AMD Q2 Earnings Live Blog

Eric Jhonsa

AMD shares were surging in after-hours trading on Tuesday after the hot chipmaker beat consensus sales and revenues estimates for Q2, and also posted better-than-expected guidance for Q3 and boosted its expectations for 2020 revenues.

AMD reported revenue of $1.93 billion, ahead of a $1.86 billion consensus, according to FactSet. GAAP EPS of $0.13 beat an $0.11 consensus, while non-GAAP EPS of $0.18 beat a $0.16 consensus.

For the third quarter, AMD said it expects revenue of $2.55 billion, plus or minus $100 million, above a $2.3 billion consensus. And it also said it now expects about 32% revenue growth growth in 2020, ahead of its previous guidance of 25% growth, plus or minus 5%.

Shares were rising almost 10% to $74.35 in after-hours trading Tuesday.

TheStreet's tech columnist, Eric Jhonsa, is analyzing the company's earnings report, as well as the call with analysts that's scheduled to begin at 5:00 p.m. ET.

Comments (79)
No. 1-50
Eric Jhonsa
Eric Jhonsa

Editor

AMD's call has ended. Shares are up 9.9% after hours to $74.33 after the company beat Q2 estimates with the help of triple-digit annual Ryzen and Epyc sales growth, guided for Q3 revenue of $2.45B-$2.65B (above a $2.31B consensus) and raised its full-year revenue growth guidance to ~32% from 20% to 30%.

AMD also disclosed that data center products made up over 20% of its Q2 revenue, and that it hit its goal of achieving a double-digit server CPU share. The company said it's on track to launch Zen 3 PC and server CPUs, as well as its RDNA 2 gaming GPU line and its first CDNA server GPU, in late 2020.

Thanks for joining us.

Eric Jhonsa
Eric Jhonsa

Editor

Another question about Intel's 7nm setback, and what AMD might do to take advantage of it.

Su remains diplomatic. Says AMD will keep focusing on executing on its roadmap, and that the company is excited about it.

Eric Jhonsa
Eric Jhonsa

Editor

Question about gross margin expectations.

Su: We have some new products that will begin shipping later this year that should carry higher margins. Console processor margins should improve over time. A lot depends on sales mix, we have to see how that plays out. But there should be Q/Q gross margin growth in Q4.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Intel's 7nm setbacks, and whether AMD sees this as an opportunity to up its internal investments or explore M&A.

Su: We're excited about our organic growth opportunities. We want to maintain a 20%-plus CAGR over the next 3-4 years. Opex will grow, but it will grow a little slower than revenue.

Regarding M&A, she says AMD has been focused on organic growth. Company will evaluate acquisition opportunities when they present themselves, but organic growth is the primary focus right now.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's Q3/Q4 expectations, and the impact of new products.

Su: Game console processors will be a big Q3 revenue contributor. But we also see PC and server CPUs growing Q/Q. Console processors will be down a bit Q/Q in Q4 due to seasonality, though less than usual. But new products (Zen 3, RDNA 2, etc.) should help total revenue grow Q/Q in Q4.

Eric Jhonsa
Eric Jhonsa

Editor

Question about data center sales (over 20% of Q2 revenue).

Su: Most of our data center revenue in Q2 came from CPUs.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Apple's plans to shift to ARM-based Mac CPUs, and whether ARM CPUs could become a bigger competitive threat.

Su: We think this isn't about ARM vs. x86. It's about what kind of performance you can offer, and what the ecosystem is like. We feel good about where we stand competitively.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's work with software developers.

Su: We continue working with ISVs and other software developers. In data center GPUs, we think we're gaining some mindshare.

Eric Jhonsa
Eric Jhonsa

Editor

Question about whether the "tenor" of AMD's conversations with customers has been changing lately, thanks to recent events.

Su: We're encouraged by our talks with customers with over the last couple of quarters. We've stressed that customers can count on our roadmap. We've talked with them about Zen 4.

Eric Jhonsa
Eric Jhonsa

Editor

Question about data center GPUs, a market where Nvidia has long had a dominant position.

Su: Sales were lower in Q2, but we expect them to grow modestly in the second half. We have good momentum in areas such as cloud gaming and virtual desktops, as well as some supercomputer wins. Data center GPUs won't be a big portion of AMD's sales in 2020, but we're optimistic about the business.

Eric Jhonsa
Eric Jhonsa

Editor

Question about whether cloud clients might enter a digestion period in 2H20.

Su: We see higher demand among some cloud customers in the second half, and lower demand among some. But overall, we expect to grow our cloud sales.

She adds that AMD expects enterprise and HPC-related Epyc sales to continue growing. Notes that there is some weakness in the SMB space, but adds that AMD doesn't have significant exposure there.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's chip wafer supplies (amid reports TSMC is seeing 7nm supply constraints).

Su: 7nm supply is tight. But we feel good about our supply situation. We're increasing capacity to meet our customers' needs.

Eric Jhonsa
Eric Jhonsa

Editor

Question about whether AMD's console processor expectations could prove conservative, given recent reports about next-gen console builds growing.

Su: We expect strong demand. Consoles are a multi-year cycle. There is pent-up demand for new consoles, but this is just the beginning of the ramp.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's enterprise PC CPU sales.

Su: Our PC business is more weighted towards consumers right now. But we are making progress in the enterprise, our design wins continue to grow.

Eric Jhonsa
Eric Jhonsa

Editor

Question about what AMD is seeing in terms of Epyc adoption in traditional, on-premise, enterprise environments (a place where Intel's share is still pretty high).

Su: We feel pretty good about Epyc's enterprise progress. We now have a lot of OEM engagement, have also put a lot of work into engaging with software developers. We'll continue working on driving cloud, enterprise and HPC growth.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Epyc share gain expectations over the next 12-18 months.

Su: We feel good about how Epyc is doing. Saw strong traction in Q2, particularly with some major cloud accounts. New OEM platforms and cloud deployments will be happening in 2H20. We're excited about Milan, it's looking good in the labs.

Eric Jhonsa
Eric Jhonsa

Editor

Question about gaming GPU sales.

Su: Desktop channel sales were soft in Q2. But sell-through was pretty good. We feel good about our upcoming RDNA 2 gaming GPU line.

Notably, Su indicates the RDNA 2 line will be a meaningful contributor to GPU sales towards the end of the year, and then going into 2021.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's notebook processor strength.

Su: The PC market was strong for us. Desktops were down (Q/Q), but COVID-19 has led to higher PC demand overall. The Ryzen 4000 line has done extremely well. Sell-through has exceeded our expectations. We expect the second half will be strong for notebooks as well, and for PCs overall.

Adds that there's strength in consumer, gaming and education notebooks.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the drivers behind AMD's full-year revenue growth guidance hike, and one about gross margin guidance, which was maintained at 45%.

Su: In April, we were cautious about COVID-19-related uncertainty. We now have better visibility. We previously expected second-half PC weakness, but now expect our sales to the market to grow. Epyc and semi-custom will also drive growth.

Regarding the GM guidance, Su notes that CPU mix changes can impact margins, and that console processor sales carry relatively low margins.

Eric Jhonsa
Eric Jhonsa

Editor

Su: When I look at our server roadmap, I feel very good about it. We've always said the data center market is a bit of a journey. I would say we're still in the early innings of what we can do in the server market. Our goal is to satisfy "a broad swath" of server workloads.

Eric Jhonsa
Eric Jhonsa

Editor

Su reiterates Zen 3 server CPUs (Milan) are set to arrive before year's end, and that AMD is working on developing its Zen 4-based server CPU line (Genoa).

Eric Jhonsa
Eric Jhonsa

Editor

First question is about AMD's server CPU roadmap, and whether its view of the competitive environment has changed following Intel's 7nm delay.

Su: We've been very focused on our roadmap, and discuss it with customers. Many decisions are made years in advance. We updated our roadmaps at our March analyst day, and are focused on executing on them.

Eric Jhonsa
Eric Jhonsa

Editor

AMD is holding onto its after-hours gains: Shares are up 9.7% after hours.

Eric Jhonsa
Eric Jhonsa

Editor

The Q&A session is starting.

Eric Jhonsa
Eric Jhonsa

Editor

The midpoint of AMD's Q3 sales guidance implies 32% Q/Q growth and 42% Y/Y growth. That compares with 26% Y/Y Q2 growth.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar: Q3's Q/Q and Y/Y growth will be driven by higher Ryzen and Epyc sales, plus higher semi-custom (console processor) sales.

Eric Jhonsa
Eric Jhonsa

Editor

Q2 free cash flow was $152M.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar: Q2 op. margin was 12%, up from 7% a year ago.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar recapping AMD's Q2 performance. Notes GM growth was driven by higher PC and server CPU sales.

Eric Jhonsa
Eric Jhonsa

Editor

CFO Devinder Kumar is now talking.

Eric Jhonsa
Eric Jhonsa

Editor

Su concludes her remarks by reiterating that AMD's goal is to be "a best-in-class growth franchise."

Eric Jhonsa
Eric Jhonsa

Editor

Su: While there's still macro uncertainty and "pockets of demand softness," we're well-positioned to see strong second-half growth.

Eric Jhonsa
Eric Jhonsa

Editor

Su: We expect to continue gaining server CPU share in 2H20.

Eric Jhonsa
Eric Jhonsa

Editor

The number of AMD enterprise server platforms is said to have grown more than 40% this year. Su highlights recent design wins with Dell, Lenovo and (via the DGX A100 system) Nvidia.

Eric Jhonsa
Eric Jhonsa

Editor

Multiple cloud clients ramped Epyc usage for both cloud computing instances and internal workloads in Q2.

Eric Jhonsa
Eric Jhonsa

Editor

Enterprise, Embedded & Semi-Custom revenue rose Q/Q due to record server CPU sales and initial shipments for next-gen game console processors.

As one would expect, AMD expects strong 2H game console processor shipment growth.

Eric Jhonsa
Eric Jhonsa

Editor

Data center GPU revenue fell Y/Y, but is expected to grow in 2H20 as cloud design wins ramp and AMD launches its CDNA GPU.

Eric Jhonsa
Eric Jhonsa

Editor

Notebook GPU sales rose strongly Q/Q, but desktop channel sales fell.

Eric Jhonsa
Eric Jhonsa

Editor

She says Ryzen 4000 revenue has ramped faster than any notebook processor line in AMD's history.

Eric Jhonsa
Eric Jhonsa

Editor

Su: Desktop CPU sales fell Q/Q but were up Y/Y. Mobile revenue rose significantly Q/Q and more than doubled Y/Y thanks to Ryzen 4000 demand.

Eric Jhonsa
Eric Jhonsa

Editor

She adds that AMD hit its goal of achieving a double-digit server CPU share.

Eric Jhonsa
Eric Jhonsa

Editor

Su: We accelerated our server and notebook processor businesses significantly. Data center products were more than 20% of revenue.

Eric Jhonsa
Eric Jhonsa

Editor

Lisa Su is talking.

Eric Jhonsa
Eric Jhonsa

Editor

The call is starting. AMD is going over its safe-harbor statement.

Eric Jhonsa
Eric Jhonsa

Editor

One thing to watch on the call: Any comments about how specific CPU and GPU end-markets are trending.

Notebooks appear to be a lot stronger than desktops right now, and in the server CPU market, AMD has had stronger traction with cloud giants (the proverbial hyperscalers) and HPC system buyers than with traditional enterprise deployments.

Eric Jhonsa
Eric Jhonsa

Editor

With shares up 10% after hours, AMD's stock is now up 62% on the year. Its market cap stands at $87B.

Eric Jhonsa
Eric Jhonsa

Editor

In a quote within the earnings release, Lisa Su says that Ryzen and Epyc revenue more than doubled annually in Q2. This follows a Q1 in which Epyc unit shipments more than tripled Y/Y.

Eric Jhonsa
Eric Jhonsa

Editor

AMD says there are now 50+ notebooks powered by its 7nm Ryzen Mobile 4000 processor line on the market, and that another 30+ will be launching.

The comments come ahead of Intel's pending launch of its second-gen 10nm notebook processor line (Tiger Lake). Intel is hosting an event on Sep. 2 where many expect Tiger Lake to be revealed.

Eric Jhonsa
Eric Jhonsa

Editor

While Epyc design wins for cloud computing instances sold to third parties naturally get announced, design wins for the internal workloads of Internet/cloud giants only sometimes do.

Last year, when AMD unveiled its Rome Epyc CPUs, Google said it was using Rome for internal workloads, without specifying which ones.


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