News [TheStreet] AMD Lower After Report of In-Line Earnings, Weaker Revenue Outlook

[Hitman928]

https://www.thestreet.com/investing...revenue-outlook-15038563?puc=CNBC&cm_ven=CNBC

Revenue was $1.53 billion, a 13% decrease from $1.76 billion a year earlier and ahead of analysts' expectations of $1.52 billion.

Computing and graphics revenue came in at $940 million, missing expectations of $983 million. Enterprise embedded and semi-custom revenue was $591 million, beating estimates of $544 million.

AMD's third-quarter 2019 revenue guidance is $1.8 billion, plus or minus $50 million. That's below analysts' estimates of $1.94 billion.

Management expects full year 2019 sales growth in the mid-single digits percent, "driven by significant sales growth" of the Ryzen, EPYC and Radeon processors, offset partly by lower-than-expected semi-custom revenue.

 

[Arkaign]

They've got to get their A teams to work in three areas IMHO :

Chipset/Bios/Driver/OS optimization and support. Problems may not be ubiquitous with the Ryzen 3000 experience, but it's not exactly been a totally smooth launch period either. Nobody should pretend that we wouldn't laugh our collective butts off at arrogant Intel should they release a desktop CPU that couldn't run a common title like Destiny 2.

OEM contract and partnership. This ties in with the first of course, but getting Zen2 SKU out there widespread, particularly in laptops (and no, not the Zen++ but real 7nm Zen2 stuff) is key.

GPU. Too much to list here, but you already know. Ties in with the first two as well.

The core product and performance is killer. It's just in need of some spit, polish, and politicking.

 

[itsmydamnation]

They've got to get their A teams to work in three areas IMHO :

Chipset/Bios/Driver/OS optimization and support. Problems may not be ubiquitous with the Ryzen 3000 experience, but it's not exactly been a totally smooth launch period either. Nobody should pretend that we wouldn't laugh our collective butts off at arrogant Intel should they release a desktop CPU that couldn't run a common title like Destiny 2.

OEM contract and partnership. This ties in with the first of course, but getting Zen2 SKU out there widespread, particularly in laptops (and no, not the Zen++ but real 7nm Zen2 stuff) is key.

GPU. Too much to list here, but you already know. Ties in with the first two as well.

The core product and performance is killer. It's just in need of some spit, polish, and politicking.

I think your basically 100% wrong, AMD are focusing there limited resources exactly where they need to.

1. These numbers are last quarter, so Zen2 and Navi have nothing to do with these numbers, both ryzen and GPU had downward pressure on them.
2. Zen2 is selling 3.5 times faster then Zen+ did at launch
3. The last 6 months have been a low point for the consumer GPU side, I think NAVI is priced to high but relative to the competition is very good value.
4. OEM's are the last think AMD should be chasing, there designs are DC targeted and scaling down from there, nothing shows this better then the fact mobile Ryzen 3k is still Zen+ on 14/12nm. better off spending those resources on DC products.
5. AMD has a lot more partner buy in for rome compared to naples and intel is much weaker in the DC space then in the mobile OEM space.
6. AMD is starting to get gpu compute buyin and by the look of arcturus there looking to provide a very high performance GPU compute part.
7. One game not working that can be fixed in firmware is not a big deal, really honestly its a nothing, you would never delay a launch for that.

 

[zinfamous]

I think your basically 100% wrong, AMD are focusing there limited resources exactly where they need to.

1. These numbers are last quarter, so Zen2 and Navi have nothing to do with these numbers, both ryzen and GPU had downward pressure on them.
2. Zen2 is selling 3.5 times faster then Zen+ did at launch
3. The last 6 months have been a low point for the consumer GPU side, I think NAVI is priced to high but relative to the competition is very good value.
4. OEM's are the last think AMD should be chasing, there designs are DC targeted and scaling down from there, nothing shows this better then the fact mobile Ryzen 3k is still Zen+ on 14/12nm. better off spending those resources on DC products.
5. AMD has a lot more partner buy in for rome compared to naples and intel is much weaker in the DC space then in the mobile OEM space.
6. AMD is starting to get gpu compute buyin and by the look of arcturus there looking to provide a very high performance GPU compute part.
7. One game not working that can be fixed in firmware is not a big deal, really honestly its a nothing, you would never delay a launch for that.

If you're looking for Zen2 sales to show up next quarter and make everything better, then that doesn't fly with AMD's adjusted, lower guidance for the rest of the year. It's not what anyone expected, and it's certainly why shares fell about 4% overnight.

 

[DrMrLordX]

If you're looking for Zen2 sales to show up next quarter and make everything better, then that doesn't fly with AMD's adjusted, lower guidance for the rest of the year. It's not what anyone expected, and it's certainly why shares fell about 4% overnight.

Semi-custom is dragging them down (ironically). The company sector that saved AMD is going to be their lodestone until next year.

 

[gk1951]

AMD is alive and kicking.

A few short years ago it looked like it was on its deathbed.

The Epyc/Ryzen line has sure righted the ship.

 

[Hitman928]

https://seekingalpha.com/article/42...inc-2019-q2-results-earnings-call-slides?dr=1

 

[PotatoWithEarsOnSide]

Next year is going to be excellent for AMD.

 

[Hitman928]

https://seekingalpha.com/article/42...-2019-results-earnings-call-transcript?page=1

Conference call quotes:

Ryzen 3000 processor customer demand has been very strong with sales at global e-tailers and retailers outpacing our previous generations of Ryzen by more than three times at the same point following their respective launches. Based on the market response to our latest mobile and desktop processors and the growing number of AMD powered commercial and consumer PCs, we expect to gain share in the high volume back-to-school and holiday periods.

We had another quarter of strong year-over-year data center GPU sales growth, driven largely by HPC and cloud wins. We continue making progress expanding this margin accretive part of our business based on our strategy to focus on working closely with marquee customers.

Turning to our Enterprise Embedded and Semi Custom segment, revenue decreased 12% from a year ago due to lower Semi Custom revenue.

In server, CPU revenue grew significantly year-over-year and sequentially driven by initial shipments of our next-generation Rome processors to lead cloud and OEM customers. First generation EPYC processor based cloud deployments continue to increase in the quarter.

Amazon expanded availability of its EPYC processor powered instances to more than 15 regions and dozens of new configurations. And Microsoft launched general availability of its Azure HB supercomputing virtual machines that for the first time ever enabled customers to run demanding HPC workloads in the cloud.

Turning to our next-generation Rome server processor. . . compared to our first-generation EPYC processors, we have more than twice the number of platforms in development with a larger set of partners. We also have four times more enterprise and cloud customers actively engaged on deployments prior to launch. As a result, Rome is on track to ramp significantly faster than our first-generation EPYC processor.

We are seeing particular strength in HPC where we offer leadership compute density and IO. We had multiple supercomputing wins in the quarter, including public announcements from Indiana University and Norway's National Research Network. Our supercomputing momentum was highlighted by the US Department of Energy and Oak Ridge National Laboratory selecting both epic CPUs and Radeon instinct GPUs to power their next-generation Frontier exascale supercomputer built by Cray. Frontier is expected to be the world’s fastest computer when it launches in 2021. We look forward to providing more details on Rome at our launch events on August 7th.

In summary, as we complete the first half of 2019, we have reached a significant inflection point for the Company as we enter our next phase of growth with the most competitive product portfolio in our history. We have seen some uncertainties across our supply chain driven by tariffs, trade concerns in the US entities list. In the second quarter we stopped shipping to customers added to the US entities list.

While we remain cautious given the fluidity of the situation, the impact to date has been limited and offset by growing momentum in other parts of our business. We are executing well to our plans and see a path to significant market share gains for our product portfolio across the PC, gaming and data center markets in the coming quarters.

 

[Hitman928]

On the Samsung side, it's a multiyear, multigenerational deal that we have across our graphics portfolio for mobile. In terms of 2019, the revenue is approximately $100 million, that would be added. This was not originally in our guidance and it offset some of the headwinds that we talked about in semi custom and in China. As it's not pure IP though, so the way you should think about it is, there is some specific development expenses that are being that are part of that that deal.

Sounds like the Samsung deal isn't just licensing IP but AMD is actually developing something for them. . .

 

[Hitman928]

Hans Mosesmann


Thanks, guys, and congrats on the execution with the 7-nanometer. Hey, Lisa, are you guys constrained in terms of 7-nanometer at TSMC?


Lisa Su


Hans, yes. So we do have a number of products ramping at TSMC in 7-nanometer and we are not constrained per se. I will say that cycle times of 7-nanometer are longer and so it just takes more time to ramp up, but we are not constrained, TSMC has supported us quite well.


Hans Mosesmann


Great, And can you give us a sense if you can on 7-nanometer high-end Navi and mobile 7-nanometer CPUs, if you can? Thanks.


Lisa Su


Hans, you asked the good product questions, I would say they are coming. You should expect that our execution on those are on track and we have a rich 7-nanometer portfolio beyond the products that we have currently announced in the upcoming quarters.

In the second quarter, we saw sequentially mobile units up and we saw desktop units down. And the desktop units down is somewhat due to the seasonality in the second quarter as well as the fact that we were going through a product transition as we were preparing for the third generation launch which happened at the very end of the quarter. In terms of graphics, we were up double digits sequentially, and that's both units and revenue statement as it relates to, and that was driven primarily by the graphics channel.

 

[moinmoin]

https://seekingalpha.com/article/42...inc-2019-q2-results-earnings-call-slides?dr=1

https://seekingalpha.com/article/42...-2019-results-earnings-call-transcript?page=1
Conference call quotes:

Thank you for these. Wish these were what the thread started with.

Standout quote:
"Ryzen 3000 processor customer demand has been very strong with sales at global e-tailers and retailers outpacing our previous generations of Ryzen by more than three times at the same point following their respective launches."

So it's not a lack of supply but over three times bigger demand (likely even more for the higher end models) that makes Ryzen 3k scarce.

Sounds like the Samsung deal isn't just licensing IP but AMD is actually developing something for them. . .

Yes, sounds more and more like building on the existing semi custom business.

 

[senseamp]

Products are decent, but they are jebaiting their margins away playing 4D chess.

 

[arandomguy]

In the short term broader economic factors affecting the semiconductor industry and global economy is likely going to be what weighs down prospects. I know on tech forums people want distill it down to a company A vs B on a product level but the above are stronger forces.

The other thing to consider is that things have reversed now with respect to how AMDs product stack will occlude issues. It's CPU strength is now shielding the GPU side. There is no way that those pre launch price cuts will not affect outlook. I'm sorry but the only people who got "je-baited" are the people who believe the post spin.

 

[Yotsugi]

Sounds like the Samsung deal isn't just licensing IP but AMD is actually developing something for them. . .

It's a JV kind of deal.

 

[trivik12]

if macro trends affect their H2 and prevent them from hitting Annual guidance it will get ugly. But could also be an opportunity as Intel still is behind the curve with 10nm.Probably has another 2-3 years leeway until intel 7nm launches. Also there could be an impact if Intel graphics become a player next year though Nvdia could face bigger impact.

 

[Hitman928]

Products are decent, but they are jebaiting their margins away playing 4D chess.

How so?

The other thing to consider is that things have reversed now with respect to how AMDs product stack will occlude issues. It's CPU strength is now shielding the GPU side. There is no way that those pre launch price cuts will not affect outlook. I'm sorry but the only people who got "je-baited" are the people who believe the post spin.

In the conference call they said that their 7 nm products across the board are higher margin than their 14/12 nm products and that as 7 nm products continue to increase their share of AMD's product mix, margins will increase. They also said that lower Q3 revenue guidance is from softer than expected semi-custom demand and the trade issues with China. So not sure where this sentiment is coming from.

It's a JV kind of deal.

Do you have details you've seen or just speculating?

 

[Hitman928]

if macro trends affect their H2 and prevent them from hitting Annual guidance it will get ugly. But could also be an opportunity as Intel still is behind the curve with 10nm.Probably has another 2-3 years leeway until intel 7nm launches. Also there could be an impact if Intel graphics become a player next year though Nvdia could face bigger impact.

They essentially have to hit 2.2B in revenue in Q4 to hit full year guidance. While that's a lot, Lisa said she is still comfortable with their full year guidance right now. So either AMD knows something we don't or they are delaying the bad news, stretching it out over a few quarterly reports. I think both are quite plausible. Even if they don't hit 2.2B, I think if they can crack 2B they'll be fine. The new consoles will start bringing in significant revenue 2H of next year. The question will be can they continue to increase their high margin product market share (e.g. Epyc) to not have margins drop again when semi-custom kicks into high gear again next year.

 

[swilli89]

If you're looking for Zen2 sales to show up next quarter and make everything better, then that doesn't fly with AMD's adjusted, lower guidance for the rest of the year. It's not what anyone expected, and it's certainly why shares fell about 4% overnight.

AMD didn't lower guidance for the rest of the year, just Q3. Q3 is STILL guided to 8% year over year increase which is solid.

Q4 AMD is forecasting at over $2.1B, a record quarter in terms of the last several years. Despite Semi-custom tanking, EE&SC posted an increase in net income, meaning EPYC is finally starting to get real traction. Gross margins forecasted at 43% for next quarter versus last quarter of 2017 they were at 34% so this is a truly massive improvement.

Next things to transform AMD will be 7nm APUs which they should be able to drive serious adoption in the OEM space for both desktop and laptops, and then if a potential big Navi can make it to market by end of year, and assuming NV doesn't have 7nm cards until a quarter or two later, its possible to add some chunks of revenue there as well. And as Hitman said above, next-gen SoC for consoles will begin contributing revenue in Q3 next year. By 2020 with Rome EPYC I bet AMD will be pulling in $2.1B+ quarters starting in Q2 and finishing the year closer to $2.5B.

 

[Hitman928]

Thank you for these. Wish these were what the thread started with.

Nature of quarterly reports. The summary comes out first and then a few hours later the conference calls happen then a few hours later a transcript of the conference call comes out from which I can quote.

 

[moinmoin]

Nature of quarterly reports. The summary comes out first and then a few hours later the conference calls happen then a few hours later a transcript of the conference call comes out from which I can quote.

That's true. Just feel the early summaries and especially their titles too often are knee jerks that don't age well.

 

[Hitman928]

That's true. Just feel the early summaries and especially their titles too often are knee jerks that don't age well.

I agree with you there.

 

[senseamp]

How so?

They are pricing too low relative to competititon, aiming to capture market share, but demand is not sufficiently elastic to offset the forgone revenue. They got good CPU product, and Intel is having serious issues, they should be making a lot more bank off Ryzen than they are. The setup is perfect for them now, if they aren't going to make good money now, when are they going to make good money? Intel is not going to be caught flat footed for long.

 

[misuspita]

There is market inertia and a long delay into brand recognition. Even now, at 3rd Ryzen generation, people still spout over the interwebz things like Ryzen is hot, not performing, and are recommending 9400 or 9600 instead 3600. This all takes time for people to realise that amd changed, Ryzen 3 is better than anything Intel has at the moment except i9900k in specific scenarios.

This things cannot be changed fast. Good part for AMD is that I tel seems stuck for at least a year, and not happy to lower prices,so mindshare will definitely change

 

[Hitman928]

They are pricing too low relative to competititon, aiming to capture market share, but demand is not sufficiently elastic to offset the forgone revenue. They got good CPU product, and Intel is having serious issues, they should be making a lot more bank off Ryzen than they are. The setup is perfect for them now, if they aren't going to make good money now, when are they going to make good money? Intel is not going to be caught flat footed for long.

Do you know what AMD's margins are for retail sales, or what their pricing structure is for OEMs, or their current product mix for 7nm products vs 12/14 nm products?