AMD’s Ryzen-fueled recovery handed the company its first full-year profits in years in 2017, and 2018 appears to be off to a very strong start. The company posted revenue of $1.65B for Q1 2018, up 1.4x from the same period in 2017. According to AMD CEO Lisa Su, Ryzen processor shipments grew significantly, from a bit more than 40 percent of client APU/CPU revenue in Q4 2017 to 60 percent in Q1 2018. This surge was undoubtedly helped by the launch of both Ryzen Mobile in very late Q4 and new Ryzen desktop APUs like the 2400G and 2200G in mid-Q1.
Here’s how Lisa Su summarized the GPU market:
In Graphics, we delivered strong year-over-year revenue growth as ASP and unit shipments increased significantly. On a sequential basis, revenue increased and we outperformed seasonality with strong Radeon Vega and 500 series channel sales, driven by both gaming and blockchain demand.
AMD also stated it’s on track to ramp Radeon Instinct MI25 for deep learning workloads, and still expects to deliver a 7nm die shrink for its GPUs later in 2018. Apart from a very small OEM rebrand effort around the 500-series, AMD has not indicated that it intends to launch any new desktop cards this year, and it’s not clear if such cards could significantly close the gap with the refreshed hardware Nvidia is expected to debut.
Server revenue grew by double-digits sequentially, though be aware that ramp is essentially starting from $0. While AMD has been slowly ramping Epyc into the server market, these rollouts take time. The company has previously stated it hopes to hold mid-single digit market share in server by the end of the year (we’re estimating that at 4-6 percent).
AMD’s gross margins ticked up to 36 percent, in-line with the company’s predictions and 4 percentage points higher than the 32 percent it recorded for Q1 2017. AMD expects its Q2 2018 earnings to be $1.725B, up 1.5x from the same period in Q2 2017. While investors have repeatedly expressed fear that AMD might suffer a hit if GPU sales into cryptocurrency mining calm down, AMD doesn’t see itself as overly exposed. Devinder Kumar told investors that the company expects “Blockchain revenue to be mid to high-single-digit percentage of revenue for 2018.” Reduced profit in the EESC business was related to a one-time licensing gain that AMD recorded back in Q1 2017 rather than a significant difference in unit sales.
Now, we’re not saying that 7-9 percent of AMD’s yearly revenue is nothing. Even if we assumed AMD simply hit Q1 2018’s sales figures four times in a row, that’d work out to as much as $594M. But remember, revenue isn’t the same thing as profit, and AMD’s margins on GPUs have historically been much smaller than its CPUs. Napkin-level math using our lowballed ($1.65B *4) figure with a 10 percent net profit margin suggests AMD might make $60 million in profit off crypto mining in 2018, assuming that demand for cards holds. Again, that’s by no means nothing, but it’s not particularly large compared with Ryzen, either. With a second-generation Ryzen now in-market, AMD looks to be well-positioned for 2018.
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