AMD Announces Q3 Earnings: $71M In The Black
by Brett Howse on October 24, 2017 10:30 PM EST- Posted in
- CPUs
- AMD
- GPUs
- Financial Results
2017 has been a great year for the tech enthusiast, with the return of meaningful competition in the PC space. Today, AMD announced their third quarter earnings, which beat expectations, and put the company’s ledgers back in the black in their GAAP earnings. For the quarter, AMD had revenues of $1.64 billion, compared to $1.31 billion a year ago, which is a gain of just over 25%. Operating income was $126 million, compared to a $293 million loss a year ago, and net income was $71 million, compared to a net loss of $406 million a year ago. This resulted in earnings per share of $0.07, compared to a loss per share of $0.50 in Q3 2016.
| AMD Q3 2017 Financial Results (GAAP) | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $1643M | $1220M | $1307M | ||
| Gross Margin | 35% | 33% | 5% | ||
| Operating Income | +$126M | +$25M | -$293M | ||
| Net Income | +$71M | -$16M | -$406M | ||
| Earnings Per Share | +$0.07 | -$0.02 | -$0.50 | ||
AMD also provides Non-GAAP results, which can give a look at the underlying business. It’s especially important this quarter, because a year ago, AMD took a charge of $340 million for an amendment to their wafer supply agreement with GlobalFoundries. This impacted their GAAP results severely, but as a one-time charge, it can skew how the numbers look. AMD’s Non-GAAP results exclude charges for the wafer agreement, loss on debt redemption, stock based compensation, and several other factors. On a Non-GAAP basis, AMD had the same revenue of $1.64 billion, up 25%. Operating income up 121% to $155 million, and net income was up 307% to $110 million. Earnings per share came in at $0.10, up 233% from $0.03 a year ago.
| AMD Q3 2017 Financial Results (Non-GAAP) | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $1643M | $1222M | $1307M | ||
| Gross Margin | 33% | 33% | 31% | ||
| Operating Income | +$155M | +$49M | +$70M | ||
| Net Income | +$110M | +$19M | +$27M | ||
| Earnings Per Share | +$0.10 | +$0.02 | +$0.03 | ||
The good news for AMD is that even on a GAAP basis, they were profitable. They’ve made some tough decisions to get here, and on a GAAP basis for this quarter, they have a gross margin of 35%, which is right where they need to be.
The Computing and Graphics segment has been a key to these numbers, with some impressive launches this year, especially on the CPU side. Revenue for this segment was up 74% to $819 million, and AMD attributes this to strong sales of both Radeon GPUs and Ryzen desktop processors. Average Selling Price (ASP) was also up significantly thanks to Ryzen sales. AMD is still undercutting Intel on price, but they don’t have to almost give things away like they did the last couple of years. ASP of GPUs was also up significantly, and the proliferation of cryptocurrency likely played a large part in that. Operating income for the segment was an impressive $70 million, compared to an operating loss of $66 million last year.
| AMD Q3 2017 Computing and Graphics | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $819M | $659M | $472M | ||
| Operating Income | +$70M | +$7M | -$66M | ||
The Enterprise, Embedded, and Semi-Custom segment has been strong for AMD in the past, often providing the majority of the operating income for the company thanks to AMD’s success in the console market. This quarter has tended to be especially strong for the company as the console makers prepare for the holiday sales. This quarter, we’ve also got the lead-up to the Xbox One X, however revenue for this group is actually down year-over-year, about 1.3%, to $824 million. AMD attributes that to lower semi-custom SoC sales, which were mostly offset by IP related and EPYC processor revenues. We’ll have to wait and see how the console market plays out here, but it seems like it could finally be slowing down after several years of solid sales. Operating income for this segment also took a hit, down 38% to $84 million. They’ve also noted that gross margins overall were impacted by costs associated with the wafer agreements for “certain wafers purchased at another foundry” which likely means the TSMC wafers used for consoles.
| AMD Q3 2017 Enterprise, Embedded, and Semi-Custom | |||||
| Q3'2017 | Q2'2017 | Q3'2016 | |||
| Revenue | $824M | $563M | $835M | ||
| Operating Income | $84M | $42M | $136M | ||
The All Other category had a operating loss of $28 million, compared to an operating loss of $363 million a year ago, which was mostly the wafer agreement charges.
It’s great to see AMD back, offering quality products at good prices. The hard work has clearly paid off, at least for the short term, and their earnings have borne this out. Looking ahead to next quarter, AMD is expecting a revenue decrease from this quarter of about 15%, plus or minus 3%, which would be about a 26% increase from Q4 2016.
Source: AMD Investor Relations
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Communism - Tuesday, October 24, 2017 - link
For a company that is this far in debt in a "legacy," declining industry, the only thing that matters much at all is cashflow ops / total debt.http://quicktake.morningstar.com/StockNet/bonds.as...
Of course that's assuming anyone cares about fundamentals at all instead of hype train pump and dumps.
StrangerGuy - Tuesday, October 24, 2017 - link
At this rate of net income it's gonna take some further 19 years to earn back that $5.4 billion used to purchase ATI some 10 years ago.steve wilson - Wednesday, October 25, 2017 - link
That's assuming that things stay the same. Things could get massively better, or massively worse. If they go from strength to strength now and start earning massive profits then it will look like a great move in 10 years time.IGTrading - Wednesday, October 25, 2017 - link
Lets hope that as EPYC starts to sell more and more, those ASPs will double or maybe even triple from the current levels. Therefore those 19 years will most likely be 5 years.ddriver - Wednesday, October 25, 2017 - link
"At this rate of net income"That statement presumes that this particular income will persist, which is very unlikely for AMD.
If you look at their overall performance, their average performance yields a net loss of 7-8 billion $ IIRC. AMD has always been a black hole, it has NEVER been in the black on average, which begs the question why even bother with it?
Which is where my conspiracy theory comes in, that AMD is secretly being kept alive by Intel in order to limit their monopoly to practical by introducing at least a theoretical competitor figure to the equation.
Crazy I know, but with the amount of money Intel is pocketing, it wouldn't actually be much of a burden for them, and will actually represent a tremendously lucrative investment with huge returns in profits.
But if someone else has a better theory, I am open :) Fact is, overall AMD hasn't made any money, so far it has lost billions, and is unlikely to ever net in the positive in the years to come.
FreckledTrout - Wednesday, October 25, 2017 - link
Im sure there is something to your conspiracy ddriver. Although I don't think it is so direct but I do think Intel does not want to see AMD die off. Intel benefits a ton from AMD as they can slow down progress when AMD isn't competing thus making more money off little R&D efforts while they put those efforts into more future looking products like Ice Lake all the while not being deemed a monopoly.ddriver - Wednesday, October 25, 2017 - link
Of course it cannot be directly. Money passes at least through several proxies before it goes from intel to amd.Intel enjoys merely symbolic competition, pockets in dozens of billions while doing next to nothing over the course of several years, then allows amd to be competitive for a while, just to reinforce the illusion of competition.
BTW knowing when amd gets to be competitive open up a door to tremendous profit opportunities on its own, you basically know when and how stock prices will move. Needless to say, you don't do that directly either, you use your indirection proxies to do it, and probably give them all the profits as a reward for their service, which helps to evade suspicion even more. On the surface it looks like business, but underneath it is the tentacles of the same evil working together, as they say, one hand washes the other, there is nothing more do discover :)
StevoLincolnite - Thursday, October 26, 2017 - link
Unless you have evidence for your conspiracy... It is pointless.ddriver - Thursday, October 26, 2017 - link
i suggest you lookup the word "theory" ;)jospoortvliet - Friday, October 27, 2017 - link
Actually you'd find a 'theory' isn't just "a random bunch of made up stuff", which even goes for 'fact' these days in politics.Realize that the Theory of Gravity, the Theory of Relativity or the Theory of Evolution are all based on solid evidence gathered over decades of work and, more importantly, form the underpinnings of countless other theories, technologies and techniques which power our every-day life. Eg if the theory of gravity was as vague as yours, rockets wouldn't go far. If the theory of relativity wasn't as reliable as it is counter-intuitive, our GPS devices wouldn't work at all. And without evolution, countless phenomena in nature would make no sense, leaving biologists unable to predict or manage and influence them.