AMD Q1 2014 Quarterly Earnings Analysis
by Brett Howse on April 17, 2014 8:45 PM EST
AMD hosted their quarterly earnings conference call this afternoon to announce their financial results for the quarter ending March 2014. While they still reported a GAAP loss of $20 Million ($0.03 per share), year over year results showed a strong revenue gain of 28% and a substantial 86% increase in net income (though still a small loss).
| AMD Q1 2014 Financial Results (GAAP) | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Revenue | $1.40B | $1.59B | $1.09B | ||
| Net Income | -$20M | $89M | -$146M | ||
Gross margins were 35% for the quarter which was flat compared to Q4 2013. These margins are in-line with AMD’s stated goals, and while they’d no doubt appreciate greater margins right now, the long term plan is to be profitable with these margins.
Non-GAAP numbers were slightly higher, with a small profit of $12M, or $0.02 per share.
| AMD Q1 2014 Financial Results (Non-GAAP) | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Revenue | $1.40B | $1.59B | $1.09B | ||
| Net Income | $12M | $45M | -$94M | ||
The biggest decrease was in the Computing Solutions (CPUs & APUs) segment, where there was a decrease of 12% year-over-year, however the Graphics and Visual Solutions (GPUs & custom SoCs) segment had a huge year-over-year increase of 118% mostly due to semi-custom SoC production. This isn’t surprising with the very high sales of the Xbox One, and more so the PS4, both which have AMD silicon at the heart of their platform.
| AMD Q1 2014 Computing Solutions Division Financial Results | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Operating Income | -$3M | -$7M | -$39M | ||
GPU operating income also increased year-over-year up $75M with the release of the popular Radeon R7 and R9 products and strong Average Selling Prices of those devices. Sequentially, GPU operating income fell $30M due to a decrease in semi-custom SoC sales. This isn’t surprising, since the PS4 and Xbox One both arrived in Q4 2013 – complete with the major production ramp-up and stockpiling that a console launch entails – and were a large boost to AMD’s sales numbers for that quarter.
| AMD Q1 2014 Graphics and Visual Solutions Financial Results | |||||
| Q1'2014 | Q4'2013 | Q1'2013 | |||
| Operating Income | $91M | $121M | $16M | ||
Total debt combining long term and short term was up slightly at $2.14B, however Cash, cash equivalents, and marketable securities were hovering around the $1B mark which is where AMD wants to keep its cash reserves. This is in addition to making the final payment to GlobalFoundries of $200M for its previous wafer commitments for 2012, as well as fixing prices for their 2014 wafer purchases.
AMD is expecting a 3% revenue increase (plus or minus 3%) for the 2nd quarter this year.
Overall this is a decent quarter for AMD. Consensus earnings for Q1 was $0.00 per share non-GAAP, which AMD beat at $0.02 per share. AMD shares are up 5.96% in after-hours trading at this time.
Going forward, AMD is expected to bring its ARM 64 bit server architecture out this year, and is hoping to make inroads in the profitable server market.
Rory Read – AMD’s president and CEO – must be pretty happy with the new fiscal outlook. There was a time in 2012 where people weren’t sure if AMD was going to be able to pull through but strong GPU and SoC sales, coupled with cost savings in the CPU division have brought AMD back.
Source: AMD Earnings Release
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humanglowstick - Friday, April 18, 2014 - link
Actually, Globalfoundaries (AMD's fab) and Samsung made a deal to implement 14nm FinFET. So, this could be a catalyst for AMD to speed up their 14nm designs and potentially catch up with Intel. Hopefully, for AMD's sake, they have been apprised of this deal before the news went public. http://semimd.com/blog/2014/04/17/globalfoundries-...mga318 - Friday, April 18, 2014 - link
Globalfoundaries isn't AMD's fab any more...humanglowstick - Friday, April 18, 2014 - link
Not according to ... AMD, which just inked a deal: http://www.amd.com/en-us/press-releases/Pages/amd-...sascha - Friday, April 18, 2014 - link
"AMD (NYSE: AMD) today announced that it amended its Wafer Supply Agreement (WSA) with GLOBALFOUNDRIES Inc. for 2014. (...) "The successful close of our amended wafer supply agreement with GLOBALFOUNDRIES demonstrates the continued commitment from our two companies to strengthen our business relationship as long-term strategic partners, and GLOBALFOUNDRIES’ ability to execute in alignment with our product roadmap,” said Rory Read, president and chief executive officer, AMD."ppi - Friday, April 18, 2014 - link
Well, yes, but unlike at Intel fabs, they can actually get their chips produced there.humanglowstick - Monday, April 21, 2014 - link
I see the confusion in my comment. I meant GF was AMD's in the sense that they were using GF as their fabs, not ownership.humanglowstick - Friday, April 18, 2014 - link
I think the console wins, more than anything, will help AMD win additional custom silicon customers. The CEO mentioned in the earnings conference call that there were 1-2 potential customers this year that haven't been inked (read: could still fall through) that would produce $200-500+ million in future revenue. AMD's future may still be speculative, but in my opinion, they are on the road to recovery.Kevin G - Saturday, April 19, 2014 - link
I'm scratching my head as to who those potential customers could be.The ARM side is hyper competitive and the giants like Facebook/Google/Amazon would have enough volume to merit a custom SoC design. Using AMD (or Broadcom, or Qualcomm etc.) to design the SoC could mean that the chip meant for your company winds up being sold to the competitor unless you're willing to pay a bit more for an exclusive contract. Google and Amazon are also the type of companies that aren’t afraid to license the 3rd party IP and design the SoC themselves.
The GPU side is interesting as I can see demand for customer SoC’s focused on supercomputing. The problem with supercomputing is that there isn’t enough raw volume and money to merit these designs. AMD’s GPU designs have not proven themselves in the ultra mobile market yet so that rules out another sector.
That leaves the one ace up AMD's sleeve: x86. The problem I'm having is figuring out who has enough volume to merit a custom x86 based SoC.
Well there is the obvious answer of who already has them today: console manufacturers. Nintendo is still on PowerPC with the Wii U. Despite its poor sales, it still seems premature to replace that with a new hardware platform. Valve’s steam box efforts appear to be rooted in 3rd party designs with SteamOS being licensed to them.
The datacenter giants like Facebook/Google/Amazon are Linux based and eyeing the ARM SoC's. I'm just not seeing enough in their software stack that is dependent upon x86 to merit a custom chip.
Similarly the enterprise networking guys like Cisco tend to design their own custom SoC’s already. Cisco has announced they’re going with Intel has a foundry partner for some designs.
None of the PC OEM’s are brave enough to go this route. They’re hyper risk adverse and feed off of generic designs. It doesn’t help that the PC market themselves is also shrinking, further compounding the situation.
The FPGA guys are based around ARM and some have even worked out deals with Intel to manufacture chips (with ARM cores no less).
Apple is an option as they like to do things their way. Though they’ve been able to get some oddball parts from Intel to meet their demands, though nothing like a full SoC. Apple’s Mac line does have enough volume to merit a custom SoC design. It is just difficult to see Apple leaving Intel. And if Apple wanted to ditch Intel, they’d just *buy* AMD and add them to their internal design teams.
There is always the hyper longshot of nVidia. They've been reportedly wanting to compete with Intel on the desktop but have never been able to get an x86 license. Granted nVidia would want to include their own GPU technology and the companies have a few lawsuits going back and forth. Yet they're one of the few players that'd make sense to ink a custom deal to get x86 CPU cores into a custom SoC but there is too much bad blood here.
humanglowstick - Monday, April 21, 2014 - link
Great points. I'm sure AMD investors dream of an Apple buy out. But, I see your point. The custom silicon business in the x86 realm is few and far between. Maybe, at this point, AMD can only hope that the console wins will improve their clout in the silicon industry, perhaps opening doors that were unavailable in the past. Regardless, I still believe AMD can be a player against Intel, but probably will never reach its previous heights in the mid-2000s.lefty2 - Friday, April 18, 2014 - link
Actaully, you missed all the interesting news, which came out in the conference call:1) OEMs are now producing Beama and Kavari laptops
2) GPU and console chips will start to be made at Globalfoundaries
3) AMD will announce 1-2 new customers for their custom design business