Advanced Micro Devices reported its revenues and earnings for the second quarter ended June 30 beat 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 a share, beating expectations of $1.05 a share on revenues of $6.5 billion on a non-GAAP basis. AMD’s shares are down 3.7% to $95.55 a share in after-hours trading.

The Santa Clara, California-based company continues to benefit from its highly competitive Zen and Zen 2 architectures for processors, which can generate 50% or more better 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 has helped the perennial No. 2 PC chipmaker into a fast-growing contender against Intel.

The results were better than what rival Intel reported. In the past couple of years, Intel has also stumbled on both the chip design side and in manufacturing, where it has lost its technological advantage to rivals such as TSMC, which makes both processors and graphics chips for AMD. As a result, AMD has been making historic market share gains for the past three years.

What’s interesting is AMD has been making these gains amid a historic chip shortage driven by the supply whipsaw from the pandemic and unprecedented demand for electronic goods.

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

“We delivered our eighth straight quarter of record revenue based on our strong execution and expanded product portfolio,” said AMD CEO Lisa Su, in a statement. “Each of our segments grew significantly year-over-year, led by higher sales of our data center and embedded products. We see continued growth in the back half of the year highlighted by our next generation 5nm product shipments and supported by our diversified business model.”

Intel, meanwhile, has been doubling down on its manufacturing investments as a way to stay competitive and take advantage of the chip boom and supply shortage.

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

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

In an analyst call, Su said that Epyc processor demand was strong in the quarter with growth across cloud and enterprise customers. In cloud, more than 60 new instances powered by third-generation Epyc processors launched in the quarter from AWS, Baidu, Google, Microsoft Azure, and Oracle.

Client segment revenue was $2.2 billion, up 25% from a year ago, driven by Ryzen mobile processor sales. Client processor average selling prices increased thanks to Ryzen mobile. Operating income was $676 million, up from $538 million a year ago. Su said that AMD believes it gained client processor revenue for the ninth straight quarter, led by Ryzen mobile.

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

Su said that AMD made progress with its datacenter GPU footprint in the quarter, highlighted by the AMD-based Frontier supercomputer hitting the No. 1 spot on the list of the world’s fastest supercomputers.

Embedded segment revenue was $1.3 billion, up 2,228% from a year ago thanks to inclusion of the Xilinx acquisition. Operating income was $641 million, up from $6 million a year ago. All other operating loss was $1.5 billion, compared to $92 million a year ago due to amortization of intangible assets related to the Xilinx acquisition. The company said that 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 (coming in 2024) architectures.

For the outlook, AMD expects Q3 2022 revenue to hit $6.7 billion, plus or minus $200 million, up 55% from a year ago thanks to growth in the datacenter and embedded segments.

For the full year, AMD estimates revenue will be $26.3 billion, up 60% from a year earlier, and gross margins of 54%. Su said the customer pull for the 5nm Genoa server CPU is very strong.

“Our work over the last several years has placed AMD on a significant growth trajectory,” Su said. “AMD has never been stronger, and the markets for our products have never been as large or diverse.”

Despite a tough macroeconomic environment, Su said the company sees continued growth in the second half of the year, led by next-generation 5nm products coming.

By: DocMemory
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