Strong revenue doesn’t stem red ink in AMD’s fiscal third quarter

AMD posted a remarkable increase in revenue for its fiscal third quarter of 2016. The company took in $1.3 billion, up 23% year-on-year, thanks to "record" sales in its semi-custom SoC business and improved sales figures in its GPU and mobile APU businesses.

However, that cash inflow wasn't enough to offset losses from the $340 million one-time charge the company recorded earlier this year as part of a revision to its wafer supply agreement with GlobalFoundries. Thanks in part to that charge, the company recorded a $293 million operating loss. Also thanks to that charge, AMD says its gross margin fell to 5%, down from 23% a year ago.

  Q3 2016 Q3 2015 Change from Q3 2015
Revenue $1.3 billion $1.06 billion up 23%
Operating income -$293 million -$158 million
Net income -$406 million -$197 million

AMD's Computing and Graphics business brought in $472 million, an 11% increase from Q3 2015. The company says that increase is mostly thanks to increased GPU sales, but that performance wasn't enough to offset a decline in client desktop processor and chipset sales. The segment recorded a $66 million operating loss, an improvement compared to the $181 million operating loss recorded this time last year.

The Enterprise, Embedded, and Semi-Custom business took in $835 million, a 31% year-over-year increase that was driven by increased sales of semi-custom SoCs. The division turned a $136 million operating profit. AMD's "All Other" category recorded a $363 million operating loss, mostly accounted for by the $340 million one-time charge.

For its fiscal fourth quarter, AMD expects an 18% decrease in revenue from this quarter, plus or minus three percent. Even so, the company projects that the "midpoint of guidance" would result in a 12% year-on-year increase in revenue for the fourth quarter of 2016.

Comments closed
    • ronch
    • 3 years ago

    #MakeAMDGreatAgain

    • NimaV
    • 3 years ago

    I wonder how a company can loose so much money each quarter for years and still survive! How AMD compensate all these losses?

      • LostCat
      • 3 years ago

      They just paid up a billion dollars in debt apparently, so there is that.

    • Meadows
    • 3 years ago

    I don’t envy you, you keep having to come up with new headlines for describing the same thing over and over again.

    And you still do a good job.

    • ronch
    • 3 years ago

    I’ve always rooted for AMD because I’ve always rooted and still root for underdogs. I’d be rooting for Cyrix and Nexgen if they were still around. I root for Suzuki (I don’t live in the U. S.). I root for Acer. And you know who I root for now in the world of processors? Mediatek. Mediatek is the ‘other guy’ in the mobile space and they show they are a fighting underdog. AMD just seems like the same old story, the promise that never happens. I dunno. I’m honestly feeling not very excited for Zen anymore even if it turns out to be great. It’s like hope that AMD will ever fight again has left me. They keep bungling up. They keep throwing away their cash. They keep missing their opportunities. Sorry guys, but this is just how I feel at the moment. Just being honest. I hope Zen and Vega prove to me again that I’m an AMD fan.

    • Srsly_Bro
    • 3 years ago

    Yea, this sucks, but how much cash on hand and cash equivalents does AMD have? I think this could be much worse.

      • tipoo
      • 3 years ago

      From another comment, 1.3 billion cash in the bank. So they could survive a lot more slightly lossy quarters actually, but of course that doesn’t get them out of the cycle.

    • Kretschmer
    • 3 years ago

    If only AMD would split into a viable GPU company and dying CPU/APU company. I feel like a decade of subparx86 products is stripping them of the R&D spend and talent needed to compete on all other fronts.

    (I went Freesync and am highly interested in both Vega and future driver support, both of which can’t come from a dead firm.)

    Edit: I mean they were quite competitive on the GPU front a few years back but became so resourced constrained that they rebranded the mid-range and flubbed the high end. Now they’re a year behind delivering the next generation of GPUs…

      • chuckula
      • 3 years ago

      You have a point. Even with the Polaris launch, which was supposed to be a very big deal, the overall unit still lost money due to the legacy CPU/APU/chipset business dragging them down.

      • wingless
      • 3 years ago

      I wonder what they’d call the GPU company…..like Array Technologies Inc or something. Yeah, that sounds good.

        • K-L-Waster
        • 3 years ago

        Hmm, the acronym for that sounds familiar. Can’t place it though….

    • chuckula
    • 3 years ago

    I read the conference call transcript here: [url<]http://seekingalpha.com/article/4013705-advanced-micro-devices-amd-lisa-su-q3-2016-results-earnings-call-transcript[/url<] Nothing really earth shattering in the corporate-speak other than a confirmation that they want to launch Zen for the desktop in Q1 2017 with Zen for servers coming in Q2 2017. Vega is first [b<]half[/b<] 2017, which is interesting since Su was more precise with the timing on Zen. Given the fact that (1) They love to publicly demo products months before they are available; (2) They've done Zen demos back in August and it's likely not really going to be available until February/March; and (3) They have yet to publicly show off Vega, my analysis is that Vega is a May/June type of product launch.

    • K-L-Waster
    • 3 years ago

    So most of the strength is due to record sales in custom SoC and they expect it to drop by 18% next quarter?

    In other words, they sold a larger than expected number of SoCs for consoles, and after the Xmas rush is over they don’t expect that level of sales to continue.

    • chuckula
    • 3 years ago

    I have this old joke about AMD’s theoretical profit numbers and how Intel would call that Tuesday.

    Then I did the math.

    Running the numbers in the most unrealistically favorable way possible to AMD that ignores the latest “one time” charge, here you go:

    Intel’s GAAP reported profits: $3.4 Billion.
    AMD’s non-GAAP profit pretending they didn’t pay GloFo: $27 Million.
    July/August/September: 92 days

    Intel’s profit/day in millions: 3,400 / 92 = $36.956 million/day
    Fraction of the day that it took Intel to earn AMD’s profit: 27 / 36.956 = 0.731
    Number of hours that equates to: 17.544 hours — or — midnight to about 5:32:38 in the afternoon.

    So “Tuesday” is somewhat inaccurate. Tuesday from midnight to 5:32:38 PM is more precise.

      • tipoo
      • 3 years ago

      Remember when Intels failed Itanium still eclipses AMDs entire business cash flow? Good times, good times.

      Sometimes my mind is staggered that they compete at all, even if they aren’t doing so well right now.

        • ronch
        • 3 years ago

        I love how AMD extended the x86 architecture to 64-bit with the K8. Felt good to be in the 64-bit club without shelling out bajillions for Itanium, even if the effort was far less monumental as Itanium was.

          • jihadjoe
          • 3 years ago

          I’ve always suspected that Intel did their own x86-64 in some secret project, but didn’t release it until after AMD forced their hand because they were pushing Itanium hard.

    • NTMBK
    • 3 years ago

    Ah, but they’re going to turn it all around when they get an APU into the next Nintendo! Wait, no, hold on

    • albundy
    • 3 years ago

    well, it’s a good thing they’ve released Zen this month like they said they would…oh wait. i’m sure their 4th quarter will be better…when they release Zen.

    • ronch
    • 3 years ago

    This is getting really old and tiresome.

    • Paine
    • 3 years ago

    AMD is coming around. Their next desktop CPU is supposed to be able to compete with Sandy Bridge! It will probably need 250 watts to do so though 😉

      • Leader952
      • 3 years ago

      Sandy Bridge Xeon’s are dirt cheap on eBay.

      You can pick up Xeon E5-2640 (6-core with HT) for around $33.
      [url<]http://www.ebay.com/sch/i.html?_from=R40&_sacat=0&_nkw=xeon+e5-2640&_sop=15[/url<] [url<]http://ark.intel.com/products/64591/Intel-Xeon-Processor-E5-2640-15M-Cache-2_50-GHz-7_20-GTs-Intel-QPI[/url<] How exactly will AMD be able to compete against these prices?

        • Paine
        • 3 years ago

        Volume!

        Seriously, I gave away a couple of elderly Intel x58 920 systems to a gamer this year when I cleaned out the garage – at 4.2, they smoked the AMD 6-core he was running, but I have no idea how old it was. I pity AMD if that was one of their newer chips – the 920 came out in 2008.

    • Voldenuit
    • 3 years ago

    I see a lot of AMD throwaway parts in OEM machines. “Gaming” prebuilt desktops costing north of a thousand bucks with a Radeon R9 370 inside.

    I’m fairly certain that AMD is selling these cards at thin margins, despite the inflated sticker price slapped on it by the OEM.

    • slaimus
    • 3 years ago

    After so many wafer agreement charges, you would think AMD should just buy those wafers from GF and donate to them schools for tax write offs and/or promoting their brand.

    I remember DEC used to donate their hardware that they don’t sell all the time.

      • ptsant
      • 3 years ago

      I suspect converting a wafer to a functional CPU requires packaging the die, packaging the CPU in a box, testing, shipping. So, maybe they are better off just destroying the wafer, instead of investing even more money to make functional products out of it.

    • beck2448
    • 3 years ago

    Hardly a great quarter. 11 % gpu increase with Polaris. Forward guidance DOWN 18%. Let’s compare to Nvidia in 2 weeks.

      • strangerguy
      • 3 years ago

      Even without that one-time wafer agreement charge they were still be making a $66M loss this quarter.

        • beck2448
        • 3 years ago

        They have more big debt repayments due in the next few years. Hard to function selling product at a loss.

    • south side sammy
    • 3 years ago

    wonder how much not releasing a 490/490x had a hand in this. I, like many others are tired of waiting for it. Almost purchased a 1070 a week ago. And that wasn’t the first time I thought of it.

      • digitalnut
      • 3 years ago

      I couldn’t wait, just bought a Asus 1070 a few weeks ago. Wanted to play my new games (Doom, Gears 4) at 2560×1440! Had AMD cards for the last 7 years.

      • rudimentary_lathe
      • 3 years ago

      The strategy would have worked a whole lot better if they had actually delivered a compelling product and/or price. Instead the RX 480 turned out to be a glorified GTX 970 in DX 11 (980 in DX 12), and where I live they sell for about the same price as a new GTX 970. That’s not going to get it done when you can buy the better GTX 1060 for less. Then there’s the lack of significant differentiation between the RX 470 and RX 480, both spec wise and price wise.

      I suspect they were expecting much better results for the launch. Hopefully Vega delivers, and is complemented with more compelling RX 475 and RX 485 parts as rumored. I’m still holding out for my next card – really want to support the Red team here because of their support of open standards, but they’re making it really tough.

    • jihadjoe
    • 3 years ago

    Wouldn’t be AMD without the red ink.

      • muxr
      • 3 years ago

      non-GAAP was actually green $27M.

      They also paid down a lot of debt.. and have $1.3B in the bank.. This is a great quarter for AMD.

        • K-L-Waster
        • 3 years ago

        Non-GAAP? You mean the accounting “methodology” that made Enron great?

        There’s a reason no one sensible invests real money based on non-GAAP.

        • uni-mitation
        • 3 years ago

        One of my all-time pet peeves is the usage of the word “non-gaap.” Non-gaap figures are useless. When reporting earnings to investors you should only talk about good figures and omit the gaap prefix, it is implicitly assumed that you are using good figures! We are talking and giving information to investors that rely on them to make investing decisions! Otherwhise what is the point of accounting?

        People should have no tolerance for this kind of loose talk.

        /rant

        Uni-mitation

        Edit-fixed typos

      • adamlongwalker
      • 3 years ago

      I would have bought a AMD video card “IF” they produced a 4GB 480 video card at $199.99 now, as they quoted in June/July. Where are they now?

      All I saw was the modified “bait and switch” tactic of producing a very limited supply of product to promote angst to purchase a more expensive product by their partners at a +20+% premium.

      To hell with that.

      When companies start delivering on what they really promise instead of this border-line false advertising is when more people will buy more product.

      I’ll keep my R9 270 as I am able to play all of my video games to the quality I am used too.

      And when the new thing comes around, I will decide to get a used and/or overstocked item
      at a lower price, in this case that 4GB RX 480 AMD card because THAT is the market economy that the industry has created.

      And you wonder why certain companies are in the red.

        • Demetri
        • 3 years ago

        Newegg had a Sapphire 480 for $200 the other day; no rebate required. The MSI 480 is 200 after rebate at the moment, and was 180 after rebate earlier in the week. They’re eligible for $25 off Masterpass promo too, or $15 off w/ Androidpay. But yes, we’re just now getting to the point where the 480 is selling for 200 like they said back in June, and that’s after rebates and discounts in most cases. I’d really like to know how many of those reference 4GB cards for $200 were actually produced at launch, because they were nowhere to be found, and are no longer being manufactured.

          • adamlongwalker
          • 3 years ago

          Thanks for bringing up Newegg as I just went to to the site and saw the following.

          The lowest 4GB card was at 219.99 – LIMITED OFFER. SPECIAL $10 REBATE

          This is not the 199.00 base price with no limit offers that was offered in June/July by AMD. They are not AMD cards but their partners cards with rebates and hoops and yada yada yada stuff.

          I don’t deal with this crap as the same way I don’t deal with certain fortune 500 companies leasing out some of the my commercial investments. The only thing I like dealing with said companies is when my regional VP of banking calls me “Sir”. Other than that I’ve had to learn Marketing 101 with these Teflon suits as well as different economic markets the hard way. Believe me, those Teflon suits live in another world.

          At times it makes me at times miss the good old days of soldering chipset replacements on $900 motherboards and tweaking window 98 for peak performance. It was fun doing reports for this site, but real life smack me in the face with a lead pipe. So I had to get mean and play the game to make money. And I do miss those days but today everything is so damned Gimmicky more than before. Something that is part of the New Now. Something I do not like at all.

          My comment still stands and again if AMD kept their promise of delivering the cards and done it in mass quantities back in June, instead of such a short run, then they would see less red and more in the black. The only winners here are their partners and the re-sellers in this case.

          I’ll wait another 6 months or a year and get the card I want at my price and not pay their premiums and jump though the hoops of cashing in rebates and so on.

          I will buy my video card at my price. And I can definitely wait.

            • BurntMyBacon
            • 3 years ago

            Normally I’m right there with you. Can’t stand paying the initial markup when demand outstrips supply. I find myself wondering how they always seem to underestimate demand by such a large margin time and time again. Of course, wafer supply is out of their hands, but you’d think TSMC, Global Founderies, etc. would want to sell more wafers as well. Whether incompetence, lack of investment in facilities (perhaps its not worth it), or some other factor, we always seem to be stuck with this supply and demand scenario for new anticipated chips.

            That all said, as you and Demetri seemed to find different price points looking at the same site, I checked it out myself. I saw no stock models (probably due to the power issues found in the stock design). I did however find a custom Asus card (ASUS Dual-Fan Radeon Rx 480 4GB) sitting at $200 at both Newegg and Amazon. It does say “Special savings, limited offer” at Newegg, but makes no such claim at Amazon, so I’m inclined to believe that the label is there at Newegg to make buyers feel a sense of urgency rather than being a legitimate sale only price. They’ll probably move the price up at some point and bring it back down for another “Sale” shortly after. In any case, you can get it at Amazon and most likely other vendors. I also saw an MSI GAMING RX 480 GDDR5 4GB that was $200 after MIR, but I personally can’t stand basing buying decisions on MIRs. So there is only one (2 if you count MIR) cards at the $200 price, but there are only six models for sale to begin with. In any case, the RX480 4GB (custom even) is out there and available right now at $200 (no rebates) at more than one vendor so it looks like its time to put your money where your mouth is.
            [quote=”adamlongwalker”<]I would have bought a AMD video card "IF" they produced a 4GB 480 video card at $199.99 now, as they quoted in June/July. Where are they now?[/quote<]

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