The Six Five team examines the recent AMD earnings report.
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Transcript:
Daniel Newman: Another company that outperformed, did well, raises some question marks about the whole chip shortage and supply chain, the PC space… not the growth it’s had the past few quarters, but still a really remarkable growth comes from AMD. Lisa Su, watched her on CMBC the other day. I had a chance to talk about them on Bloomberg Tech early in the week, Pat, but I always like getting your take on this company, as one of the early AMD execs. You watch them so closely and always have great input.
Patrick Moorhead: I appreciate that. I kind of looked smart years ago and everybody was saying that AMD was going to go out of business. By the way, my take then was, you know what they could. They needed two things to come in. They needed Intel to have major issues, that was the first thing. The second thing that they needed to do was flawlessly execute. Actually, there was a third thing, which is bring something monumentally different. We know what happened. Intel had stumbles, AMD flawlessly executed, and they brought a disaggregated design to the table, which was super risky, but they absolutely pulled it off and the rest of the industry is following them on that. They just got to it first. AMD did exactly what you would expect. If I were to put a description on this earnings it’d be, isn’t growth mode fun?
Revenue up 54%, gross margin up 70%, gross margin percent up 450 basis points. Op Inc up 111%. Net income, 137%. Those are gap numbers, not non-gap, but you get the idea. They were very close. The why is, it’s very simple, they doubled the size of their data center market… that’s EPYC plus Instinct. AMDs being still a little bit cagey, not breaking out EPYC and not breaking out Instinct and not even breaking out Graphics. I don’t think it’s a story they want to tell at this point, to be honest. They’ve had growth, but not growth like in Invidia. CCG, which is essentially CPUs and GPUs for the client, 44%. They increased their ASPs, which is great. I’m pretty sure they gained revenue share. They probably lost some unit share, though, to the folks over at Intel. ESC division, which is a combination of EPYC and Semi-Custom up 69%. That is the reason that the gross margin was up so high because the gross margin on EPYC is just monumental.
A cautionary tale though, AMD needs to be very careful in how they move forward. You have Intel architecturally who is adopting what AMD did in a more distributed. We’ve got 3D packaging that AMD hasn’t… maybe they’ve shown one of their cards so far and I’m convinced until otherwise that Intel is in the lead on this. If the market shifts like that, we could see AMD having trouble getting 54% quarterly growth in the next couple years.
Daniel Newman: There’s always an end to every great run and there’s always a turning point. Overall, AMD seems to still have the momentum them as Intel continues to redesign its entire existence, but in a way that I think the market is increasingly starting to get their arms around. We’re going to talk about that more later when we talk about Intel On, Pat, but it’s hard to not look at what the company was able to accomplish this quarter and say, “Wow, this is a really good result.” I think we’re going to be very interested when Mercury and some of the other market size numbers, market share numbers start to come out to see exactly what happened. Like I said, I think the time for AMD to grab market is starting to come to an end, though. It’s been very easy for the past, seemingly, eight to 12 quarters, and it’s not going to be as easy anymore.
Intel’s got a much clearer path. Of course NVIDIA’s very competitive and the Arm acquisition’s still out there lingering and we’re seeing more interest in that particular tie up and what that could mean for the business. But like I said, Lisa Su is just an impressive leader, she just seems to get things right that need to be right. They are benefiting from being much smaller overall revenue than Intel, so you don’t need to have as much to grow. But watching into the next few quarters, seeing if they can sustain this level of growth is going to be what everyone’s eyes are on. Then obviously, Design Link’s tie up. Does that get approval? It’s still out there, it’s lingering. It’s a big deal for the company, FPGAs, ASICs, new architectures, all high interest. It was a big commitment, big dollars. The market’s waiting now. Is this going to get over the line with all the attention on semiconductors, shortages? I believe it will, Pat. My instinct is this deal will get done. It has a higher probability in my eyes than the Arm deal getting done, although I think both are still possibilities.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
