10-QPeriod: Q2 FY2018

ADVANCED MICRO DEVICES INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:AMD

Summary

Advanced Micro Devices Inc. (AMD) reported strong year-over-year growth in its second quarter of 2018, with net revenue increasing by 53% to $1.76 billion. This growth was driven by a significant 64% increase in the Computing and Graphics segment, primarily due to higher sales of its Radeon™ and Ryzen™ products, and a 37% increase in the Enterprise, Embedded and Semi-Custom segment, fueled by semi-custom revenue and EPYC™ server sales. The company also achieved profitability, with net income of $116 million compared to a net loss of $42 million in the prior year's second quarter. This turnaround reflects improved gross margins to 37% and increased operating income to $153 million, signaling effective execution of its growth strategy. AMD's financial position remains solid, with cash, cash equivalents, and marketable securities at $983 million, and the company expects sufficient liquidity to fund operations.

Financial Highlights

50 data points
Beta

Revenue

$1.76B

37.1% Gross Margin

Net Income

$116.00M

6.6% Net Margin

EPS (Diluted)

$0.11

Total Assets

$4.10B

Cash & Equivalents

$956.00M

Free Cash Flow

-$98.00M

Financial Statements
Beta
Revenue$1.76B
Cost of Revenue$1.10B
Gross Profit$652.00M
R&D Expenses$357.00M
SG&A Expenses$142.00M
Operating Income$153.00M
Interest Expense$31.00M
Net Income$116.00M
EPS (Basic)$0.12
EPS (Diluted)$0.11
Shares Outstanding (Basic)972.00M
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Net revenue surged 53% year-over-year to $1.76 billion, driven by strong performance in both the Computing and Graphics segment (up 64%) and the Enterprise, Embedded and Semi-Custom segment (up 37%).
  • 2The company returned to profitability, reporting a net income of $116 million, a significant improvement from a net loss of $42 million in the same period last year.
  • 3Gross margin improved to 37% from 34% year-over-year, attributed to the ramp-up of new, higher-margin products.
  • 4Operating income reached $153 million, a substantial turnaround from an operating loss of $1 million in the second quarter of 2017.
  • 5Research and Development expenses increased by 25% to $357 million, reflecting continued investment in product engineering and design.
  • 6Cash, cash equivalents, and marketable securities stood at $983 million, providing a healthy liquidity position.
  • 7The company is actively managing its debt, with plans to repurchase outstanding notes and maintaining compliance with its secured revolving line of credit.

Frequently Asked Questions

Revenue growth was primarily driven by a 64% increase in the Computing and Graphics segment, largely due to higher sales of Radeon™ and Ryzen™ products, and a 37% increase in the Enterprise, Embedded and Semi-Custom segment, fueled by semi-custom revenue and EPYC™ server sales.

AMD achieved significant profitability improvement, reporting a net income of $116 million for the second quarter of 2018, compared to a net loss of $42 million in the second quarter of 2017. This turnaround was supported by higher revenues and improved gross margins.

As of June 30, 2018, AMD had $983 million in cash, cash equivalents, and marketable securities. The company has an aggregate principal debt obligation of approximately $1.7 billion. AMD believes its cash balance and credit line are sufficient to fund operations over the next 12 months.

The adoption of ASC 606 (Revenue from Contracts with Customers) in early 2018 accelerated revenue recognition for certain custom products and sales to distributors (sell-in rather than sell-through). This change impacted the timing of revenue recognition but did not affect cash flows from operations. It also had a notable impact on the presentation of prior periods and is expected to affect seasonality trends.