AMD Q4 Earnings Live Blog

Eric Jhonsa

AMD reports its fourth-quarter earnings on Tuesday and investors will be looking to see to see how fast the chip developer is growing now, as well as for updates on its supply chain issues. 

Analysts polled by FactSet are expecting AMD to report EPS of $0.47 on revenues of $3.03 billion in the quarter, and are projecting earnings of $0.35 per share in this year’s first quarter on sales of $2.72 billion.

RealMoney'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.

AMD is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AMD? Learn more now.

Comments (70)
No. 1-50
Eric Jhonsa
Eric Jhonsa

Editor

AMD's call has ended. Shares have erased their prior after-hours losses, and are now roughly flat.

To recap: AMD topped Q4 estimates and guided for ~79% Y/Y Q1 sales growth and ~37% 2021 sales growth. The Enterprise, Embedded & Semi-Custom segment saw 176% Y/Y growth in Q4 thanks to major increases in both console SoC and server CPU sales, while the Computing & Graphics segment grew 18%, as double-digit PC CPU sales growth offset lower GPU sales.

AMD also said it expects all of its major businesses to grow in 2021, and that it will officially launch its Milan server CPU line in March.

Thanks for joining us.

Eric Jhonsa
Eric Jhonsa

Editor

Su: Server GPU sales were down in 2020 as some cloud gaming ramps paused . The business is relatively small right now. But it could double in 2020. Our goal is for it to become a ~$500M/year business.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's server CPU share expectations.

Su: We don't have a new server CPU share target right now. Our data center sales were a high-teens % of revenue last year, and this predominantly consisted of CPU sales. And we expect strong growth in 2021.

Eric Jhonsa
Eric Jhonsa

Editor

Question about cloud gaming-related GPU sales.

Su: We do have some cloud gaming engagements that will continue ramping in 2021. But this will be a smaller part of our server GPU business this year than HPC-related engagements.

Eric Jhonsa
Eric Jhonsa

Editor

Question about server CPU demand from cloud SPs. What does demand look like for internal workloads compared with demand related to cloud computing instances?

Su: We've done very well with internal workloads. A number of applications ramped in 2H20, and we see that strength continuing. The move from Rome to Milan "is not too heavy a lift" from hyperscalers. We've also worked on improving go-to-market efforts to sell to enterprises in tandem with cloud providers and OEMs, and that's yielding results as well.

Eric Jhonsa
Eric Jhonsa

Editor

Question about what GM would look like if AMD's product yields were similar to what they were 2 years ago.

Su: Our long-term target is for a 50%+ GM, and we're on track for that. Yields are on track as well. GM can be impacted in a given quarter by shifts in product mix. We're pleased that were grew GM by 2 points in 2020, and expect another 2 points of growth this year.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Intel's efforts to lobby Washington for support for domestic chip manufacturing.

Su: Semiconductors are becoming increasingly strategic. Manufacturing and leading-edge research both matter. We participate in a lot of these conversations.

Eric Jhonsa
Eric Jhonsa

Editor

Question about what GMs look like excluding the console business, and where AMD expects GM to be at the end of 2021.

Su: It's early right now. Console SoC GMs do tend to improve as a console cycle progresses. We're guiding for a ~46% Q1 GM and a ~47% full-year GM, so we expect some improvement later in the year.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's 2021 GM guidance of ~47%. What's driving the improvement.

Kumar: Server and PC CPU growth will be margin tailwinds. Semi-custom growth will be a headwind.

Su: Console SoCs have a below-average GM, but a "quite reasonable" operating margin. We expect some mix improvement for PC CPUs in 2021 as we focus on premium segments, and that should provide a GM lift.

Eric Jhonsa
Eric Jhonsa

Editor

Question about competing against Nvidia in the gaming GPU market.

Su: Our GPU business has been focused on having a consistent roadmap. RDNA and RDNA 2 both delivered ~50% performance/watt improvements, and we plan on maintaining that kind of roadmap consistency. There's a lot of pent-up demand for gaming GPUs right now.

Eric Jhonsa
Eric Jhonsa

Editor

Question about server GPU sales expectations.

Su: I think the data center GPU business is coming into its own. It'll still be lumpy quarter to quarter. But we see 2021 as a growth year for the business as CDNA-architecture GPUs ramp. And we also see the business as a multi-year growth driver.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Milan expectations.

Su: We expect Milan to make us more competitive across both enterprise and cloud environments. As performance goes up, we do expect some ASP lift. Milan's single-threaded performance gains will help with enterprise adoption.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's opex growth, and whether it could top its target for a 20% long-term revenue CAGR.

Su: We're not going to change our long-term growth rate just yet. But we're very pleased with how we're growing. We plan to keep growing opex, but our goal is to grow it at a slower rate than revenue growth. We plan to make investments in new products, system IP, software, go-to-market efforts, etc.

Eric Jhonsa
Eric Jhonsa

Editor

Su: We expect the PC market to see around mid-single-digit growth in 2021, though the seasonal balance will be different than usual. We feel we're well-positioned in the premium segments of the market. Ryzen 5000 products have received a very strong OEM reception.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the server CPU pricing environment.

Su: Server CPU ASPs rose Q/Q in Q4, thanks to mix and the start of Milan shipments. Our goal isn't to compete on price, but on our value proposition and TCO. As we go into 2021, our server CPU sales are still relatively cloud-weighted. ASPs are trending about how we expected.

Eric Jhonsa
Eric Jhonsa

Editor

Question about gross margin. It was fractionally below expectations in spite of the revenue beat. Was that due to console SoC mix?

Su: We saw stronger-than-expected console, server and PC demand in Q4. PC sales tend to be more weighted to the low end in Q4, and that impacted margins a bit. And we expect console and PC sales to be stronger than normal seasonality in Q1.

Eric Jhonsa
Eric Jhonsa

Editor

Question about whether AMD is seeing cloud capex digestion (Intel has mentioned seeing it). Also one about AMD's expectations for further server CPU share gains.

Su: We're excited about Milan. Zen 3 is very competitive. Manufacturing technology is a factor in determining performance, but there are many others. Milan is a very balanced product, and we're pleased with the initial reception for it.

Eric Jhonsa
Eric Jhonsa

Editor

Question about what AMD's Q1 and 2021 guidance look like excluding the semi-custom (console processor) business.

Su: We see the PC and console markets being stronger than seasonality in 1H21. Consoles will be modestly down Q/Q in Q1. Server demand will be strong. Our full-year guidance assumes "very significant growth" in server CPUs, along with console SoC growth and PC CPU strength. Also expect GPU growth.

Eric Jhonsa
Eric Jhonsa

Editor

Question about supply constraints. Could you provide color about how much they're impacting sales, and does AMD full-year guidance assume increasing supply from TSMC?

Su: The semiconductor environment is very strong. We did have some supply constraints at the end of the year. They were largely in the low-end PC market and the gaming market. We do see some tightness during 1H21, but capacity should improve later in the year.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's 2021 server CPU sales expectations.

Su: We're happy about our data center progress. We see significant growth in 2021. Cloud demand is strengthening. The reception for Milan has been very strong. We expect Milan to help us land new customers and grow our enterprise presence.

Eric Jhonsa
Eric Jhonsa

Editor

Question about AMD's expectations for 2021 PC demand.

Su: Our Q1 guidance reflects the stronger-than-seasonal PC demand we're seeing. But we're also seeing a strong data center environment, we expect server CPU sales to grow again in Q1.

Eric Jhonsa
Eric Jhonsa

Editor

First question is about full-year guidance. Any details AMD can provide about specific products/segments?

Su: We're excited about 2021. We see strength across all of our businesses. We expect significant growth in server CPUs, as well as growth in PCs and semi-custom. Also see growth in GPUs.

Eric Jhonsa
Eric Jhonsa

Editor

The Q&A session is starting.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar: Our forecast for ~79% Y/Y growth in Q1 is driven by expectations of growth across all businesses. PC product, semi-custom SoC and data center product demand are expected to be strong.

Eric Jhonsa
Eric Jhonsa

Editor

In spite of AMD's aggressive spending, opex fell to 28% of revenue in 2020 from 31% in 2019 thanks to revenue growth.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar notes AMD received a $1.06 GAAP EPS boost in Q4 from the release of a tax valuation allowance.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar: Inventory rose 8% Q/Q in Q4 in preparation of expected 2021 sales. Very different from normal seasonality.

Eric Jhonsa
Eric Jhonsa

Editor

Kumar is going over AMD's Q4 financial performance. Notes opex was boosted by both higher investments and higher variable employee compensation expenses.

Eric Jhonsa
Eric Jhonsa

Editor

CFO Devinder Kumar is now talking.

Eric Jhonsa
Eric Jhonsa

Editor

Says AMD remains on track to close the Xilinx deal by the end of 2021.

Eric Jhonsa
Eric Jhonsa

Editor

Su: We expect high-performance computing adoption to accelerate in the coming years as we enter an HPC "mega-cycle."

Eric Jhonsa
Eric Jhonsa

Editor

Su: We expect our data center business to accelerate in 2021 as we launch Milan. Milan production began in Q4 as planned, with initial shipments to cloud and HPC customers.

Eric Jhonsa
Eric Jhonsa

Editor

Su is now going over AMD's cloud server CPU engagements. Notes the number of AMD-powered cloud computing instances more than doubled last year to more than 200.

Eric Jhonsa
Eric Jhonsa

Editor

Su: Our semi-custom SoC sales are ramping faster than they did during the last console cycle.

Eric Jhonsa
Eric Jhonsa

Editor

Says GPU sales were up Q/Q and down Y/Y. Notes demand is very strong for the recently-launched Ryzen 6000 gaming GPU line.

Server GPU sales were down Y/Y but up Q/Q with the help of the recent MI 100 GPU launch.

Eric Jhonsa
Eric Jhonsa

Editor

Su: We're on track to increase Ryzen 5000 notebook design wins by 50% relative to Ryzen 4000.

Eric Jhonsa
Eric Jhonsa

Editor

Says desktop CPU sales rose by "a strong double-digit percentage" Q/Q and Y/Y. Notes Ryzen 5000 sales were particularly strong.

Notebook processor sales also rose by a double-digit % Q/Q and Y/Y.

Eric Jhonsa
Eric Jhonsa

Editor

Su: Server processor sales more than doubled Y/Y in 2020, and our total data center sales are now a high-teens % of total revenue.

Eric Jhonsa
Eric Jhonsa

Editor

Su: While the PC market grew ~13% in 2020, our client processor revenue rose more than 50%.

Eric Jhonsa
Eric Jhonsa

Editor

Su going over AMD's 2020 performance. Notes AMD ramped production for 20+ 7nm products during the year.

Eric Jhonsa
Eric Jhonsa

Editor

Lisa Su is talking.

Eric Jhonsa
Eric Jhonsa

Editor

AMD is going over its safe-harbor statement.

Eric Jhonsa
Eric Jhonsa

Editor

The call is starting.

Eric Jhonsa
Eric Jhonsa

Editor

The call will be starting in a few minutes. Here's the webcast link:

Eric Jhonsa
Eric Jhonsa

Editor

AMD is now down 1.8% AH. This is really a case of high pre-earnings expectations rather than any significant bad news being shared. Will be interesting to see how the stock trades during the Q4 call.

Eric Jhonsa
Eric Jhonsa

Editor

Among the things to look out for during the earnings call: Any additional color about Epyc sales (whether for Q4 or Q1), commentary about 7nm wafer shortages and other supply constraints, and any details shared about AMD's 2021 product roadmap.

Eric Jhonsa
Eric Jhonsa

Editor

Just to spell it out: AMD's guidance for 37% 2021 revenue growth implies full-year revenue of $13.38B. That compares with a pre-earnings consensus of $12.26B.

Eric Jhonsa
Eric Jhonsa

Editor

AMD's quarterly revenue trend over the last 2 years. Revenue was up 53% Y/Y in Q4 and 45% over the whole of 2020.

Eric Jhonsa
Eric Jhonsa

Editor

With the help of that FCF growth, AMD ended Q4 with $2.3B in cash and short-term investments. The debt balance stood at just $330M.

Eric Jhonsa
Eric Jhonsa

Editor

For the whole of 2020, AMD generated free cash flow of $777M. That's up sharply from 2019's $276M.


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