AMD Beats Wall Street's Expectations, Posts Non-GAAP Earnings of 3 Cents Driven By Outstanding Console Sales

This is not investment communication. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

AMD's 3rd quarter earnings are out and the company has beaten Wall Street's expectations (on a non-GAAP basis) on both revenue and earnings, posting a not-GAAP EPS of three cents a share on a internet income of $27 Million. Analysts were expecting non-GAAP earnings to exist flat (no profit, no loss). The visitor also managed to generate a revenue of $one,307 million beating analyst'south expectation of $one.21 Billion. of On the GAAP side, the Sunnyvale flake manufacturer posted a loss per share of 5 cents on a net loss of $406 Meg.

Avant-garde Micro Devices, Inc (NASDAQ:AMD) beats on non-GAAP expectations, posts GAAP loss per share of 5 cents on internet loss of $406 1000000

AMD (NASDAQ:AMD) shares are down more than than 5.vii% (at the fourth dimension of writing) equally a result of the earnings announcement, because while the company has browbeaten on both acquirement and eps every bit far every bit non-GAAP earnings are concerned, the GAAP side of the story paints a slightly darker film. The main driver that collection the internet loss of $406 Million on the GAAP side was the WSA charge of $340 Million (without which AMD would have gone into 'operating profitability') which was excluded nether IFRS guidelines on a non-GAAP basis merely is a very existent accuse for the company to bear - one that is non going away anytime soon.

The Wafer Supply Agreement was amended quite recently and represents a material 'special charge' for the company to bear on an ongoing basis. This is why even though it'south beingness classified every bit such, the nature of the agreement makes this very much an operational expense and quite pregnant to investors. The new terms of the agreement have put quite a lot of fiscal hoops for AMD to jump through including an array of monetary payments to GlobalFoundries. For more information, yous tin read our exclusive deep dive into WSA and its impacts.

AMD (NASDAQ:AMD)'south CEO had the following to say:

"Our tertiary quarter financial results highlight the progress we are making beyond our business organisation," said Lisa Su, AMD president and CEO. "We now await to deliver higher 2022 annual revenue based on stronger demand for AMD semi-custom solutions and Polaris GPUs. This positions us well to accelerate our growth in 2022 equally we introduce new loftier-performance computing and graphics products."

Another thing that we have covered in the past is the fact that AMD received approximately $i.4 Billion afterward a seasoned effect of common shares and convertible senior debt simply this was used to pay off outstanding debt. Approximately $796 of outstanding term debt has been retired as well as $226 One thousand thousand of outstanding ABL balance using the net proceeds of $1.022 Billion. Since the company does non have any Term Debt maturities till 2022, the company'south strategy here is to minimize its payables for the coming few years (the load volition be replaced by the WSA charges to some extent) while information technology rolls out what could be the near important production for the existence of its ongoing concern: Zen.

At present let's talk a bit near how the dissimilar segments did. The Computing and Graphics segment (which consists primarily of Radeon Technologies Group) saw its acquirement increment ix percent sequentially and eleven year over year, which is a very good for you growth rate considering the properties of the "diminishing" PC manufacture. The real rock stars of the company (NASDAQ:AMD)'s earnings, nevertheless, was the Enterprise, Semi-Custom and Embedded segment which generated a revenue of $835 Million and saw a growth of a massive 41 percent sequentially and 31 percent year over year. This was driven primarily by sales of semi-custom SOCs (think consoles). This is one trend that volition hopefully proceed for the foreseeable hereafter since not only has AMD managed to bag the contract for the PS4 Pro but with next generation consoles such as Xbox Scorpio and panel refreshes coming more frequently than before, this is a very lucrative business organisation and AMD is in the expressionless center of it. The visitor is also increasing its focus on the enterprise segment through the introduction of Zen based server fries such as Naples.

And on that annotation, I would like to conclude by maxim that AMD (NASDAQ:AMD) has never been in a better position to plough the ship effectually, nonetheless practical constraints like the amended WSA agreement make that very hard to happen. And of class, the one thing that goes without proverb: Zen is crucial to AMD'due south success as a company. This is the start architecture afterwards the at present outdated Bulldozer compages and marks a very different approach for the company in terms of its compute implementation. A lot is riding on Zen and the company needs to get everything simply right if it'south to preserve the investor'southward conviction.

GAAP Results	Q3-sixteen	Q2-xvi	Q3-xv
Revenue	$one,307M	$1,027M	$i,061M
Operating loss	$(293)M	$(8)M	$(158)M
Net income (loss) / earnings (loss) per share	$(406)M/$(0.50)	$69M/$0.08	$(197)1000/$(0.25)

Non-GAAP Results	Q3-16	Q2-16	Q3-15
Acquirement	$1,307M	$1,027M	$ane,061M
Operating income (loss)	$70M	$3M	$(97)M
Net income (loss) / earnings (loss) per share	$27M/$0.03	$(40)Thou/$(0.05)	$(136)M/$(0.17)

Financial Segment Summary

Computing and Graphics segment revenue of $472 million increased nine pct sequentially and eleven percentage from Q3 2022. The sequential and year-over-year increases were driven primarily by increased sales of GPUs, kickoff by decreased sales of client desktop processors and chipsets. The twelvemonth-over-twelvemonth increase was also driven by increased sales of client mobile processors.
- Operating loss was $66 million, compared with an operating loss of $81 million in Q2 2022 and an operating loss of $181 meg in Q3 2022. The sequential improvement was driven primarily by higher GPU revenue, and the year-over-year comeback was primarily due to higher GPU acquirement and the absenteeism of an inventory writedown charge.
- Customer average selling price (ASP) decreased sequentially driven by lower mobile and desktop processor ASPs and was apartment year-over-year.
- GPU ASP increased sequentially and year-over-year driven by college channel and professional person graphics ASPs.
Enterprise, Embedded and Semi-Custom segment revenue of $835 million increased 41 percent sequentially and 31 percent year-over-year due to higher sales of semi-custom SoCs.
- Operating income was $136 million compared with $84 1000000 in Q2 2022 and $84 million in Q3 2022. The sequential improvement was primarily due to higher revenue and the year-over-year improvement was primarily due to college acquirement and a $24 million IP licensing proceeds.
All Other category operating loss was $363 million in Q3 2022 compared with $11 million in Q2 2022 and $61 one thousand thousand in Q3 2022. The sequential increase was primarily driven by a $340 million WSA accuse.
AMD completed uppercase markets transactions that raised approximately $1.4 billion in cash, earlier issuance costs, to lower overall debt, reduce interest expense payments, and further support growing business organisation opportunities.
AMD announced a 5-twelvemonth amendment to the WSA with GF that strengthens the strategic partnership, while providing AMD with flexibility in sourcing foundry services and greater financial predictability.

Q4 2022 Outlook for AMD

Revenue to decrease eighteen% sequentially, +/- three%, primarily driven past seasonally lower semi-custom sales. The midpoint of acquirement guidance would be up 12% year-over-yr.
Non-GAAP gross margin to be approximately 32%,
Non-GAAP operating expenses to be approximately $350 meg,
IP monetization licensing gain of approximately $25 million,
Maintain non-GAAP operating profitability,
Non-GAAP interest expense, taxes and other to be approximately $32 million,
Cash and cash equivalents balances to be upwardly, in-line with our guidance of ending the yr free cash menses positive excluding greenbacks from majuscule markets transactions and internet gain from the ATMP JV,
Inventory to decline to approximately $660 million,
Basic share count to exist approximately 930 meg shares which includes 115 one thousand thousand shares related to the Q3 2022 equity issuance.
Expect full year 2022 revenue to be up approximately 6% from 2022 based on the midpoint of Q4 2022 revenue guidance.