Advanced Micro Devices reported better-than-expected revenues and profits in the second quarter of 2018, raising the prospect that AMD is gaining share on archrival Intel.
Analysts expected AMD to post adjusted earnings of 12 cents a share on revenues of $1.72 billion for the second quarter, ended June 30. AMD reported second-quarter earnings per share of 14 cents on revenue of $1.76 billion, and its stock price was up 4.5 percent in after-hours trading.
The big question is how much market share AMD is taking from Intel, the leader in PC processors. AMD has surged since launching its Zen-based processors in March 2017, and it has steadily chipped away at Intel’s dominant position. Year-end figures (2017) showed that AMD’s market share had grown from 8 percent to 12 percent, according to Mercury Research. While that seems like a small shift, it’s enough to make AMD comfortably profitable, and it ultimately represents billions of dollars changing hands.
Intel will report its second-quarter earnings next week, which will shed more light on whether AMD is gaining market share. But for now, the picture looks fairly clear.
“I do believe AMD is gaining unit and revenue market share in desktop, notebooks, and servers,” said Patrick Moorhead, analyst at Moor Insights & Strategy, in an email today.
The Zen-based processors — including Ryzen for consumer, Threadripper for high-end gaming, Epyc for the datacenter, and Ryzen Pro commercial mobile for laptops — have made a real difference for AMD’s financials. Overall revenues are up 54 percent from a year ago, and revenues for computing and graphics as a division are up 64 percent. Adjusted net income was $156 million in the quarter, compared to a loss of $7 million a year ago. That was the highest quarterly net income for the company since 2011.
Ryzen chips were 60 percent of overall AMD client processor revenue. AMD customers have shipped 44 Ryzen systems already, and AMD expects 60 systems in the market by the end of the year.
“We ended the first half of 2018 strong, delivering our fourth consecutive quarter of double-digit year-over-year revenue growth, driven by increased demand for our high-performance products,” said Lisa Su, AMD president and CEO, in a conference call with analysts.
Gartner and International Data Corp. have said that quarterly PC shipments are at their strongest point in years, which could further benefit AMD.
“We feel good about our market position and are on the path to double-digit market share,” Su said, in a call with analysts.
Northland Capital Markets analyst Gus Richard downgraded Intel in June, noting that AMD’s contract manufacturer, Globalfoundries, may be pulling ahead in manufacturing processes. That could neutralize an advantage Intel has long had over AMD.
AMD is aiming to launch 7-nanometer chips based on Globalfoundries’ technology, and those could put AMD on par with Intel for the first time in at least a decade, analysts said. AMD’s stock price is up about 70 percent since its last earnings report.
“Ryzen unit shipments grew strong double digits sequentially as Ryzen mobile processor shipments more than doubled in the quarter,” Su said. “Acer, Asus, Dell, HP, Huawei, Lenovo, and Samsung launched dozens of Ryzen processor-based notebooks, which position us well to continue growing Ryzen mobile sales heading into the back-to-school and holiday seasons.”
On the gaming front, AMD expects to launch its second-generation Threadripper processor in August.
AMD’s graphics chip shipments were weaker in the quarter, thanks to lower demand for blockchain and cryptocurrency-related sales. The company said it is readying a new generation of Vega-based graphics chips.
Su said that the company is sampling its next-generation Radeon Vega graphics chip on the 7-nanometer process, and it is on track to launch the chips later this year.
“We don’t believe process technology is going to be a gate for us,” Su said.
Su said she expects 2018 revenues for blockchain/cryptocurrency will be down in the upcoming third quarter and that 2018 overall blockchain/cryptocurrency revenue will be down.
As for the datacenter market’s future, Su said “We received first silicon of our next-generation 7-nanometer Epyc processor with ‘Zen 2’, codenamed ‘Rome’, in the second quarter, and the silicon quality and bring-up has gone very well. I am happy to report that we recently started sampling ‘Rome’ to select partners for early validation, and we are on track to launch in 2019.”
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