AMD Earnings: Posts Record Revenue of $2.13 Billion Thanks to Ryzen (NASDAQ: AMD)

Jan 28, 2020
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AMD (NASDAQ:AMD) has posted its fourth quarter and FY 2019 results with $2.13 billion in revenue and a diluted Non-GAAP EPS of 32 cents.

Catch up with our in-depth earnings preview and analysis of AMD's financials: Link

JPR: AMD Clawed Market Share From NVIDIA And Intel As GPU Shipments Surged 22.6% In Q4’19

As of this writing, AMD shares are down 3% in after-hours, and this is something I cited as a strong possibility in the above earnings preview:

At near record highs, should AMD miss its earnings by just a tad, or deliver less-than-expected guidance for Q1, its share price could collapse tomorrow since analysis points to the stock being overbought right now.

AMD's guidance was soft by about $100 million for Q1 and its 2020 full year expected gross margin of 45% is a bit shy of the hoped-for 47%.

Key Takeaways:

  • Epyc still not driving major growth in EESC segment
  • Computing and Graphics (Ryzen and Radeon) posted huge gains
  • AMD just posted a record-breaking quarter

Computing and Graphics is the star here. AMD said that its Ryzen desktop parts were the chief driver in the segment's stellar 69% growth YoY to $1.662 billion, up from $986 million in the fourth quarter of 2018. While the segment was no doubt aided by the addition of Radeon 5700 series, based on Navi GPU chips we can attribute most of this to healthy demand for Ryzen 3000 and Threaripper processors.

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EPYC not quite a showstopper...yet

While C&G grew 69% YoY AMD's Enterprise, Embedded, and Semi-Custom (EESC) posted a much more muted 7% gain on the year.

AMD attributes this to drastically reduced console-driven demand, which most were expecting as the PS4 and Xbox One wind down their respective life cycles, yet EPYC still isn't selling enough to pick up the slack and push this segment up along with its C&G sister group.

However, look beyond revenue for EESC for one moment. From AMD's press release:

Operating income was $45 million compared to an operating loss of $6 million a year ago
and operating income of $61 million in the prior quarter. The year-over-year improvement
was primarily driven by higher EPYC processor revenue. The decrease compared to the
prior quarter was due to lower semi-custom sales.

While revenue may be down, EPYC is making enough of an impact to drive profitability, something even more important to AMD than revenue. Low margin APU sales to console builders Sony and Microsoft pale when you're talking about $6,000 EPYC chips.

Outlook

AMD is finally beginning to see the benefits of higher selling prices and volumes - greatly increased earnings

 

For the first quarter of 2020, AMD expects revenue to be approximately $1.8 billion, plus or minus $50 million, an increase of approximately 42 percent year-over-year and a decrease of approximately 15 percent sequentially. The year-over-year increase is expected to be driven by strong growth of Ryzen, EPYC and Radeon product sales. The sequential decrease is driven primarily by negligible semi-custom revenue which continues to soften in advance of the ramp of next generation products, in addition to seasonality.

For the full year 2020, AMD expects revenue growth of approximately 28 to 30 percent over 2019 driven by strength across all businesses. AMD expects non-GAAP gross margin to be approximately 45 percent for 2020.

Despite what in my opinion is a very good earnings statement, AMD shares are down a few percent in after-hours trading, which could point to all of these expectations already being priced in to the stock. We will have to wait for full-day volume tomorrow to see where things go from here.

 

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