GPU sales. That division booked $1.37B in revenue for the quarter, $427M (45%) more than Q2 of 2019. The segment’s operating income as up significantly as well, jumping from just $22M a year ago to $200M this year.

These numbers come as AMD closes the book on their first year of Zen 2 product sales – the first retail chips hit store shelves at the very start of Q3’2019. Since then AMD has grown their desktop chip sales significantly, and combined with laptop sales the company is reporting their best client processor revenue in more than 12 years. As previously mentioned, laptop sales saw record revenue – doubling last year’s numbers – thanks in part to AMD shipping a record number of notebook chips.

AMD Q2 2020 Computing and Graphics
  Q2'2020 Q2'2019 Q1'2020
Revenue $1367M $940M $1438M
Operating Income $200M $22M $262M

As for product average selling prices (ASPs), AMD is reporting that client processor prices are up on a year-over-year basis (thanks again to Zen 2). However they have dropped on a quarterly basis due to a greater mix of Ryzen Mobile sales.

Meanwhile AMD’s GPU division looks to have once again been the laggard. While AMD doesn’t break out revenue numbers to specific divisions, on the subject of ASPs they note that GPU ASPs are down on both a year-over-year and quarterly basis, due to lower channel sales. On their earnings call, AMD has noted that while mobile GPU sales are up by double digits, this was more than offset by declines in desktop GPU sales. Overall, with AMD’s Q2’2019 being a somewhat soft quarter for GPU sales to begin with as consumers awaited their heavily-teased Navi architecture products, I’m surprised to see that AMD’s ASPs still slipped this year.

AMD Q2 2020 Enterprise, Embedded and Semi-Custom
  Q2'2020 Q2'2019 Q1'2020
Revenue $565M $591M $348M
Operating Income $33M $89M -$26M

Finally, AMD’s Enterprise, Embedded, and Semi-Custom segment saw a very solid Q2, as the group enjoyed an uptick in EPYC processor sales. In fact AMD has finally, albeit belatedly, finally captured a double-digit share of the server processor market, a major goal for the company. Fittingly, on a year-over-year basis, EPYC revenue has doubled.

None the less, the odd grouping of server CPUs with semi-custom (console) chips means that revenue actually dropped on a year-over-year basis thanks to lower semi-custom sales. The upshot, at least, is that it’s a significant improvement over Q1, where the group ended up in the red. Meanwhile AMD has started production of the PS5 and Xbox Series X SoCs, so revenues here should significantly improve next quarter, but those are still lower margin products.

Looking forward, like much of the rest of the tech industry AMD is looking towards a strong second-half of the year, as the company has been able to successfully weather the immediate challenges from the coronavirus pandemic. As a result, AMD is increasing its full-year projections, and the company is now calling for 32% revenue growth over 2019, and a gross margin of around 45%.

Driving this growth for AMD will be a mix of the slow expansion of server products, as well as new products launched in the second-half of the year. AMD is expecting EPYC sales to continue to grow and for the company to gain market share there as more server vendors further ramp up their EPYC server production. Meanwhile AMD is reiterating that it’s expecting to begin shipping its Zen 3-based “Milan” EPYC processors late this year. AMD’s upcoming CDNA-based data center GPUs are also set to launch around at time.

As for the consumer side of matters, AMD is expecting continued sales success with its consumer products, particularly Ryzen Mobile. None the less, all eyes are going to be on AMD’s future products, as AMD is reiterating their 2020 launch plans. The company reports that it’s on track to launch Zen 3 client CPUs in late 2020, and the company’s eagerly-anticipated RDNA2 products, which will eventually encompass a full stack refresh, will launch in late 2020 as well.

Source: AMD

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  • brucethemoose - Tuesday, July 28, 2020 - link

    Good for them!

    The stock price is still insane though. A P/E of 170... holy moly.
    Reply
  • ads295 - Wednesday, July 29, 2020 - link

    P/E is dependent on price as well as earnings. Earnings for AMD have been poor enough to now lead to ludicrous P/E ratios. Reply
  • brucethemoose - Wednesday, July 29, 2020 - link

    Well yes, exactly. Its like theres an expectation that earnings will jump 10x, and do it soon. Reply
  • rahvin - Sunday, August 2, 2020 - link

    The forward PE is only 48, still high but not nearly as exorbitant as the 170 you claim. Looking at the same PE from what was predicted the growth has far exceeded the prior predicted which means a higher PE than average is justified.

    My own investment in 2018 had similar predicted PE's, and I've seen a 400% increase in value. As long as AMD exceeds their sale goals the growth in stock value will continue, especially since intel has stumbled again on process tech which should make hitting those sale goals even easier.

    Look at it this way, AMD is still pushing Intel for the top on CPU's, has them licked on the server side (which practically guarantees server sales increases) and now has a guaranteed 6 months (and probably longer if you go by history) more time to hit those profits.
    Reply
  • TheJian - Monday, August 3, 2020 - link

    ROFL. He said, PE, then you change topic to forward PE.

    At some point you have to grow NET INCOME too. You can get all the revenue you want, but if you make NOTHING on it, what is the point? At some point people will ask you to PROFIT or dump your shares like I did ;) At this point AMD has to prove more than "we can sell it cheap, get revenue and ACT like we make money"...Not good enough after 3 years of this crap. If you're not making .5B GROSS PROFIT on 1B revenue, you're doing it WRONG in this business and the best do far better than that (see Intel, while losing share, losing fab war, etc, STILL understand how to MAKE MORE NET INCOME). Wake me when AMD figures it out.

    Making 150mil on 2B is FAILING. PERIOD. There are NO GUARANTEES when the other guy can simply PAY people with 23B NET INCOME he earned to people YOU need to survive. IE, a simple extra 10% maybe (use your imagination, it's called contra revenue etc) for the same fab wafers as AMD, and promise even more crap every year you ignore AMD, what do you think TSMC does? They don't care who wins, only who makes them more money. They just make chips, they don't care WHO they are from, only who pays more to get them.

    4.1B+ per year for 4yrs+ was BLOWN just to stay in mobile by Intel. In case you missed it, Intel was pissing away MORE than 1/2 of AMD's revenue...YEARLY...ROFL. You don't think they will allow the enemy to buy wafers they need do you? They already said ~7 new divisions now, each can decide what fab to go with, OTHER than Intel's.

    Translation: All your fabs belong to US (Intel, well, ok, an apple...ROFL). WAFERS to the highest bidders. DUH. Guarantee...LOL. Until person X writes a larger check than person Y. If AMD doesn't have a contract for years, the party is OVER. Intel and even NV can pay MUCH more per wafer start than AMD. Rumors are abound about the fighting over them already, and Intel supposedly already has an agreement with TSMC now. Huawei gone sept, so I'm guessing Intel outbids anyone but Apple for that stuff, and since apple is on 5nm, It's Intel vs. everyone else for those wafers. I'm guessing Intel's 23B NET INCOME per year matters here. I guess you missed the part where AMD SOLD their fabs (and everything else they owned but IP, due to stupid LOW PRICING for decades). IF you don't OWN the fab, anyone can ruin your day with a check (use your imagination, 100 ways to pay you without a check too, easily made legal). How do you stop someone from paying MORE than you can afford for a wafer?

    What is AMD's option here, take or pay agreement again on wafers? How many years did it take to get out of that from GF? It cost them billions for that mistake. Intel put the fear of god in everyone (board makers couldn't put their name on mboards, Asus sold boards in whiteboxes etc, PC makers threatened, stores, etc etc), and AMD got stuck with years of wafers they couldn't use. Read The Art of War (or heck, Trump's Art of the Deal), and maybe you'll get how warfare works (business is ruthless, China reads trump's book...LOL, odd USA isn't using it in all schools).

    The best product doesn't always win. Just ask Netscape, Beta, etc etc :) Intel can piss away another 4B a year just to stop you from getting wafers easily and still make nearly 20B NET. What happens with 5nm TSMC server chips from Intel? You are not listening to INTEL telling you what is coming. OTHER FABS making INTEL chips. Do the math.
    Reply
  • rahvin - Monday, August 3, 2020 - link

    Price to Earnings ratio has two equally valid calculations. Trailing P/E is based on the previous years earnings while forward P/E is based on the projected earnings. The trailing P/E is the one typically calculated because it's not based on projections. But in the case of AMD the trialing PE is distorted because of the cyrto-coin GPU market distortion and as a result the trialing P/E IMO is not a reliable indicator until that distortion is no longer in the calculation. Good investors investigate the basis of numbers before accepting them.

    You then spend a couple paragraphs scattershoting various topics that appear to be a stream of consciousness that makes little sense. If you'd like a reply please post something coherent.

    AMD remains a very good investment, they have significant potential to not only hit their growth targets but exceed them, as they've done for the last several years, especially given that Intel continues to miss their goals and struggle with manufacturing.
    Reply
  • guachi - Wednesday, July 29, 2020 - link

    I can't believe I'll be able to retire much more comfortably in 2 years in large part to AMD's massive stock price increase on the last 5 years. Reply
  • ads295 - Wednesday, July 29, 2020 - link

    Capitalism and human non-rationality FTW. Reply
  • beginner99 - Wednesday, July 29, 2020 - link

    I'm still surprised how small their server cpu sales are compared to client. I guess consumers are more aware to performance/$ than corporations... Reply
  • WaltC - Wednesday, July 29, 2020 - link

    Companies tend upgrade servers slowly...;) Reply

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