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Advanced Micro (AMD) Posts Q1 Loss as Expected, Revenues Beat
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Advanced Micro Devices (AMD - Free Report) reported loss of 7 cents per share in first-quarter 2017, which matched the Zacks Consensus Estimate and was narrower than loss of 14 cents per share reported in the year-ago quarter.
Revenues increased 18.3% year over year to $984 million and exceeded the Zacks Consensus Estimate of $983 million. The year-over-year growth was primarily driven by higher GPU sales.
AMD’s shares fell almost 13% in pre-market trading. We note that shares have outperformed the Zacks Electronics Semiconductors industry on a year-to-date basis. While the industry gained 18.5%, AMD returned 20.1%.
Quarter Details
Advanced Micro has two reportable segments — Computing and Graphics (focused on the traditional PC market), and Enterprise, Embedded and Semi-Custom (focusing on adjacent high-growth opportunities). The details of these segments are discussed below:
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Computing and Graphics includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. This segment accounted for 60.3% of revenues and was up almost 29% year over year to $593 million. The year-over-year growth was driven primarily by higher desktop and graphics processor sales.
Client average selling price (ASP) increased year-over-year driven by desktop processor ASP. GPU ASP increased year-over-year primarily due to higher desktop GPU ASP.
The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. This segment brought in the remaining 39.7% of revenues, up 5.1% year over year to $391 million. The year-over-year increase can be attributed to higher semi-custom SoC sales.
Product Highlights
During the quarter, AMD launched its first x86 Ryzen desktop processor, which is based on the new “Zen” core micro-architecture. The company introduced the Radeon RX 500 series line of GPUs based on a refined, second-generation “Polaris” architecture.
AMD is set to launch x86 server CPU, codenamed “Naples”, in the second quarter. The company also announced collaboration with Microsoft (MSFT - Free Report) to incorporate the cloud delivery features of “Naples” with Microsoft's “Project Olympus” server platform.
Moreover, Microsoft’s new premium game console “Project Scorpio” will be powered by a highly-customized AMD SoC and is anticipated to be available for holiday 2017.
Further, AMD's “Vega” GPU architecture is on track to be launched in the second quarter. The company also announced the launch of the Radeon Pro Duo, the first “Polaris” architecture based dual-GPU graphics card.
Balance Sheet
Cash, cash equivalents & marketable securities were $943 million at the end of the first-quarter 2017, as compared with $1.26 billion at the end of the previous quarter.
Payables to related parties were $329 million in the quarter, which includes payables to GLOBALFOUNDRIES and ATMP JV. Total wafer purchases from GLOBALFOUNDRIES were $152 million in the reported quarter.
Long-term debt at the end of the quarter was $1.41 billion, down from $1.44 billion in the previous quarter primarily due to debt reduction activities.
Free cash outflow was $322 million, compared with free cash flow of $167 million in the previous quarter.
Guidance
AMD expects second-quarter 2017 revenues to increase 17% sequentially (+/- 3%). At mid-point this reflects 12% growth on a year-over-year basis.
Gross margin is likely to be 33%, while non-GAAP operating expenses are estimated to be $370 million.
Other top ranked stocks in the broader technology sector are Applied Optoelectronics (AAOI - Free Report) and Texas Instruments (TXN - Free Report) , both sporting a Zacks Rank #1.
Long-term earnings growth for Applied Optoelectronics and Texas Instruments is currently pegged at 20% and 9.6%, respectively.
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Advanced Micro (AMD) Posts Q1 Loss as Expected, Revenues Beat
Advanced Micro Devices (AMD - Free Report) reported loss of 7 cents per share in first-quarter 2017, which matched the Zacks Consensus Estimate and was narrower than loss of 14 cents per share reported in the year-ago quarter.
Revenues increased 18.3% year over year to $984 million and exceeded the Zacks Consensus Estimate of $983 million. The year-over-year growth was primarily driven by higher GPU sales.
AMD’s shares fell almost 13% in pre-market trading. We note that shares have outperformed the Zacks Electronics Semiconductors industry on a year-to-date basis. While the industry gained 18.5%, AMD returned 20.1%.
Quarter Details
Advanced Micro has two reportable segments — Computing and Graphics (focused on the traditional PC market), and Enterprise, Embedded and Semi-Custom (focusing on adjacent high-growth opportunities). The details of these segments are discussed below:
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise | Advanced Micro Devices, Inc. Quote
Computing and Graphics includes desktop and notebook processors and chipsets, discrete GPUs and professional graphics. This segment accounted for 60.3% of revenues and was up almost 29% year over year to $593 million. The year-over-year growth was driven primarily by higher desktop and graphics processor sales.
Client average selling price (ASP) increased year-over-year driven by desktop processor ASP. GPU ASP increased year-over-year primarily due to higher desktop GPU ASP.
The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, dense servers, semi-custom SoC products, engineering services and royalties. This segment brought in the remaining 39.7% of revenues, up 5.1% year over year to $391 million. The year-over-year increase can be attributed to higher semi-custom SoC sales.
Product Highlights
During the quarter, AMD launched its first x86 Ryzen desktop processor, which is based on the new “Zen” core micro-architecture. The company introduced the Radeon RX 500 series line of GPUs based on a refined, second-generation “Polaris” architecture.
AMD is set to launch x86 server CPU, codenamed “Naples”, in the second quarter. The company also announced collaboration with Microsoft (MSFT - Free Report) to incorporate the cloud delivery features of “Naples” with Microsoft's “Project Olympus” server platform.
Moreover, Microsoft’s new premium game console “Project Scorpio” will be powered by a highly-customized AMD SoC and is anticipated to be available for holiday 2017.
Further, AMD's “Vega” GPU architecture is on track to be launched in the second quarter. The company also announced the launch of the Radeon Pro Duo, the first “Polaris” architecture based dual-GPU graphics card.
Balance Sheet
Cash, cash equivalents & marketable securities were $943 million at the end of the first-quarter 2017, as compared with $1.26 billion at the end of the previous quarter.
Payables to related parties were $329 million in the quarter, which includes payables to GLOBALFOUNDRIES and ATMP JV. Total wafer purchases from GLOBALFOUNDRIES were $152 million in the reported quarter.
Long-term debt at the end of the quarter was $1.41 billion, down from $1.44 billion in the previous quarter primarily due to debt reduction activities.
Free cash outflow was $322 million, compared with free cash flow of $167 million in the previous quarter.
Guidance
AMD expects second-quarter 2017 revenues to increase 17% sequentially (+/- 3%). At mid-point this reflects 12% growth on a year-over-year basis.
Gross margin is likely to be 33%, while non-GAAP operating expenses are estimated to be $370 million.
Zacks Rank & Other Key Picks
Advanced Micro carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Other top ranked stocks in the broader technology sector are Applied Optoelectronics (AAOI - Free Report) and Texas Instruments (TXN - Free Report) , both sporting a Zacks Rank #1.
Long-term earnings growth for Applied Optoelectronics and Texas Instruments is currently pegged at 20% and 9.6%, respectively.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>