AMD rode surging demand for its datacenter silicon and a healthy appetite for Ryzen notebooks to a solid end to its second quarter of the year, which saw it hit more than $6 billion in sales.
“Our work over the last several years has placed AMD on a significant growth trajectory,” CEO Lisa Su said on Tuesday’s Q2 2022 earnings call with analysts. “AMD has never been stronger, and the markets for our products have never been as large or diverse.”
According to her, this is AMD’s “eighth straight quarter of record revenue,” though revenue and non-GAAP EPS were pretty much in line with Wall Street’s expectations.
Also during the call we learned that the 5nm Zen 4 Ryzen 7000 desktop processor line is set to launch this quarter, and the 5nm Zen 4 Epyc server processors code-named Genoa will ramp up in the second-half of this year into 2023. That would mark the official introduction of this latest CPU architecture.
Top-end RDNA 3 graphics chips are also set to launch this year. The biz, which relies on TSMC to manufacture its silicon, is still experiencing some supply crunch issues but sees fab capacity opening up.
AMD’s financial figures are in stark contrast to Intel’s disastrous second quarter, which saw revenues slide 22 percent and a $454 million net loss that it blamed on adverse market conditions, including ongoing supply chain challenges and lower-than-expected demand.
However, these factors don’t appear to have negatively impacted AMD quite so much. We do have to note that though AMD recorded $6.55 billion in total sales, up 70 percent year on year, this is a little shy of half of Intel’s quarterly revenues. In other words, AMD’s sales are up and up, but don’t forget this fabless biz is a far smaller company than Intel.
That said, AMD claimed double-digit growth across each of its business units, including an 83 percent surge in year-over-year growth in its datacenter business. Here, its Epyc CPU, Xilinx FPGA, and Instinct GPU product families raked in $1.5 billion in revenues during the quarter.
It should be noted that AMD recently changed how it reported revenues to bring them inline with how the business is now organized following the Xilinx and Pensando acquisitions. As such, we recommend taking AMD’s normalized year-over-year performance claims with a grain of salt.
While AMD’s revenues were up across the board, the company’s net income and diluted earnings per share slid precipitously — down 37 percent to $447 million and 53 percent to $0.27, respectively — from the same time last year. The x86 outfit blamed the fall in profits on its operating income, which was down 37 percent to $526 million “primarily due to amortization of intangible assets associated with the Xilinx acquisition.” The drop in diluted EPS was “primarily due to lower net income and a higher share count as a result of the Xilinx acquisition.”
Gross margin also dipped to 46 percent from the year-ago 48 percent, and operating margin fell to eight percent from 22.
“We are on track to launch and reach production of Genoa, as the industry’s highest-performance, general-purpose server CPU later this year, positioning our data center business for continued growth and share gains,” Su added in a thinly veiled jab at Intel’s long-delayed Sapphire Rapids Xeon CPUs.
AMD attributed robust client computing revenues — which topped $2.2 billion, up 25 percent year over year — on strong demand for its laptop-focused Ryzen mobile processor facility.
And while Team Red reported softening demand for discrete GPUs in Q2, robust demand for next-gen consoles — Xbox Series X and Playstation 5 — and other semi-custom silicon products — Valve Steamdeck — drove the company’s gaming division to $1.7 billion dollars. That’s an increase of 32 percent from the same time last year.
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Finally, the company’s embedded business unit benefited handily from the inclusion of Xilinx’s large embedded portfolio, which drove revenues of $1.3 billion in the quarter.
A quick glance over Intel’s Q2 earnings from last week show that AMD saw double-digit growth in every equivalent business unit where Intel saw declines.
AMD expects PC sales to slide, datacenter to remain strong in Q3
And unlike its larger rival, which predicted a tumultuous couple of quarters, AMD’s Su painted a picture of continued revenue growth, driven primarily by the strength of its datacenter and embedded business units.
“Despite the current macroeconomic environment, we see continued growth in the back half of the year, highlighted by our next-generation 5nm product shipments and supported by our diversified business model,“ she said. “As we go into the fourth quarter, what we see is, again, the sequential growth will be led by the datacenter as well as our embedded business.”
As such, her biz is predicting Q3 revenues of around $6.7 billion and full year 2022 revenues of roughly $26.3 billion. The third-quarter outlook was just short of Wall Street’s expectations of $6.8 billion, causing AMD’s share price to tumble more than six percent in after-hours trading.
AMD’s optimistic-leaning outlook over the next few quarters isn’t to say the company isn’t prepared for a drop in demand. Su expects her PC business to be down “let’s call it mid-teens” in Q3. This isn’t entirely surprising given just how hard declining PC demand hit Intel this quarter.
Su also predicts gaming GPU revenues will remain soft over the next few quarters, rebounding slightly toward the end of Q4 and in 2023, as AMD ramps production of its next-gen CPU and GPU families.
Meanwhile on the datacenter side of the house, Su admits that despite the recent success of its MI200-series GPUs, which power the Frontier supercomputer, the GPUs won’t contribute meaningfully to AMD’s bottom line in 2022.
“Overall, from a revenue standpoint, it’s not a big contributor this year,” she said, adding that she expects that to change considerably in 2023. ®