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AMD Third-Quarter Earnings Live Blog

Real Money's Eric Jhonsa covers AMD's third-quarter earnings report and conference call with management.

Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report has seen more demand for its CPUs and GPUs than it can handle this year. And investors have responded by bidding the company's shares to a $150 billion market cap.

Markets will be looking for another quarter of strong results and guidance when AMD reports after the bell on Tuesday. Among analysts polled by FactSet, the consensus is for AMD to post Q3 revenue of $4.11 billion (up 47% Y/Y) and non-GAAP EPS of $0.66.

AMD typically provides quarterly and full-year sales guidance in its reports. Currently, the Q4 revenue consensus is at $4.25 billion (up 31% annually), and the full-year consensus is for revenue to grow 59% to $15.52 billion (AMD guided for 60% full-year growth in July).

Eric Jhonsa, Real Money's tech columnist, will be live-blogging AMD's Q3 report, which is expected a little after the market's close, along with an earnings call scheduled for 5 P.M. Eastern Time. Please refresh your browsers for updates.

6:00 PM ET: AMD's call has ended. Shares are down 0.6% after hours to $122.25 after AMD beat Q3 estimates and guided its Q4 sales ~$250M above consensus at the midpoint of its range.

On its call, AMD said its saw very strong sales growth for Epyc server CPUs, RDNA 2 gaming GPUs, Radeon Instinct server GPUs and Xbox/PlayStation SoCs. And it forecast (with the PC market expected to be "flattish" amid supply chain issues) server CPUs and console SoCs would drive sequential growth in Q4.

AMD also reiterated that it expects the Xilinx deal to close by year's end. And the company indicated it expects 2022 to be another growth year for Epyc, GPUs and console SoCs, as it launches new products and secures additional wafer supply.

Thanks for joining us.

5:52 PM ET: A question about server CPU share gains. Could AMD gain another 500bps of share next year, and where could its share eventually go?

Su: We believe we'll be a share-gainer again in 2022. The data center is a place where our tech is very differentiated. We think that's true for Milan, and we're working to make sure it's also true for Genoa.

5:50 PM ET: A question is about AMD's software efforts.

Su: We continue investing heavily in software, particularly on the data center GPU side. We've made significant investments here ahead of our MI200 GPU launch. Bringing in Xilinx's software talent should also help

5:49 PM ET: A question about whether AMD expects more op. margin expansion next year.

Kumar: We're disciplined in terms of opex. We're investing to drive growth. Opex growth should be below revenue growth next year.

5:47 PM ET: A question about 2022 PC product expectations.

Su: We still have room to gain more share. Our GPU business has performed quite well. There's still strong demand among gamers. I don't view the PC market as a headwind as we go into 2022. Some think the market will be up, others think it'll be down. Our base case is it'll be flattish. We're aiming to grow in the market next year.

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5:45 PM ET: A question about potential engagements with hyperscalers on custom CPU designs.

Su: We definitely see it as an opportunity. The tailoring of compute for various workloads is a trend. Our IP portfolio is strong, and we expect it to become stronger. We're working with a number of hyperscalers on potential solutions that can leverage our CPUs, GPUs, interconnect IP and Xilinx.

5:43 PM ET: A question about Q1 PC seasonality.

Su: Typically, Q1 is down seasonally. Things could be a little different this time. But we'll have to see how things play out in the coming months.

5:42 PM ET: A question about Q3 Computing & Graphics margins.

Kumar: The operating margin pressure seen by the segment was due to higher investments.

5:41 PM ET: A question about whether supply constraints were bigger in Q3 for AMD's PC or server business. Also one about how AMD is thinking about pricing next year, as Intel guides for a lower GM in the near-term.

Su: We've brought on a tremendous amount of supply. The PC market isn't constrained by CPU supply, but by other products. We're being careful not to build customer inventory here. Regarding pricing, I think this is all about the products in 2022. We're focused on providing significant value to customers, and are excited about our 2022 product portfolio.

5:38 PM ET: Another question about wafer supply.

Su: We've been working to improve supply for more than a year. If we could ship more, we would. We'll see more supply arrive in 2022.

5:37 PM ET: A question about 2022 semi-custom sales expectations.

Su: Demand has exceeded supply for the business. Typically, year 4 of a console cycle has been the peak. We expect the business to grow in 2022 (year 3).

5:35 PM ET: A question about Q3 GPU sales and AMD's crypto exposure.

Su: We're pleased with how our RDNA 2 GPU sales have grown. We think crypto revenue was negligible in Q3. We also expect gaming to be a growth driver for us in 2022.

5:34 PM ET: Su says AMD has secured some additional wafer supply, and is guiding for Q/Q server CPU and gaming product sales growth.

5:32 PM ET: A question about how big AMD's server GPU business now is, and how large it can become.

Su: Q3 was a big quarter for the business, aided by Frontier supercomputer business. It's still a relatively small business for us, and a lumpy one. We expect server GPU sales will be down Q/Q in Q4. But we still see the business as a growth driver over the next few years.

5:30 PM ET: A question about AMD's GM growth, and whether there are any potential headwinds in 2022, such as higher foundry prices or other cost inflation.

Kumar: We expect to continue making margin progress. Without getting into specifics, product mix and the competitiveness of our products should help us.

5:29 PM ET: A question about 2022 sales expectations

Su: We see a positive demand environment next year. That's both a market statement and AMD statement. We have strong data center momentum, and are also optimistic about GPU and console sales. For PCs, end-user demand appears to be strong, but there are supply constraints that will continue into 1H22. We're assuming the PC market will be "flattish" next year, but we'll still have opportunities to grow here.

5:26 PM ET: A question about the Xilinx deal and AMD's post-acquisition plans.

Su: We've been working diligently on the Xilinx deal, and have made good progress. We've also made progress on the integration front.

5:25 PM ET: A question about Intel's Q3 call comments about soft demand among Chinese hyperscalers? How is AMD seeing Chinese demand trend?

Su: We continue seeing strong data center demand. We didn't see anything unusual in China.

5:24 PM ET: A question about share gains at hyperscalers, and whether that can be extended to the enterprise.

Su: Hyperscaler sales have been a strength for us, and we think we can gain more share here. Q3 was a also a good quarter for enterprise Epyc sales. In the enterprise, the key has been to grow customer familiarity with Epyc, and we think we're making progress there.

5:21 PM ET: A question about server CPU demand and planned Intel server CPU launches.

Su: Data center demand remains very strong, and we expect that to continue in 2022. We believe Milan is very competitive. We always expect the competition to be strong, but we feel very good about our roadmap and Zen 4/Genoa.

5:20 PM ET: First question is about Q4 guidance for Computing and Graphics sales to be down Q/Q. Is it due to supply constraints? Also one about GMs.

Su: PC demand remains strong, but there are supply constraints. I'd say the PC market is flattish in Q4 rather than down. Data center and console demand remains strong.

Kumar: Product mix is expected to provide a margin boost in Q4, with server CPU sales growth acting as a tailwind.

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

5:16 PM ET: Regarding Q4 guidance, Kumar says expected Y/Y growth of ~39% is expected to be driven by growth across all businesses, while expected Q/Q growth of ~4% is expected to be driven by server CPUs and console SoCs.

5:12 PM ET: AMD's stock got a slight lift from Su's prepared remarks. It's now up 0.5% after hours.

5:12 PM ET: Devinder Kumar is now talking. He starts by recapping AMD's Q3 financials. 

5:11 PM ET: Also mentioned: AMD is working to secure additional wafer capacity.

5:10: Su adds that server CPU/GPU revenue now equals a mid-20s % of AMD's total revenue.

5:09 PM ET: Su: We expect semi-custom revenue to rise Q/Q in Q4 thanks to strong console demand. Server CPU sales more than doubled Y/Y and grew by a significant double-digit % Q/Q. Multiple hyperscalers expanded their Milan deployments. New deployments also recently announced by Cloudflare, Netflix and Vimeo, and enterprise Epyc growth was particularly strong in the quarter. AMD's enterprise server pipeline has more than doubled Y/Y.

5:06 PM ET: Su: Commercial PC CPU growth was fueled by major wins among Fortune 1000 clients. We're also seeing strong workstation CPU momentum. GPU revenue more than doubled Y/Y, with RDNA 2 gaming GPU sales rising significantly in Q3 and server GPU sales more than doubling Q/Q and Y/Y.

5:04 PM ET: Su starts by recapping AMD's Q3 performance. Notes each of AMD's businesses rose significantly Y/Y.

Also mentions AMD's PC CPU sales rose by a strong double-digit % Y/Y, while declining slightly Q/Q. Says AMD believes it gained PC CPU revenue share for the 6th straight quarter.

5:03 PM ET: Lisa Su is talking.

5:02 PM ET: AMD is going over its safe-harbor statement. Typically, its calls feature prepared remarks from CEO Lisa Su and CFO Devinder Kumar, after which both execs field questions from analysts.

5:01 PM ET: The call is starting.

5:00 PM ET: AMD's stock is down 0.5% after hours to $122.31 heading into its call. It's worth remembering that initial post-earnings reactions can be misleading in both directions -- in July, AMD initially moved lower post-earnings, only to shoot higher in the following days.

4:55 PM ET: AMD's Q3 call should get underway in a few minutes (I'll be covering). Here's the webcast link, for those looking to tune in.

4:53 PM ET: Q3 free cash flow was $764M, which compares with $888M in Q2 and $265M a year earlier.

That helped AMD end Q3 with $3.61B in cash (down less than $200M Q/Q) in spite of its buybacks. Debt remained at $313M.

4:48 PM ET: With revenue growing, inventories are rising too. AMD ended Q3 with $1.9B worth of inventory, up from $1.77B at the end of Q2 and $1.4B at the beginning of the year.

4:45 PM ET: In spite of the aggressive spending, AMD's non-GAAP op. income rose 101% Y/Y to $1.055B, thanks to 54% revenue growth and ~400bps GM growth.

The EESC segment's op. income jumped to $542M from $141M a year ago. Computing & Graphics op. income rose to $513M from $384M.

4:41 PM ET: AMD continues dialing up its R&D and sales/marketing investments. Q3 non-GAAP operating expenses rose 14% Q/Q and 47% Y/Y to $1.035B, a little above guidance of ~$1B.

On a GAAP basis, opex totaled $1.14B, with R&D accounting for $765M and marketing/G&A spend accounting for $376M.

For Q4, AMD is guiding for non-GAAP opex to rise to ~$1.15B. However, with full-year sales guidance hiked, it now sees opex equaling ~24% of 2021 revenue, down from ~25%.

AMD Q4 guidance

4:35 PM ET: AMD's stock is now up 0.6% AH. The Q3 report looks good, but the stock has seen a pretty good run since late July.

4:33 PM ET: AMD notes its 3rd-gen Epyc CPUs (Milan), which launched in March, made up a majority of its Q3 server CPU sales. It also mentions (as expected) that console SoC sales continued growing in Q3.

AMD EESC Q3

4:30 PM ET: Regarding the Xilinx deal (currently pending Chinese approval), AMD reiterates it's on track to close by year's end. Xilinx's stock is up about 1% AH.

4:27 PM ET: As was the case in Q2, AMD's GPU and PC CPU ASPs rose both Q/Q and Y/Y.

The company also notes its server GPU sales (historically a small % of its GPU sales) more than doubled Q/Q and Y/Y. Supercomputer design wins likely played a major role here.

AMD Q3 CG

4:24 PM ET: Providing a lift to Q3 EPS: $750M was spent to buy back more than 7M shares. That's up sharply from Q2 buybacks of $256M.

4:22 PM ET: Here's AMD's Q3 release. And here's their earnings slide deck.

4:21 PM ET: The Q3 non-GAAP gross margin was 48% -- flat Q/Q, up from 44% a year ago, and in-line with guidance.

For Q4, AMD is guiding for non-GAAP GM to rise to 49.5%. Full-year GM guidance remains at 48%.

4:19 PM ET: The Computing & Graphics segment, which covers sales of GPUs and PC CPUs, saw revenue grow 7% Q/Q and 44% Y/Y to $2.4B, topping a $2.33B consensus.

The Enterprise, Embedded & Semi-Custom segment, which among other things covers sales of server CPUs and console SoCs, saw revenue grow 20% Q/Q and 69% Y/Y to $1.9B, beating a $1.78B consensus.

4:17 PM ET: Shares are up 1% after hours.

4:16 PM ET: AMD expects Q4 revenue of $4.5B, +/- $100M. That's above a $4.25B consensus.

Full-year revenue growth guidance is hiked to 65% from 60%.

4:15 PM ET: Results are out. Q3 revenue of $4.31B beats a $4.11B consensus. Non-GAAP EPS of $0.73 beats a $0.66 consensus.

4:10 PM ET: Still waiting for the Q3 report to come out. It should likely arrive shortly.

4:07 PM ET: Also worth watching: Any commentary AMD shares about wafer supply improvement at foundry partner TSMC. AMD's server CPUs, gaming GPUs and game console SoCs have all been supply-constrained this year.

4:04 PM ET: PC CPU sales are one area where markets will be looking closely for any signs of softness. Intel and others have reported seeing headwinds in the low-end PC market, due to softening demand and the impact of component shortages on PC builds. That said, AMD's PC CPU sales now skew more towards the high end of the market, where demand appears to be healthier.

4:02 PM ET: Last week, CPU archrival Intel reported a 20% Y/Y drop in its Data Center Group's Q3 sales to cloud service providers. That points to additional meaningful share gains for AMD's Epyc CPUs among hyperscalers.

Also of note: Facebook guided yesterday for 2022 capex of $29B-$34B, well above its 2021 capex guidance of ~$19B. All signs point to 2022 being another solid year for cloud capex.

3:56 PM ET: AMD tends to post earnings a little after the market's close. In July, the Q2 report was posted at 4:15 PM ET.

3:55 PM ET: AMD's stock is up 34% YTD and 50% over the last 12 months, gains that leave the company sporting a $150B market cap. Shares are up 0.3% today heading into the close.

3:53 PM ET: The FactSet consensus is for AMD to post Q3 revenue of $4.11B and non-GAAP EPS of $0.66, and to guide for Q4 revenue of $4.25B. But with all signs pointing to very strong demand for AMD's server CPUs, informal expectations are probably a little higher.

3:50 PM ET: Hi, This is Eric Jhonsa. I'll be live-blogging AMD's Q3 report and call.