With assists from Intel’s (INTC) - Get Report manufacturing setback, strong cloud server demand and high expectations for Microsoft (MSFT) - Get Report and Sony’s (SNE) - Get Report next-gen game consoles, AMD’s (AMD) - Get Report stock is flying high heading into Tuesday’s Q2 report.
Currently, the consensus among analysts polled by FactSet is for AMD to post Q2 revenue of $1.86 billion (up 21% annually), GAAP EPS of $0.11 and non-GAAP EPS of $0.16. However, AMD’s sales expected to rise sharply during the back half of the year, the company’s Q3 and full-year sales guidance might take the spotlight.
AMD’s Q3 revenue consensus currently stands at $2.31 billion (up 28%), and its full-year consensus stands at $8.4 billion (up 25%). In April, AMD guided for its full-year revenue to be up 25%, plus or minus 5%.
I’ll be live-blogging AMD’s earnings report, which typically arrives 15 minutes after the market closes, along with an earnings call scheduled for 5 P.M. Eastern Time. Here are some things to keep an eye on:
1. Server CPU Demand
AMD’s server unit shipments more than tripled annually in Q1, aided by share gains among cloud and high-performance computing (HPC) clients as well as strong cloud capital spending. And judging by what the likes of Intel, Micron (MU) - Get Report and Nvidia (NVDA) - Get Report have shared since then, demand has remained quite healthy in the subsequent months.
On Thursday, Intel disclosed that its server CPU division (the Data Center Group, or DCG) saw revenue rise 43% annually in Q2, with sales to cloud clients rising 47%. Intel did caution DCG’s sales to enterprise and government clients (a field where AMD has a relatively small share) would weaken in Q3, but also forecast demand among cloud and telco clients would remain strong.
In addition -- ahead of AMD’s planned launch of a next-gen server CPU line based on its Zen 3 CPU core microarchitecture -- Intel said that it expected tougher competition from AMD during the back half of the year. However, the company also insisted that it expects to end the year with a “somewhat higher” server CPU share than what it originally expected.
2. The Game Console Processor Ramp
With COVID-19 having provided a major boost to both PC and console gaming activity, expectations have grown for the initial demand that Microsoft’s Xbox Series X and Sony’s PlayStation 5 -- each of which will contain a powerful AMD processor -- will see this holiday season. Last week, Bloomberg and Japan’s Nikkei both reported that Sony had significantly hiked its 2020 production plans for the PS5.
In April, AMD said that it expected its console processor sales (referred to by the company as “semi-custom” revenue) would rise sequentially in Q2 ahead of a bigger second-half shipment ramp. Any details AMD shares about just how large it expects this ramp to be will get attention.
3. Desktop and Notebook CPU Sales
Notebook demand remains elevated right now, thanks to purchases made to support remote workers and students. Desktop demand is weaker, although much of this weakness revolves around the corporate desktop market, where AMD has a lower share than it does in the consumer desktop market.
AMD guided in April for its notebook processor sales to rise sequentially in Q2, aided by strong end-market demand and the ramp of its Ryzen 4000 Mobile processor line (launched in Q1). Desktop processor sales were forecast to drop sequentially, but second-half demand could get a boost from recent product refreshes and (potentially) the launch of its first Zen 3-based desktop CPUs.
Intel, for its part, guided on Thursday for its PC total addressable market (TAM) to drop by a high-single digit percentage annually in Q3, as weak commercial PC spending, OEM inventory drawdowns and macro pressures offset healthy consumer notebook demand.
4. PC and Data Center GPU Demand
AMD’s GPU sales rose by a double-digit percentage annually in Q1, fueled by strong demand for its Radeon RX 5000 (Navi) desktop and notebook GPUs. With consumer spending on gaming hardware and software pretty strong right now, Q2 might have seen decent gaming GPU growth as well.
AMD’s server GPU sales might have also seen an uptick in Q2, thanks to demand related to workloads such as virtual desktops and cloud gaming. Microsoft’s xCloud gaming service, which is currently in preview and relies on AMD GPUs, formally launches in September.
5. Commentary About Future CPUs and GPUs
CEO Lisa Su often shares a new detail or two on AMD’s call about upcoming products. Products that could be discussed include:
- Zen 3 PC CPUs. AMD has promised it will launch its first Zen 3-based PC offerings before the end of 2020, but hasn’t shared which market segments these products will target (high-end desktops are a strong possibility) or how large it expects 2020 sales to be.
- Zen 3 server CPUs (codenamed Milan). They’re also promised to launch before the end of the year, but their exact launch timing remains unknown.
- Next-gen gaming GPUs. PC GPUs based on AMD’s next-gen RDNA 2 architecture -- including a flagship GPU codenamed Big Navi -- are due to launch at some point in the second half of 2020.
- Zen 4 PC and server CPUs. With Intel having just pushed back its launch plans for PC and server CPUs relying on its next-gen, 7-nanometer, manufacturing process node, AMD could have a golden opportunity to take share in 2022 and 2023 via CPUs based on its Zen 4 microarchitecture. The company indicated in March that Zen 4 CPUs will arrive by 2022.