AMD’s 7nm EPYC, Ryzen, Radeon Family Leads To Highest Quarterly Revenue Since 2005

AMD has just announced its record revenue of $1.80 Billion in the third quarter of 2019 and also its highest quarterly revenue since 2005. This was the first full quarter of AMD's 7nm lineup, featuring their new 2nd Generation EPYC, 3rd Gen Ryzen and Radeon RX 5700 series Navi products, leading to a 9% increase in revenue from the previous year & an 18% revenue increase from the previous quarter.

AMD Posts Strong Q3 2019 Financials - First Full Quarter of 7nm EPYC, Ryzen, Radeon Lead To Highest Quarterly Revenue Since 2005

For Q3 2019, AMD has announced a revenue of 1.80 Billion, an operating income of $186 million and a net income of $120 million. Following are the highlights of the AMD Q3 2019 earnings report:

• Revenue was $1.80 billion, up 9 percent year-over-year and 18 percent quarter-over-quarter due to higher revenue in the Computing and Graphics segment, partially offset by lower revenue in the Enterprise, Embedded, and Semi-Custom segment.
• Gross margin was 43 percent, up 3 percentage points year-over-year and 2 percentage points
  quarter-over-quarter, primarily driven by increased RyzenTM and EPYCTM processor sales.
• Operating income was $186 million compared to $150 million a year ago and $59 million in the prior quarter. Non-GAAP operating income was $240 million compared to $186 million a year ago and $111 million in the prior quarter. The year-over-year and sequential increases were primarily due to higher revenue in the Computing and Graphics segment.
• Net income was $120 million compared to $102 million a year ago and $35 million in the prior quarter. Non-GAAP net income was $219 million compared to $150 million a year ago and $92 million in the prior quarter.
• Diluted earnings per share were $0.11 compared to $0.09 a year ago and $0.03 in the prior quarter. Non-GAAP diluted earnings per share were $0.18 compared to $0.13 a year ago and $0.08 in the prior quarter.
• Cash, cash equivalents and marketable securities were $1.2 billion at the end of the quarter.

Our first full quarter of 7nm Ryzen, Radeon and EPYC processor sales drove our highest quarterly revenue since 2005, our highest quarterly gross margin since 2012 & a significant increase in net income year-over-year,” said Dr. Lisa Su, AMD president, and CEO. “I am extremely pleased with our progress as we have the strongest product portfolio in our history, significant customer momentum and a leadership product roadmap for 2020 and beyond.

via AMD

Dissecting the different markets, AMD's computing and Graphics segment revenue were $1.28 Billion, up 36% (Y/Y). The primary driver of these sales was the new 3rd generation Ryzen lineup which sold really well in both desktop and notebook segments. The GPU ASP increased year over year due to higher channel sales but saw a decline from the previous quarter due to higher mobile sales than the desktop parts. Operating income for the Computing and graphics department was $179 million compared to $100 million just a year back and $22 million in the previous quarter.

We have already seen major impact of 3rd Gen Ryzen processors in various markets where AMD has finally started taking control of major desktop and notebook PC market share. There have also been the same reports for AMD's EPYC lineup which is expected to hit the double-digit market share by the end of 2020.

AMD's enterprise, embedded and semi-custom revenue was $525 million, down 27% from the previous year and 11% sequentially. These were mostly due to lower semi-custom sales on the console front but EPYC was able to offset this due to stronger sales with the new 2nd Generation lineup.

It should be pointed out that most of the semi-custom chips are designed for consoles which include the Microsoft Xbox One, the Sony PlayStation 4 and their refreshed, updated variants. These console manufacturers are on the verge of introducing their next-generation products featuring AMD's latest Zen and Radeon cores so the slow down is expected as both console giants switch over to AMD's next-gen custom SOCs for their products.

Current Outlook

For the fourth quarter of 2019, AMD expects revenue to be approximately $2.1 billion, plus or minus $50 million, an increase of approximately 48 percent year-over-year and approximately 17 percent sequentially. The year-over-year and sequential increases are expected to be driven by an increase in Ryzen, EPYC, and Radeon product sales. AMD expects non-GAAP gross margin to be approximately 44 percent in the fourth quarter of 2019.

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