Advanced Micro Devices, Inc. AMD reported non-GAAP earnings of 11 cents per share for first-quarter 2018 compared with break-even reported in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of 9 cents per share.
Revenues increased 40% year over year to $1.65 billion and exceeded the Zacks Consensus Estimate of $1.52 billion.
The accelerated adoption of the company’s products in the PC, gaming and data center industries primarily led to its impressive performance.
Segments
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).
Computing and Graphics
Computing and Graphics segment revenues witnessed year-over-year increase of 95% to $1.12 billion. The increase can be attributed to accelerated sales of Radeon graphics and Ryzen desktop processors.
Operating income for this segment was $138 million against a loss of $21 million in the year-ago quarter, primarily driven by higher revenues.
Notably, the introduction of Ryzen desktop accelerated processing unit (APU) with a combination of Radeon “Vega” graphics architecture and “Zen” CPU cores is a huge positive for the company. Additionally, Advanced Micro launched its “2nd Generation Ryzen desktop CPUs”, which can enhance gaming performance by around 15%.
Advanced Micro and Microsoft MSFT announced a collaboration for providing support to Radeon FreeSync technology in Microsoft’s Xbox One S and Xbox One X consoles.
Prominent PC providers such as Acer, HP HPQ and Lenovo, which are part of Advanced Micro’s client base, recorded impressive sales during the quarter, which is encouraging. The release of Dell’s new notebooks and 2-in-1s earlier this month is a tailwind for the company.
Management also stated that Dell, HP and Lenovo are planning to launch commercial notebooks powered by Advanced Micro.
Enterprise, Embedded and Semi-Custom
Segment revenues amounted to $532 million, down 12% year over year due to lower semi-custom revenues.
Operating income for the segment was $14 million compared with $55 million recorded in the year-ago quarter. The figure was higher in the year-ago quarter due to a licensing gain in the said time frame.
The adoption of AMD EPYC processor-powered platforms continue to grow. During the quarter, Dell EMC launched “three new PowerEdge platforms powered by AMD EPYC 7000 series server processors.”
Yahoo Japan Corporation and Packet were added to its list of clients. Additionally, Cray CRAY announced the addition of “EPYC processors to its Cray CS500 line of HPC offerings.”
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise
Advanced Micro Devices, Inc. Price, Consensus and EPS Surprise | Advanced Micro Devices, Inc. Quote
Margins
Non-GAAP gross margin increased 400 basis points (bps) to 36% year over year driven by higher percentage of revenues from new products.
Non-GAAP operating margin during the quarter came in at 9% compared with 3% reported in the year-ago quarter. The year-over-year expansion was primarily owing to higher operating income from the Computing and Graphics segment driven by higher revenues.
Adjusted EBITDA amounted to $196 million compared with $58 million in the year-ago quarter.
Balance Sheet & Cash Flow
AMD ended the first quarter with cash and cash equivalents of $1.04 billion compared with $1.19 billion in the previous quarter. Total debt (including current portion) was $1.388 billion.
Guidance
For second-quarter 2018, management expects revenues to be roughly $1.725 billion (+/-$50 million). The Zacks Consensus Estimate for revenues is pegged at $1.58 billion.
Non-GAAP gross margin is expected to be 37%.
Zacks Rank
Advanced Micro carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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