AMD Q3 Earnings Beats Street Expectations With Strong Console Sales Driving Demand For Its Silicon

Advanced Micro Device's tally for its fiscal third quarter reached just $1.3 billion. That represents a jump of 23 percent from the same quarter a year prior on strong demand for its semiconductors used in game consoles, and it beat out what analysts were expecting. That's the good news. The bad news is that it wasn't enough for AMD to pull a profit.

Just the opposite, AMD's loss for the quarter climbed to $406 million, or $0.50 per share, more than doubling the $197 million loss, or $0.25 per share, it posted in the third quarter for 2015. It's also a big swing from the $69 million profit ($0.08 per share) AMD posted just a quarter ago on revenue of a little over $1 billion. AMD says the decline was driven by a $340 million wafer supply agreement charge with Globalfoundries and a $61 million loss on debt redemption offset by increased revenue. It also noted that last quarter's profit was largely the result of a $150 million pre-tax gain on the sale of 85 percent of ATMP facilities to Nantong Fujitsu Microelectronics.

Project Scrorpio
Microsoft's Project Scorpio console will feature AMD hardware inside

"Our third quarter financial results highlight the progress we are making across our business," said Dr. Lisa Su, AMD president and CEO. "We now expect to deliver higher 2016 annual revenue based on stronger demand for AMD semi-custom solutions and Polaris GPUs. This positions us well to accelerate our growth in 2017 as we introduce new high-performance computing and graphics products."

In short, AMD is acknowledging it posted a big loss in Q3, but feels the investments it has made and the position it is currently in bode well for the future. AMD is on particularly solid ground with its GPU business—it expanded its family of mainstream and workstation graphics with its Polaris launch, and it continues to dominate the console sector with new and upcoming systems by Sony and Microsoft again tapping AMD for semi-custom SoCs.

To attach some numbers to its console dominance, AMD's enterprise, embedded, and semi-custom businesses posted revenue of $853 million, up 31 percent compared to last year with most of that growth attributable to game consoles. That said, Nintendo turned to NVIDIA instead of AMD for its recently announced Switch console (previously codenamed NX), so we'll have to wait and see how that affects things.