We haven't made a habit, at least in recent times, of writing about the financial performance of the companies whose products we cover. Financial analysis is not our area of expertise, and I suspect that a company's quarterly mishaps and fortunes rarely factor into your buying decisions.
But earnings calls and financial announcements are sometimes meaningful because companies reveal tidbits about future plans and products, reveal where they are on their roadmap, and where there might be unexpected light or darkness. This week's Intel earnings announcements, for example, revealed delays in 10nm manufacturing, and a subsequent second tick to the typical Intel tick tock.
AMD's second quarter earnings announcement yesterday is a different story still. To many, it feels as if there continues to be an undercurrent of concern about the long-term financial well-being of AMD, a susurrous jostle of the leaves, as it were, suggesting that a major hiccup, a product stumble, OEM indecision, or whatever else that can plague a company, will in fact send AMD to its doom. (This is an exaggeration, of course.)
Make no mistake, though, things are not pretty. Lisa Su called Q2 a disappointment, and it follows successive quarters of disappointment. Revenue was down, gross margins were down, operating expenses (GAAP and non-GAAP) were up. Last quarter, the company predicted revenues would be flat or up by as much as 3 percent, and that gross margins would be 32 percent (they were actually 25 percent).
AMD spent considerable time on yesterday's earnings call answering questions about how it has managed its cash and its debt, with company executives pointing to a long runway where its financial maneuvers could continue to withstand performance weakness, and adding that it has many further instruments at its disposal such as accessing capital markets, although AMD CFO Devinder Kumar wouldn't speculate what form that capital might take.
So let's keep it simple and report what AMD reported, and all of you can have some idle water cooler discussion in the comments.
- AMD revenue was $942 million, down 8 percent from Q1 (which was down almost 17 percent from the previous quarter), and 35 percent year-over-year. AMD attributed the quarterly weakness to downward consumer PC demand, and the yearly decline to client and graphics product line sales decreases.
- AMD reported an operating loss for the quarter of $137 million, equal to last quarter's operating loss, and a net loss of $181 million compared with a $180 million net loss in Q1.
- AMD also reported that the computing and graphics part of its business was down 29 percent from last quarter, and 54 percent over the same time period compared to the year prior. The company attributed the quarterly decrease to fewer sales of client notebook processors. The operating loss in this part of the business was $147 million, compared to $75 million in Q1 and just $6 million a year ago.
- In better news, AMD's enterprise, embedded and semi-custom revenues were up 13 percent over last quarter, mostly because of semi-custom SoC wins. The operating income was positive, at $27 million, but down compared with Q1's $45 million and the comparable quarter last year ($97 million), attributable to a charge taken from a node transition.
There's more to it than that. We've covered AMD's roadmap, unveiled at the recent Financial Analyst Day (here and here), with further commentary from AMD CEO Lisa Su during a recent chat early last month. The company projects a 6 percent increase in revenue for Q3, based partly on the semi-custom projections, a positive outlook for Windows 10 for the second half, and the anticipation that Sony and Microsoft will build console inventory for the holiday season. The company also expects to make good Q4 progress in graphics, thanks to the holiday season.