AMD’s Q3 2020 results are in, and they paint an incredibly strong picture for the firm on the eve of launching two next-generation consoles: Microsoft’s Xbox Series X, and the Sony PlayStation 5.
Before we dive into the modern figures, I want to quickly step back to the results AMD reported in Q3 2013, when both the PS4 and Xbox One were prepping for launch. AMD’s Q4 2013 would be slightly larger than its Q3, but you can see the console ramp very clearly in terms of revenue ($1.46B in Q3 2013 versus $1.16B in Q2).
In Q3 2013, AMD reported $1.46B in revenue. Gross margin was 36 percent, operating income was $95M, and net income was $48M. Now, here’s Q3 2020:
That’s net revenue of $2.8B (up 1.92x from 2013), an 8 percentage point improvement to gross margin, and net income of $390M (an improvement of 8.125x since 2013). Back in 2013, the PS4 and Xbox One almost certainly saved AMD as a company. These two contracts represented proven design wins with major corporations to provide silicon design work and brought in hundreds of millions in revenue every quarter on a reliable basis.
Today, AMD’s console business is a core component of its financials, but it isn’t a “must have” whose absence would doom the company. AMD’s compute and graphics division is putting up formidable figures, all on its own:
Not that I want to imply anything is wrong with the Enterprise, Embedded, and Semicustom markets. They’re also firing well, with AMD reporting record server revenue and strong ramps for both the Xbox Series X and PlayStation 5. Server revenue set a record and operating income grew substantially both year-over-year and quarter-over-quarter. Q4 2020 could be even bigger due to demand for consoles (Q4 2013 was bigger than Q3 2013, so there’s precedent).
AMD confirmed it will begin shipping Milan (Zen 3) servers to cloud and HPC in volume in Q4, with Tier 1 OEM availability following in Q1 2021. Hyperscale HPC and OEM engagement is said to be very high overall.
According to AMD CEO Lisa Su, AMD’s repeated design wins are driving interest in its products in new segments and opportunities, with added impact from the console ramp. AMD now expects Q4 2020 revenue to be $3B, plus or minus $100M, which is up 41 percent year-on-year and 7 percent sequentially. This surge will be driven significantly by console sales, but AMD is guiding upwards on server market share and overall data center demand for its products as well.
There’s no bad news here. The company also announced its purchase of Xilinx in an all-stock deal worth $35B during the conference call, but we’ve covered that information in more detail here.
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