AMD Reports Fourth Quarter and Annual 2018 Financial Results

[btarunr]

AMD (NASDAQ:AMD) today announced revenue for fiscal year 2018 of $6.48 billion, operating income of $451 million, net income of $337 million and diluted earnings per share of $0.32. On a non-GAAP basis, operating income was $633 million, net income was $514 million and diluted earnings per share was $0.46.

For the fourth quarter of 2018, the Company reported revenue of $1.42 billion, operating income of $28 million, net income of $38 million and diluted earnings per share of $0.04. On a non-GAAP basis, operating income was $109 million, net income was $87 million and diluted earnings per share was $0.08.



"In 2018 we delivered our second straight year of significant revenue growth, market share gains, expanded gross margin and improved profitability based on our high-performance products. Importantly, we more than doubled our EPYC processor shipments sequentially and delivered record GPU datacenter revenue in the quarter," said Dr. Lisa Su, AMD president and CEO."Despite near-term graphics headwinds, 2019 is shaping up to be another exciting year driven by the launch of our broadest and most competitive product portfolio ever with our next-generation 7nm Ryzen, Radeon, and EPYC products."

2018 Annual Results

• Revenue of $6.48 billion was up 23 percent year-over-year primarily driven by higher revenue in the Computing and Graphics segment.
• Gross margin was 38 percent compared to 34 percent for the prior year. Non-GAAP gross margin was 39 percent compared to 34 percent in the prior year. Gross margin expansion was primarily driven by our new Ryzen, EPYC and Radeon products.
• Operating income was $451 million compared to $127 million in the prior year. Non-GAAP operating income was $633 million compared to $224 million in the prior year. The operating income improvement was primarily due to higher revenue and gross margin expansion partially offset by higher operating expenses.
• Net income was $337 million compared to a net loss of $33 million in the prior year. Non-GAAP net income was $514 million compared to $103 million in the prior year.
• Diluted earnings per share was $0.32 compared to a loss per share of $0.03 in 2017. Non-GAAP diluted earnings per share was $0.46 compared to $0.10 in the prior year.
• Cash,cash equivalents and marketable securities were $1.16 billion at the end of the year, down slightly from $1.18 billion at the end of2017.
• Free cash flow was -$129 million for the year due to higher inventory related to new products and to the timing of collections.

Q4 2018 Results

• Revenue of $1.42 billion was up 6 percent year-over-year primarily driven by the Computing and Graphics segment. Revenue was down 14 percent compared to the prior quarter as a result of lower revenue in the Enterprise, Embedded and Semi-Custom segment. Third quarter 2018 included approximately $125 million of IP-related revenue.
• Gross margin was 38 percent compared to 34 percent a year ago and 40 percent in the prior quarter. Fourth quarter gross margin included a $45 million charge related to older technology licenses that are no longer being used. Non-GAAP gross margin was 41 percent compared to 34 percent a year ago and 40 percent in the prior quarter. Gross margin improvements were primarily driven by Ryzen and EPYC processor sales.
• Operating income was $28 million compared to an operating loss of $2 million a year ago and operating income of $150 million in the prior quarter. On a non-GAAP basis, operating income was $109 million compared to $19 million a year ago and $186 million in the prior quarter. The year-over-year improvement was primarily due to the ramp of higher margin products in the Computing and Graphics segment. The decrease compared to the prior quarter was primarily due to seasonally lower Enterprise, Embedded and Semi-Custom segment revenue and the absence of IP-related revenue, partially offset by the benefit of new Ryzen, EPYC and Radeon products.
• Net income was $38 million compared to a net loss of $19 million a year ago and net income of $102 million in the prior quarter. On a non-GAAP basis, net income was $87 million compared to $8 million a year ago and $150 million in the prior quarter.
• Diluted earnings per share was $0.04 compared to a loss per share of $0.02 a year ago and diluted earnings per share of $0.09 in the prior quarter. On a non-GAAP basis, diluted earnings per share was $0.08 compared to $0.01 a year ago and $0.13 in the prior quarter.
• Cash,cash equivalents and marketable securities were $1.16 billion at the end of the quarter as compared to $1.06 billion at the end of the prior quarter.
• Free cash flow was $79 million for the quarter

Current Outlook
For the first quarter of 2019, AMD expects revenue to be approximately $1.25 billion, plus or minus $50 million, a decrease of approximately 12 percent sequentially and 24 percent year-over-year. The sequential decrease is expected to be primarily driven by continued softness in the graphics channel and seasonality across the business. The year-over-year decrease is expected to be primarily driven by lower graphics sales due to excess channel inventory, the absence of blockchain-related GPU revenue and lower memory sales. In addition, semi-custom revenue is expected to be lower year-over-year while Ryzen, EPYC and Radeon datacenter GPU product sales are expected to increase. AMD expects non-GAAP gross margin to be approximately 41 percent in the first quarter of 2019. In addition, the Company expects to record a $60 million IP licensing gain which will be a benefit to operating income and recorded on the licensing gain line of the P&L.

For full year 2019, AMD expects high single digit percentage revenue growth driven by Ryzen, EPYC and Radeon datacenter GPU product sales as the Company ramps 7nm products throughout the year. AMD expects non-GAAP gross margin to be greater than 41 percent for 2019.

View at TechPowerUp Main Site

 

[TheinsanegamerN]

And somehow making significantly more profits results in a lower share price. As if we needed any more evidence the stock system is a complete scam.

Good to see AMD finally making money, hopefully some of that makes its way into RTG and we finally get a successor to the arthritic GCN.

 

[nemesis.ie]

They have gone up in after hours trading. But your point is valid. The issue is that it's not just about the company's performance and tech, there are folks also betting and hoping the company does badly and this results in FUD. Likewise competitors with dirty tricks. i.e. it's definitely not a level, honest and "simple" playing field.

It'll also be interesting to see what the price/performance for Radeon VII is.

 

[the54thvoid]

AMD isn't a simple proposition. If you look at the outcome forecast, which many analysts use for value, they're expecting a 24% decrease year on year, blaming the exact same things the competition does, too much channel inventory and drop in mining.
EPYC and Ryzen are the main positive drivers. Computing as well has helped but that's the usual story where cards sell for up to $10k, and in large numbers.

 

[TheLostSwede]

The stock market is simply another kind of legalised gambling, just with the side effect that it could make or break a company.

 

[nemesis.ie]

I'd describe it more as "government/corporate sanctioned gambling". A lot of gambling is generally legal in a lot of places outside the stock market (and also state-sponsored in some cases).

 

[Deleted member 158293]

This shows it can be good for a company to have a diverse range of products and be more than just a trick pony.

 

[TheLostSwede]

This shows it can be good for a company to have a diverse range of products and be more than just a trick pony.

It's also hard to be diverse. What do you suggest AMD should get into? They've tried selling branded DRAM and SSDs, which wasn't a hit. Their coolers are meh, at best. They once upon a time did motherboards, poorly. So what's left? Maybe they should start a shoe factory, people will always need shoes, right?

 

[Deleted member 158293]

It's also hard to be diverse. What do you suggest AMD should get into? They've tried selling branded DRAM and SSDs, which wasn't a hit. Their coolers are meh, at best. They once upon a time did motherboards, poorly. So what's left? Maybe they should start a shoe factory, people will always need shoes, right?

AMD is doing fine with their expanding product portfolio and strategic partnerships. As for memory chips, AMD can act as a bulk buyer for their partners and probably either had to meet buying targets, or wanted to test the market since they have access to this inventory anyways.

 

[medi01]

And somehow making significantly more profits results in a lower share price. As if we needed any more evidence the stock system is a complete scam.

Stock is up 12%.

 

[notb]

And somehow making significantly more profits results in a lower share price. As if we needed any more evidence the stock system is a complete scam.

As mentioned already: AMD stock went up after the event (which took place after trading hours).

And keep in mind stock value is based on future earnings, not past results.
AMD was priced at 20.5-21.0 for most of January. The stock went down a bit last week after poor results from other companies.
Since AMD has shown results in line with expectations, their stock back to the previous price (even slightly higher).

They still forecasts a drop in graphics in 2019, but it was expected and is already included in the valuation.

It's also hard to be diverse. What do you suggest AMD should get into? They've tried selling branded DRAM and SSDs, which wasn't a hit. Their coolers are meh, at best. They once upon a time did motherboards, poorly. So what's left? Maybe they should start a shoe factory, people will always need shoes, right?

Diversification is not about what you sell. It's about to whom you're selling. It doesn't matter how many products you make if you sell them to the same people (they have limited money).
AMD may keep making just CPUs and GPUs. But they should address new markets.
At this point they're great in consoles and lately became attractive in high-end consumer desktops.
But they're doing poorly in enterprise segment (just some EPYC deals for large datacenters) and are almost absent in notebooks.

Maybe they should try something new? Maybe high-end mobile graphics?
They have total supremacy in traditional consoles, but lost the Nintendo Switch (Nvidia Tegra).

Phones are becoming so large they may already house a discrete GPU chip. I wonder if Nvidia and AMD are already checking this possibility.

The stock market is simply another kind of legalised gambling, just with the side effect that it could make or break a company.

You're calling stock market "gambling" because what? Because you can lose money?
Try opening your own company. It may be great or it may be a flop and you'll lose your investment. So is opening a company gambling as well?
Then what is not gambling?

Also, keep in mind stock market has 2 roles:
One, the more important, is for companies to get funds (via IPOs). This is fundamental for the economy.
The second role is just a necessary result of the first one: stock market lets you trade stocks.

Trading stocks is risky and you can lose money. But it's built into our concept of economy. It is important.
Cars are built into our concept of transportation and living. And they're risky as well.

 

[B-Real]

Stock is up 12%.

20%.

 

[notb]

20%.

I looked at the forecast yesterday. Really brave stuff from AMD managers. IMO it'll keep going up. $25-26, maybe more.

 

[medi01]

20%.

AMD posts profit and its stocks are up, shocking, no sarcasm as that is not how AMD's stock normally works.

Fingers crossed for Navi to make major market grabs this year.

 

[notb]

AMD posts profit and its stocks are up, shocking, no sarcasm as that is not how AMD's stock normally works.

Fingers crossed for Navi to make major market grabs this year.

Stock price doesn't directly depend on reported profits. This is not how stock markets work.

 

[nemesis.ie]

He's aware of that I believe, the point of his post (AFAIRI) is that for a change AMD is going in a more logical direction compared to the usual counter-intuitive/manipulated direction.

 

[notb]

He's aware of that I believe, the point of his post (AFAIRI) is that for a change AMD is going in a more logical direction compared to the usual counter-intuitive/manipulated direction.

AMD simply starts to deliver on their promises and shows actual growth.
There's finally a chance that their stock value will be related to their financial plans rather than to twitter news... ;-)

But yeah, there are still people who think stock price goes up because a company earned (or worse: sold) more. So I use every occasion to clear that up.

 

[nemesis.ie]

 

[TheLostSwede]

As mentioned already: AMD stock went up after the event (which took place after trading hours).

And keep in mind stock value is based on future earnings, not past results.
AMD was priced at 20.5-21.0 for most of January. The stock went down a bit last week after poor results from other companies.
Since AMD has shown results in line with expectations, their stock back to the previous price (even slightly higher).

They still forecasts a drop in graphics in 2019, but it was expected and is already included in the valuation.

Diversification is not about what you sell. It's about to whom you're selling. It doesn't matter how many products you make if you sell them to the same people (they have limited money).
AMD may keep making just CPUs and GPUs. But they should address new markets.
At this point they're great in consoles and lately became attractive in high-end consumer desktops.
But they're doing poorly in enterprise segment (just some EPYC deals for large datacenters) and are almost absent in notebooks.

Maybe they should try something new? Maybe high-end mobile graphics?
They have total supremacy in traditional consoles, but lost the Nintendo Switch (Nvidia Tegra).

Phones are becoming so large they may already house a discrete GPU chip. I wonder if Nvidia and AMD are already checking this possibility.

You're calling stock market "gambling" because what? Because you can lose money?
Try opening your own company. It may be great or it may be a flop and you'll lose your investment. So is opening a company gambling as well?
Then what is not gambling?

Also, keep in mind stock market has 2 roles:
One, the more important, is for companies to get funds (via IPOs). This is fundamental for the economy.
The second role is just a necessary result of the first one: stock market lets you trade stocks.

Trading stocks is risky and you can lose money. But it's built into our concept of economy. It is important.
Cars are built into our concept of transportation and living. And they're risky as well.

You make a lot of strange assumptions and you clearly know squat.

Why would anyone make a discrete GPU for a phone? That's insane. Also, what's inside Qualcomm's SoCs (i.e. Adreno) was originally AMD tech. Both Intel and AMD were making ARM chips at one point. There's clearly a reason why neither make ARM related hardware any more. Neither might have a good reason, but at the time they sold those BUs, there was a reason as to why they did so. Nvidia clearly doesn't give a crap about consumer ARM platforms any more, apart from the Switch, as they can claim to have a console win, which looks good on paper, even though it's a low-end, low-cost part.

I already have my own company thankyouverymuch. But as you like to make assumptions... I guess I'm just a dumbass...

The stock market is gambling, as people bet on how companies are going to do in the future and there's so much BS insider speculation, that the whole thing should be shut down. This has nothing to do with with my money, or anyone else buying shares, it has to do with the fact that companies goes bust, based on rumours. Who gave these people the right to gamble with the employees lively hoods? Maybe one day it'll be you that will be standing there without a job, as the company you worked for went bust, as someone spread a rumour about it and it tanked on the stock market so badly they went bust.

 

[mtcn77]

Yet, there exists something eerie in their outlook. Normally, AMD would promote the guy that made the 'nexgen' memory. For the first time in two generations, they don't have the key inventorim their ranks. This is prone to cataclysms and since GDDR6 isn't a smooth ride as GDDR5 and HBM used to be, I think this will cloud the forecast on their prospective launches.