AMD Returns To GAAP Profitability In Q3 Thanks To Strong Ryzen And Radeon Demand

AMD Building

This does not always happen, but AMD finally has reason to celebrate after posting a quarterly earnings reports. The Sunnyvale chip designer raked in $1.64 billion the third quarter of 2017, to the tune of a $71 million profit. That is a remarkable turnaround from the same quarter a year ago in which AMD posted a whopping $406 million loss, and up from a loss of $16 million just one quarter ago.

"Strong customer adoption of our new high-performance products drove significant revenue growth and improved financial results from a year ago," said Dr. Lisa Su, AMD president and CEO. "Our third quarter new product introductions and financial execution mark another important milestone as we establish AMD as a premier growth company in the technology industry."

More than anything, AMD's performance in the third quarter is confirmation that it is on the right track with its new generation CPU and GPU lines, both of which benefited from major architectural changes over the past year. On the CPU side, AMD introduced Zen-based CPUs, including mainstream Ryzen processors and ultra high-end Ryzen Threadripper chips, and in graphics, AMD's Radeon Technologies Group led by Raja Koduri developed competitive offerings based on its new Vega GPU architecture.

Despite all of the recent success, investors remain skittish, in particular because AMD said it expects revenue to drop around 15 percent sequentially in the fourth quarter. The company also expects to close out 2017 with a greater than 20 percent jump in revenue annually, up from its previous guidance of mid-to-high teens percentage, but investors seem to be overlooking the bigger picture. AMD's share price is down around 8.35 percent in early morning trading.

Not everyone is soured by the anticipated Q4 decline.

"The Q4 decline is expected and very seasonal. I’m looking forward to see what AMD can do in the next six months with the new Zen and Vega-based Raven Ridge notebook parts and Epyc driving some revenue... I’m not concerned with the Q4 revenue forecast decline as this is seasonal and attributable to declines in game consoles. This happens every Q4," Patrick Moorhead, President and Principal Analyst at Moor Insights & Strategy, said in a statement.

Moorhead described AMD's third quarter performance as "tremendous," adding that it likely increased its market share with Ryzen. He also attributed some of the GPU demand to cryptocurrency mining.

This is just the beginning of AMD's comeback tour. The company's roadmap through 2020 includes 7-nanometer Zen 2 and Zen 3 CPUs, along with a 7nm Navi GPU architecture.

Thumbnail Image Source: Flickr (Quintin Lin)