AMD announced its quarterly results yesterday, with significant improvements in year-on-year sales. Total revenue grew by 1.4x year-on-year, driven by growth in Ryzen and Epyc demand, while Compute and Graphics segment revenue grew by 1.73x year-on-year.
AMD claims to have held more than 50 percent of the premium CPU market at various e-tailer firms this year, which is at least somewhat verified by the regular reports we’ve seen coming out of companies like Mindfactory.de. Bestselling lists at Amazon and Newegg have also regularly listed AMD holding 50 percent or more of the top-selling processors.
According to CEO Lisa Su, revenue from the console side of the business was quite low, as Microsoft and Sony are now drawing down the inventory of PS4 and Xbox One hardware that they’d previously produced, rather than focusing on ramping production in Q3 for a new sales cycle.
AMD expects to start ramping production of the new console components next quarter, which means this is the closest look we’ve ever gotten at AMD’s total server revenue without console sales hitting the segment. Note, however, that this business still contains an unknown number of GPU sales to support Google Stadia and other cloud gaming/datacenter GPU use-cases. Comments made by AMD suggest that Epyc is a larger percentage of total data center revenue than Instinct is, but exact figures have not been disclosed.
According to AMD, revenue for the quarter was $348M in this segment, down 21 percent year-on-year due to the decrease in console sales (partially compensated for by increased Epyc sales). This segment reported an operating loss of $26M in Q1 2020, though AMD notes that Q1 2019 included a $60M licensing gain and that Q4 2019 had “higher revenue and lower operating expenses.” Despite the revenue hit, AMD grew its server business by double-digit percentages from Q4 2019 to Q1 2020.
A year ago about this time, I argued that AMD would improve its gross margins after the launch of 7nm rather than gutting its prices and devaluing its brand-new 7nm products. This is exactly what happened:
Overall, AMD has continued to improve its balance sheet and overall position in the market, quarter after quarter. Three years ago, we’d only recently seen evidence that the original Zen architecture would have some legs, and enthusiasts were debating whether Intel’s lead at 1080p was evidence of some critical gaming flaw yet to be discovered. Today, you can buy a $99 AMD CPU with expected-equivalent or better performance to 2017’s $350 Core i7-7700K.
If you bought a high-end X370 motherboard in 2017, you can step from a maximum of eight to 16 cores without upgrading your platform. It’s not unheard of for an older board to support higher-core-count CPUs, but core count doubling with frequency and IPC improvements is a rare upgrade path. Intel still has noted strengths in the server market and maintains a smaller leadership position in gaming than it did in 2017, but AMD has done an excellent job of executing these past three years. Ryzen’s continued success and AMD’s various financial improvements are a testament to the excellent execution of its engineering team. We don’t know how AMD has structured its royalty license with Sony and Microsoft this time out, but the launch of the Xbox Series X and PS5 will only be beneficial to AMD’s bottom line.
For full-year 2020, AMD projects revenue growth of 1.2x – 1.3x, with a gross margin of 45 percent and operating expenses at 29 percent of revenue. Relatively few companies are giving full-year projections given coronavirus uncertainties, so AMD is clearly feeling confident on that basis alone.
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