AMD Releases Q1 2017 Earnings, Confirms Vega and Naples Still On-Track for This Quarter
by Ryan Smith on May 2, 2017 7:00 AM EST- Posted in
- CPUs
- AMD
- GPUs
- Financial Results
AMD’s Q1 earnings are in, capping off a very important quarter for the company. For the first quarter of the year, AMD booked $984 million in revenue, a sizable 18% jump over Q1 last year. This revenue increase was enough to narrow the company’s losses, but not to wipe them out entirely. On a GAAP basis the company lost $73M for the quarter, leading to an overall loss of $0.08 per share. Q1 is also a relatively weak quarter for technology companies in general, and AMD is no exception, with revenue down and losses up slightly compared to their revenue-strong fourth quarter of 2016.
March of course saw the launch of their first CPUs based on the Zen architecture, kicking off AMD’s big comeback into the CPU space that has long been their core competency and biggest breadwinner. The Ryzen 7 launch in turn isn’t meant to turn AMD’s fortunes around overnight – especially when it was only on retail shelves for one month of the quarter – but it’s the start of something bigger for AMD. The impending launch of Naples – which AMD has reiterated is on track for this quarter – will be the second part of this turnaround.
| AMD Q1 2017 Financial Results (GAAP) | |||||
| Q1'2017 | Q4'2016 | Q1'2016 | |||
| Revenue | $948M | $1110M | $832M | ||
| Gross Margin | 34% | 32% | 32% | ||
| Operating Income | -$29M | -$3M | -$68M | ||
| Net Income | -$73M | -$51M | -$109M | ||
| Earnings Per Share | -$0.08 | -$0.06 | -$0.14 | ||
One bit of good news here is that AMD’s gross margin is up, and is now at 34%. AMD has structured their business to be able to operate with margins in the 30% range, but 35% has long been considered the soft floor for profitability, which means AMD is getting close to that. AMD’s cash flow is a bit less rosy though; the company has $943M in cash and short-term investments as of the end of Q1’17, versus $1.26B in the prior quarter. On an overall basis, AMD’s asset value is largely unchanged, with the difference in cash being offset by an increase in the company’s inventory and accounts receivable.
AMD’s non-GAAP results, which the company reports as a means to better show the state of the core business, show similar results. Non-GAAP results show a smaller loss overall, but the company is still in the red on operating income and net income. There is no single large factor this time around hurting GAAP results – AMD isn’t taking any large write-offs or the like – but rather it’s a number of smaller items, including the cost of employee stock-based compensation and charges related to AMD’s $1.41B in long-term debt.
| AMD Q1 2017 Financial Results (Non-GAAP) | |||||
| Q1'2017 | Q4'2016 | Q1'2016 | |||
| Revenue | $984 | $1110M | $832M | ||
| Gross Margin | 34% | 32% | 32% | ||
| Operating Income | -$6M | $26M | -$55M | ||
| Net Income | -$38M | -$8M | -$96M | ||
| Earnings Per Share | -$0.04 | -$0.01 | -$0.12 | ||
Breaking results down by segments, AMD’s situation in Q1’17 was fairly similar to past quarters. The Computing and Graphics segment is still the largest part of AMD’s two divisions, and outside of overall stock-based compensation, is still the division losing AMD money. Overall the Computing division booked $593M in revenue for the quarter, which is up 29% from Q1’16 and in fact is barely down from the always-strong Q4. The operating loss for the quarter was $15M, down significantly from Q1’16’s $70M loss, and even still better than Q4’16’s $21M loss.
The biggest factor here, of course, is Ryzen. With its high prices compared to AMD’s past desktop processors, it has been a big part in increasing AMD’s overall average selling price both on a quarterly and yearly basis. Similarly, GPU ASPs were up as well.
| AMD Q1 2017 Computing and Graphics | |||||
| Q1'2017 | Q4'2016 | Q1'2016 | |||
| Revenue | $593M | $600M | $460M | ||
| Operating Income | -$15M | -$21M | -$70M | ||
Meanwhile AMD’s Enterprise, Embedded, and Semi-Custom segment continued to stay in the black for the quarter, but revenue did drop from the previous quarter as holiday console sales tapered off. Revenue for the quarter was $391M, up slightly from the $372M of Q1’16, while the operating income was $9M, versus last year’s $16M. Otherwise the All Other segment booked a $23M loss due to the aforementioned stock-based compensation.
| AMD Q1 2017 Enterprise, Embedded, and Semi-Custom | |||||
| Q1'2017 | Q4'2016 | Q1'2016 | |||
| Revenue | $391M | $506M | $372M | ||
| Operating Income | $9M | $47M | $16M | ||
Looking towards the future, AMD a 17% revenue increase for Q2, while gross margins are expected to dip slightly to 33%. Besides enjoying a full quarter of Ryzen sales, AMD has once again confirmed that they will be launching both the Naples server CPU and the Vega GPU architecture in this quarter. Both are high-end, high-profit products that should significantly help AMD’s bottom line if they perform as expected. Though even with the Q2 launch, AMD won’t enjoy the full benefits of those launches until Q3 when they have further ramped up and collect revenue for those products over the whole quarter.
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silverblue - Tuesday, May 2, 2017 - link
A couple of mistakes... :)AMD Q1 2017 Financial Results (GAAP) table: Revenue for Q4'2016 shows $1110B.
AMD Q1 2017 Financial Results (Non-GAAP) table: second column header shows Q1'2016 and Revenue is missing the M (very minor point!); third column header shows Q4'2015.
siddharta - Tuesday, May 2, 2017 - link
Yes and I do hope they have more than $943 in cash :).Ryan Smith - Tuesday, May 2, 2017 - link
Like I said, Q4 was very good to AMD.siddharta - Tuesday, May 2, 2017 - link
Not if they spent $1.26B to be left with $934 :). Thanks for fixing that Ryan.Eden-K121D - Tuesday, May 2, 2017 - link
I really hope that Vega is not a paper launchedlee - Tuesday, May 2, 2017 - link
AMD needs to send a game optimizing team to every major publisher, and get them to tune their games for more cores/threads, and you will see ryzen gaming benchmarks in line with intel. They already beat intel in the synthetics, they just need to optimize more for gaming, and it will be selling like hot cakestrparky - Tuesday, May 2, 2017 - link
Not as long as there are memory compatibility issues, BIOS bugs, and general stability issues. It really comes down to the fact that Ryzen was half-baked at release. If you're looking to upgrade today, go Intel; you won't be sorry. If you can wait a year, see what Ryzen v2.0 is like.EasyListening - Tuesday, May 2, 2017 - link
lol, so much FUD. Ryzen is doing fine.TheJian - Wednesday, May 3, 2017 - link
Fine? ROFL. A full quarter of your cpu comeback in sales and you can't break even? Margins up only 2%? Inventory blowing up? What kind of problems are you having here?trparky was spot on. They should have waited another month or two for motherboards to NOT be ruining the story at reviews all over the web. That casts doubt on your cpu and ends with lost sales. Your new cpu loses in every game (is there a game it wins in? Close enough to call it ALL IMHO), and we're already discussing gen2 IN reviews from the cpu maker themselves. Multiple company people basically saying well gen1 is only for work stuff, the fixed one with better gaming is coming shortly (16 core x399/X390 chipset, maybe 12core as well). That is not a great way to launch. The games were OK as a problem alone perhaps, but most reviewers complained of board issues (granted bios pretty much, but it's embarrassing) and that made a LOT of sour reviews rather than showing the chips as good as they could have been only a month or so later with FINISHED bios files and better tuned boards. Most of the reviews mentioned how picky memory was also. Again, that's down to another month of testing and proper bios work getting done, but it still adds up to what could have been decent reviews (without those issues) to instead end with, "well, crap, that wasn't what we expected".
Stock holders took notice too, to the tune of a $3.60 haircut (25%!) on the stock (not good on a $13.50 stock). If you can't make money, I don't care what you say, you've got issues and you had better figure them out quick. Ryzen/amd great comeback amounted to a stock crash. Granted I think it will go back up as server/vega stuff come and hopefully a gen2 desktop (game fixed version) as soon as possible (better be before xmas), but this Q should have been much better than it was. A full quarter of sales of the new cpu and margins suck and no profit either. OUCH. The inventory is worrying since it would seem reviews DID hurt sales and that isn't good for the life of gen1, which is why I say gen2 can't come soon enough. IF the 16 core desktop version that is supposedly fixed works, they need to transition to it ASAP across the full line of desktops. You can't fix the CCX (L3 cache issues) with windows patches etc so games for gen1 are pretty much as is. Game devs are not going to help unless paid (AMD is already short on cash), so better to just fix the tech yourself with gen2 if you can. Most game devs will just figure the hit in their perf is not on enough desktops to be worth fixing (meaning not enough zen chips sold).
Tamz_msc - Wednesday, May 3, 2017 - link
Games, games, games - all you can think of is gaming performance. The ecosystem at launch was nowhere as bad as it was made out to be, considering it was primarily one motherboard manufacturer's whining that set the ball rolling.Ryzen has barely been in the market for 1.5 months at the time of this report.