AMD Reports Second Quarter 2018 Financial Results

— Reve­nue incre­a­sed 53 per­cent year-over-year; gross mar­gin expan­ded to 37 percent —

SANTA CLARA, Calif. 

AMD (NASDAQ:AMD) today announ­ced reve­nue for the second quar­ter of 2018 of $1.76 bil­li­on, ope­ra­ting inco­me of $153 mil­li­on, net inco­me of $116 mil­li­on and dilu­t­ed ear­nings per share of $0.11. On a non-GAAP1 basis, ope­ra­ting inco­me was $186 mil­li­on, net inco­me was $156 mil­li­on and dilu­t­ed ear­nings per share was $0.14.

We had an out­stan­ding second quar­ter with strong reve­nue growth, mar­gin expan­si­on and our hig­hest quar­ter­ly net inco­me in seven years,” said Dr. Lisa Su, AMD pre­si­dent and CEO. “Most import­ant­ly, we belie­ve our long-term tech­no­lo­gy bets posi­ti­on us very well for the future. We are con­fi­dent that with the con­ti­nued exe­cu­ti­on of our pro­duct road­maps, we are on an excel­lent tra­jec­to­ry to dri­ve mar­ket share gains and pro­fi­ta­ble growth.”

Q2 2018 Results

  • Reve­nue was $1.76 bil­li­on, up 53 per­cent year-over-year and 7 per­cent quar­ter-over-quar­ter. The year-over-year incre­a­se was dri­ven by hig­her reve­nue in both the Com­pu­ting and Gra­phics and Enter­pri­se, Embed­ded and Semi-Cus­tom busi­ness seg­ments. The sequen­ti­al incre­a­se was dri­ven by hig­her reve­nue in the Enter­pri­se, Embed­ded and Semi-Cus­tom segment.
  • Gross mar­gin grew to 37 per­cent, up 3 per­cen­ta­ge points year-over-year, dri­ven by the ramp of new pro­ducts. On a sequen­ti­al basis, gross mar­gin was up 1 per­cen­ta­ge point pri­ma­ri­ly dri­ven by a richer mix of reve­nue in the Enter­pri­se, Embed­ded and Semi-Cus­tom segment.
  • On a GAAP basis, ope­ra­ting inco­me was $153 mil­li­on com­pa­red to an ope­ra­ting loss of $1 mil­li­on a year ago and ope­ra­ting inco­me of $120 mil­li­on in the pri­or quarter.
  • Net inco­me was $116 mil­li­on com­pa­red to a net loss of $42 mil­li­on a year ago and net inco­me of $81 mil­li­on in the pri­or quar­ter. Dilu­t­ed ear­nings per share was $0.11, com­pa­red to a loss per share of $0.04 a year ago and dilu­t­ed ear­nings per share of $0.08 in the pri­or quarter.
  • On a non-GAAPbasis, ope­ra­ting inco­me was $186 mil­li­on com­pa­red to ope­ra­ting inco­me of $23 mil­li­on a year ago and $152 mil­li­on in the pri­or quarter.
  • Non-GAAP1 net inco­me was $156 mil­li­on com­pa­red to a net loss of $7 mil­li­on a year ago and net inco­me of $121 mil­li­on in the pri­or quar­ter. Non-GAAP dilu­t­ed ear­nings per share was $0.14, com­pa­red to a loss per share of $0.01 a year ago and dilu­t­ed ear­nings per share of $0.11 in the pri­or quarter.
  • Cash, cash equi­va­lents and mar­ket­a­ble secu­ri­ties were $983 mil­li­on at the end of the quarter.

Quarterly Financial Segment Summary

  • Com­pu­ting and Gra­phics seg­ment reve­nue was $1.09 bil­li­on, up 64 per­cent year-over-year and down 3 per­cent quar­ter-over-quar­ter. Year-over-year reve­nue growth was dri­ven by strong sales of Rade­on™ pro­ducts and con­ti­nued growth of Ryzen™products. The quar­ter-over-quar­ter decli­ne was pri­ma­ri­ly rela­ted to lower reve­nue from GPU pro­ducts in the block­chain market. 
    • Cli­ent pro­ces­sor average sel­ling pri­ce (ASP) was lower year-over-year and quar­ter-over-quar­ter pri­ma­ri­ly due to lower desk­top pro­ces­sor ASP, par­ti­al­ly off­set by hig­her mobi­le pro­ces­sor ASP.
    • GPU ASP incre­a­sed year-over-year dri­ven by Rade­on pro­ducts for the chan­nel and dat­a­cen­ter. GPU ASP incre­a­sed quar­ter-over-quar­ter dri­ven by GPU sales for datacenter.
    • Ope­ra­ting inco­me was $117 mil­li­on, com­pa­red to ope­ra­ting inco­me of $7 mil­li­on a year ago and ope­ra­ting inco­me of $138 mil­li­on in the pri­or quar­ter. The year-over-year ope­ra­ting inco­me impro­ve­ment was pri­ma­ri­ly dri­ven by hig­her reve­nue. The quar­ter-over-quar­ter ope­ra­ting inco­me decli­ne was pri­ma­ri­ly due to lower reve­nue and hig­her ope­ra­ting expenses.
  • Enter­pri­se, Embed­ded and Semi-Cus­tom seg­ment reve­nue was $670 mil­li­on, up 37 per­cent year-over-year and 26 per­cent quar­ter-over-quar­ter pri­ma­ri­ly due to hig­her semi-cus­tom and ser­ver revenue. 
    • Ope­ra­ting inco­me was $69 mil­li­on, com­pa­red to ope­ra­ting inco­me of $16 mil­li­on a year ago and ope­ra­ting inco­me of $14 mil­li­on in the pri­or quar­ter. The year-over-year and quar­ter-over-quar­ter incre­a­ses were pri­ma­ri­ly due to hig­her revenue.
  • All Other ope­ra­ting loss was $33 mil­li­on com­pa­red with ope­ra­ting los­ses of $24 mil­li­on a year ago and $32 mil­li­on in the pri­or quarter.

Q2 2018 Highlights

  • At Com­putex 2018, AMD show­ca­sed the next-genera­ti­on of lea­ders­hip CPU and GPU pro­ducts inclu­ding the first public demons­tra­ti­ons of: 
    • The 12nm “Zen+”-based 2nd Genera­ti­on Ryzen Thre­ad­rip­perTM CPU, fea­turing an indus­try-lea­ding 32-cores and 64-threads of HEDT com­pu­ting power, sche­du­led to launch in Q3 2018.
    • The 7nm Rade­on “Vega” archi­tec­tu­re-based GPU for ser­vers and work­sta­tions that is plan­ned to launch later in 2018.
  • One year after its mar­ket debut, AMD EPYC™ dat­a­cen­ter pro­ces­sor sales con­ti­nue to acce­le­ra­te, with new plat­form deploy­ments and com­mit­ments from indus­try leaders: 
    • HPE laun­ched two new AMD EPYC plat­forms, inclu­ding the Pro­Li­ant DL325 Gen10 ser­ver deli­vering two-socket per­for­mance in a one-socket server.
    • Cis­co laun­ched the first ever AMD-based UCS ser­ver, with EPYC pro­ces­sors powe­ring Cisco’s hig­hest den­si­ty offe­ring with 128% more cores, 50% more ser­vers and 20% more sto­rage per rack com­pa­red to their exis­ting rack offerings.
    • Ten­cent Cloud now offers an EPYC pro­ces­sor-based SA1 Cloud instance, deli­vering excep­tio­nal per­for­mance at a lower total cost of owners­hip com­pa­red to other solutions.
    • The Natio­nal Insti­tu­te for Nuclear Phy­sics in Ita­ly selec­ted the AMD EPYC 7351 pro­ces­sor to power its high-per­for­mance com­pu­ting cluster.
  • AMD announ­ced unpre­ce­den­ted adop­ti­on of its AMD Ryzen PRO pro­ces­sors with Rade­on Vega gra­phics, with new com­mer­cial note­books and desk­tops now avail­ab­le from Dell, HP and Lenovo.
  • AMD con­ti­nued to expand its offe­rings for gamers: 
    • AMD announ­ced that Rade­on Free­Sync™ tech­no­lo­gy is now sup­por­ted across Samsung’s QLED TV fami­ly, brin­ging the ulti­ma­te 4K gaming expe­ri­ence to lar­ge-screen TVs.
    • Power­Co­lor unvei­led the Rade­on RX Vega56 Nano Edi­ti­on gra­phics card, enab­ling enthu­si­ast 4K gaming in small form fac­tor PCs.
    • At E3, AMD announ­ced an expan­ded part­ners­hip with Ubi­soft to leverage DirectX12 tech­no­lo­gy to opti­mi­ze their next-genera­ti­on games for Rade­on GPU users, inclu­ding the high­ly anti­ci­pa­ted “Tom Clancy’s Divi­si­on 2” title.

Current Outlook

AMD’s out­look state­ments are based on cur­rent expec­ta­ti­ons. The fol­lowing state­ments are for­ward-loo­king, and actu­al results could dif­fer mate­ri­al­ly depen­ding on mar­ket con­di­ti­ons and the fac­tors set forth under “Cau­tio­na­ry State­ment” below.

For the third quar­ter of 2018, AMD expects reve­nue to be appro­xi­mate­ly $1.7 bil­li­on, plus or minus $50 mil­li­on, an incre­a­se of appro­xi­mate­ly 7 per­cent year-over-year, and non-GAAP gross mar­gin to incre­a­se to appro­xi­mate­ly 38 per­cent, dri­ven by the sales growth of Ryzen and EPYC pro­ducts, par­ti­al­ly off­set by lower sales of GPU pro­ducts in the block­chain market.

AMD Teleconference

AMD will hold a con­fe­rence call for the finan­cial com­mu­ni­ty at 2:30 p.m. PT (5:30 p.m. ET) today to dis­cuss its second quar­ter 2018 finan­cial results and for­ward loo­king finan­cial gui­d­ance. AMD will pro­vi­de a real-time audio broad­cast of the telecon­fe­rence on the Inves­tor Rela­ti­onspage of its web­site at www.amd.com. The web­cast will be avail­ab­le for 12 mon­ths after the con­fe­rence call. A sli­de pre­sen­ta­ti­on of quar­ter­ly finan­cial results can be found at ir.amd.com.

The three mon­ths ended June 30, 2018 GAAP dilu­t­ed EPS is cal­cu­la­ted based on 1,147 mil­li­on shares, which inclu­de 100.6 mil­li­on shares rela­ted to the Company’s 2026 Con­ver­ti­ble Notes and an $11 mil­li­on inte­rest expen­se add-back to net inco­me under the “if con­ver­ted” method.

The three mon­ths ended June 30 and March 31, 2018 non-GAAP dilu­t­ed EPS are cal­cu­la­ted based on 1,147 mil­li­on and 1,140 mil­li­on shares, respec­tively, which inclu­de 100.6 mil­li­on shares rela­ted to the Company’s 2026 Con­ver­ti­ble Notes and a $5 mil­li­on cash inte­rest expen­se add-back to net inco­me under the “if con­ver­ted” method for both periods.

About AMD

For more than 45 years, AMD has dri­ven inno­va­ti­on in high-per­for­mance com­pu­ting, gra­phics and visua­liz­a­ti­on tech­no­lo­gies — the buil­ding blocks for gaming, immer­si­ve plat­forms and the dat­a­cen­ter. Hund­reds of mil­li­ons of con­su­mers, lea­ding For­tu­ne 500 busi­nes­ses and cut­ting-edge sci­en­ti­fic rese­arch faci­li­ties around the world rely on AMD tech­no­lo­gy dai­ly to impro­ve how they live, work and play. AMD employees around the world are focu­sed on buil­ding gre­at pro­ducts that push the bounda­ries of what is pos­si­ble. For more infor­ma­ti­on about how AMD is enab­ling today and inspi­ring tomor­row, visit the AMD (NASDAQ: AMDweb­siteblogFace­book and Twit­ter pages.

Cautionary Statement

This docu­ment con­tains for­ward-loo­king state­ments con­cer­ning Advan­ced Micro Devices, Inc. (AMD) such as AMD’s expec­ted posi­tio­ning in the future; AMD’s abi­li­ty to exe­cu­te its pro­duct road­maps and the resul­ting impact on mar­ket share and pro­fi­ta­ble growth; AMD’s finan­cial out­look for the third quar­ter of 2018, inclu­ding reve­nue, non-GAAP gross mar­gin and expec­ted dri­vers; the fea­tures, func­tio­n­a­li­ty, avai­la­bi­li­ty, timing and expec­ted bene­fits of AMD’s pro­ducts and tech­no­lo­gies inclu­ding the expec­ted launch of 2nd Genera­ti­on Ryzen Thre­ad­rip­perTM CPU and 7nm Rade­on “Vega” archi­tec­tu­re-based GPU pro­ducts; and the con­ti­nued acce­le­ra­ti­on of AMD EPYC dat­a­cen­ter pro­ces­sor sales, which are made pur­suant to the Safe Har­bor pro­vi­si­ons of the Pri­va­te Secu­ri­ties Liti­ga­ti­on Reform Act of 1995. For­ward-loo­king state­ments are com­mon­ly iden­ti­fied by words such as “would,” “may,” “expects,” “belie­ves,” “plans,” “intends,” “pro­jects” and other terms with simi­lar mea­ning. Inves­tors are cau­tio­ned that the for­ward-loo­king state­ments in this docu­ment are based on cur­rent beliefs, assump­ti­ons and expec­ta­ti­ons, speak only as of the date of this docu­ment and invol­ve risks and uncer­tain­ties that could cau­se actu­al results to dif­fer mate­ri­al­ly from cur­rent expec­ta­ti­ons. Such state­ments are sub­ject to cer­tain known and unknown risks and uncer­tain­ties, many of which are dif­fi­cult to pre­dict and gene­ral­ly bey­ond AMD’s con­trol, that could cau­se actu­al results and other future events to dif­fer mate­ri­al­ly from tho­se expres­sed in, or implied or pro­jec­ted by, the for­ward-loo­king infor­ma­ti­on and state­ments.  Mate­ri­al fac­tors that could cau­se actu­al results to dif­fer mate­ri­al­ly from cur­rent expec­ta­ti­ons inclu­de, without limi­ta­ti­on, the fol­lowing: Intel Corporation’s domi­nan­ce of the micro­pro­ces­sor mar­ket and its aggres­si­ve busi­ness prac­ti­ces; the abi­li­ty of GLOBALFOUNDRIES Inc. to satisfy AMD’s manu­fac­tu­ring requi­re­ments; the abi­li­ty of third par­ty manu­fac­tu­rers to manu­fac­tu­re AMD pro­ducts on a time­ly basis in suf­fi­ci­ent quan­ti­ties and using com­pe­ti­ti­ve tech­no­lo­gies; the abi­li­ty of third par­ty manu­fac­tu­rers to achie­ve expec­ted manu­fac­tu­ring yiel­ds; AMD’s abi­li­ty to intro­du­ce pro­ducts on a time­ly basis with fea­tures and per­for­mance levels that pro­vi­de value to its cus­to­mers; AMD’s abi­li­ty to gene­ra­te suf­fi­ci­ent reve­nue and ope­ra­ting cash flow or obtain exter­nal finan­cing; the loss of a signi­fi­cant cus­to­mer; AMD’s abi­li­ty to gene­ra­te reve­nue from its semi-cus­tom SoC pro­ducts; actu­al or per­cei­ved secu­ri­ty vul­nera­bi­li­ties of AMD’s pro­ducts; poten­ti­al data breaches and cyber-attacks; glo­bal eco­no­mic uncer­tain­ty; AMD’s abi­li­ty to gene­ra­te suf­fi­ci­ent cash to ser­vice its debt obli­ga­ti­ons or meet its working capi­tal requi­re­ments; AMD’s lar­ge amount of indeb­ted­ness; restric­tions impo­sed by agree­ments gover­ning AMD’s debt and its secu­red revol­ving line of credit; the com­pe­ti­ti­ve natu­re of the mar­kets in which AMD’s pro­ducts are sold;  the dilu­ti­ve effect on share­hol­ders if West Coast Hitech L.P. exer­ci­ses its war­rants to purcha­se AMD’s com­mon stock, and the con­ver­si­on of AMD’s 2.125% Con­ver­ti­ble Seni­or Notes due 2026; uncer­tain­ties invol­ving the orde­ring and ship­ment of AMD’s pro­ducts; fluc­tua­tions in demand or a mar­ket decli­ne for AMD’s pro­ducts; AMD’s reli­an­ce on third-par­ty intel­lec­tu­al pro­per­ty to design and intro­du­ce new pro­ducts in a time­ly man­ner; AMD’s reli­an­ce on third-par­ty com­pa­nies for the design, manu­fac­tu­re and sup­ply of mother­boards, soft­ware and other com­pu­ter plat­form com­pon­ents; AMD’s reli­an­ce on Micro­soft Corporation’s sup­port and other soft­ware ven­dors; AMD’s reli­an­ce on third-par­ty dis­tri­bu­tors and AIB part­ners; AMD’s abi­li­ty to con­ti­nue to attract and retain qua­li­fied per­son­nel; AMD’s abi­li­ty to repurcha­se its debt in the event of a chan­ge of con­trol; the high­ly cycli­cal natu­re of the semi­con­duc­tor indus­try; future acqui­si­ti­ons, dive­s­ti­tures and/or joint ven­tures that may dis­rupt AMD’s busi­ness; modi­fi­ca­ti­on or inter­rup­ti­on of inter­nal busi­ness pro­ces­ses and infor­ma­ti­on sys­tems; quar­ter­ly and sea­so­nal sales pat­terns that may affect AMD’s busi­ness; avai­la­bi­li­ty of essen­ti­al equip­ment, mate­ri­als or manu­fac­tu­ring pro­ces­ses to manu­fac­tu­re AMD’s pro­ducts; com­pa­ti­bi­li­ty of AMD’s pro­ducts with indus­try-stan­dard soft­ware and hard­ware; cos­ts rela­ted to defec­ti­ve pro­ducts; the effi­ci­en­cy of AMD’s sup­ply chain; AMD’s abi­li­ty to rely on third par­ties’ cer­tain sup­ply-chain logistics func­tions, pro­duct dis­tri­bu­ti­on, trans­por­ta­ti­on manage­ment and infor­ma­ti­on tech­no­lo­gy sup­port ser­vices; future impairments of good­will; stock pri­ce vola­ti­li­ty; poli­ti­cal, legal and eco­no­mic risks and natu­ral dis­as­ters; world­wi­de poli­ti­cal con­di­ti­ons; unfa­vor­able cur­ren­cy exchan­ge rate fluc­tua­tions; AMD’s abi­li­ty to effec­tively con­trol the sales of its pro­ducts on the gray mar­ket; AMD’s abi­li­ty to pro­tect its tech­no­lo­gy or intel­lec­tu­al pro­per­ty; cur­rent and future liti­ga­ti­on; poten­ti­al tax lia­bi­li­ties; and envi­ron­men­tal laws and con­flict mine­rals-rela­ted pro­vi­si­ons. Inves­tors are urged to review in detail the risks and uncer­tain­ties in AMD’s Secu­ri­ties and Exchan­ge Com­mis­si­on filings, inclu­ding but not limi­ted to AMD’s Quar­ter­ly Report on Form 10‑Q for the year ending March 31, 2018.

For the three mon­ths ended June 30, 2018, dilu­t­ed EPS inclu­des the impact of the 2026 Con­ver­ti­ble Notes as their inclu­si­on is dilu­ti­ve under the “if-con­ver­ted” method. Accord­in­gly, $11 mil­li­on of inte­rest expen­se is added back to net inco­me and dilu­t­ed shares inclu­des 100.6 mil­li­on shares.

(1)The Com­pu­ting and Gra­phics seg­ment pri­ma­ri­ly inclu­des desk­top and note­book pro­ces­sors and chip­sets, dis­cre­te and inte­gra­ted gra­phics pro­ces­sing units (GPUs) and pro­fes­sio­nal GPUs. The Com­pa­ny also licen­ses por­ti­ons of its intel­lec­tu­al pro­per­ty portfolio.

(2)The Enter­pri­se, Embed­ded and Semi-Cus­tom seg­ment pri­ma­ri­ly inclu­des ser­ver and embed­ded pro­ces­sors, semi-cus­tom Sys­tem-on-Chip (SoC) pro­ducts, deve­lo­p­ment ser­vices and tech­no­lo­gy for game con­so­les. The Com­pa­ny also licen­ses por­ti­ons of its intel­lec­tu­al pro­per­ty portfolio.

(3)All Other cate­go­ry pri­ma­ri­ly inclu­des cer­tain expen­ses and credits that are not allo­ca­ted to any of the ope­ra­ting seg­ments. Also inclu­ded in this cate­go­ry is stock-based com­pen­sa­ti­on expense.

(4)Reconciliation of GAAP Ope­ra­ting Inco­me (Loss) to Adjus­ted EBITDA*

(5) Free cash flow reconciliation**

*The Com­pa­ny pres­ents “Adjus­ted EBITDA” as a sup­ple­men­tal mea­su­re of its per­for­mance. Adjus­ted EBITDA for the Com­pa­ny is deter­mi­ned by adjus­ting ope­ra­ting inco­me (loss) for stock-based com­pen­sa­ti­on and depre­cia­ti­on and amor­tiz­a­ti­on expen­se. The Com­pa­ny cal­cu­la­tes and pres­ents Adjus­ted EBITDA becau­se manage­ment belie­ves it is of impor­t­ance to inves­tors and len­ders in rela­ti­on to its over­all capi­tal struc­tu­re and its abi­li­ty to bor­row addi­tio­nal funds. In addi­ti­on, the Com­pa­ny pres­ents Adjus­ted EBITDA becau­se it belie­ves this mea­su­re assists inves­tors in com­pa­ring its per­for­mance across repor­ting peri­ods on a con­sis­tent basis by exclu­ding items that the Com­pa­ny does not belie­ve are indi­ca­ti­ve of its core ope­ra­ting per­for­mance. The Company’s cal­cu­la­ti­on of Adjus­ted EBITDA may or may not be con­sis­tent with the cal­cu­la­ti­on of this mea­su­re by other com­pa­nies in the same indus­try. Inves­tors should not view Adjus­ted EBITDA as an alter­na­ti­ve to the GAAP ope­ra­ting mea­su­re of ope­ra­ting inco­me (loss) or GAAP liqui­di­ty mea­su­res of cash flows from ope­ra­ting, inves­ting and finan­cing acti­vi­ties. In addi­ti­on, Adjus­ted EBITDA does not take into account chan­ges in cer­tain assets and lia­bi­li­ties as well as inte­rest inco­me and expen­se and inco­me taxes that can affect cash flows.

**The Com­pa­ny also pres­ents free cash flow as a sup­ple­men­tal Non-GAAP mea­su­re of its per­for­mance. Free cash flow is deter­mi­ned by adjus­ting GAAP net cash pro­vi­ded by (used in) ope­ra­ting acti­vi­ties for capi­tal expen­dit­ures. The Com­pa­ny cal­cu­la­tes and com­mu­ni­ca­tes free cash flow in the finan­cial ear­nings press release becau­se manage­ment belie­ves it is of impor­t­ance to inves­tors to under­stand the natu­re of the­se cash flows. The Company’s cal­cu­la­ti­on of free cash flow may or may not be con­sis­tent with the cal­cu­la­ti­on of this mea­su­re by other com­pa­nies in the same indus­try. Inves­tors should not view free cash flow as an alter­na­ti­ve to GAAP liqui­di­ty mea­su­res of cash flows from ope­ra­ting activities.

The Com­pa­ny has pro­vi­ded recon­ci­lia­ti­ons wit­hin the ear­nings press release of the­se non-GAAP finan­cial mea­su­res to the most direct­ly com­pa­ra­ble GAAP finan­cial measures.