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Advanced Micro Devices announced that its sales and earnings for the third quarter ended September 30th exceeded expectations, with sales growing 54% to a record $ 4.3 billion.
Non-GAAP net income for the quarter was $ 893 million, or 73 cents per share, exceeding expectations of 67 cents per share on a non-GAAP basis. AMD said it raised its annual earnings forecast and its shares rose slightly to $ 123.15 per share in after-hours trading.
Based in Santa Clara, California, the company has good momentum behind its Zen and Zen 2 architectures for processors that can achieve 50% or more better performance per clock cycle than the previous generation. This architecture put AMD ahead of Intel in terms of performance for the first time in a decade, and it has made longtime # 2 PC chipmaker a fast-growing competitor against Intel.
In recent years, Intel has stumbled not only in chip design, but also in manufacturing, where it lost its technological lead over competitors like TSMC, which makes both processors and graphics chips for AMD. As a result, AMD has made historic market share gains over the past three years. Interestingly, AMD made these gains amid a historic chip shortage caused by the volatility of supply from the pandemic and unprecedented demand for electronic goods.
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“AMD had another record quarter with revenue growing 54% and operating income doubling year over year,” said AMD CEO Lisa Su in a statement. “Shipments of third generation Epyc processors increased significantly in the quarter as our data center sales more than doubled year over year. Our business accelerated significantly in 2021 and, thanks to our leading products and consistent execution, grew faster than the market. “
Intel, meanwhile, has doubled its manufacturing investment to stay competitive and capitalize on the chip boom and supply shortage.
Results for the third quarter of 2021
As mentioned earlier, revenue was $ 4.3 billion, up 54% year over year and 12% quarter over quarter. This was driven by higher average retail prices, a richer mix of Ryzen processor sales, and also higher graphics chip prices. Growth was good for data center graphics, server processors and semi-custom chips (including game console chips for Microsoft and Sony).
Analysts had expected sales of 4.12 billion US dollars for the third quarter. They expect $ 4.25 billion for the fourth quarter and $ 15.66 billion for the full year.
Analysts were expecting earnings of 67 cents per share for the third quarter ended September 30th. For the fourth quarter, analysts expect 69 cents per share. And for the full fiscal year, they expect $ 2.49 per share.
The gross profit margin was 48%, 4.4 percentage points more than in the previous year and slightly higher than in the previous 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 last year and $ 778 million the previous quarter. Diluted non-GAAP earnings per share were 73 cents compared to 41 cents a year ago and 63 cents a quarter ago.
AMD now has $ 3.6 billion in cash and short-term investments. Cash flows into the company at the rate of $ 849 million per quarter, compared to $ 339 million a year ago and $ 952 million a year earlier.
Quarterly summary of the financial segment
Computing and graphics sales were $ 2.4 billion, up 44% year-over-year and 7% quarter-over-quarter, driven by higher sales of Ryzen, Radeon and AMD Instinct processors. The average selling price (ASP) of client processors rose 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 quarterly, driven by sales of high-end Radeon graphics products, including sales of data center GPUs. Operating profit was $ 513 million compared to $ 384 million a year ago and $ 526 million a year earlier. The quarterly decline was due to higher operating costs.
Revenue in the enterprise, embedded and semi-custom segments was $ 1.9 billion, up 69% year over year and 20% quarter over quarter. The increases were due to higher sales of Epyc processors and sales of semi-custom products. 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 of about $ 4.5 billion plus or minus $ 100 million, an increase of about 39% year over year and about 4% quarter over quarter. The year-on-year increase is expected to be driven by growth in all business areas. The quarter-over-quarter increase is expected to be primarily driven by growth in AMD’s server and semi-custom businesses. AMD expects a non-GAAP gross margin of approximately 49.5% for the fourth quarter of 2021.
For the full year 2021, AMD now expects sales growth of approx. 65% compared to the previous forecast of approx. 60%, driven by strong growth in all business areas. AMD now expects a non-GAAP gross margin of approximately 48% for full year 2021.
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