On October 30, Beijing time, semiconductor manufacturer AMD announced its new quarterly financial report. The data shows that its revenue and net profit have achieved year-on-year and month-on-month growth. Specifically, revenue was $1.8 billion, slightly lower than market expectations of $1.81 billion. Net profit was US$120 million, a year-on-year increase of nearly 18%.

Although AMD’s third-quarter revenue and earnings were largely in line with market expectations, the forecast itself has fallen from the EPS of $0.23 and revenue of $1.94 billion expected earlier this year. Meanwhile, fourth-quarter revenue is expected to reach $2.1 billion, missing expectations, and fourth-quarter guidance is also slightly weaker.

Shares rose 2.6 percent to $33.9 in after-hours after the earnings report. However, it may be affected by the above news. As of now, AMD has reported 33.03 US dollars, and its stock price has fallen by 1.96%.

Interpretation of AMD’s financial report: revenue hit a record high but it was difficult to meet market expectations

From the financial report, AMD’s revenue growth is not very high, and its performance outlook for the fourth quarter is not as good as previously expected. However, there is still hope for AMD’s development prospects, especially after the launch of the 7nm process Ryzen, Xiaolong and Radeon graphics cards this year, AMD’s three main products have achieved major upgrades in technology and architecture. In the CPU processor, AMD has achieved a double surpass in technology and performance.

AMD’s strong rise in recent years is obvious to all. At present, the industry has formed a three-way competition between Intel, NVIDIA and AMD. The year-on-year growth of AMD’s Q3 revenue has once again confirmed its strength, but the fact that the growth rate is not eye-catching also shows that it is facing corresponding difficulties. Under the background that the overall decline of the semiconductor market has not been reversed, AMD challenges are not small. Q3 revenue and net profit double growth Ryzen client processor sales are an important growth engine

Interpretation of AMD’s financial report: revenue hit a record high but it was difficult to meet market expectations

In terms of revenue. In the third quarter, AMD’s revenue was US$1.8 billion, an increase of 9% year-on-year and an increase of 18% month-on-month, which was basically the same as the US$1.81 billion previously expected by analysts.

In terms of earnings per share, it has also achieved year-on-year and month-on-month growth to varying degrees, with earnings per share of $0.11 in the quarter, compared with $0.09 in the same period last year and $0.03 in the previous quarter. Adjusted non-GAAP EPS of $0.18 was fully in line with consensus estimates and increased nearly 39% year over year from $0.08 last quarter.

From net profit. According to the financial report, the net profit for the quarter was US$120 million, an increase of nearly 18% from US$102 million in the same period last year, and the net profit for the previous quarter was US$35 million, a significant increase from the previous quarter. From the perspective of gross profit margin, the gross profit margin for the quarter was 43%, an increase of 3% over the same period last year, and an increase of 2% over the first half of this year, mainly due to the increase in sales of Ryzen and Xiaolong servers. At the end of the third quarter, the company had $1.2 billion in cash and equivalents and marketable securities.

From a business perspective. In the third quarter, the Computing and Graphics segment had revenue of $1.28 billion, compared with $938 million in the same period last year and $940 million in the previous quarter, both a year-over-year and A substantial increase of 36% month-on-month. This was mainly driven by sales growth of Ryzen client processors.

Among them, the average selling price of client processors continued to record year-on-year growth, thanks to the growth in sales of Ryzen’s desktop processors, the first high-performance 7nm processor in the consumer desktop market, and the quarter-on-quarter growth was led by Ryzen. Sales of desktop and mobile processors were double-boosted. The average selling price of GPUs also increased year-on-year due to increased channel sales, but decreased quarter-on-quarter, mainly due to an increase in the proportion of mobile product sales.

At the same time, the loss recorded during the period was US$54 million, which was larger than the US$36 million in the same period last year and higher than the US$52 million in the second quarter of this year. At the same time, the financial report predicts that the revenue in the fourth quarter of 2019 is about 2.1 billion US dollars, up and down or floating by 50 million US dollars, representing a quarter-on-quarter increase of nearly 17% and a year-on-year increase of 48%, slightly lower than the mainstream market expectation of 2.15 billion US dollars.

Taken together, AMD’s third-quarter earnings report was mixed. Although AMD has continuously launched more competitive products on the market, it should be noted that competitors are also sparing no effort. The US Stock Research Institute will analyze its future opportunities and challenges through the analysis of its main business.

The industry has not been able to get out of the downturn, and the main business is facing challenges from strong rivals

When it comes to technology giants like AMD, it is inseparable from the semiconductor market. The overall downturn in the semiconductor market has become an unavoidable barrier for companies to escape.

1. Global semiconductor market sales decline, AMD as a semiconductor manufacturer is inevitably unaffected

In 2019, the global demand for solid-state storage, smartphones, and PCs slowed down, and product inventories were high, leading to a decline in the global semiconductor demand market. At the same time, global trade frictions heated up. The protracted trade war between China and the United States also had a greater impact on the semiconductor trade market. .

According to data from the Global Semiconductor Trade Statistics Association, global semiconductor sales in 2018 were US$468.78 billion, a year-on-year increase of 13.7%. However, in the second quarter of 2019, global semiconductor sales were US$98.2 billion, a year-on-year decrease of 16.8%. In the first half of 2019, the global semiconductor market sales decreased by 14.5% year-on-year. It is predicted that for the whole year of 2019, global semiconductor sales will be It fell 13.3%.

At the same time, according to Gartner, global semiconductor revenue in 2019 was $429 billion, down 9.6% from $475 billion in 2018. From the perspective of various regions in the world, in 2018, the United States, Europe, and Asia-Pacific all showed varying degrees of growth. However, in 2019, according to the forecast of WSTS, the global semiconductor demand market will decline. Among them, the US region will decline by 27.3%, the European region will decline by 6.1%, the Japan region will decline by 9.7%, and the Asia-Pacific region (except Japan) will decline. It fell 9.8%.

As a semiconductor manufacturer AMD has risen strongly in the industry in recent years, it is inevitable that it will not be affected in the current state of not optimistic. The financial report data shows that although the third quarter met analysts’ expectations, the revenue forecast for the third quarter has actually fallen from the 1.94 billion expected in the first half of this year. This is not unrelated to the overall downturn in the industry.

2. The fierce battle between AMD and the “Double British” giants continues and intensifies

According to a report from The Register a few days ago, AMD’s shipments and share in the European market have seen a relatively significant increase. On the one hand, the reason is the increase in the performance of AMD’s products, and on the other hand, it may be attributed to Intel supply constraints. That is to say, the further expansion of AMD’s market share, in addition to the improvement of its own product performance, there are certain market factors.

In the details of Intel’s third-quarter financial report, we can see that they experienced a 5% decline in the PC business, while the PC industry in the last quarter saw a rise of about 4-5%. That is to say, Intel Last quarter was a contrarian in the PC market, so some of the lost revenue is likely to fall into the hands of AMD, and as a result Intel’s market share fell from 92% to 86%. If Intel is not affected by supply constraints, AMD’s shipments and market share growth rates may be questioned to some extent once Intel breaks the supply shortage situation. It can be said that this is a potential risk faced by AMD in the future.

As the leader of the semiconductor industry, Intel’s strength cannot be underestimated. Recently, according to well-known hardware whistleblowers in the industry, Intel will soon launch a new generation of Tiger Lake processors for thin and light notebooks and support LPDDR5. LPDDR5 is suitable for mobile computing needs in a variety of categories such as smartphones, tablets, ultrabooks, and it even provides features designed for critical applications such as automobiles. This also provides reliable technical support for Intel’s diversified business.

Judging from Intel’s Q3 financial report, although the total revenue has not changed much and the net profit has declined by 6 percentage points, the stock price has risen sharply, creating a new high in half a year. The capital market remains optimistic about its future.

In addition, AMD and Nvidia have been competing for a long time, and AMD has been trying to undermine Nvidia’s dominance in the gaming GPU space. The competition between the two is mainly concentrated in the mid-end graphics card market. Both parties launched new terminal graphics products in July this year.In February of this year, AMD released a GPU called the Radeon VII, which is

As we all know, Nvidia has always had a clear advantage in the graphics card market. In the discrete graphics card market in the fourth quarter of 2018, Nvidia’s market share increased to 81.2%, while AMD’s fell to 18.8%, according to market research firm JPR.

Although AMD’s products in the high-end graphics card market are not as good as Nvidia, it chose to directly declare war with Nvidia in the mid-range graphics card market, and continuously make targeted adjustments in terms of price, performance and power consumption, which will also be a double-edged sword. The sword, while improving itself, also intensifies the competition in the market.

The financial report shows that the lowering of the performance guidance for the fourth quarter and the year-on-year revenue growth of the third quarter is only a single-digit growth of 9%, which is also closely related to the fierce competition in the industry.

In addition, it is worth noting that AMD has become synonymous with “cost performance” in both the CPU and GPU fields, which will definitely have a corresponding impact on its own profits. The financial report shows that the revenue is 1.8 billion but the net profit is only 120 million. In contrast, Intel’s Q3 revenue is 19.19 billion US dollars, but the net profit is 9.709 billion US dollars. In contrast, this ratio is slightly awkward. That’s not a good thing for AMD in the long run.

Will AMD’s “high cost performance” strategy be a long-term solution?

According to statistics from Context, a data research organization, 12% of the 5.242 million desktop PCs sold by resellers and retailers in Western Europe used AMD’s CPUs, a 5% increase from the same period last year. In retail, the growth was more pronounced. The proportion of consumer PCs using AMD CPUs reached 18%, an increase of 7%, and about 8% of commercial PCs used AMD CPUs, an increase of 5% year-on-year.

Indeed, Intel’s supply constraints have given AMD a big piece of the cake. Of course, AMD itself has unique advantages. A few days ago, Master Lu released the Q3 PC processor rankings. From the CPU performance rankings, the number of AMD and Intel on the list is almost 55%. In addition, the first place on the list was also won by AMD 2990WX, with a score of more than 440,000 points, which was far lower than the more than 390,000 points of Intel i9-9980XE.

It can be seen that AMD’s overall strength should not be underestimated. According to previous reports from WCCFTECH, AMD Zen 3 architecture Ryzen 4000 series processors and “Milan” server CPU series are planned to be launched in the second half of next year, using TSMC’s 7nm+ manufacturing process, and will officially start production next year. At the same time, in the latest video, AMD acknowledged the Zen 4 architecture for the first time, and stated that Zen 4 and Zen 5 were designed and developed by two independent teams.

According to the news from IT House, the fourth generation of Zen 4 architecture products will not be released until 2022. But this period of time is worth the wait, as AMD will also launch a brand new SP5 platform, although the specific specifications are still being defined. It is certain that DDR5 memory, PCIe 5.0 bus, and the more advanced Infinity Fabric interconnect bus should not be missing.

In addition, according to the current time node, the five generations of Zen 5 architecture products are basically locked in 2023, because the 7nm + Zen 3 architecture of the Milan three-generation Xiaolong has been taped out in the second quarter of this year, and it is expected to be in the third quarter of 2020. Officially released. So 2021 will be the year AMD has to spend its energy designing a new platform, which is expected to be released in 2023.

AMD’s proactive plans show confidence in the future processor market. Of course, there are also many uncertainties during this period. The old rival Intel is bound to continue to introduce new products, and it may achieve an overall cost-effective overtake at any time. Once Intel gains an advantage in price, it will be a heavy blow to AMD.

In addition to opponents, it is still necessary to take into account the performance of their own products. As a semiconductor manufacturer, we still have to face the characteristics of a long industry cycle. Then, how to stably increase the production of 7nm and maintain the yield rate and continue to maintain competitiveness in the market will be a key consideration.

Furthermore, global demand trends are not clear, which increases the corresponding risk. The current slowdown in the global semiconductor market has severely crippled the growth of many companies in the industry, and with international trade tensions and increased uncertainty about supply chain demand, companies don’t know exactly when their channel inventories will normalize. To mitigate risks from the trade war, AMD has been adjusting its supply chain. AMD chips are manufactured in Taiwan, with back-end manufacturing, testing and assembly done in Malaysia.

Although AMD is not currently suffering from a setback in the trade war, any changes in channel demand or the eventual slowdown in the market may have an impact on AMD’s stock price, and the downturn in channel demand will also take AMD longer to reduce inventory levels.

On the whole, although AMD’s financial report this time is flat with expectations and its net profit has increased by 18% year-on-year, there are also many hidden worries behind it, which is not optimistic. Next, whether to further expand market share and maintain revenue growth amid the overall downturn in the semiconductor industry can only be answered when the next quarterly earnings report is announced.

Source of this article: U.S. Stock Research Institute=——It aims to help Chinese investors understand the world, and focus on reporting U.S. technology stocks and Chinese stocks. Friends who are interested in U.S. stocks quickly follow us

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