AMD introduced its Q1 2019 outcomes yesterday, and the outcomes, whereas not nice, truly spotlight how a lot the corporate’s place has improved because it launched Ryzen again in 2017. Gross sales for the quarter have been $1.23B, down 10 % from This autumn 2018 (roughly in-line with seasonality) and 23 % from Q1 2018. AMD reported larger working bills of $543M in comparison with $477M a yr in the past, each instantly associated to the 7nm ramp. A rise in stock forward of the Ryzen launch occurred for a similar purpose.
AMD’s gross margin was the star of the present, rising Three factors quarter-on-quarter and 5 factors year-on-year. AMD attributed a lot of the three % acquire to “a cost within the fourth quarter of 2018 associated to older know-how licenses,” however claimed the 5 level enchancment over the past twelve months was the results of improved Epyc, Ryzen, and information middle GPU gross sales. The corporate additionally picked up $60M from its licensing take care of THATIC.
One factor to remember when contemplating AMD’s outcomes in comparison with this era final yr. The crypto growth was nonetheless in full swing in Q1 2018, and that had a markedly optimistic impact on AMD again then. Now that the bubble has burst, AMD appears comparatively worse in consequence. AMD attributed the year-on-year fall off in income to the decline of the crypto market, whereas the a lot smaller quarterly decline was because of decrease consumer CPU gross sales. Regardless of this, progress in Ryzen and Epyc gross sales was robust. Right here’s CEO Lisa Su:
Ryzen and EPYC processor and information middle GPU income greater than doubled year-over-year, serving to broaden gross margin by 5 share factors, and partially offsetting graphics channel softness and decrease semi-custom income.
our Computing and Graphics phase, income declined year-over-year as larger consumer processor gross sales have been offset by decrease graphics gross sales to the channel. Consumer processor gross sales elevated by a robust double-digit share from the yr in the past interval, as unit shipments elevated considerably and our new merchandise drove larger consumer ASP. Consequently, we consider we gained unit market share for the sixth straight quarter.
Consumer CPU common promoting costs (ASPs) grew in desktop year-on-year as Ryzen stuffed within the channel, however fell barely quarter-on-quarter because of cellular declines.
In a current article discussing what sort of enhancements AMD clients should expect from the third-generation Ryzen / Zen 2 CPU household, I mentioned AMD’s margins and the way the corporate merely doesn’t have room to slash pricing to intestine its per-core pricing in the way in which a few of its followers would really like it to, 7nm transition or no. The corporate’s monetary outcomes right this moment spotlight this. The slideshow beneath expands on this matter.
The explanation AMD remains to be worthwhile — albeit narrowly — regardless of a income hit and a simultaneous enhance in working bills is due partially to its skill to command larger margins than it as soon as did. ET is a technical website, not a inventory agency, and I don’t give funding recommendation. However you don’t must be a inventory dealer to see the connection between incomes a better margin on product gross sales and having extra room to soak up larger prices and decrease unit quantity. The worst factor AMD might do, having survived 2011 – early 2017, can be to show its again on these enhancements by slashing costs. The truth that AMD’s gross margin is being partly nudged by one-time funds solely makes this challenge extra important — the corporate doesn’t have room to take a margin hit if it needs to stay worthwhile.
When requested about AMD’s margin construction particularly, CFO Devinder Kumar stated:
The consumer and information middle companies are larger than company common and the semi-custom enterprise and graphics as we simply stated within the final quarter are decrease than company common, particularly graphics client facet and the info middle, GPU facet clearly is best.
He was then requested a follow-up query by David Wong:
“Nice. And our gross margins rising on your microprocessor companies in the mean time?”
Right here’s Kumar’s reply:
I feel earlier within the yr that is the second quarter, we’re getting the second quarter at 21% information and our steering for the yr is bigger than 41% on an annual foundation, is what we’ve acknowledged to this point.
AMD clearly has no plans to cut back its microprocessor gross margins. The value construction anticipated by varied rumors on-line usually are not suitable with statements by the corporate’s company officers.
We don’t know for sure that AMD gained market share, however the firm believes it did, and that’s what was forecast by a number of analysis companies, because of the ongoing Intel CPU scarcity. The slight lower in cellular ASPs that the corporate famous might have been brought on by its entry into the low-end Chromebook market. For Q2 2019, AMD expects income of $1.52B, a rise of 19 % sequentially however down 13 % year-on-year. The year-on-year decline is anticipated to be pushed by decrease semi-custom income, partly offset by elevated server gross sales.
The falling semi-custom income is to be anticipated, and AMD informed traders it expects semi-custom income to say no by roughly 20 % this yr. When AMD first unveiled its semi-custom wins with the Xbox One and PS4, it introduced that the income deal it had struck with Sony and Microsoft was designed to ship the very best earnings within the first few years, with AMD’s earnings per APU declining at an undisclosed charge thereafter. We might anticipate to see semi-custom income head northward once more as soon as the Xbox Subsequent and PS5 hit market in 2020, whereas the info middle phase might get a lift as soon as 7nm Epyc CPUs hit market.
Just a few final fascinating tidbits:
Whereas Intel needed to stroll again its information middle predictions as overly optimistic throughout its final convention name, Lisa Su indicated that the info middle market was evolving as AMD anticipated. AMD’s market share is just within the 3-5 % vary, nonetheless, which enormously limits its publicity.
Su’s phrasing in a reference to Navi may very well be learn to point a midsummer launch. Her precise phrases:”As we have a look at the graphics enterprise, once more, the channel stock scenario has improved, and in order that we anticipate that the channel can be up right here within the second quarter, after which into the second half as we launch Navi.” This is able to nonetheless fulfill the Q3 requirement (Q2 ends in July).
Su additionally articulated a brand new tough goal for AMD’s server market share. “[W]e anticipate that over the subsequent quarter to 6 quarters, we might proceed to ramp our server market share with a objective of getting the double-digit share share.”
AMD’s information middle GPU and CPU enterprise is price a “mid-teens” share of income. On gross sales of $1.23B and an assumed 15 % of income, that works out to $184.5M in income. Su additionally acknowledged that gross sales have been roughly even between CPU and GPU, implying income in Q1 of ~$92M every.