AMD Q1 Earnings Points Towards a Strong Q2 - Gross Margin Increases

AMD's 2019 is all about the second half.

AMD Q1 Earnings Points Towards a Strong Q2 - Gross Margin Increases

AMD Q1 Earnings Points Towards a Strong Q2 - Gross Margin Increases

AMD has released their Q1 2019 earnings, and its a bit of a mixed bag. When compared to last year revenues are down, mostly thanks to the crypromining crash, while the company remains profitable with higher margins. 

When compared to Q1 2018 AMD's revenues are down 23%, lowering AMD's revenues from $1.65 billion to $1.27 billion in Q1 2019. This meets AMD's expectations for Q1, which sat at 1.25 billion plus or minus $50 million. In Q1 2019 AMD has noted a 5% increase in gross margin, which comes thanks to the company's penetration into the datacentre market with both Radeon Vega series graphics cards and their EPYC series of processors, both of which are high margin products. 

AMD's lowered Q1 revenues are primarily due to their Computing and Graphics segment, as AMD has moved from a time where cryptocurrency miners would purchase every GPU they could manufacture to a time where demand from the cryptomarket has dried up, and Nvidia has provided stiff competition within the gaming market thanks to their Turing series of graphics hardware. 

In AMD's Enterprise, Embedded and Semi-Custom segment, revenue is down 17% year-over-year and 2% sequentially, mostly thanks to lower demand for semi-custom products. This change makes sense as we approach the end of the PS4 and Xbox One's lifecycle, though these revenues are expected to increase in 2020 thanks to Sony's AMD-powered next-generation PlayStation console. Increased server sales partially offset this division's decrease in revenue.  

AMD Q1 Earnings Points Towards a Strong Q2 - Gross Margin Increases  

While AMD's Q1 could be considered weak, it is worth remembering that AMD's 2019 is all about the second half, with the release of 7nm Ryzen/EPYC processors promising to produce strong sales for the manufacturer. The launch of 7nm Navi series graphics cards should also generate increased sales for the company. 

In Q2 2019, AMD expects to generate around $1.52 billion in revenue +/- $50 million, representing 19% growth sequentially thanks to growth across multiple areas of the business. Lower graphics card demand should result in a 13% year-over-year decrease in Q2 revenues, but again this is due to non-existent crypto-related demand in 2019. Remember that 7nm Ryzen and EPYC will release in Mid-2019, giving both products a limited time to impact AMD's Q2 financials. 

Q3 2019 is where AMD's earnings should receive a sharp uptick, as this is when the majority of the company's next-generation offerings will be released. In Q3 AMD's success relies on the company's ability to execute its plans with Zen 2 and Navi, both of which should allow the company to generate more client/datacentre CPU and gaming graphics sales respectively. 

You can join the discussion on AMD's Q1 2019 Earnings on the OC3D Forums

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