AMD, impressive revenue growth

What an impressive revenue growth of 70% from ‌$AMD(AMD)$‌ in Q2 2022! Though GAAP net income was down 37% from last year Q2,that was due to amortization of intangible assets associated with the Xilinx acquisition.

Starting in the second quarter, AMD updated the financial segment reporting to align with the four strategic end markets: data center, client, gaming and embedded. Q2 revenue growth of each segment was improving, led by significant improvement in data center and embedded sales and operating margin. 

Data center revenue was contributed by strong demand for EPYC server processor by cloud and enterprise customers.

Client segment revenue was led by strong adoption of Ryzen mobile processors in professional notebooks. AMD seem to have navigated well through the recent PC market softness.

Gaming segment includes semi-custom SoC (consoles) and gaming graphics. The former was doing well in Q2 while gaming graphic sales was impacted by macro conditions. AMD expects the gaming graphics market to be down in the third quarter. AMD expect consoles to peak in the third quarter and see a decline in the fourth quarter as the normal seasonality would be.

The really impressive revenue growth in embedded segment was led by robust demand across all markets and nodes for the FPGA and adaptive computing products. The acquisition of Xilinx by AMD was proven a brilliant move.

Furthermore, AMD has closed the acquisition of Pensando in Q2 quarter which would further expanding AMD data center solutions capabilities with the addition of DPU and software stack that complement their existing products.

Even though AMD has issued a debt of $1billion, they have free cash flow of $906 million (equal to 13.8% FCF margin) and repurchased $920 million of common stock

For Q3, they expect revenue to be approximately $6.7billion, plus or minus $200 million non-GAAP gross margin to be approximately 54%. Full year revenue is expected to be around $26.3 billion, plus

or minus $300 million, non-GAAP gross margin to be around 54%. The growth should be led by data center and embedded segments.

In a nutshell, the future growth is very much coming from data centers and embedded. As in previous TSMC earnings release, they are seeing strong demand for high-performing computing. Therefore, we can be confident that cloud/ data center still has much room to grow.

Just glance through the Q2 2022 preliminary result released by Nvidia today, I would say it is bad, dragged down by its gaming revenue.