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AMD-Opteron-A1100

AMD reported its Q3 2018 earnings on October 24, and the results are good, if a touch mixed in places. Revenue for the quarter was $1.65B, up iv percentage year-on-year and down 6 pct quarter-on-quarter. That's a little unusual for AMD, Q3 has been the company's best quarter for acquirement since the PS4 and Xbox One launched. On the other hand, gross margin improved by three points to hitting 40 percent. It's been a long fourth dimension since AMD recorded gross margins this loftier, and the company confirmed that the gains were due to increased product sales in the Compute and Graphics division. Net income was downward slightly from Q2 ($102M versus $116M) merely up substantially compared with Q3 2017 ($102M versus $61M).

AMD-Revenue

AMD notes that the decrease in acquirement was due to "lower graphics acquirement in the Computing and Graphics business organization segment," which isn't really a surprise. With gamers expecting the Turing refresh from Nvidia, it makes sense that players would concur off to meet what happened with the new RTX family unit. The additional gross margin is likewise the result of IP-related income from AMD's articulation venture in People's republic of china, with roughly two percentage of the increase attributed to "IP-related revenue and memory and inventory related adjustments." Yet, no thing how you slice it, bringing its gross margin up is a critical step towards long-term sustainable profitability — and IP licensing ventures are a groovy way to ensure more regular cash flows.

Lower GPU Revenue Linked to Blockchain Turn down?

One matter AMD makes clear in this quarter's results is that GPU sales are responsible for its reduced overall earnings. Blockchain sales could explain this. The company'due south Form 8-K states that in Q2, blockchain related revenue was "high single-digit" percentage of AMD'south total revenue. Based on Q2 2018 revenue and a target pct of viii percent, that works out to ~$140M in blockchain-based sales for Q2. AMD says that it offset some of this refuse with higher Ryzen sales, and the divergence between Q2 2018 and Q3 2018 is ~$103M. In short, the math works.

EESC (Enterprise, Embedded, and Semi-Custom) was also upwards compared with Q2 (that's the seasonal impact of the console marketplace, at to the lowest degree in part) but downwards compared with final year. This may surprise some analysts, who expected — and occasionally merits to continue to suspect, despite AMD's repeated messaging to the reverse — that Epyc would launch, accept xx percent of the server market place within six minutes, so hit 50 pct within a modest six weeks. But the Epyc ramp has been much slower, with a modest mid-single-digit market penetration target by the end of the year. We've e'er known that the Xbox I and PS4 were designed to front-load their revenue payments and that income from these sources would decline over time, so the drop in EESC revenue year-over-twelvemonth probable reflects some combination of decreasing panel margins and lower overall shipments, combined with Epyc's improved ramp. Again, there are multiple forces pushing the numbers in contrary directions.

AMD's sales projections for Q4 2018 are just $i.45B, which seems markedly low compared with what the company made in Q2 and Q3, but there's a annotation buried in the company's 8-M that shifts how we evaluate its relative strength. Non only would $1.45B exist an improvement on Q4 2017's $ane.34B, simply the company as well notes that in Q4 2017, "blockchain-related GPU sales of approximately depression double-digit percent of overall AMD acquirement."

This implies that in Q4 2017, at least $134M of AMD'south revenue was driven by blockchain sales that won't be present in Q4 2018 — but these temporary curt-term sales last twelvemonth effectively occluded some of the existent comeback to AMD'south longer-term businesses. It's still perfectly valid to compare the company'southward year-over-year position in both cases, of course, but if what you intendance well-nigh is the long-term health of the CPU and GPU businesses, the brusque-term surge in cryptocurrency made information technology harder to gauge how well the visitor's primary brands were performing — and the terminate of crypto sales may take made AMD look a little weaker at present than it actually was.

AMD's stock has plunged 22 percent on its news, but this may take more to do with the overall state of the market. The Dow Jones erased its entire gains for the year on the 24th, plunging more than 600 points. AMD's Q3 report may not have been the shining beacon of calorie-free that investors were looking for, merely on a 24-hour interval similar today, it'south not articulate any results would have fabricated a difference.

Now Read: Epyc Achievement: AMD Now Bachelor for Oracle Cloud Compute Instances, If Intel Is Suffering a CPU Shortage, Tin can AMD Selection Up the Slack?, and AMD Moves All 7nm CPU, GPU Production to TSMC