AMD announced their second quarter earnings for the 2019 fiscal year, and the company’s revenue was $1.53 billion for the quarter. This is down 13% from the same quarter last year. Gross margin improved from 37% to 41% year-over-year. Operating income was $59 million, down from $153 million a year ago, and net income was down $81 million to $35 million. This resulted in earnings-per-share of $0.03.

AMD Q2 2019 Financial Results (GAAP)
  Q2'2019 Q1'2019 Q2'2018
Revenue $1531M $1272M $1756M
Gross Margin 41% 41% 37%
Operating Income $59M $38M $153M
Net Income $35M $16M $116M
Earnings Per Share $0.03 $0.01 $0.12

Although AMD was in the black for yet another quarter, this is certainly a dip that AMD does not expect to last. Their forecast for Q3 2019 is a 9% year-over-year increase in revenue to $1.8 billion, and they’ve recently launched new products that could help them achieve those goals.

AMD Q2 2019 Computing and Graphics
  Q2'2019 Q1'2019 Q2'2018
Revenue $940M $831M $1086M
Operating Income $22M $16M $117M

Looking back at Q2 though, Computing and Graphics revenue was down 13% to $940 million, and AMD attributes this drop to lower graphics channel sales. This drop was slightly offset though by higher client CPU and datacenter GPU sales. Also good for AMD and their investors is that their average selling price for client processors has increased thanks to more Ryzen sales, and GPU average selling price has also increased thanks to datacenter GPU sales. The Computing and Graphics segment had an operating income of $22 million for the quarter, compared to $117 million a year ago.

AMD Q2 2019 Enterprise, Embedded and Semi-Custom
  Q2'2019 Q1'2019 Q2'2018
Revenue $591M $441M $670M
Operating Income $89M $68M $69M

AMD’s other major segment is their Enterprise, Embedded, and Semi-Custom, and this product group also saw revenues fall 12% to $591 million for the quarter. AMD attributes this drop to lower semi-custom product revenue, which you can more or less read as console sales, and that makes sense since the current generation consoles are reaching the end of their life, but both Microsoft and Sony have both committed to AMD platforms for their next generation consoles, so expect this segment’s fortunes to get a bit better soon. Operating income was $89 million for this group, which was up from $69 million last year. The higher operating income is thanks to higher EPYC processor sales, which is also a great sign for this segment.

Although this quarter’s revenue certainly saw a dip, AMD did just launch their latest third generation Ryzen this month, which wouldn’t be reported in their Q2 earnings which ended June 29th. As we saw in our review, this is a great step forward for AMD’s processor designs, and they have also launched their Navi based GPUs in July, so it makes some sense to see a dip prior to a major product launch. We’ll keep our eye on their results for Q3, but as previously mentioned they are expecting this to be a short-term drop, and with their new product lineup, that seems like a safe bet.

Source: AMD Investor Relations

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  • RSAUser - Thursday, August 1, 2019 - link

    Intel has those margins as they are still using a tech that's been paid off for years.
  • dullard - Wednesday, July 31, 2019 - link

    If we want AMD to stick around, we need to encourage AMD to raise prices. Business 101. Competing on cost is not a long term winning strategy. Never has been, never will be.
  • eva02langley - Wednesday, July 31, 2019 - link

    Building trust into consumer by offering better product at competitive prices DOES work. Best example is KIA. Look at what they were offering in 2010... in 2014... and today. It took 10 years, but now the quality of Korean cars are on par with the Japanese. In 5 years, we might see second hand market price rise close to Japanese second hand cars.

    It does work and it is working right now.
  • dullard - Wednesday, July 31, 2019 - link

    Kia isn't a great example. But, we can go with it. Since Dec 31, 2010, Kia Motor's stock price (KRX) has dropped 13.5%. Kia's 2010 profit was 2.25 trillion won, Kia's 2018 profit was 1.2 trillion won, down 46.6%.
  • dullard - Wednesday, July 31, 2019 - link

    AMD as a company has two big competitive risks. (1) Intel could get 10 nm and then 7 nm working. AMD has used up its lower process size ammo and doesn't have much of any additional counters for that. If that happens, AMD won't have a compelling way to win on the high end. (2) Zhaoxin, ARM, or another company could make a usable CPU on the low end. AMD's low-price strategy could be undercut by another even lower priced company.

    Yes, both risk are unlikely, but they are both quite feasible, especially in the long term.

    Thus, it is quite possible for AMD to be bested on both sides, by performance and by price. That sandwich position is not a good long-term position to be in.
  • dullard - Wednesday, July 31, 2019 - link

    The sooner AMD gets the "we have a premium product and will charge a premium price" idea, the better their long term prospects will be.
  • RSAUser - Thursday, August 1, 2019 - link

    If they are at the same price, they wouldn't sell as the average consumer will just go with Intel as they have had Intel in their machines for years.

    Same reason as why they go for Nvidia (though in Nvidia's case, AMD's GPU have not been competitive since the R9 200 series).

    Competing on price/performance is what AMD should do and is what they're doing and its going well for them.

    I am really interested how Q3 2019 goes, most people I know were waiting on that generation of Ryzen as single threaded performance for gaming was near on-par and the 3600 is insanely well priced (I and three other friends I know of waited to replace our 2600K and 4770K with them, I'm getting max 65W usage versus my ~150W on the 4770K with similar/better performance and no fans taking off).
  • dullard - Friday, August 2, 2019 - link

    You just reinforced what I said. If cost is the sole reason to buy AMD, then AMD has a losing strategy -- customers will go elsewhere the second they have the opportunity. AMD needs to have stronger reasons than cost for customers to buy them. AMD needs to work harder on differentiating their products, so that they are the default go to company, not Intel. And naming your chips with more cores mainstream instead of HEDT is just marketing fluff, not a real differentiating factor. Give us something Intel can't give us.

    Low cost is only a successful strategy short term.
  • WaltC - Wednesday, July 31, 2019 - link

    Traditionally, in the weeks ahead of a new cpu architecture launch, sales on current chips will dip--true for everyone in the business. The Q2 numbers don't include Zen 2 sales to date, which Su said a little while ago are already 3.5X their initial Zen + sales numbers. Q3 & 4 coming up should show markedly different and much more robust numbers, and on the server side, too. Personally, I'm all for AMD plowing every cent it can back into R&D--it isn't enough to get ahead--they have to stay ahead moving forward.
  • bobhumplick - Wednesday, July 31, 2019 - link

    well they were actually losing money for years until the first zen came out. amd are coming from way behind. itll get better for them if they keep things going well. thats the story of amd. boom and bust

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