AMD beats second-quarter earnings with $6.55 billion in revenue, up 70%

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Advanced Micro Devices reported that its revenue and profit for the second quarter ended June 30 exceeded expectations, with revenue growing 70% to $6.55 billion on a GAAP basis.

Non-GAAP net income for the quarter was $1.707 billion, or $1.05 per share, beating expectations of $1.05 per share on revenue of $6.5 billion on a non-GAAP basis . AMD shares are down 3.7% at $95.55 per share after hours trading.

The Santa Clara, Calif.-based company continues to benefit from its highly competitive Zen and Zen 2 architectures for processors, which can generate 50% or more higher performance per clock cycle than the previous generation. This architecture put AMD ahead of Intel in performance for the first time in a decade, and it helped the perennial No. 2 PC chipmaker become a fast-growing contender against Intel.

The results were better than rival Intel reported. Over the past two years, Intel has also stumbled on both the chip design and manufacturing side, where it has lost its technological edge to rivals such as TSMC, which makes both processors and processors. graphics chips for AMD. As a result, AMD has made historic market share gains over the past three years.

The HPE Cray Frontier uses AMD Epyc processors.

What’s interesting is that AMD made these gains amid a historic chip shortage caused by pandemic supply and unprecedented demand for electronics.

AMD posted quarterly revenue of $6.55 billion, a non-GAAP gross margin of 54% and a non-GAAP operating margin of 30%. On a GAAP basis, revenue was $6.55 billion, up 70%.

“We achieved our eighth consecutive quarter of record revenue thanks to our strong execution and expanded product portfolio,” AMD CEO Lisa Su said in a statement. “Each of our segments experienced significant year-over-year growth, driven by increased sales of our data center and integrated products. We expect continued growth in the second half of the year, evidenced by our shipments of next-generation 5nm products and supported by our diversified business model.

Intel, meanwhile, has doubled its investment in manufacturing to stay competitive and take advantage of the chip boom and supply shortage.

Analysts had expected AMD to report earnings of $1.03 per share on revenue of $6.53 billion for the second quarter ended June 30. For the third quarter ended Sept. 30, analysts expect AMD to report earnings of $1.09 per share on revenue of $6.82 billion.

AMD said data center revenue was $1.5 billion, up 83% from a year earlier, based on strong sales of Epyc server processors. Operating profit was $472 million, down from $204 million a year ago, driven by higher revenue and partially offset by higher operating expenses.

On a call with analysts, Su said demand for Epyc processors was strong in the quarter, with growth from cloud and enterprise customers. In the cloud, more than 60 new instances powered by third-generation Epyc processors were launched during the quarter by AWS, Baidu, Google, Microsoft Azure and Oracle.

Customer segment revenue was $2.2 billion, up 25% from a year ago, driven by sales of Ryzen mobile processors. Average selling prices of customer processors have increased thanks to Ryzen mobile. Operating profit was $676 million, compared to $538 million a year ago. Su said AMD believes it won customer processor revenue for the ninth straight quarter, led by Ryzen mobile.

Games segment revenue was $1.7 billion, driven by higher sales of semi-custom products such as chips for PlayStation 5 and Xbox Series X/S game consoles. Operating profit was $187 million, down from $175 million a year earlier. This was partially offset by lower game graphics revenue. AMD said it is on track to ship its Ryzen 7000 5nm and AM5 desktop processors later this quarter. AMD expects gaming graphics to be down in Q3, but it still plans to launch its high-end RDNA 3 GPUs later this year.

Su said AMD made progress with its data center GPU footprint during the quarter, highlighted by the AMD-based supercomputer Frontier which rose to the top spot on the world’s fastest supercomputers list.

Embedded segment revenue was $1.3 billion, up 2,228% year-over-year due to the inclusion of the Xilinx acquisition. Operating profit was $641 million, compared to $6 million a year ago. All other operating losses were $1.5 billion, down from $92 million a year ago due to amortization of intangible assets related to the Xilinx acquisition. The company said it saw strong growth in field-programmable gate array and networking products with cloud and financial customers.

AMD said it is working on its Zen 4 and Zen 5 core architectures (coming in 2024).

For the outlook, AMD expects Q3 2022 revenue to reach $6.7 billion, plus or minus $200 million, up 55% from a year ago on growth data center and embedded segments.

For the full year, AMD estimates revenues will be $26.3 billion, up 60% from the prior year, and gross margins of 54%. Su said customer demand for the Genoa 5nm server processor is very strong.

“Our work over the past several years has put AMD on a significant growth path,” Su said. “AMD has never been stronger and the markets for our products have never been larger or more diverse.”

Despite a challenging macro environment, Su said the company expects continued growth in the second half, driven by upcoming next-generation 5nm products.

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