Thanks to consoles, AMD posts first profit in over a year

AMD promised a return to profitability in the second half of 2013, and it has delivered on that promise. The company's third quarter financials, released earlier this afternoon, show net income of $95 million on revenue of $1.46 billion. This marks AMD's first profit following four consecutive quarters of net losses. The last time the chipmaker turned a profit was in Q2 2012—and even that came after losses in the prior two quarters.

Sales of console chips can be credited almost entirely for AMD's return to the black. The company's revenue from processors and discrete GPUs declined in the third quarter, but sales of what it calls "semi-custom" chips boomed. AMD silicon powers the Xbox One and the PlayStation 4, which are both hitting stores next month.

Here are AMD's financials for the quarter at a glance, starting with results for the whole company...

  Q3 2012 Q2 2013 Q3 2013
Revenue $1.27 billion $1.16 billion $1.46 billion
Net income -$157 million -$74 million $48 million
Gross margin 31% 40% 36%

...and following up with figures for AMD's two main businesses:

  Q3 2012 Q2 2013 Q3 2013
Computing Solutions $927 million $841 million $790 million
Graphics and Visual Solutions $342 million $320 million $671 million

Revenue for the Computing Solutions business fell both sequentially and compared to the same quarter a year ago. AMD attributes those declines to "decreased notebook and chipset unit shipments," which were "partially offset by an increase in desktop unit shipments."

Revenue for the Graphics and Visual Solutions business, on the other hand, increased dramatically. That business encompasses discrete GPUs, semi-custom chips, and game console royalties. While discrete GPU revenue was down across the board, sales of "semi-custom" chips helped the business almost double its revenue overall.

Here's what AMD CEO Rory Read had to say about the results:

AMD returned to profitability and generated free cash flow in the third quarter as we continued to successfully execute the strategic transformation plan we outlined a year ago. . . . We achieved 26 percent sequential revenue growth driven by our semi-custom business and remain committed to generating approximately 50 percent of revenue from high-growth markets over the next two years. Developing industry-leading technology remains at our core, and we are in the middle of a multi-year journey to redefine AMD as a leader across a more diverse set of growth markets.

For the ongoing fourth quarter, AMD says revenue is expected to grow by "5 percent, plus or minus 3 percent" compared to Q3.

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