AMD Q2 2017 earnings

[dark zero]

Its still early, but so far Ryzen is proving to be a tremendously successful product for AMD. Glad to see their business getting healthier.

Actually this is the year of the underdogs.. AMD returned with Ryzen and Vega seems promising, VIA returned from the oblivion in China and seems that they are ready to retake the world and Mediatek managed to catch Qualcomm up after a ton of years later. Still is pending to see how much effective is ending that comeback from the latter one.

 

[hasu]

Why is AMD never making a profit irrespective of increased sales? They always position themselves at a slight loss per share.
(I do have AMD stocks in my portfolio but I am not a savvy investor)

 

[dullard]

Why is AMD never making a profit irrespective of increased sales? They always position themselves at a slight loss per share.
(I do have AMD stocks in my portfolio but I am not a savvy investor)

AMD's gross margin is too low for profitability.

Gross margin = (revenue - (cost of goods sold)) / revenue

When you have a low gross margin, just simply selling more does not necessarily make you profitable. Why? The profit on each part is too small and because selling more often comes with other additional expenses. It might take more raw materials, more marketing, more sales people, more overhead, etc. So the additional profit with selling more gets sucked up by the additional expenses. The net effect is that they are not much more profitable than they were in the past.

In numbers, AMD sold $238 million more stuff. But it cost AMD $165 million more just to build that stuff. AMD doesn't own the foundries, AMD yields are probably not yet optimum, etc. Their chips simply are more expensive for them to produce than it could otherwise be. So all these extra sales only generated $73 million in more potential profit. But, AMD also ramped up spending in R&D substantially (14.8% more than this quarter last year) and marketing a bit. So that extra $73 million shrunk even more.

Like someone above said, AMD is focusing on growing revenue and not profit. I personally think they are simply under pricing their chips. Sure, customers like that. But if we want AMD around for the long haul, AMD needs to price their chips higher.

 

[itsmydamnation]

AMD's gross margin is too low for profitability.

Gross margin = (revenue - (cost of goods sold)) / revenue

When you have a low gross margin, just simply selling more does not necessarily make you profitable. Why? The profit on each part is too small and because selling more often comes with other additional expenses. It might take more raw materials, more marketing, more sales people, more overhead, etc. So the additional profit with selling more gets sucked up by the additional expenses. The net effect is that they are not much more profitable than they were in the past.

In numbers, AMD sold $238 million more stuff. But it cost AMD $165 million more just to build that stuff. AMD doesn't own the foundries, AMD yields are probably not yet optimum, etc. Their chips simply are more expensive for them to produce than it could otherwise be. So all these extra sales only generated $73 million in more potential profit. But, AMD also ramped up spending in R&D substantially (14.8% more than this quarter last year) and marketing a bit. So that extra $73 million shrunk even more.

Like someone above said, AMD is focusing on growing revenue and not profit. I personally think they are simply under pricing their chips. Sure, customers like that. But if we want AMD around for the long haul, AMD needs to price their chips higher.

No this is completely wrong, it's simple why, it's tax on profits. Amd upped r&d and downed debt this quarter. Amd could have ran a profit if they wanted to by why pay extra tax when you have acouple bill of debt and two main competitors who out spend You in R&D.

 

[dullard]

No this is completely wrong, it's simple why, it's tax on profits. Amd upped r&d and downed debt this quarter. Amd could have ran a profit if they wanted to by why pay extra tax when you have acouple bill of debt and two main competitors who out spend You in R&D.

Do you even understand math?

AMD's long term debt went down $60 million since the start of the year, yes. But their short term debt went up $42 million in the same time and their other liabilities went up too. Heck, their total debt went UP $9 million in the last quarter.

What do you think happened then to their additional $238 million of sales? Oh, that's right, cost of goods sold (up $110 million since this quarter last year), R&D (up $36 million since this quarter last year), marketing (up $8 million since this quarter last year), etc.

 

[itsmydamnation]

Do you even understand math?

Do you even understand math?
The cost of production increased because they produced more.
The only new product they released has significantly more gross margin then the previous , hell a 200mm sq 14nm finfit chip might actually cost less to produce then a 320mm sq plannar SOI chip (Vishera) as substrate costs are much higher then bulk.

Vishera consumer launch had 14 models ranging from $115 to $275 at launch with 11 of them under $200 and an average of $168.

Ryzen has 9 models at launch ranging from 499 to 109 for an average of $254 with only 4 chips under $200.

Obviously this isn't average sell price but does illustrate a point.

Then consider thread ripper there is only two models, they could have structured it like the 1800/1600 lines ( 5 parts) to maximize unit sales, but they haven't i wonder what they must be doing (hint how much does 2x 1600x's cost.......).

Now look at the product stack and compare it to Intel, a 1800X is the direct competitor to a 7700k, but it costs more has no GPU, look at the low end 1200,1300X,1500x priced around the same as intels 7100,7300,7400 perform around the same, trading peak freq and a smallish IPC lead for more cores/threads.

What parts of this is AMD chasing revenue not margin? Just because intel have been price gouging the highend doesn't mean AMD isn't making serious margin on their high end parts and just as much margin on their low end parts.

AMD margins over all are low because semi-custom is low margin, EPYC hasn't been shipping long enough to matter, there are no high margin GPU parts yet(remains to be seen) and Excavator is still being used in the laptop and desktop space. Whats going to happen When AMD can complete on performance and perf per watt with every intel Mobile chip, AMD's margins in small form factors will go up. If Vega doesn't suck, Margins will go up, if EPYC takes even just a couple of % the Server market, Margins will go up.

Nothing AMD has done has been about chasing revenue, its been about competitive pricing and offering an incentive to switch.

AMD's long term debt went down $60 million since the start of the year, yes. But their short term debt went up $42 million in the same time and their other liabilities went up too. Heck, their total debt went UP $9 million in the last quarter.

Your bundling things that don't matter together to try and make it look like it got worse, purchasing inventory so you can SELL YOUR DAM PRODUCT isn't a bad thing. What do you think that short term debt is financing? With current low interest rates why would you spend your limited cash?

What do you think happened then to their additional $238 million of sales? Oh, that's right, cost of goods sold (up $110 million since this quarter last year), R&D (up $36 million since this quarter last year), marketing (up $8 million since this quarter last year), etc.

Wow making more chips cost more money..... more news at 11...........
AMD still has large markets ($20 odd billion usd a year) where they are just still competing on price alone because CON cores are CON cores, that will change as RR moves into the market.

 

[frozentundra123456]

Whilst AMD should turn a profit in a qtr or two, am I the only one who is surprised they didn't make a profit this qtr?

But, but, if they made a profit (the bane of all businesses), they would have to pay those awful taxes. /s
So they are in great shape.

 

[frozentundra123456]

AMD's gross margin is too low for profitability.

Gross margin = (revenue - (cost of goods sold)) / revenue

When you have a low gross margin, just simply selling more does not necessarily make you profitable. Why? The profit on each part is too small and because selling more often comes with other additional expenses. It might take more raw materials, more marketing, more sales people, more overhead, etc. So the additional profit with selling more gets sucked up by the additional expenses. The net effect is that they are not much more profitable than they were in the past.

In numbers, AMD sold $238 million more stuff. But it cost AMD $165 million more just to build that stuff. AMD doesn't own the foundries, AMD yields are probably not yet optimum, etc. Their chips simply are more expensive for them to produce than it could otherwise be. So all these extra sales only generated $73 million in more potential profit. But, AMD also ramped up spending in R&D substantially (14.8% more than this quarter last year) and marketing a bit. So that extra $73 million shrunk even more.

Like someone above said, AMD is focusing on growing revenue and not profit. I personally think they are simply under pricing their chips. Sure, customers like that. But if we want AMD around for the long haul, AMD needs to price their chips higher.

Well said, in contrast to all the apologists.​

 

[hasu]

AMD's gross margin is too low for profitability.

Gross margin = (revenue - (cost of goods sold)) / revenue

When you have a low gross margin, just simply selling more does not necessarily make you profitable. Why? The profit on each part is too small and because selling more often comes with other additional expenses. It might take more raw materials, more marketing, more sales people, more overhead, etc. So the additional profit with selling more gets sucked up by the additional expenses. The net effect is that they are not much more profitable than they were in the past.

In numbers, AMD sold $238 million more stuff. But it cost AMD $165 million more just to build that stuff. AMD doesn't own the foundries, AMD yields are probably not yet optimum, etc. Their chips simply are more expensive for them to produce than it could otherwise be. So all these extra sales only generated $73 million in more potential profit. But, AMD also ramped up spending in R&D substantially (14.8% more than this quarter last year) and marketing a bit. So that extra $73 million shrunk even more.

Like someone above said, AMD is focusing on growing revenue and not profit. I personally think they are simply under pricing their chips. Sure, customers like that. But if we want AMD around for the long haul, AMD needs to price their chips higher.

That certainly makes sense and their strategy of bringing more people to their platform is certainly well thought out.

I used to be with AMD since the year 2000 (IIRC Athlon 1.4GHz) they used to run road shows to demonstrate their higher IPC compared to Intel. I have been using AMD up until a couple of years ago when I bought a 4790K that blew my mind! If Ryzen 7 series has similar IPC/performance then it is just a matter of time people like me go back to AMD. Competition is good!!

 

[dullard]

...

I like how almost none of that rant was even relevant to the topic that pissed you off. But, at least some of your rant was correct (the parts that I already said and you disputed earlier). For example, I said it cost more to produce more (post #53), you deny it (post #54), and then you come back and claim that it costs more to produce more (post #56).

AMD's gross margin FELL this quarter. Plain and simple. That is why AMD was not profitable this quarter. End of story. AMD itself said it won't be profitable as long as the gross margin is in the lower 30s%. If I am wrong, it is only because AMD must have lied. Or maybe, you were wrong.

 

[VirtualLarry]

AMD gross margin in the 30% range? Is that because of Ryzen's low, low prices? Or because of the console contracts?

We hear all about the 80%+ yields on Zepplin dies, and Ryzen's wonderful cost structure due to MCM construction for the larger chips.

And yet, 30%? I don't figure.

 

[jpiniero]

I'd have to think Ryzen at this point would not have been that big of a factor with the C&G sales. Margins on anything Dozer or Jaguar are probably worse than the consoles at this point.

Any idea of the impact mining had?

 

[frozentundra123456]

I'd have to think Ryzen at this point would not have been that big of a factor with the C&G sales. Margins on anything Dozer or Jaguar are probably worse than the consoles at this point.

Any idea of the impact mining had?

I would not think mining had much impact since most of the inflated prices went to retailers. What they really need to increase margins is competitive high end products.

Edit: Referring to gpu.

 

[vissarix]

And to think there was some pathetic dudes who bought the R7 1800X over an R7 1700 just to help Amd...

To be honest this couldnt go worse for Amd...they just launched a new cpu line and they are still doing pretty bad despite claims of Ryzen selling great...

Trolling and Threadcrapping are not allowed
Its also derogotory and flamebait,
Markfw
Anandtech Moderator

 

[dullard]

AMD gross margin in the 30% range? Is that because of Ryzen's low, low prices? Or because of the console contracts?

And yet, 30%? I don't figure.

To answer your questions: yes, no, yes, yes.

From the link in the OP, direct from AMD:

Gross margin was 33 percent, up 2 percentage points year-over-year due to a richer product mix and a higher percentage of revenue from the Computing and Graphics segment, driven by the first full quarter of Ryzen processor sales. On a sequential basis, gross margin declined 1 percentage point due to a higher percentage of revenue from the Enterprise, Embedded and Semi-Custom segment.

AMD sold more in their category that includes consoles; this category isn't very profitable. Partly because of this, AMD's margin dropped this quarter from 34% to 33%.

 

[dullard]

My calls will be worth bank tomorrow. I wonder if I should hold them till friday?

Considering rolling them into INTC puts for the bloodbath after their earnings. Fun times.

You should probably do more research before you try to criticize somebody who obviously knows way more than you do about stocks and tech companies.

I don't need "luck" because I don't gamble. Intel's downfall is a sure thing

How are your AMD calls and Intel put recommendations doing? The market seems to not like Threadripper. Since your first post on this thread, AMD is down 13.6% and Intel is up 4.5%.

 

[mahoshojo]

To answer your questions: yes, no, yes, yes.

From the link in the OP, direct from AMD:

AMD sold more in their category that includes consoles; this category isn't very profitable. Partly because of this, AMD's margin dropped this quarter from 34% to 33%.

Actually consoles are pretty profitable. R&D mostly paid by customer, just the margin is around 15~20% now. Unfortunately server sits in the same BU and they spend a lot on server R&D with negligible revenue in return, for now.

 

[FIVR]

How are your AMD calls and Intel put recommendations doing? The market seems to not like Threadripper. Since your first post on this thread, AMD is down 13.6% and Intel is up 4.5%.

LOL the calls are not doing very good right now... down 40% overall. I have until Jan 2018 for most of my AMD calls. I'm going to buy more if it dips below 12!


My INTC Jan 2019 and Sept 2018 puts are doing great, thanks. Bought them right after it peaked on flat earnings and flat guidance two days ago. They are headed for $30 by sept 2018 for sure. I'll prob make money on both positions, but the AMD one is by far the more tenuous.


Edit:

Actually I just checked, and at market close my AMD calls are down 56.3% from their cost basis haha. Ouch.

INTC puts up 1.7%


Nasdaq closed down 2%!!! That's the worst close in at least a year!

I will wait until after Jong Un is done nuking guam on the 15th to buy more calls. Fire sale is on!

 

[FIVR]

Bernstein reiterates $30 price target and "underperform" rating! Looks like somebody with big money agrees with my position on INTC.


By the way, I averaged down on my AMD calls during the last dip, and after yesterdays rally I've nearly broken even. Looks like my INTC puts are up today too

http://www.barrons.com/articles/int...02803807?mod=yahoobarrons&ru=yahoo&yptr=yahoo

Bernstein’s Stacy Rasgon today presses the negative case on Intel (INTC), reiterating an Underperform rating, and a $30 price target, writing that despite the stock being cheap, and despite what seems a “conservative” outlook from the company, nevertheless he sees several things that “sound a siren, audible at least to those who might be listening."

Among those risks are perhaps the first signs Advanced Micro Devices (AMD) may be having an impact on Intel, in the form of falling prices.

Rasgon goes back too the company’s July 27th Q2 report, when the company surprised the Street with its quarterly results and outlook, and also raised expectations for this year for the second time in a row, with personal computer chip sales a standout of the report.


"We suppose there is some modest positive spin that can (and likely was) placed on the results,” he writes, "namely, numbers admittedly did go up, some believe conservatism is baked into forward outlook, and at least optically the shares appear cheap."

But, Rasgon’s finds multiple concerns in the report. One, he believes the company faces challenges for the second half of this year by “over-shipping” the personal computer market: "By the company's own admission, Intel's notebook MPU shipments rose 14% YoY, significantly above the market. Our channel analysis suggests evidence of significant overshipment over the last 2 quarters."

“We believe current dynamics bring risk to PC client results into the back half of the year."

While no fan of AMD, and acknowledging it’s too soon to tell how successful it will be, Rasgon sees a warning sign:

However, we noted an interesting incremental datapoint in Intel's results. Q2 was the first quarter (since Intel began providing data in 2013) that the company's desktop ASPs have declined YoY. Coincidentally, Q2 was also the first quarter that AMD's Ryzen desktops were shipped in volume. » While one datapoint of course does not necessarily make a trend, it is not challenging to interpret it as potentially the first bit of evidence that competition is starting to show up in numbers.

He also takes aim at the company’s data center business, writing there’s little hope for the improvement in outlook bulls seem to be hoping for:

We believe bullish investors have been hoping for the company to raise their current "high single digit" guidance for DCG this year. However, Q1 disappointed, and Q2 was only in-line; neither showed any acceleration vs current expectations and the company has so far held guidance, accompanied though it is by (in their own words) their "biggest datacenter refresh in 10 years.” We still are not convinced that the company was being overly conservative when they gave guidance. Indeed, just to reach "high single digits" for the year requires a second half that is up solidly in the double digits, and strong vs recent years; increasing guidance (to, say, low double digits) would require a 2H on the order of 2014 (the strongest year for DCG in recent history). Additionally, current guidance already suggests extremely strong 2H v 1H outlook; raising guidance would require the strongest 2H over 1H growth in many years. And of course current numbers likely already contain over a billion dollars in Skylake-SP pre-shipments in the 1H, potentially absorbing some of the pent-up demand (as well as implying the 1H was even weaker than it appeared).

Intel shares are up 7 cents at $36.41 in early trading.