This afternoon, AMD released their financial results for the third quarter, which ended September 27, 2014. While revenue was down slightly from Q2, the net income was positive for this first time this fiscal year. non-GAAP Earnings Per Share was $0.03, which missed analysts’ projections of $0.04. Earlier in the quarter projections were as high as $0.07 per share, but the Computing and Graphics segment was mixed this quarter due to “challenging market conditions” according to AMD.

Starting July 1st, 2014, AMD reorganized their reporting structure into two groups. The Computing and Graphics group focuses on desktop and notebook processors, chipsets, discrete desktop GPUs, and workstation GPUs. The Enterprise, Embedded, and Semi-Custom group includes server processors, embedded processors, dense servers, semi-custom SoCs, engineering services, and royalties, which is pretty much every market AMD is in other than the traditional desktop/notebook market.

AMD Q3 2014 Financial Results (GAAP)
  Q3'2014 Q2'2014 Q3'2013
Revenue (Billions) $1.43 $1.44 $1.46
Operating Income (Millions) $63 $63 $95
Net Income (Millions) $17 -$36 $48
Earnings Per Share $0.02 -$0.05 $0.06

Revenue for Q3 2014 was $1.43 billion, down just under 1% from Q2 2014’s $1.44 billion. As compared to Q3 2013, revenue was down 2%. Operating Income was $63 million (non-GAAP $66M) for the quarter, which is also down from the previous quarter and year-over-year. Net income was $17 million (non-GAAP $20M) for the quarter which is up from the $36 million loss last quarter, but down from $48 million profit in Q3 2013. Gross margin was flat from last quarter at 35%.

AMD Q3 2014 Financial Results (Non-GAAP)
  Q3'2014 Q2'2014 Q3'2013
Revenue (Billions) $1.43 $1.44 $1.46
Operating Income (Millions) $66 $67 $78
Net Income (Millions) $20 $17 $31
Earnings Per Share $0.03 $0.02 $0.04

The Computing and Graphics segment revenue decreased 6% from last quarter and 16% year-over-year. AMD states the primary decrease is due to by lower chipset and GPU sales as compared to last quarter, and decreased notebook processor and chipset sales as compared to a year ago. The Operating Loss for the division was $17 million, which is up (or down, depending on how you look at negative numbers) substantially from the $6 million loss last quarter and $9 million loss in Q3 of last year.  The Average Selling Price (ASP) of CPUs/APUs actually increase sequentially and year-over-year. Discrete GPU ASP decreased over last quarter, but increased over the same period last year. The Computing and Graphics segment is a tough market for AMD right now. Intel is moving to 14 nm while AMD has to rely on Global Foundries and other fabs to attempt to catch up. This hampers their ability to match Intel on the performance per watt metric certainly. On the GPU front, NVIDIA just released the Maxwell based GTX 980 and 970, as well as the mobile counterparts which have shown impressive performance, and efficiency. Hopefully AMD can counter with some new products in the near term.

The Enterprise, Embedded, and Semi-Custom division fared much better for Q3, with a 6% sequential gain in revenue and 21% year-over-year. Operating income for the quarter was $108 million which was up from the $97 million of Q2, and $92 million of Q3 2013. As with the last couple of quarters, AMD attributes the gains primarily due to increased sales of semi-custom SoCs. Their embedded revenue grew by “double digits” as compared to last quarter. Clearly AMD has found a niche here where they can use their expertise in new markets to shore up the company, and so far, it has been successful. In addition, AMD has closed two new Semi-Custom SoC designs this quarter which should help this division continue its growth.

Results Per Division
  Q3'2014 Q2'2014 Q3'2013
Computing and Graphics Revenue (Millions) $781 $828 $925
Computing and Graphics Operating Income (Millions) -$17 -$6 $9
Enterprise, Embedded, and Semi-Custom Revenue (Millions) $648 $613 $536
Enterprise, Embedded, and Semi-Custom Operating Income (Millions) $108 $97 $92

In addition, AMD is also trying to cut costs by reducing their workforce by about 7% Currently, they have 10,149 employees as of the end of Q3, which means around 710 people will be cut from the company. Most of these cuts should be done by the end of Q4. AMD will then adjust their real estate footprint to accommodate the smaller workforce, which could mean additional infusions of cash from the sale of buildings. They are hoping to have savings of $9 million for Q4 and $85 million for FY 2015.

Their forecast for Q4 is not rosy either. AMD is expecting revenue to decrease 13% from Q3, plus or minus 3%. However they are also hoping to drop expenses from the current guidance of $420 to $450 million, to $385 million, which means they are hoping for a positive non-GAAP free cash flow.

Although AMD did miss investor earnings, they did not miss by much and the net result was a quarter where the company managed to turn a tiny profit, which is in stark contrast to the first couple of quarters for 2014. Unfortunately, AMD’s losses all stem from the desktop PC industry. Intel just had a record quarter, so there is certainly money to be made in this sector. We will have to see how Dr. Su, the new CEO of AMD, addresses this for the next quarter.

 

Source: AMD Investor Relations

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  • meacupla - Friday, October 17, 2014 - link

    pretty sure it's a deep discount offered by AMD for apple to buy their cards. Reply
  • tipoo - Thursday, October 16, 2014 - link

    Their graphics division has been keeping them afloat. Without ATI they'd really have nothing. No high end GPUs that still pull in money, no APUs which are their biggest CPU sales. They'd just have crappy CPU cores. Reply
  • Wreckage - Friday, October 17, 2014 - link

    Without ATI they would have $5.4 billion. Reply
  • Kjella - Friday, October 17, 2014 - link

    Without the ATI purchase, AMD would have more cash to keep up with Intel on the CPU side and could have had both ATI and nVidia competing to provide integrated graphics, even on the same chip as SoC vendors do. Particularly as Intel started pushing their integrated graphics aggressively AMD might have ended up holding two good cards in a three-way race by not having their own solution and offering a platform for both ATI and nVidia to launch at Intel, potentially also boosting their fab volume. By committing to ATI, they naturally invited Intel and nVidia to join forces and crush both sides of the company. Still it was 2006 and many things looked different back then and a whole lot could have happened since, it's pretty much all speculation. Reply
  • Mayuyu - Thursday, October 16, 2014 - link

    I think they should just close the cpu division. They're not even close to being competitive. Reply
  • meacupla - Thursday, October 16, 2014 - link

    Then they would have no APUs, which brought them their console deals. Reply
  • Flunk - Thursday, October 16, 2014 - link

    Which are not really that lucrative or the company would be doing better. Reply
  • eanazag - Thursday, October 16, 2014 - link

    They are keeping the lights on and 93% of its workforce employed. They have things they can do. They just don't. There are better processes out there. No reason they need to be stuck on 28 nm. They would do better resurrecting their previous architecture and fabbing at these smaller geometries than bulldozer. Reply
  • Mayuyu - Friday, October 17, 2014 - link

    Seems like only Apple is using 20nm for non-Intel made chips so far. AMD enough money or market power to buy up all the 20nm capacity like Apple did. Reply
  • TylerGrunter - Friday, October 17, 2014 - link

    Samsung also is using 20nm on their SoCs. In particular Exynos 5430 and Exynos 5433 (now called Exynos 7 octa) are build in 20nm.
    In fact they were doing it prior to Apple.
    Reply

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