Continuing our look at tech industry financial results, AMD this afternoon is celebrating setting some new records in its Q2’2020 financial results. Enjoying a continuing turn-around in its fortunes t hanks in big part to its Zen series of CPU architectures and resulting products, the company has just closed the books on the first year of sales of its Zen 2-based desktop processors, with EPYC following close behind. At this point AMD is now setting quarterly revenue records, and the company is expecting to grow its revenue further over the coming months.
For the second quarter of 2020, AMD reported $1.93B in revenue, a 26% jump over the same quarter a year ago. As a result, Q2’2020 was AMD’s best quarter ever, built on the back of record notebook and server revenue. Overall, all of AMD’s metrics have improved in a year-over-year basis, with net income up $122M (349%) to $157M, while the company’s all-important gross margin improved by 3 points to 44%. In fact the only real knock that can be made on AMD’s quarter is that they didn’t pass their Q1’2020 net income or gross margin, which was due to increased semi-custom shipments, which aren’t as profitable for the company.
Once again the flag bearer for AMD is their Computing and Graphics segment, which encompasses their desktop and notebook CPU sales, as well as their GPU sales. That division booked $1.37B in revenue for the quarter, $427M (45%) more than Q2 of 2019. The segment’s operating income as up significantly as well, jumping from just $22M a year ago to $200M this year.
These numbers come as AMD closes the book on their first year of Zen 2 product sales – the first retail chips hit store shelves at the very start of Q3’2019. Since then AMD has grown their desktop chip sales significantly, and combined with laptop sales the company is reporting their best client processor revenue in more than 12 years. As previously mentioned, laptop sales saw record revenue – doubling last year’s numbers – thanks in part to AMD shipping a record number of notebook chips.
As for product average selling prices (ASPs), AMD is reporting that client processor prices are up on a year-over-year basis (thanks again to Zen 2). However they have dropped on a quarterly basis due to a greater mix of Ryzen Mobile sales.
Meanwhile AMD’s GPU division looks to have once again been the laggard. While AMD doesn’t break out revenue numbers to specific divisions, on the subject of ASPs they note that GPU ASPs are down on both a year-over-year and quarterly basis, due to lower channel sales. On their earnings call, AMD has noted that while mobile GPU sales are up by double digits, this was more than offset by declines in desktop GPU sales. Overall, with AMD’s Q2’2019 being a somewhat soft quarter for GPU sales to begin with as consumers awaited their heavily-teased Navi architecture products, I’m surprised to see that AMD’s ASPs still slipped this year.
Finally, AMD’s Enterprise, Embedded, and Semi-Custom segment saw a very solid Q2, as the group enjoyed an uptick in EPYC processor sales. In fact AMD has finally, albeit belatedly, finally captured a double-digit share of the server processor market, a major goal for the company. Fittingly, on a year-over-year basis, EPYC revenue has doubled.
None the less, the odd grouping of server CPUs with semi-custom (console) chips means that revenue actually dropped on a year-over-year basis thanks to lower semi-custom sales. The upshot, at least, is that it’s a significant improvement over Q1, where the group ended up in the red. Meanwhile AMD has started production of the PS5 and Xbox Series X SoCs, so revenues here should significantly improve next quarter, but those are still lower margin products.
Looking forward, like much of the rest of the tech industry AMD is looking towards a strong second-half of the year, as the company has been able to successfully weather the immediate challenges from the coronavirus pandemic. As a result, AMD is increasing its full-year projections, and the company is now calling for 32% revenue growth over 2019, and a gross margin of around 45%.
Driving this growth for AMD will be a mix of the slow expansion of server products, as well as new products launched in the second-half of the year. AMD is expecting EPYC sales to continue to grow and for the company to gain market share there as more server vendors further ramp up their EPYC server production. Meanwhile AMD is reiterating that it’s expecting to begin shipping its Zen 3-based “Milan” EPYC processors late this year. AMD’s upcoming CDNA-based data center GPUs are also set to launch around at time.
As for the consumer side of matters, AMD is expecting continued sales success with its consumer products, particularly Ryzen Mobile. None the less, all eyes are going to be on AMD’s future products, as AMD is reiterating their 2020 launch plans. The company reports that it’s on track to launch Zen 3 client CPUs in late 2020, and the company’s eagerly-anticipated RDNA2 products, which will eventually encompass a full stack refresh, will launch in late 2020 as well.
