AMD Crushes on Earnings on Strength of 7nm

2019 was always going to be a big year for AMD. With multiple products launching on 7nm with a new foundry partner, all eyes were on the company to see if it could deliver multiple generations of CPU and GPU improvement while navigating a foundry transition, a new node, and improved architectures. One year later, the company has come through with flying colors.

AMD reported net revenue of $2.127B in Q4 2019, up 1.49x year-on-year. Gross margin was 45 percent, up from 38 percent year-on-year. Net income was $170M for the quarter, compared with $38M in 2018.

Yearly income in the Compute and Graphics segment was $4.7B compared with $4.125B in 2018, with total year revenue of $6.731B compared with $6.475B last year. That 4 percent gain might not sound impressive, but remember — AMD is dealing with the drawdown of Sony and Microsoft sales related to the PS4 and Xbox One families. When it first announced those deals, AMD declared that it would earn most of the revenue from those products early in the cycle and take a smaller margin as time went on.

In Enterprise, Embedded, and Semicustom, revenue grew seven percent year-on-year but fell sequentially compared with Q3. Q3 is typically the highest quarter for console sales as Sony and Microsoft prepare for the holiday season. What we’re seeing here is Epyc revenue rising while semicustom revenue drops at the end of the console cycle.

We’ll get a better picture of how Epyc is itself performing next quarter. According to AMD, “We expect first-quarter semi-custom revenue to be negligible and the ramp of next-generation semi-custom products to start in the second quarter with revenue to be heavily weighted towards the second half of the year.”

AMD did share some data on its overall server ramp, however. Rome is ramping much faster than first-generation Epyc did, with server revenue specifically up by “a strong double-digit percentage.” We’re told that shipments to cloud providers increased by a “significant double-digit percentage.” AMD has doubled the number of Epyc processor platforms in market, to more than 100.

AMD expects Q1 2020 revenue to be ~$1.8B, up 42 percent year-over-year, and down 15 percent sequentially. The growth is related to strong sales of 7nm CPU and GPU products; the decline is due to the continued softening of the console market, in addition to normal seasonality. Q1 of any year is typically the weakest for companies like AMD and Intel — consumer spending is lower following the holiday season.

Results like this are an excellent example of how the semiconductor business does not have to be a zero-sum game. Both AMD and Intel have reported increased revenue, higher unit shipments, and better business fundamentals in the same quarter.

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