AMD Meets Q4 Earnings Expectations With Strong Ryzen And EPYC Sales Sending Shares Higher

AMD's Q4 earnings have been highly anticipated, especially after its rival in the graphics arena -- NVIDIA -- yesterday revised its revenue guidance downward by $500 million, sending its shares plunging. Luckily for AMD, it was mostly good news for the company today.

AMD recorded Q4 2018 GAAP revenue of $1.42 billion (analysts were expecting $1.44 billion), net income of $38 million and operating income of $28 million. Diluted earnings per share (EPS) came in at $0.04. During the same quarter in 2017, AMD reported revenue of $1.34 billion, a net loss of 19 million and operating loss of $2 million. Likewise, there was a loss per share of $0.02.

We should point out that revenue was down sequentially in Q4 by 14 percent ($1.42 billion versus $1.65 billion). However, AMD says that $125 million of the revenue that it booked for Q3 came from IP-related transactions.

ryzen 3000 2

For the full year, revenue stood at $6.48 billion (23 percent gain compared to 2017), net income came in at $337 million (+ $324 million), and operating income was $451 million (+ $370 million).

Gross margins for both Q4 and all of 2018 soared from 34 percent (Q4 2018, and full year 2018) to 38 percent (Q4 2018, and full year 2018). AMD attributed the increase in gross margins to increasing shipments of its Ryzen mainstream and EPYC enterprise processors.

The company’s overall performance has been helped primarily thanks to its Zen family of processors, which have allowed the company to claw some market share away from market leader Intel. “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," said AMD CEO Lisa Su. "Importantly, we more than doubled our EPYC processor shipments sequentially and delivered record GPU datacenter revenue in the quarter."

AMD EPYC Zen 2 64 Core CPU
AMD Zen 2-Based EPYC 64-Core Server Processor

Looking towards Q1 2019, gross margins are expecting to rise to 41 percent and AMD is expecting revenue of $1.25 billion, whereas The Street was expecting around $1.47 billion. AMD explains this discrepancy, writing:

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.

The Street was overall pleased with AMD's earnings, sending the stock up just over 8 percent in after hours trading.