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Advanced Micro Devices reported its revenues and earnings for the third quarter ended September 30 exceeded expectations, with revenue growing 54% to a record $4.3 billion.
Non-GAAP net income for the quarter was $893 million, or 73 cents a share, beating expectations of 67 cents a share on a non-GAAP basis. AMD said it was increasing its annual earnings forecast and its shares are up slightly to $123.15 a share in after-hours trading.
The Santa Clara, California-based company has had a good run on momentum behind its Zen and Zen 2 architectures for processors, which can generate 50% or more better performance per clock cycle than the previous generation. This architecture put AMD ahead of Intel in performance for the first time in a decade, and it has helped the perennial No. 2 PC chip maker into a fast-growing contender against Intel.
In the past couple of years, Intel has had stumbles not only on the chip design side but also in manufacturing, where it has lost its technological advantage to rivals such as TSMC, which makes both processors and graphics chips for AMD. As a result, AMD has been making historic market share gains for the past three years. What’s interesting is AMD has been making these gains amid a historic chip shortage driven by the supply whipsaw from the pandemic and unprecedented demand for electronic goods.
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“AMD had another record quarter as revenue grew 54% and operating income doubled year-over-year,” said AMD CEO Lisa Su in a statement. “Third Gen Epyc processor shipments ramped significantly in the quarter as our data center sales more than doubled year-over-year. Our business significantly accelerated in 2021, growing faster than the market based on our leadership products and consistent execution.”
Intel, meanwhile, has been doubling down on its manufacturing investments as a way to stay competitive and take advantage of the chip boom and supply shortage.
Q3 2021 results
As noted, revenue was $4.3 billion, up 54% year-over-year and 12% quarter-over-quarter. That was driven by higher average selling prices, a richer mix of Ryzen processor sales, and higher prices for graphics chips as well. Growth was good in datacenter graphics, server processors, and semi-custom chips (which include game console chips for Microsoft and Sony).
Analysts had expected revenues of $4.12 billion for the third quarter. For the fourth quarter, they expect $4.25 billion, and they expect $15.66 billion for the full year.
Analysts expected third-quarter earnings of 67 cents a share for the third quarter ended September 30. For the fourth quarter, analysts expect 69 cents a share. And for the full fiscal year, they expect $2.49 a share.
The gross profit margin was 48%, up 4.4 percentage points year-over-year and up slightly quarter-over-quarter. The increases were driven by a richer product mix. That means AMD is doing well across the board.
Non-GAAP net income was $893 million compared to $501 million a year ago and $778 million in the prior quarter. Non-GAAP diluted earnings per share was 73 cents compared to 41 cents a year ago and 63 cents in the prior quarter.
AMD now has $3.6 billion in cash, cash equivalents, and short-term investments. Cash is coming into the company at a rate of $849 million per quarter, compared to $339 million a year ago and $952 million in the prior quarter.
Quarterly financial segment summary
Computing and graphics segment revenue was $2.4 billion, up 44% year-over-year and 7% quarter-over-quarter driven by higher Ryzen, Radeon and AMD Instinct processor sales. Client processor average selling price (ASP) grew year-over-year and quarter-over-quarter driven by a richer mix of Ryzen processor sales.
Graphics processing unit (GPU) ASP grew year-over-year and quarter-over-quarter driven by high-end Radeon graphics product sales, including datacenter GPU sales. Operating income was $513 million, compared to $384 million a year ago and $526 million in the prior quarter. The quarterly decrease was driven by higher operating expenses.
Enterprise, embedded, and semi-custom segment revenue was $1.9 billion, up 69% year-over-year and 20% quarter-over-quarter. The increases were driven by higher Epyc processor revenue and semi-custom product sales. The semi-custom products include processors for the PlayStation 5 and Xbox Series X/S game consoles.
For the fourth quarter of 2021, AMD expects revenue to be approximately $4.5 billion, plus or minus $100 million, an increase of approximately 39% year-over-year and approximately 4% quarter-over-quarter. The year-over-year increase is expected to be driven by growth across all businesses. The quarter-over-quarter increase is expected to be primarily driven by growth in AMD’s server and semi-custom businesses. AMD expects non-GAAP gross margin to be approximately 49.5% in the fourth quarter of 2021.
For the full year 2021, AMD now expects revenue growth of approximately 65%, up from prior guidance of approximately 60%, driven by strong growth across all businesses. AMD now expects non-GAAP gross margin to be approximately 48% for the full year 2021.