01—Abstract
Summary
Summary of the 10-K filed February 21, 2017. Cited figures are marked; the original filing is the authoritative source.
Advanced Micro Devices, Inc. (AMD) reported revenues of $4.27 billiona 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 millionb 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 billionc 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.
02—Key points
Key Highlights
- Revenue increased by 7% to $4.27 billion in 2016, driven by growth in both Computing & Graphics and Enterprise, Embedded & Semi-Custom segments.
- Net loss improved to $497 million from $660 million in the prior year, though the company remained unprofitable.
- Gross margin declined to 23% from 27% due to a substantial $340 million charge related to the GLOBALFOUNDRIES wafer supply agreement and a warrant issuance.
- Total debt was reduced significantly from $2.2 billion to $1.4 billion, and cash reserves increased to $1.3 billion.
- The company launched several new products, including Polaris architecture GPUs and 7th Generation PRO APUs, indicating ongoing product development efforts.
- Significant customer concentration risk exists, with Sony, Microsoft, and HP Inc. collectively representing a substantial portion of net revenue.
- The company is heavily reliant on GLOBALFOUNDRIES for wafer supply, with a significant minimum purchase commitment through 2020.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2016, Advanced Micro Devices Inc lost $0.12.
- Revenue$4.27B100.0%
- Cost of revenue−$3.27B76.5%
- Gross profit$1.00B23.5%
- Operating costs−$1.38B32.2%
- Operating income−$373.0M8.7%
- Interest, other & tax−$125.0M2.9%
- Net income−$498.0M11.7%
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 21, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $4.27B$3.99B | +7.0% |
| Cost of Revenue | $3.27B$2.91B | +12.5% |
| Gross Profit | $1.00B$1.08B | −7.1% |
| R&D Expenses | $1.01B$947.00M | +6.4% |
| SG&A Expenses | $466.00M$482.00M | −3.3% |
| Operating Income | -$373.00M-$481.00M | +22.5% |
| Interest Expense | $156.00M$160.00M | −2.5% |
| Net Income | -$498.00M-$660.00M | +24.5% |
| EPS (Basic) | $-0.60$-0.84 | +28.6% |
| EPS (Diluted) | $-0.60$-0.84 | +28.6% |
| Shares Outstanding (Basic) | 835.00M783.00M | +6.6% |
| Shares Outstanding (Diluted) | 835.00M783.00M | +6.6% |
05—Questions
Frequently Asked Questions
What was AMD's financial performance in 2016?
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.
How did AMD manage its debt and liquidity in 2016?
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.
What are the main risks highlighted in the filing for AMD?
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.
What are AMD's product segments and recent product developments?
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.
06—Continue