Table of Contents
Quick Refresher:
AMD designs CPUs and GPUs, offers software and provides connectivity equipment for a wide array of cloud and enterprise clients. If there’s one thing the semiconductor industry loves, it’s constantly changing the names of products with a swarm of acronyms for us to juggle. What matters? AMD’s positioning within these areas and how it’s integrating them with its rack scale data center offering called Helios.
Rack Scale is a data center blueprint that treats a server rack as a compute building block rather than the individual servers. Rack scale enables larger, more efficient connections between GPUs to turbocharge compute performance, density and efficiency.
Taiwan Semi manufactures the chips that AMD designs.
GPU: Graphics Processing Unit. This chip is built to run thousands of calculations in parallel. The accelerated compute needed for GenAI apps and models pulls from next-gen GPUs. AMD leadership believes its “MI” series GPUs compete very formidably across memory and bandwidth with Nvidia. They’re enjoying some nice momentum and market share in this arena, but Nvidia is still considered the performance leader by most.
MI series GPUs are part of the “Instinct” product family.
CPU: Central Processing Unit. This is a general-purpose processor that executes software instructions and handles data processing. CPUs fall in the general compute bucket. General compute CPUs are still optimal for sequential, step-by-step and logic-heavy tasks. They’re also much cheaper than deploying next-gen GPUs when they can work for the specific use case.
AMD's family of data center CPUs is called EPYC. The current iteration of EPYC is called Turin, with Venice now beginning to ship.
Its PC (laptop, desktop and gaming) CPUs are called Ryzen.
AMD and Intel are the big boys in this market, with AMD consistently taking market share over the last several years.
More to Know:
NPU: Neural Processing Unit. Used for AI-enabled personal computers (PCs).
Data Processing Units (DPUs) (or smart Network Interface Cards (NICs)): Processors that offload excess networking, storage and security work from generalist CPUs to allow those CPUs to focus on main tasks.
TOPS: Tera Operations Per Second. This measures raw math speed and capabilities.
a. Demand
Beat revenue estimates by 2.2% & beat guidance by 2.9%.
Data center revenue beat estimates by 3.4%.
b. Profits
Missed 56.1% GPM estimates by 20 basis points (bps; 1 basis point = 0.01%) & missed guidance by 10 bps.
Strong mix shift toward higher-margin CPUs drove the bulk of the Y/Y gross margin expansion. GPUs offset that momentum a bit, as they’re still dilutive to overall margins.
Beat EBIT estimates by 6.9% & beat guidance by 8.1%.
OpEx rose 29% Y/Y amid hefty R&D spending. EBIT rose by 75% Y/Y.
Beat $1.94 EPS estimates by $0.15 & beat guidance by $0.15.
GAAP EPS of $1.46 was hit by a $1.1B non-cash charge. The charge is from warrants given to Meta and OpenAI as part of those large supply agreements. Each can buy up to 10% of AMD for $0.01 per share if the companies fulfill capacity and purchase commitments. Both agreements also have AMD stock price triggers alongside the other items. The accounting impact kicked in this quarter. This has an impact on share count and GAAP margins, but it’s excluded from non-GAAP, which makes that a better place to focus in this specific case. The $1.1B charge was mainly due to AMD’s share price going up a lot and is, again, non-cash. Not concerning from a fundamental point of view.
c. Balance Sheet
$15.7B cash & equivalents.
57% Y/Y inventory growth. They stocked up for a large anticipated delivery ramp.
$7.1B debt.
0.7% Y/Y dilution.
d. Guidance & Valuation
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