AMD Announces Q3 FY 2018 Earnings: Improving Margins, But Dogged By Crypto Decline
by Brett Howse on October 24, 2018 8:50 PM EST- Posted in
- CPUs
- AMD
- Financial Results
This afternoon, AMD announced their third quarter earnings for the 2018 fiscal year, and while there are a couple of issues they’ll have to work through, this quarter was another strong one from the company. Revenue was up 4% year-over-year to $1.65 billion, and possibly more importantly, AMD achieved a gross margin of 40%, which is up 4% from a year ago. That’s a big win for the company which struggled with margins over the last several years, dipping to as low as 29% in Q4 2014. Operating income was up 26% to $150 million, and net income was up 67% to $102 million. This resulted in earnings per share of $0.09, up 50% from a year ago.
| AMD Q3 2018 Financial Results (GAAP) | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $1653M | $1756M | $1584M | ||
| Gross Margin | 40% | 37% | 36% | ||
| Operating Income | $150M | $153M | $119M | ||
| Net Income | $102M | $116M | $61M | ||
| Earnings Per Share | $0.09 | $0.11 | $0.06 | ||
AMD attributes the growth in gross margin to the launches of new products like Ryzen and EPYC, but also due to IP related revenue, which accounted for half of the gross margin increase. While that revenue stream may not last, even without it, 38% puts them in a much better position than they have been previously.
Looking at their segments, Computing and Graphics saw revenues climb 12% year-over-year to $938 million, and the segment had operating income of $100 million, up 37% from a year ago. Strong Ryzen desktop and mobile sales were actually offset though by lower GPU revenues with the fall of the cryptocurrency market. AMD says that blockchain revenue for this quarter was negligible, and it’s unlikely to grow with the current state of cryptocurrency. What this does lead to though is AMD having a glut of products in the channel where crypto sales haven’t happened, which is likely to impact upcoming quarters.
| AMD Q3 2018 Computing and Graphics | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $938M | $1086M | $835M | ||
| Operating Income | $100M | $117M | $73M | ||
AMD’s other major segment is Enterprise, Embedded, and Semi-Custom, which helped them with the lean years thanks to AMD wins in both the Xbox and PlayStation. Revenue for this segment was $715 million, down 4.5% from a year ago. Operating income was $86 million, up 16.2%. The lower revenue is due to lower semi-custom product and IP related revenue, which isn’t surprising given how long the consoles have been on the market. This was offset though by increase server sales with EPYC, and the additional EPYC sales also helped with the margins, thanks to enterprise offering much better returns than consumer plays. AMD has also said their Radeon Instinct line of datacenter graphics products also were a key factor to their income growth this year.
| AMD Q3 2018 Enterprise, Embedded, and Semi-Custom | |||||
| Q3'2018 | Q2'2018 | Q3'2017 | |||
| Revenue | $715M | $670M | $749M | ||
| Operating Income | $86M | $69M | $74M | ||
Looking ahead to next quarter, AMD expects revenue to be $1.45 billion, plus or minus $50 million, and non-GAAP gross margin to be 41%.
Source: AMD Investor Relations
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Dragonstongue - Thursday, October 25, 2018 - link
Does AMD generate an acceptable amount of cash through operations?AMD’s debt level has been constant at around US$1.40B over the previous year made up of current and long term debt. At this stable level of debt, AMD currently has US$1.19B remaining in cash and short-term investments , ready to deploy into the business. Additionally, AMD has produced US$68.00M in operating cash flow over the same time period, leading to an operating cash to total debt ratio of 4.87%, meaning that AMD’s debt is not appropriately covered by operating cash. This ratio can also be a sign of operational efficiency as an alternative to return on assets. In AMD’s case, it is able to generate 0.049x cash from its debt capital.
Does AMD’s liquid assets cover its short-term commitments?
With current liabilities at US$1.49B, it seems that the business has been able to meet these obligations given the level of current assets of US$2.62B, with a current ratio of 1.76x. Usually, for Semiconductor companies, this is a suitable ratio since there is a bit of a cash buffer without leaving too much capital in a low-return environment.
(source google search)
just like countries and "banking" in general, debt is actually a good thing because it means you are spending money on investments, portfolio, RnD and the like, as long as what you are bringing in keeps you in the "black" it does not matter how much "red" you have, in this case, AMD has been profitable for the past 6 quarter or so and has pretty much paid back the vast majority of long term debt levels and is now "maintaining" their expected debt load.
Dr Su is one smart lady.
HStewart - Thursday, October 25, 2018 - link
Dt Su is probably smart in deceiving some people that AMD can use it fan based to bad mouth the competition and at same time spend more money than they worth, AMD's purchase of ATI was the first stage of AMD going into debt - and investing in Zen architecture and focusing on the gaming nd mining world maybe seem smart in the short term - but in the long run it will destroy them.Lets be very honest and don't blame Intel licensing - have you gone into a local BestBuy, how many desktop machines do you find compared to laptops. Dr Su is lost sense of Reality.
FullmetalTitan - Thursday, October 25, 2018 - link
So when other users tell you to shut up it's because of this. You didn't even respond to the analysis Dargonstongue provided, instead you just called the AMD CEO a liar and deceiver, and accused them of slander.We all get that you have a permanent brown nose from kissing Intel ass, but you can't blame others for being fed up with your garbage when it's basically your whole deal on this site.
Manch - Thursday, October 25, 2018 - link
FullmetalTitan, you hit the nail on the head!HStewart - Thursday, October 25, 2018 - link
I think you try to make doing something that I didn't do - I didn't say Dr Su is a liar - but instead I base on what Dragonstongue statement is that may not be so smart. You can actually go to AMD financial statements and see the processing of debts - or simple search AMD Debt on the internet.But interesting at this current time 15:43 EST Intel stock is up 5.14% and AMD is down 16.54%
so it obvious is looking at AMD numbers and seeing red. Yes Intel stock got hurt by Spectre/Meltdown stuff - but if look at there stock in 5 year plan you will notice that It is same level as Nov 2017 - which looks like Intel has recovered from it. On the other side, look at AMD and you will see that very rapidly AMD lost the gain that AMD gain last summer.
FullmetalTitan - Thursday, October 25, 2018 - link
"Dt [sic] Su is probably smart in deceiving some people that AMD can use it fan based to bad mouth the competition."Not sure how else to read this than Dr. Su is manipulating facts (lying) to advantage her company, while spreading false statements about competition.
I think most readers here understand that 'the investors' are all thin skinned babies that will dump a stock following a 0.001% miss on earnings guidance, only to pick it back up on rebound.
More to the point, my ear on the ground in semicon manufacturing only ever hears about Intel engineers jumping ship for various foundry and design companies, never those from AMD. I trust the actual industry professionals 100x more than I do the C-suite and investors when it comes to company health.
HStewart - Thursday, October 25, 2018 - link
It is all based on AMD statement and the current stock - just search for stock and look at past 8 years and compare difference between Intel and AMD.,Oh the random generator - stock market change - AMD is only down 15.45% and intel is only up 4.46%
https://www.bing.com/search?q=AMD+Stock&filter...
HStewart - Thursday, October 25, 2018 - link
Of course we have Raju from AMD and now in Intel.Targon - Thursday, October 25, 2018 - link
Intel executives are doing a good job at making people badmouth their own company. Did Intel CPU performance go up significantly between 2013 and 2017, or was it largely stagnant? It took Ryzen in order to wake Intel up and start actually trying to do anything.AMD purchased ATI just prior to the recession which caused the entire stock market to go down significantly. If the timing had been a year later in 2008 after the recession hit, the purchase price would have been a lot lower. These things happen in business, but AMD survived it. Lisa Su has done an amazing job of setting a direction for the company, get the CPU business back to being properly competitive again at the high end, and then use the resulting money to get the graphics division back on track(expectation of 2020 for when the next true all-new GPU architecture will come out from AMD).
You are only deceiving yourself if you think that AMD isn't on the verge of going from continually struggling to being seen as a true leader.
just4U - Wednesday, October 24, 2018 - link
I am actually quite fine with the AMD side of the GPU market. You can finally pick up Vega cards at a half ways decent price and their multi purpose. The 580 is still excellent for gaming as well.. and again is coming in at reasonable prices. Looking thru local stock, there isn't a lot there but at least you can walk in to a store and buy one.Amd should be looking at their next gen as Nvidia has it's top guns out already and many are not happy with the pricing.. but with many gamers already having some pretty good graphic setups right now there isn't a lot to be all that thrilled about (upgrade wise) so .. whatever it is what it is. If your on a old system nows the time to get that much needed upgrade.