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AMD posts a small Q2 loss despite its most competitive chips in a decade

Advanced Micro Devices posted a GAAP second-quarter loss of 2 cents a share and 2 cents a share profit on an adjusted basis, even as it continued with the launch of its most competitive chips in a decade. But in the third quarter, AMD expects revenues to rise 23 percent above Q2 levels.

Depending on how you look at those results, it’s both good news and bad news, which is where AMD has pretty much been for the past decade. From AMD’s point of view, the future will only get better.

AMD has been stuck around the breakeven level for a while, but the new Ryzen chips launched as early as March didn’t really help the company much so far. That’s the bad news. But the good news is that the pipeline of getting chips into new computers and in the hands of customers takes a while, and AMD is in the middle of that. AMD’s results were close to breakeven, but they were slightly better than expectations.

The Sunnyvale, Calif.-based chip maker is the No. 2 maker of PC processors behind Intel, and its results are a bellwether for the PC industry. The company is in the midst of launching its Ryzen desktop processors and Epyc server processors, which AMD claims will take the performance crown away from Intel for the first time in a decade. AMD has also announced its new Vega graphics processing units for high-end computers in competition with graphics chip maker Nvidia.

“Our second quarter results demonstrate strong growth driven by leadership products and focused execution,” said Lisa Su, AMD president and CEO, in a statement. “Our Ryzen desktop processors, Vega GPUs, and Epyc data center products have received tremendous industry recognition. We are very pleased with our improved financial performance, including double digit revenue growth and year-over-year gross margin expansion on the strength of our new products.”

The Ryzen and Epyc families are based on AMD’s Zen cores, which are 52 percent faster per clock cycle than AMD’s previous generation. The chips represent AMD’s core strategy of trying to out-innovate Intel, which has enormous financial, manufacturing, and manpower advantages.

Analysts expected AMD to report a loss of 3 cents a share on a GAAP basis, and a breakeven quarter on an adjusted basis. In the same quarter a year ago, AMD reported a profit of 8 cents a share.

Above: AMD Epyc server chip

Image Credit: AMD

Analysts also expected AMD to report sales of $1.16 billion. Actual revenue in the second quarter was $1.22 billion, up 19 percent from a year ago. Sales were driven by the first full quarter of Ryzen processor sales. Average selling prices were up significantly from a year ago.

The GAAP net loss was $16 million compared to net income of $69 million a year ago and a net loss of $73 million in the prior quarter. Loss per share was 2 cents, compared to 8 cents a year ago. On an adjusted basis, net income was $19 million compared to a net loss of $40 million a year ago and a net loss of $38 million in the prior quarter. Diluted earnings per share was 2 cents, compared to a loss per share of 5 cents a year ago and a loss per share of 4 cents in the prior quarter.

AMD said that semi-custom chip sales, which include chips for game consoles, were down 5 percent from a year ago.

AMD recently announced pricing and availability for its Ryzen 3 and Ryzen Threadripper consumer desktop processors, and the chip maker touted prices that undercut Intel’s comparable central processing units (CPUs) by as much as $1,000. But those chips started shipping in the third quarter, after the June 30 end of the second quarter.

AMD also unveiled the pricing and launch dates for its two Ryzen Threadripper CPUs for high-end desktops. The models include a 12-core, 24-thread Ryzen Threadripper 1920X with a 3.5-GHz base speed and 4.0-GHz boost; and a 16-core, 32-thread Ryzen Threadripper 1950X at a 3.4-GHz base and 4.0-GHz boost. Those chips will be available in early August. The 1920X sells $800 and the 1950X sells for $1,000.

For the third quarter of 2017, AMD expects revenue to increase approximately 23 percent sequentially, plus or minus 3 percent. The midpoint of guidance would result in third quarter 2017 revenue increasing approximately 15 percent year-over-year. AMD now expects annual revenue to increase by a mid to high-teens percentage, compared to prior guidance of low double-digit percentage revenue growth.

Above: AMD’s Ryzen chip

Image Credit: AMD

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Source: Microsoft