AMD reached its highest quarterly revenue in a decade, at US$ 1.8 Billion. AMD’s recently launched EPYC (2nd Gen) processor managed to capture business from several major OEMs and cloud providers. In addition, AMD benefitted as the desktop and laptop processor segment grew 36% Y/Y, while Intel’s market position declined. However, Enterprise, embedded, and semi-custom segments declined 27% despite the strong performance of the 2nd generation EPYC processor. The major reasons for this were declining demand in-game console chips as well as shipments of EPYC processor not meeting expectations due to the US-China trade war. In the coming quarters, AMD is expected to grow market share in both the client processor and data center segment.
Counterpoint’s View on AMD’s Q3-2019 Earnings
- AMD’s 2nd Gen EPYC processor has attracted a lot of business; many server OEMs and cloud providers are now powering their servers and data centers with AMD 2nd Gen EPYC processors.
- AMD will likely take market share from Intel in the data center segment, due to and lower cost. AMD is expected to double up its share in the data center processor segment in 2019.
- AMD’s main competitor, Intel, has reported a decline in its client processor sales, in which AMD has gained. AMD is taking share from Intel’s in the desktop and laptop processor segment. AMD is taking advantage of the CPU shortages of Intel.
- Due to multiple customers win, AMD’s EPYC and Ryzen families of processors will be the driving force for increasing revenues in the coming quarters.
Key Highlights from AMD:
Partnerships and Customers Wins
- Google, Amazon AWS, IBM Cloud, Microsoft Azure, OVHcloud, Twitter and Tencent have all selected 2nd Gen AMD EPYC processors based on leadership performance and total cost of ownership.
- Dell, HPE and Lenovo more than doubled their server portfolio with 2nd Gen AMD EPYC processor platforms.
- Microsoft announced that its new 15-inch Microsoft Surface Laptop 3 will be powered by an AMD Ryzen mobile processor.
- HP unveiled its first AMD-powered gaming laptop, the Pavilion Gaming 15 Laptop, featuring the 2nd Gen AMD Ryzen™ 7 mobile processors.
- HP and Lenovo announced commercial desktops powered by Ryzen 3000 PRO series processors.
Product Launches and Announcements
- AMD launched 2nd Gen AMD EPYC processors for server and cloud customers.
- AMD announced Radeon RX 5500 GPU series, which will be available for OEMs from November 2019.
- AMD also launched the AMD Athlon™ PRO processors with Radeon Vega Graphics.
Financial Highlights
- Revenue at US$1.80 billion, up 9% YoY, however, up 18% quarter-on-quarter (QoQ), in line with expectations.
- Gross margin was 43%, up 3% YoY, primarily driven by increased Ryzen and EPYC processor sales.
- Operating income was US$186 million compared to US$150 million a year ago. The increase was mainly due to higher revenue in the Computing and Graphics segment.
- Cash, cash equivalents, and marketable securities were US$1.2 billion at the end of the quarter.
- Client processor average selling price (ASP) increased YoY and sequentially driven by both Ryzen desktop and mobile processor sales.
- GPU ASP increased YoY driven by higher channel sales and decreased QoQ due to a higher proportion of mobile sales.
