After Intel reported their earnings for the first quarter of 2014, many people expected AMD’s earnings to mirror that of Intel’s or to do worse. Well, by the looks of it, AMD’s earnings have mirrored that of Intel’s in terms of remaining fairly stable and ensuring that their core business is strong. AMD reported a net loss of $20 million (or a non-GAAP profit of $12 million) on $1.4 billion in revenue which translates to a loss per share of about $0.02 or a non-GAAP profit per share of about $0.02. Wall Street’s estimates for AMD’s non-GAAP earnings were at an EPS of $0.00 and revenue of $1.36 billion. While this does represent a small beat of Wall Street’s consensus expectations, its still a beat, which generally translates well for them as a company.
AMD’s earnings broken down by revenue per division also spoke to how the company was able to beat the street’s expectations.
Computing Solutions: In their Computing Solutions business, which primarily focuses on CPUs and chipsets, AMD saw a decline of 8% quarter over quarter and 12% year over year, indicating that the PC market did shrink overall year over year, but an 8% decrease sequentially is almost to be expected going from the company’s busiest quarter (as was the case with Intel). They managed to post an operating loss of $3 million rather than an operating loss of $7 million in the previous quarter, primarily driven by lower operating expenses. This is compared to an operating loss of $39 million in the same period a year ago, clearly indicating AMD’s ability to adjust, slowly. Additionally, their CPU ASP remained flat sequentially but down ‘slightly’ year over year (no percentage provided).
Graphics and Visual Solutions: In AMD’s Graphics and Visual solutions division, which includes console APUs, AMD saw their revenue in the first quarter of 2014 decrease 15% sequentially and increase 118% year over year. This is clearly being driven by their ‘semi-custom’ SoC business and their GPU business which saw revenue increase both sequentially and year over year, indicating AMD’s thirst to improve their graphics strength. They reported that GPU sales were improved due to strong demand for their AMD Radeon R7 and R9 series of graphics cards. However, AMD still has a lot of room for improvement here with most of the GPU marketshare still being in Nvidia’s hands. Additionally, it appears as though the Xbox One’s slow-down in sales may have been the biggest factor in this change from quarter to quarter as Sony’s PlayStation 4 sales are strong as ever.
AMD also reported stronger operating income with an operating income of $91 million, compared to $121 million in Q4 2013, however, when compared to the same quarter a year ago at $16 million, AMD looks to be doing much better. The sequential decline was blamed by AMD on decreased revenue from ‘semi-custom’ SoCs while the year over year increase was also driven by higher sales of ‘semi-custom’ SoCs, basically consoles drove sales very strongly.
AMD’s outlook for 2014 was also a bit rosier than expected as they did report that they expected to see revenue for 2014 to increase year over year and that they expected their gross margin to remain around 35% which is exactly where they reported it for this quarter. Based on these slightly better than expected earnings, improved outlook and GPU sales strength, AMD’s stock is currently up 6% in after hours trading, clearly indicating investors’ happiness with this quarter’s earnings.