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Advanced Micro Devices Second-Quarter Earnings Live Blog

Real Money's Eric Jhonsa covers AMD's second-quarter earnings report and call.

Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report investors are hoping the CPU and GPU developer once more tops estimates and hikes its full-year guidance when it reports after the closing bell on Tuesday.

Among analysts polled by FactSet, the consensus is for AMD to report second-quarter revenue of $3.62 billion (up 87% annually) and non-GAAP EPS of 54 cents.

AMD typically shares quarterly and full-year revenue guidance in its report. The company's third-quarter revenue consensus stands at $3.82 billion (up 36% annually), while its full-year revenue consensus is at $14.65 billion (up 50%). The latter figure is in line with AMD's April guidance for roughly 50% full-year growth.

Real Money's tech columnist, Eric Jhonsa, will be breaking down AMD's second-quarter report, which is due after the bell on Tuesday, along with an earnings call scheduled for 5 p.m. Eastern.

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5:56 PM ET: AMD's call has ended.

Shares are currently up 0.7% after hours to $91.70 after AMD topped Q2 estimates, issued above-consensus Q3 sales guidance and hiked its full-year revenue growth guidance to ~60% from ~50%.

A 65% Y/Y sales increase was reported for the Computing & Graphics segment, and a 183% increase was reported for the Enterprise, Embedded & Semi-Custom segment thanks to huge jumps in server CPU and game console SoC sales. ASPs were up Q/Q and Y/Y for PC CPUs, server CPUs and GPUs.

On its call, AMD forecast data center and gaming products would "primarily" drive its Q/Q sales growth in Q3, and indicated data center would be its largest second-half growth driver. PC CPU sales were forecast to be "flattish" in the second half of the year, amid supply constraints and healthy end-user demand.

Thanks for joining us.

5:49 PM ET: Question about using Milan CPUs in single-threaded mode. Does AMD see an opportunity for such offerings?

Su: There are a lot of different use cases for server CPUs. Sometimes optimizing performance per $ with a lot of multithreading is key. Other times, optimizing for performance matters more. We'll keep optimizing our offerings for the needs of different customers.

5:47 PM ET: Question about expected 2H server GPU demand.

Su: We expect to grow the business in the second half, off a relatively small base. The data center GPU business is still in its early innings. Server CPUs will be a much larger data center growth driver.

5:45 PM ET: Question about how much GPU strength is from gaming vs. crypto.

Su: We don't believe there was a significant crypto component for our Q2 GPU sales. We don't think graphics is our largest 2H growth driver, data center is our largest driver. But there is still a lot of gaming GPU demand, and we'll continue to support that demand.

5:44 PM ET: Question about future opex growth.

Kumar: There are a lot of areas to invest in as we look to drive future growth. Higher employee compensation will boost second-half opex. I expect that for the full year, opex comes in a little under 25% as a % of revenue. There are a lot of new products arriving in 2022, and we'll look to support them. 

5:42 PM ET: Question about whether AMD can grow PC CPU sales in 2022 even if industry sales drop.

Su: We believe we can grow the business in 2022 even if the market is not as robust. We're still underrepresented in many PC segment. We're seeing good momentum in commercial PCs, gaming PCs, etc.

5:40 PM ET: Question about second-half console growth.

Su: This is an unusual year in terms of console seasonality. We expect some console SoC growth in the second half of the year, but less than usual.

5:39 PM ET: Question about the breadth of AMD's enterprise server CPU engagements.

Su: We have a very strong pipeline here. It started with Rome, but accelerated with Milan. We're also seeing more appliance launches, ISV optimization, etc. Visibility looks good into 2022. We have good visibility with tier-2 cloud players. SMBs and channel sales are an opportunity for us going forward.

5:37 PM ET: Question about Milan's headway in the telco market, where Intel has historically been dominant.

Su: We believe the telco segment is a very good segment for us. There is a lot of interest here. It's not a large % of revenue right now. But it is a strategically important segment for us. And acquiring Xilinx, with its customer relationships in this space, should help us. We're still very early in this cycle

5:36 PM ET: Question about server CPU price competition.

Su: Pricing isn't the first variable for buying a server CPU. It's about total cost of ownership (TCO), and I think we're very competitive there. It is a competitive market, and we'll fight for every socket.

5:35 PM ET: Question about Q2 Epyc growth. Did Epyc outgrow the market Q/Q?

Su: Yes, Epyc outgrew the market.

5:34 PM ET: Question about PC demand expectations.

Su: End-user demand has been very strong. There is a little bit of a mix shift as you go through time. I think we performed well here and continued gaining revenue share. As we go forward, I think demand remains strong, but I think you'll also hear about pockets of component shortages for the second half. We expect our PC business to be "flattish" in the second half relative to the first half. We don't think there's significant customer inventory. End-user demand is strong, but there needs to be some "supply matching" in the marketplace.

5:31 PM ET: Question about the operating leverage AMD is seeing. How is AMD thinking about balancing revenue growth and margin expansion?

Su: I think we've always been very thoughtful about balancing those things. We do continue investing in R&D and sales/marketing, but we expect to keep growing operating margins even as we spend more on opex.

5:29 PM ET: Question about how AMD is approaching buybacks going forward.

Kumar: We'll keep returning cash to shareholders as our balance sheet continues to improve. But I don't want to get in any specifics on this call.

5:28 PM ET: Question about server CPU share gains, and what's driving this year's acceleration in gains. Also one about the manufacturing roadmap Intel unveiled yesterday.

Su: We're excited about our data center momentum. Our execution is very strong. Relative to Rome, customers felt more comfortable adopting Milan broadly. Our competition is very good, and we need to keep our execution as strong as it has been.

5:26 PM ET: Question about Epyc ASP growth expectations.

Su: Milan lends itself to higher ASPs than Rome. And we expect to continue that trajectory with Genoa. Greater enterprise Epyc sales should also be a margin tailwind.

5:25 PM ET: Question about gross margin expectations.

Kumar: We're pleased with our margin progress. We're still aiming to eventually reach a 50% GM. We feel very good about out ability to bring our GM above 50% long-term.

Su: Mix is important. As data center becomes a larger % of revenue, that provides a boost to margins.

5:23 PM ET: Question about Q2 server CPU growth. How much came from Rome vs. Milan and cloud vs. enterprise. Also one about 2H  server CPU expectations, and one about total data center revenue.

Su: We saw significant Milan growth in Q2. But Rome was still a larger portion of revenue. Cloud grew faster than enterprise in Q2. We expect Milan sales to surpass Rome sales in Q3. We're seeing continued strength in cloud and HPC, but also very good momentum in enterprise. Enterprise will be "a stronger component" of Epyc sales in 2H21. Data center will keep growing as a % of revenue in the second half.

5:20 PM ET: First question is about supply constraints. How would AMD characterize the current supply/demand gap, and what does 2022 hold?

Su: The industry has seen very strong demand. We do see some level of constraints, but we are steadily making progress. We made some progress in Q2, which helped up beat guidance. Supply is expected to be tight through the end of this year, the situation is expected to improve in 2022. We're confident we can see strong growth along the way.

5:17 PM ET: The Q&A session is now starting.

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5:16 PM ET: Regarding Q3 guidance, Kumar says Q/Q growth is expected to be primarily driven by data center and gaming growth. All businesses are expected to see Y/Y sales growth.

5:15 PM ET: Kumar is recapping the quarter's segment performance. Notes the EESC segment's op. margin improved to 25% from 6% a year ago.

5:14 PM ET: Kumar: GM benefited in Q2 from an improved revenue mix and a higher margin contribution from all businesses. Op. margin doubled Y/Y to 24%. 

5:12 PM ET: CFO Devinder Kumar is now talking.

5:12 PM ET: Su reiterates AMD is on track to close the Xilinx deal by year's end. Also says AMD remains on track to launch next-gen products in 2022, including Zen 4 CPUs and RDNA 3 GPUs, and that AMD expects to keep growing "significantly faster than the market."

5:09 PM ET: Su: Server CPU sales rose by a strong double-digit % Q/Q in Q2, with both second-gen (Rome) and third-gen (Milan) CPUs contributing. Units and ASPs both grew. Cloud sales continued growing, and enterprise server CPU demand is "accelerating." We're also seeing growing design wins for hyperconverged and virtual desktop offerings, and we saw additional HPC wins.

Data center is now over 20% of revenue, up from a high-teens % in Q1. AMD expects data center to continue growing as a % of sales.

5:07 PM ET: Su: Semi-custom revenue rose Q/Q and Y/Y, and we expect game console demand to remain strong through year's end.

5:06 PM ET: Su: Data Center GPU revenue more than doubled Y/Y, aided by deployments of CDNA 2 GPUs. We expect Data Center GPU revenue to grow in 2H21, aided by the ramp of next-gen Radeon Instinct products.

5:05 PM ET: Su: We saw very strong demand across all of our businesses. Computing & Graphics benefited from "significant" Ryzen and Radeon growth. Desktop and notebook CPU sales both rose by a strong double-digit % Y/Y, and we believe we gained share. Ryzen 9 CPU shipments more than doubled Y/Y. Notebook units and ASPs rose Q/Q and Y/Y. Ryzen Pro shipments nearly doubled Y/Y amid new Fortune 500 deployments. GPU revenue doubled Y/Y, benefiting from both high-end gaming GPU and data center GPU growth.

5:03 PM ET: Lisa Su is talking.

5:02 PM ET: AMD is going over its safe-harbor statement.

5:01 PM ET: The call is starting. Typically, AMD's call features prepared remarks from CEO Lisa Su and CFO Devinder Kumar, followed by a Q&A session with analysts.

4:56 PM ET: The Q2 call should kick off in a few minutes. Here's the webcast link.

4:51 PM ET: AMD's official Q3 and full-year guidance. Thanks to the buyback authorization, the full-year diluted share count guidance has been lowered by 10M to ~1.23B.

AMD Q2 outlook

4:49 PM ET: Free cash flow totaled $888M in Q2, up from $831M in Q1 and just $152M a year ago.

As a result, AMD's cash balance rose by $777M Q/Q to $3.79B in spite of its buybacks. Debt remained at $313M.

4:46 PM ET: As a reminder, AMD's earnings call is set to start at 5PM ET. I'll be around to cover.

4:45 PM ET: As was the case for Q1, AMD says its GPU and PC CPU ASPs each rose Q/Q and Y/Y in Q2. The PC CPU ASP growth contrasts with Intel, which respectively reported 17% and 5% Y/Y Q2 ASP declines for its notebook and desktop CPUs.

4:42 PM ET: AMD's stock is now up just 0.5% AH. Results and guidance both look pretty good, but (as is the case for the tech giants that reported after the bell) high expectations seem to be keeping the stock from rallying post-earnings, at least for now.

4:40 PM ET: On a non-GAAP basis, operating expenses rose 10% Q/Q and 47% Y/Y in Q2 to $909M, which compares with guidance of ~$900M. On a GAAP basis, R&D spend rose 43% Y/Y to $659M, while MG&A spend rose 59% to $341M.

AMD is guiding for non-GAAP opex to rise to ~$1B in Q3. But with full-year revenue guidance having been hiked, AMD now sees opex equaling ~25% of full-year revenue, down from prior guidance of ~26%.

4:34 PM ET: Two months after announcing a $4B stock buyback authorization, AMD says it spent $256M to repurchase 3.2M shares in Q2. That implies an average purchase price of $80/share.

4:33 PM ET: Regarding Xilinx, AMD says the deal remains on track to close by year's end.

4:32 PM ET: Cloud server CPU demand is said to have accelerated (AMD is clearly picking up meaningful share here), and "multiple high-volume enterprise deployments" with Fortune 500 firms are reported for PC CPUs.

AMD CG Q2
AMD EESC Q2

4:28 PM ET: Here's AMD earnings slide deck. The company notes within the deck that game console SoC sales rose Q/Q, and that PC and server CPU sales set new records.

4:25 PM ET: Q2 non-GAAP GM was 48%, up from 46% in Q1 and 44% a year ago, and above guidance of 47%. AMD is guiding for its GM to stay at 48% in Q3.

4:23 PM ET: Total revenue was up 99% Y/Y, an acceleration from Q1's 93% growth.

AMD's Computing & Graphics segment (it covers GPU and PC CPU sales) saw revenue grow 7% Q/Q and 65% Y/Y to $2.25B, topping a $2.17B consensus.

The Enterprise, Embedded & Semi-Custom segment (its sales are dominated by server CPUs and game console SoCs) saw revenue grow 19% Q/Q and 183% Y/Y to $1.6B, beating a $1.44B consensus.

4:19 PM ET: Here's the Q2 report, for those interested.

4:18 PM ET: AMD is also slightly hiking its full-year non-GAAP gross margin guidance to 48% from 47%.

4:17 PM ET: For Q3, AMD expects revenue of $4.1B (+/- $100M), above a $3.82B consensus. Full-year revenue growth guidance has been hiked to ~60% from ~50%.

Shares are up 1.6% after hours.

4:15 PM ET: Results are out. Q2 revenue of $3.85B tops a $3.62B consensus. Non-GAAP EPS of $0.63 beats a $0.54 consensus.

4:12 PM ET: Still waiting for the Q2 report to hit the wires.

4:06 PM ET: Any commentary AMD shares about its expectations for the easing of supply constraints during the back half of the year will be closely watched. Also keep an eye out for any commentary about the pending Xilinx deal - Xilinx now trades at a healthy discount to the AMD deal's implied price, amid broader fears about M&A transactions subject to Chinese regulatory review.

4:01 PM ET: AMD's stock closed down 0.9% today to $91.03, amid a 1.2% drop for the Nasdaq. The Q2 report should be out soon.

4:00 PM ET: Last week, CPU archrival Intel reported strong PC CPU sales growth, while forecasting the PC market will keep growing beyond this year.

Intel also reported a 20% Y/Y drop in its Data Center Group's sales to cloud service providers, which was widely taken as a sign of additional share gains by AMD.

3:57 PM ET: AMD's report typically comes out a little after the bell. In April, the Q1 report was posted at 4:10 PM ET.

3:55 PM ET: Following big 2020 gains, AMD's stock is down fractionally YTD heading into the Q2 report. In spite of a strong Q1 report, shares sold off into the 70s in May, before rebounding over the last 2 months.

3:51 PM ET: Any change to AMD's full-year revenue guidance will get a lot of attention. In April, AMD guided for ~50% full-year growth, up from a prior outlook of ~37%.

3:50 PM ET: The FactSet consensus is for AMD to post Q2 revenue of $3.62B, GAAP EPS of $0.47 and non-GAAP EPS of $0.54.

For Q3 (AMD provides quarterly sales guidance in its reports), the revenue consensus is at $3.82B.

3:48 PM ET: Hi. I'll be live-blogging AMD's Q2 report and call.