10-KPeriod: FY2016

ADVANCED MICRO DEVICES INC Annual Report, Year Ended Dec 31, 2016

Filed February 21, 2017For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported revenues of $4.27 billion for the fiscal year ended December 31, 2016, a 7% increase year-over-year, driven by a 9% rise in its Computing and Graphics segment and a 5% increase in its Enterprise, Embedded, and Semi-Custom segment. Despite the revenue growth, the company reported a net loss of $497 million for the year, a slight improvement from the $660 million net loss in 2015. The gross margin decreased to 23% from 27% in the prior year, primarily due to a significant $340 million charge related to amendments to its wafer supply agreement with GLOBALFOUNDRIES Inc. and the issuance of a warrant. Financially, AMD made progress in strengthening its balance sheet by reducing total debt from $2.2 billion to $1.4 billion through debt repurchases and extending maturities. Cash and cash equivalents increased to $1.3 billion from $785 million, providing greater liquidity. The company also continued to execute its product roadmap, launching new processors and graphics cards, including those based on its new Polaris architecture and PRO APUs for the commercial market. The company's primary customers, Sony, Microsoft, and HP Inc., each accounted for over 10% of net revenue in 2016, highlighting a significant customer concentration risk.

Financial Highlights

54 data points
Beta

Revenue

$4.27B

23.5% Gross Margin

Net Income

-$498.00M

-11.7% Net Margin

EPS (Diluted)

$-0.60

Total Assets

$3.32B

Cash & Equivalents

$1.26B

Free Cash Flow

$4.00M

Financial Statements
Beta
Revenue$4.27B
Cost of Revenue$3.27B
Gross Profit$1.00B
R&D Expenses$1.01B
SG&A Expenses$466.00M
Operating Income-$373.00M
Interest Expense$156.00M
Net Income-$498.00M
EPS (Basic)$-0.60
EPS (Diluted)$-0.60
Shares Outstanding (Basic)835.00M
Shares Outstanding (Diluted)835.00M

Key Highlights

  • 1Revenue increased by 7% to $4.27 billion in 2016, driven by growth in both Computing & Graphics and Enterprise, Embedded & Semi-Custom segments.
  • 2Net loss improved to $497 million from $660 million in the prior year, though the company remained unprofitable.
  • 3Gross margin declined to 23% from 27% due to a substantial $340 million charge related to the GLOBALFOUNDRIES wafer supply agreement and a warrant issuance.
  • 4Total debt was reduced significantly from $2.2 billion to $1.4 billion, and cash reserves increased to $1.3 billion.
  • 5The company launched several new products, including Polaris architecture GPUs and 7th Generation PRO APUs, indicating ongoing product development efforts.
  • 6Significant customer concentration risk exists, with Sony, Microsoft, and HP Inc. collectively representing a substantial portion of net revenue.
  • 7The company is heavily reliant on GLOBALFOUNDRIES for wafer supply, with a significant minimum purchase commitment through 2020.

Frequently Asked Questions

In 2016, AMD's revenue increased by 7% to $4.27 billion, driven by growth in its Computing and Graphics segment and its Enterprise, Embedded, and Semi-Custom segment. However, the company continued to report a net loss, which decreased to $497 million from $660 million in 2015. The gross margin saw a significant decrease to 23% from 27% due to a large charge related to its wafer supply agreement with GLOBALFOUNDRIES.

AMD made significant efforts to improve its financial health in 2016. The company reduced its total debt by approximately $800 million, bringing it down to $1.4 billion from $2.2 billion at the end of 2015. Simultaneously, its cash and cash equivalents increased to $1.3 billion from $785 million, bolstering its liquidity position. These actions were primarily financed by the issuance of common stock and convertible senior notes.

Key risks include intense competition, particularly from Intel in the microprocessor market and Nvidia in the graphics market. AMD's heavy reliance on GLOBALFOUNDRIES for manufacturing, with significant minimum purchase commitments, poses a risk if GLOBALFOUNDRIES cannot meet demand or technological requirements. The company also faces risks from customer concentration, as a few major customers account for a substantial portion of its revenue. Furthermore, the cyclical nature of the semiconductor industry and global economic uncertainties are significant factors.

AMD operates in two main segments: Computing and Graphics (desktop/notebook processors, chipsets, discrete GPUs) and Enterprise, Embedded, and Semi-Custom (server/embedded processors, semi-custom SoCs for game consoles, IP licensing). In 2016, the company launched new products such as the Polaris architecture-based Radeon RX 480 GPU and 7th Generation AMD PRO APUs for business clients, indicating continued investment in product innovation.