AMD earnings: How much of Intel’s lunch is the chip maker eating?

July 24, 2018

Advanced Micro Devices Inc. earnings are expected to benefit from a rare surge in PC sales and what are seen as competitive gains against chip giant Intel Corp., but huge gains in the stock recently are subject to pullbacks given AMD’s traditional volatility following earnings.

Meanwhile, declining sales of graphics cards used by cryptocurrency miners appears to have become more of a widely accepted reality by analysts, but more erosion in that area, which makes up about 10% of AMD sales, could pose a headwind to the stock price.

Earnings: Of the 26 analysts surveyed by FactSet, AMD on average is expected to post adjusted earnings of 12 cents a share. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of 14 cents a share.

Revenue: Wall Street expects revenue of $1.72 billion from AMD, according to 25 analysts polled by FactSet. AMD predicts revenue of $1.68 billion to $1.78 billion. Estimize expects revenue of $1.76 billion.

AMD stock rises after best earnings in 7 years

July 25, 2018

Advanced Micro Devices Inc. shares rose in the extended session Wednesday after the chip maker’s quarterly results topped Wall Street estimates on strong revenue gains and the best earnings in seven years.

“We had an outstanding second quarter with strong revenue growth, margin expansion and our highest quarterly net income in seven years,” President and Chief Executive Lisa Su said in a statement.

The Santa Clara, Calif.-based chip maker reported second-quarter net income of $116 million, or 11 cents a share, compared with a loss of $42 million, or 4 cents a share, in the year-ago period. Adjusted earnings were 14 cents a share. Of the 26 analysts surveyed by FactSet, AMD on average was expected to post adjusted earnings of 12 cents a share, while Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, called for earnings of 14 cents a share.

Revenue rose to $1.76 billion from $1.15 billion in the year-ago period. Wall Street expected revenue of $1.72 billion, according to 25 analysts polled by FactSet. AMD had predicted revenue of $1.68 billion to $1.78 billion. Estimize expected revenue of $1.76 billion.

Sales of computing and graphics chips surged 64% from a year ago to $1.09 billion, driven by strong sales of Radeon and Ryzen chips, AMD said. Analysts had expected computing and graphics revenue of $1.06 billion.

Sales of enterprise, embedded and semi-custom chips segment revenue rose 37% from a year ago to $670 million. Analysts had forecast enterprise, embedded and semi-custom sales of $661 million.

For the third quarter, AMD said it estimates revenue of $1.65 billion to $1.75 billion, “driven by the sales growth of Ryzen and EPYC products, partially offset by lower sales of GPU products in the blockchain market.” Analysts had forecast revenue of $1.76 billion.

Nvidia Reveals Crypto Sales for First Time and Predicts Big Drop

May 10, 2018

Nvidia Corp. revealed for the first time how much revenue it generated from chip sales to the cryptocurrency market -- and said that figure will be much smaller in the second quarter.

Demand from cryptocurrency miners was stronger-than-expected in the first quarter and translated into revenue of $289 million, Nvidia said Thursday on its earnings conference call. Crypto sales will probably fall by about two-thirds in the current fiscal quarter, the company said.

The first-quarter sales were much higher than one analyst projected. Susquehanna’s Christopher Rolland anticipated crypto sales of about $200 million, according to an estimate before the earnings were released.

- Record revenue of $3.21 billion, up 66 percent from a year ago
- Record GAAP EPS of $1.98, up 151 percent from a year ago
- Record Datacenter revenue of $701 million, up 71 percent from a year earlier

- Gaming revenue grew 68 percent from a year earlier to $1.72 billion . . . analysts expected $1.61 billion
- Datacenter revenue grew 71 percent from a year earlier to a record $701 million . . . analysts expected $656 million
- Professional Visualization revenue grew 22 percent from a year earlier to $251 million . . . analysts expected $248.1 million
- Automotive revenue grew 4 percent from a year earlier to a record $145 million . . . analysts expected $139.5 million

NVIDIA’s outlook for the second quarter of fiscal 2019 is as follows:

- Revenue is expected to be $3.10 billion, plus or minus two percent (or revenue between $3.04 billion and $3.16 billion) . . . analysts expect $2.95 billion
- GAAP and non-GAAP gross margins are expected to be 63.3 percent and 63.5 percent, respectively, plus or minus 50 basis points.

Computing and Graphics segment revenue was $1.09 billion, up 64 percent year-over-year and down 3 percent quarter-over-quarter. Year-over-year revenue growth was driven by strong sales of Radeon™ products and continued growth of Ryzen™ products. The quarter-over-quarter decline was primarily related to lower revenue from GPU products in the blockchain market.

For the third quarter of 2018, AMD expects revenue to be approximately $1.7 billion, plus or minus $50 million, an increase of approximately 7 percent year-over-year, and non-GAAP gross margin to increase to approximately 38 percent, driven by the sales growth of Ryzen and EPYC products, partially offset by lower sales of GPU products in the blockchain market.

TSMC’s leading-edge 7nm process technology, which has reportedly enabled the company to extract an unbelievable 20.9 TFLOPS of graphics compute out of 7nm Vega, according to one source. If true, it would make it the world’s first 20 TFLOPS GPU.

S&P Global Ratings today raised its issuer credit rating on Santa Clara, Calif.-based Advanced Micro Devices, Inc. (NYSE: AMD) to 'B+' from 'B'. We revised the outlook to positive from stable.

At the same time, we raised our issue-level rating on AMD's senior unsecured debt to 'B+' from 'B'. The recovery rating remains '4', indicating our expectation for average (30%-50%; rounded estimate: 35%) recovery in the event of a payment default.

We based the upgrade on our view that recent sales traction in the firm's Zen architecture CPUs, a return to positive free cash generation, and a compelling product road map indicate material improvement in AMD's competitive position, and we are revising our assessment of the firm's business risk profile. Relatively limited capacity for R&D investment compared with its significantly larger competitors, weak if improving profitability, and exposure to cyclical PC gaming markets remain significant risks, although these factors may be somewhat diminished over time if the firm can sustain its current growth rate and further diversify its GPU business into accelerated computing and other non-gaming applications. We based the outlook revision on our view that the company may be able to reduce leverage sustainably under 2x over the next 12 months if it can continue to grow rapidly and further improve profitability.

The positive outlook on AMD reflects our view that significant share gains in the consumer CPU market, demand growth in the GPU market, and reentry into the server CPU market will enable AMD to continue to outgrow the broader semiconductor industry and reduce leverage to under 2x over the next 12 months. We expect positive free cash flow for 2018 on improving profitability and moderating growth in inventory.

We would look to leverage declining further and remaining under 2x as a primary criteria for an upgrade, along with further market share gains against Intel, sustained share against Nvidia, ongoing revenue growth, and expended EBITDA margins as factors in a potential upgrade. Evidence that AMD has sustainably reduced the performance gap between its products and those of its main competitors and has a product pipeline that can credibly sustain an improved competitive position would also support a further upgrade.

We could revise the outlook to stable if the firm's Zen architecture CPUs and Vega GPUs lose traction in the market and the firm returns meaningful share to Intel and Nvidia over the next year, leading to leverage remaining more than 2x. We would also view a deterioration in the firm's liquidity position as a limiting factor on an upgrade, and cash levels below $600 million could lead to a stable rating outlook.

... we are introducing HB-series VMs optimized for applications driven by memory bandwidth, such as fluid dynamics, explicit finite element analysis, and weather modeling. HB VMs feature 60 AMD EPYC 7551 processor cores, 4 GB of RAM per CPU core, and no hyperthreading. The AMD EPYC platform provides more than 260 GB/sec of memory bandwidth, which is 33 percent faster than x86 alternatives and 2.5x faster than what most HPC customers have in their datacenters today.

AMD stock reflects ‘irrational expectations,’ analyst says

Published: Sept 28, 2018 7:30 a.m. ET

Shares of Advanced Micro Devices Inc. have enjoyed a meteoric rise over the past few months, but one analyst argues that the current stock price “reflects irrational expectations.”

Northland Capital Markets analyst Gus Richard downgraded AMD’s stock to market perform from outperform on Thursday, writing that while he still predicts shares will continue to rise through the end of the year, he thinks investors have unrealistic expectations for the “rate of change” of AMD’s financial performance.

“Sir John Templeton said that bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria,” Richard wrote. “We believe that AMD sentiment is currently in between optimistic and euphoric.”

He sees limits to the company’s ability to grow both its PC CPU business and its server business. On the PC side, Richard argues that AMD could find itself “capacity limited” in terms of CPU output. On the server side, he discussed competitive offerings from Intel Corp.

Intel’s Cascade Lake is expected out later this year, and Richard thinks it will have “an advantage in data-intensive applications” even though AMD’s new 7-nanometer Epyc chip is likely to offer a performance boost for other applications.

“Due to the fact that Intel and AMD instruction sets differ, hyperscale datacenter operators are likely only to implement AMD in new workloads rather than re-writing software for exiting applications,” he wrote. Richard thinks that these new workloads are “disproportionately” focused on artificial intelligence, which could “slow the uptake of AMD’s server CPUs.”

Of the 33 analysts tracked by FactSet who cover AMD, 14 rate the stock a buy, 14 rate it a hold, and five rate it a sell. The average price target is $24.29, which is about 25% below Thursday’s closing price of $32.59.