As part of this morning’s announcement from AMD that the company would be buying FPGA maker Xilinx for $35 billion in stock, the company also released its Q3 earnings report alongside the buyout news. An atypical earnings release to say the least, an early-morning release allowed AMD investors and others to get a look at the very latest in AMD’s financials while also digesting the decision to use the company’s sizable market capitalization to buy another company – and ultimately to help AMD justify why they’re in such a good position now to make the transaction. Coming on the heels of a record Q2 for the company, AMD closed out the third quarter of the year setting revenue records once again all the while trebling its profits.

For the third quarter of 2020, AMD reported $2.8B in revenue, a 56% jump over the same quarter a year ago. As a result, AMD has once again set new revenue records for the company, posting both their best Q3 ever, and their best single quarter period. Driving this was further growth in both of AMD’s major segments, with everything from consumer CPU sales to EPYC and semi-custom sales reported as being on the rise.

AMD Q3 2020 Financial Results (GAAP)
  Q3'2020 Q3'2019 Q2'2020
Revenue $2.8B $1.8B $1.93B
Gross Margin 44% 43% 44%
Operating Income $449M $186M $173M
Net Income $390M $120M $157M
Earnings Per Share $0.32 $0.11 $0.13

Most eye-popping, perhaps, has been AMD’s net income, which more than trebled over the year-ago quarter. For Q3’20, AMD booked $390M in GAAP net income, a 225% increase that dwarfs the $120M they took home at this point last year. Even on a quarterly basis AMD’s revenues and profits were up significantly across the board, with AMD again more than doubling its net income versus Q2. In fact the only aspect of AMD’s financials not showing significant growth at the moment is AMD’s gross margin, which at 44% is only up 1% over last year. According to the company, GM growth is being limited by relatively low margin semi-custom sales, with the PS5/XSX ramp-up counterbalancing the increase in CPU sales.

Breaking down the numbers by segment, AMD’s Computing and Graphics segment enjoyed a strong quarter based in large part on an increase in Ryzen processor sales. Overall the segment booked $1.67B in revenue, which is up 31% over the year-ago quarter. Carrying the segment were sizable increases in both AMD’s desktop and notebook CPU shipments, with AMD reporting double-digit growth in both and setting a new record for notebook processor shipments. AMD’s graphics division was the odd man out, however; the run-up to the RX 6000 series means that graphics revenue was down versus Q3’19.

AMD Q3 2020 Computing and Graphics
  Q3'2020 Q3'2019 Q2'2020
Revenue $1667M $1276M $1367M
Operating Income $384M $179M $200M

As for product average selling prices (ASPs), AMD is reporting that both client processor and graphics ASPs have taken a hit on a yearly basis. Graphics ASPs were down due to AMD’s current-generation RX 5000 products approaching the end of their lifecycle, while CPU ASPs declined due to higher sales of mobile chips, which tend to carry lower prices. Both of these should change for AMD in the next quarter, as the launch of Zen 3 and the Radeon RX 6000 series will put a fresh round of products on the market that can fetch higher prices.

Meanwhile, AMD’s Enterprise, Embedded, and Semi-Custom segment saw another greater quarter with Q3, with shipments of everything from EPYC processors to console SoCs on the rise. With the former, AMD has continued to grow its market share in the server space, and on the company’s earnings call CEO Dr. Lisa Su confirmed that server sales have more than doubled over Q3’19, citing improved cloud and enterprise adoption. Meanwhile the ramp-up for the Playstation 5 and Xbox Series X has pushed semi-custom sales higher as well, and that’s expected to grow even more in Q4.

AMD Q3 2020 Enterprise, Embedded and Semi-Custom
  Q3'2020 Q3'2019 Q2'2020
Revenue $1134M $525M $565M
Operating Income $141M $61M $33M

And, like the consumer side of AMD’s business, the enterprise side is about to benefit as well from the launch of next-generation products. AMD has confirmed that their Zen 3 architecture-based EPYC “Milan” processors will begin shipping this quarter as previously promised, with the initial chips going out to cloud and “select HPC” customers. Meanwhile general OEM availability will follow in the first quarter of 2021.

Overall, AMD has a lot to be happy about for Q3, and even more to look forward to in Q4. With AMD posting record revenue and their traditionally strongest quarter still to come, the company is expecting an even better Q4. The combination of Zen 3 CPUs for desktops and servers, along with new Radeon hardware will mean that AMD has momentum and new products on their side. All of which comes at a critical time for the industry, as AMD seeks to use its technology advantages to carve a larger piece of the x86 processor market from an uncharacteristically dazed Intel.

Source: AMD

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  • yeeeeman - Tuesday, October 27, 2020 - link

    I am guessing AMD is pumping lots of money in R&D since their numbers are not that mind blowing given how big of a success they have in desktop, laptop and even server. Reply
  • Adramtech - Tuesday, October 27, 2020 - link

    R&D is an asset that doesn't impact earnings. Reply
  • Yojimbo - Tuesday, October 27, 2020 - link

    R&D is an operating expense. It is not an asset and it does impact earnings. Reply
  • Spunjji - Wednesday, October 28, 2020 - link

    People say the weirdest things on these posts. Reply
  • Yojimbo - Tuesday, October 27, 2020 - link

    Their R&D went up $100 M year over year while their revenue went up ~$1 B year over year. The reason their earnings have not skyrocketed is because their gross margins has remained at 44%. So That ~$1 B in revenue amounts to ~$500 M in gross profit. then you subtract ~$200 M from R&D and SG&A and you get only ~$300 M in extra profits.

    As far as server is concerned, they seemingly haven't been so successful there, yet. The big gains in their revenue came from desktop and laptop CPU sales and console SOCs.
    Reply
  • Spunjji - Wednesday, October 28, 2020 - link

    Yup. They've a huge effort ahead of them to overturn Intel's incumbent lead in that area.

    All you have to do is look at the solutions being pushed by big OEM houses like Dell and larger resellers - all these pre-defined, pre-validated arrangements of products, all still using Intel processors. It can't last forever in the face of better products for AMD, but it'll last a while, yet.
    Reply
  • ingwe - Wednesday, October 28, 2020 - link

    You hit the nail on the head. Good analysis. Gross margin drives so much. But still, earnings being up while R&D went up is good. But only so much head room with a low GM. Reply
  • TheJian - Wednesday, October 28, 2020 - link

    NO, check Q report. 504mil vs. last Q 460mil. Not exactly breaking records. But yeah, I would expect 100's of millions added, but nope, because margin too low, income too low etc. 406 R&D for 2019 Q3. They need to start charging more money for products and stop making console crap at single digit to mid teens if they want more money for R&D.

    But yeah, 100% agree, these are odd results given 20% share in x86 vs. Intel NET INCOME. WTH is wrong AMD? At 80% share Intel made 23.6B, going down now but...You are in a pricing power position but still keep discounting your stuff. That is why this guy/gal is confused now. He guessed wrong, so now he/she should get it. AMD needs to make more INCOME. BOTTOM LINE ppl. You would think adding a 1B revenue vs. last year would do more. NO, not when chasing poor while Intel/NV chase rich and shaft poor if needed. Business is suppose to be ruthless, but AMD isn't.

    https://www.macrotrends.net/stocks/charts/AMD/amd/...
    https://www.macrotrends.net/stocks/charts/nvda/nvi...
    https://www.macrotrends.net/stocks/charts/intc/int...
    AMD going up, but way below others, and even themselves from 2008-2011 (2011 1.45B). They went fabless ~2008, so that 2011 number is relevant. They need to make more income for more R&D. It is hard to win vs 8-9x Intel R&D, or even NV. Wow, NV gets it, kings win, and R&D makes kings. The Dark Mayor said the same 2011! AMD fired him for it and are now trying to do it in cpu...ROFLMAO. Gee hire him back, he'll price them right and kill consoles immediately for higher margin crap like Intel/NVDA. IF they had listened to Dirk 2011, we would have today happen in 2015 and AMD would not be part of consoles, and AMD would have 40-50% share today probably...LOL.

    Hector ruined AMD with ATI then spun off to GF to ruin them too...ROFL. Dirk just needed a few more years adding R&D etc to KINGS (see his R&D years) and avoiding that whole ATI price tag would have helped him later too (no fab loss!)! ATI wasn't worth 1.5B at losses-60mil net income. They wrote 3.5B off later proving it.

    I wonder how much will be written off of xilinx if Intel starts a price war 2021 or buys a bunch MORE of TSMC wafers to limit AMD (making big gpus there now...LOL anything to slow down AMD wafers) etc. AMD keeps making late moves. Xilinx is a response to NV/INTC moves and seem to be forcing a bad buy, AGAIN. Yeah good moves in both cases, but bad prices ON those moves hurt the point of doing it.

    Business is WAR. Intel has many ways to hurt AMD for ages legally, and we already know they don't mind breaking the law for a decade or so either ;) 60B net income in 10yrs for a 1.5B fine handed to amd. They would risk that again, guaranteed, as that is just good business sense. Duh, it's kind of the obvious move at some point. Especially in a war with China where a govt has to leave you alone because they need you...LOL. Bean counters already did the math for sure on this if necessary, probably already greased congress pockets etc, just in case. I'd be shocked if the govt deal with Intel for packaging didn't come due to Trump (he wants USA UP in everything tech). TSMC might as well be China to Trump, Sk and samsung too.

    I see good times ahead for MU at some point for the same reasons. WAR, or rather, avoiding it through strength. IE, Trump just said peace through strength yesterday at multiple "protests" (er, rally...LOL). Keep having protests until election trump! I don't know why anyone thinks AMD is in the driver seat. It is only until Intel decides to really fight, meaning other than just product. They can take wafers, price you to death, etc. Multi-billion wafer deal made with TSMC already, so guessing that's the crap hitting Q1+. Looking at new roadmap leak shows Intel is killing cpus faster than ever next year (pulling in the map). They did the same thing last time (and cheated too). It took about 3-4yrs, and it looks like maybe about the same this time or +1yr. OR 2022 for real kill? fab+packaging running all cylinders together by then (no price war needed at that point?)?? Intel won't fail die shrinks forever and people have been fired already as noted...The new people are surely UNDER THE GUN right? :)

    Whatever, you will see the same results because AMD chose not to price right for 3yrs already and should be a few more designs ahead on R&D but wasted those teams on many socs for many versions of consoles in the last 7yrs. You could pull in your designs just like Intel until they lose but, you never made those banked designs for the coming years of war. You have 1-2 in the bag while Intel probably can kill the Q4 2021 chip quick too and more. People have been fired now (board pissed when that happens), so get ready for the real Intel response, or the effects of actions already taken coming soon. IE, TSMC chips from Intel, hybrid chips, price war, pulling in map faster etc etc. Higher prices or no margin which leads to less/no R&D and stop making peanut income chips!
    Reply
  • tamalero - Saturday, November 7, 2020 - link

    Intel sells more than just processors.

    Cant compare 1-1
    Reply
  • tamalero - Saturday, November 7, 2020 - link

    Also agree that Intel might try to cut down on AMD's TSCM cake.
    Thats how intel broke AMD for almost a decade after the success of the Athlon XP and X2 series made them do a huge gamble and buy ATI and expand their fab business, which dragged AMD's resources.
    Reply

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