AMD Q3 2017 earnings

[raghu78]

https://seekingalpha.com/pr/16978522-amd-reports-third-quarter-2017-financial-results

SUNNYVALE, Calif., Oct. 24, 2017 (GLOBE NEWSWIRE) -- AMD(NASDAQ:AMD) today announced revenue for the third quarter of 2017 of $1.64 billion, operating income of $126 million and net income of $71 million, and diluted earnings per share of $0.07. On a non-GAAP(1) basis, operating income was $155 million, net income was $110 million, and diluted earnings per share was $0.10.

Q3 2017 Results

• Revenue was $1.64 billion, up 26 percent year-over-year, primarily driven by higher revenue in the Computing and Graphics segment (CG). Revenue was up 34 percent sequentially, driven by the Enterprise Embedded and Semi-Custom segment (EESC) revenue seasonality and higher revenue in CG. In the quarter, AMD closed a patent licensing transaction which positively impacted revenue in the segments.

Quarterly Financial Segment Summary

• Computing and Graphics segment revenue was $819 million, up 74 percent year-over-year primarily driven by strong sales of RadeonTM graphics and RyzenTM desktop processors.
  • Client average selling price (ASP) increased significantly year-over-year, due to higher desktop processor ASP driven by RyzenTM processor sales.
  • GPU ASP increased significantly year-over-year.
  • Operating income was $70 million, compared to an operating loss of $66 million a year ago. The year-over-year improvement was primarily driven by higher revenue.
• Enterprise, Embedded and Semi-Custom segment revenue was $824 million, approximately flat year-over-year primarily driven by lower semi-custom SoC sales, mostly offset by IP related and EPYCTM processor revenue.
  • Operating income was $84 million, compared to $136 million a year ago. The year-over-year decrease was primarily due to higher costs partially offset by the net benefit of IP related items.
• All Other operating loss was $28 million compared with an operating loss of $363 million a year ago. The year-over-year difference in operating loss was primarily related to the WSA charge in the year ago period.

Current Outlook
AMD’s outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below.

For the fourth quarter of 2017, AMD expects revenue to decrease approximately 15 percent sequentially, plus or minus 3 percent. The midpoint of guidance would result in fourth quarter 2017 revenue increasing approximately 26 percent year-over-year. AMD now expects annual 2017 revenue to increase by greater than 20 percent, compared to prior guidance of mid-to-high teens percentage.

imo 2017 is just the beginning. 2018 is when the real revenue growth will come as Raven Ridge, Pinnacle Ridge and EPYC ramp should be in full flow.

 

[PeterScott]

Is there a scheduled conference call with QA that might have some Raven Ridge, or other forward looking info?

 

[Elixer]

Is there a scheduled conference call with QA that might have some Raven Ridge, or other forward looking info?

They said in the coming weeks, they will have some laptops out from their partners, with the higher end laptops coming Q1.
They said volume Raven Ridge parts in Q4.
(Raven Ridge, Vega, Epyc to ramp in Q4)
They also said Vega to AIBs will finally be shipping Q4.
Mi-25 shipping volume in Q3, ramp in Q4.
WSA is still a thorn. (duh)
7nm is important & major node, lots of R&D here.
12nm see opportunity, performance enhancement. (not all products, only the ones that make sense.)
Epyc has more design wins this Q.

 

[ElFenix]

GPU ASP increased significantly year-over-year.

year ago polaris was $150 AR, pretty much all day, every day. today?


(i should have bought a few more of them for mining then i could be like madpacket)

 

[Cloudfire777]

Amazing results for AMD

They lost $16M last quarter and got $71M in profit this quarter. Or $110M profit with everything counted for.

Will only increase for AMD since they are still ramping up EPYC to big clients which will give revenue later down the line.
They have finally climbed out from the hole they have been buried in for so many years.

 

[jpiniero]

year ago polaris was $150 AR, pretty much all day, every day. today?

I don't know if the 580 ever got that low, but it did get close. I hate that they combined Computing and Graphics since it's hard to gauge how much of an impact mining had, and I doubt AMD would admit to giving out any kind of numbers on that.

 

[Jan Olšan]

They said in the coming weeks, they will have some laptops out from their partners, with the higher end laptops coming Q1.
They said volume Raven Ridge parts in Q4.

Didn't that rather mean, "higher volume of laptops in Q1"?

They actually said in the call that they shipped low volume in Q3 (september likely).

 

[krumme]

Ryzen selling very well and have surpricingly fast consumer adoption in this mix of catastrofic-margin-old-bd-processors but lower guidance for q4 imo hint to a slower than anticipated uptake of Epyc ?
Profit is okey and real but guidance is disapointing. Even for a company where earning money means we should raise the flag.

 

[Cloudfire777]

Ryzen selling very well and have surpricingly fast consumer adoption in this mix of catastrofic-margin-old-bd-processors but lower guidance for q4 imo hint to a slower than anticipated uptake of Epyc ?
Profit is okey and real but guidance is disapointing. Even for a company where earning money means we should raise the flag.

Doesnt really matter. As long as they make money in Q4, which they will looking at Q3 result, they can take some time to deal with whatever bottleneck or problem they have encountered.

But yeah. Could be that it takes time to get EPYC adopted. Shouldnt be too much of a surprise. Not exactly customers that just install the hardware and forgets about it. They need continuos support. And AMD have been away from the data center scene for a long time now. I guess that could be one of the reason. Building up a team to deal with these big clients

 

[sandorski]

Very nice.

 

[Jan Olšan]

Ryzen selling very well and have surpricingly fast consumer adoption in this mix of catastrofic-margin-old-bd-processors but lower guidance for q4 imo hint to a slower than anticipated uptake of Epyc ?
Profit is okey and real but guidance is disapointing. Even for a company where earning money means we should raise the flag.

It's not a low guidance. If you look at their guidance for whole year from Q2 earnings, it was actually containing an outlook of just around 1,300 millions in revenue for Q4 - at best. Now they are guiding 1,400+! The analysts also only expected 1300-1350 prior to the earnings call, note.

TL;DR in reality the guidance went up, strongly.

You people forget the usual seasonality. In Q4, the semicustom segment ALWAYS drops down due to less console chip sales (Sony/MS stock for holiday season in Q2/Q3). So you suddenly have not 830 million of semicustom/enterprise revenue, but somewhere around 500 millions of revenue*! Console sales revenue has been flat this year compared to 2016 and not subject to Ryzen-effect. You can basically expect same results like last year for it.
And that is pretty much the "weak guidance" explained?

* Q3 2016 semicustom revenue: 835 millions.
Q4 2016 semicustom revenue: 506 millions. (ouch!)

BTW, this is not all bad. The semicustom revenue has lower margin so it inflates total revenue but contributes little to net income. So if it drops to even just 550 millions that means that in Q4, 850 millions come from the higher-margin Compute&Graphics, or from Epyc sales as opposed to consoles. Which is much much better for AMD's pocket than if it was the other way around

 

[Elixer]

Speaking of "GPU ASP increased significantly year-over-year."

I really wonder how that breaks down.
If they are selling to AIBs at or above MSRP, then they should be called out on that.
If they mean they went from $300 to $350 to AIBs, that wouldn't be that bad, that is still a significant increase in ASP.

 

[bsp2020]

The semicustom revenue has lower margin so it inflates total revenue but contributes little to net income. So if it drops to even just 550 millions that means that in Q4, 850 millions come from the higher-margin Compute&Graphics, or from Epyc sales as opposed to consoles. Which is much much better for AMD's pocket than if it was the other way around

Epic revenue is part of EESC (Enterprise Embedded and Semi-Custom). So, $824M revenue include EPYC revenue from Q3. Does not really change the fact that, in Q4, AMD will sell less console SoC and more CPU/GPU. Just wanted to point out that increased EPYC revenue will show up under EESC.

 

[Jan Olšan]

The Epyc sales probably were at best somewhere under ~30 millions in Q3 2017, likely much lower. So not really a big factor, based on what AMD earlier said (during Q2 call) - that console sales will be about 5% lower compared to 2017 in this year (enterprise has had a smaller drop than that, they went down from 835 to 821 millions, so the difference could be from Epyc, but also from the licensing deal the earning PR mentions!)

So either console sales dropped even more, or Epyc revenue isn't really that significant yet. The real shipments have only started and they now reiterated that it is going up slowly, with more revenue in Q4 and then even more in 2018 - which means that currently the numbers aren't that big in the whole picture. Will change over time I'm sure, they keep repeating over and over that it is a long-term revenue growth factor, not short-term one.

Speaking of "GPU ASP increased significantly year-over-year."

I really wonder how that breaks down.

Vega got added into the mix. Averages inevitably had to go up if the volume wasn't minuscule. Although I'd say they probably racked up the prices in cooperation with the AIBs. Realistically speaking, there is no reason why it should be just the retailers that eat all the fat from the market price hike. Actually, the retailers deserve the extra money the least, after all.

 

[CatMerc]

12nm see opportunity, performance enhancement. (not all products, only the ones that make sense

Anything more specific about that or was that it?

 

[frozentundra123456]

Investors must not have viewed the results favorably. Stock fell off a cliff in after hours trading.

 

[Elixer]

Anything more specific about that or was that it?

Nope. That was it.
I am guessing this is for Zen 2, then Zen 3 on 7nm.

 

[PeterScott]

Nope. That was it.
I am guessing this is for Zen 2, then Zen 3 on 7nm.

Pinnacle Ridge and Vega refresh are expected on 12nm.

 

[maddie]

Could 4th quarter decrease in revenue be related to upcoming price reductions on Ryzen products in clearing stock for 12nm die?

 

[Arachnotronic]

Could 4th quarter decrease in revenue be related to upcoming price reductions on Ryzen products in clearing stock for 12nm die?

It's the typical seasonal decline. Q3 is the peak for console chip sales.

 

[Centauri]

Maybe. But also probably some expectation that Coffee Lake's paper launch is going to slow them down a bit.

 

[ajc9988]

Maybe. But also probably some expectation that Coffee Lake's paper launch is going to slow them down a bit.

I saw a lot of articles saying that. Meanwhile, supply is limited, which none of the articles saying this mentioned. But citi analyst low-balled them and many outlets picked that up, saying $5.xx target. So, you had the media fear mongering with the hawks sitting on shorts.

 

[raghu78]

Ryzen selling very well and have surpricingly fast consumer adoption in this mix of catastrofic-margin-old-bd-processors but lower guidance for q4 imo hint to a slower than anticipated uptake of Epyc ?
Profit is okey and real but guidance is disapointing. Even for a company where earning money means we should raise the flag.

EPYC OEM server platforms launch in Q4 2017. It will take a couple of quarters in 2018 for EPYC revenue to become significant. Moreover AMD console chip sales peak in Q3 2017 and thus a drop in revenue in Q4 2017 is expected. AMD stated that they have confidence of meeting or exceeding their server share goal of 10% . I think AMD could hit 10% server market share as early as end of 2018 or early 2019.

 

[Saylick]

Investors must not have viewed the results favorably. Stock fell off a cliff in after hours trading.

I think it's just stock traders capitalizing on the up-and-down nature of the stock at every earnings report. This stock is a swing trader's wet dream. In other words, shorts gon' short.

The long term trend should be upward, barring any major changes to AMD's release schedule.

 

[prtskg]

Nothing on desktop Raven Ridge . AMD is being quite conservative on guidance too. Last quarter they did the same. Expected a 17% growth in sales. They got 25-26%. Even sequential growth is around 34.4%. Talk about understatement! It turned around to be the best quarter in about 6 years for AMD.