One of the best outcomes of Lisa Su’s tenure as CEO of AMD has been the company’s roadmap execution. Under her predecessors, AMD’s roadmaps were often more like a guidelines than an actual rule (to steal a phrase). According to AMD’s quarterly earnings call this week, however, the company is firing on all thrusters and will deliver its entire roadmap of upcoming products on-time despite the impact of COVID-19.
“We are on track to deliver strong growth in the second half of the year,” Su said, “Driven by our current product portfolio and initial shipments of our next generation ZEN 3 CPUs and RDNA to GPUs that are on track to launch in late 2020.”
A few other tidbits from the call that I didn’t mention yet include the fact that AMD has paid off its line of credit while ending the quarter with $1.8B in cash on hand. That’s a far cry from the pre-Ryzen era, when AMD struggled to maintain $750M in cash from quarter to quarter. Free cash flow was $152M and AMD’s free cash flow has been positive for the entire year-to-date. The company expects Q3 revenue of $2.55B for the year, up 1.42x year-over-year and 1.36x sequentially. This will mostly be the impact of the PS5 and Xbox Series X launches, though Epyc’s continuing ramp and mobile Ryzen production will add some sales as well.
AMD expects full-year revenue of to be 1.32x higher than 2019, with a gross margin of ~45 percent. While still substantially below Intel’s margins, AMD has improved its own pre-Ryzen margins by 10-15 percentage points depending on the quarters you choose to compare. This shift is directly tied to the company’s newfound profitability and is also why AMD isn’t going to go on a mad price-cutting trip any time soon.
AMD no longer expects the PC market to shrink in the back half of the year, though it isn’t completely clear if the company expects the market to grow in absolute terms or it feels it’ll pick up more share and thereby ship more processors, even if total PC sales are lower. AMD has stated that it expects its console margins to lower its overall gross margin, but this is nothing new. Console margins have always been lower than PC chip sales. No word yet on how AMD has structured its future revenue from the Xbox Series X / PlayStation 5. In 2013, AMD announced that it had front-loaded revenue to ensure it received the largest benefits at the beginning of the business cycle when it needed the money the most.
Su also noted that the Ryzen Mobile 4000 family has outperformed expectations and that its server ramps continue to slowly but steadily gather momentum. Multiple analysts asked if AMD thought it would surge in servers with explicit reference to its gains in 2004 – 2006, but Lisa refused to be pinned down to any specific figures, beyond saying that AMD had met its goal of establishing double-digit market share and that data center products drove more than 20 percent of AMD’s Q2 revenue. This has long been a major goal for the company because data centers tend to be less susceptible to recession and can serve as a financial bulwark in the face of collapsing consumer demand. The current Great Cessation presents its own unique economic challenges, but data center revenue is a key metric for overall Epyc success.
7nm availability continues to be tight, with Su declaring that AMD works closely with TSMC to manage overall supply/demand issues. This may tie into reports that Intel will be “battling” AMD for 7nm chips, though uncertain timelines make it unclear what parts Intel will build at the client foundry. Su declined to comment on whether AMD would take a different approach to any aspect of the market given Intel’s problems competing of late, preferring instead to emphasize ongoing consistent roadmap execution.
Now Read:
- Intel, AMD Reportedly Fighting for Capacity at TSMC
- AMD Ryzen 4000G Desktop Chips Could Finally Deliver on the Promise of APUs
- Rumors Point Towards Remarkable Gains for AMD’s Upcoming ‘Big Navi’ GPUs
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