01—Abstract
Summary
Summary of the 10-Q filed August 2, 2018. Cited figures are marked; the original filing is the authoritative source.
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 billiona.
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 millionb 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 millionc, 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.
02—Key points
Key Highlights
- Net 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%).
- The 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.
- Gross margin improved to 37% from 34% year-over-year, attributed to the ramp-up of new, higher-margin products.
- Operating income reached $153 million, a substantial turnaround from an operating loss of $1 million in the second quarter of 2017.
- Research and Development expenses increased by 25% to $357 million, reflecting continued investment in product engineering and design.
- Cash, cash equivalents, and marketable securities stood at $983 million, providing a healthy liquidity position.
- The company is actively managing its debt, with plans to repurchase outstanding notes and maintaining compliance with its secured revolving line of credit.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, Advanced Micro Devices Inc kept $0.07.
- Revenue$1.76B100.0%
- Cost of revenue−$1.10B62.9%
- Gross profit$652.0M37.1%
- Operating costs−$499.0M28.4%
- Operating income$153.0M8.7%
- Interest, other & tax−$37.0M2.1%
- Net income$116.0M6.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed August 2, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $1.76B$1.18B | +49.1% |
| Cost of Revenue | $1.10B$800.00M | +38.0% |
| Gross Profit | $652.00M$378.00M | +72.5% |
| R&D Expenses | $357.00M$271.00M | +31.7% |
| SG&A Expenses | $142.00M$123.00M | +15.4% |
| Operating Income | $153.00M$11.00M | +1290.9% |
| Interest Expense | $31.00M$32.00M | −3.1% |
| Net Income | $116.00M-$33.00M | +451.5% |
| EPS (Basic) | $0.12$-0.04 | +400.0% |
| EPS (Diluted) | $0.11$-0.04 | +375.0% |
| Shares Outstanding (Basic) | 972.00M939.00M | +3.5% |
| Shares Outstanding (Diluted) | 1.15B939.00M | +22.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of AMD's revenue growth in Q2 2018?
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.
How did AMD's profitability change compared to the previous year?
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.
What is AMD's current financial position in terms of cash and debt?
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.
What are the key impacts of the adoption of new accounting standards, particularly ASC 606?
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.
06—Continue