Advanced Micro Devices reported a net profit in the third quarter, thanks to the strength of its Ryzen and Epyc series processors that launched earlier this year.
But the company’s shares fell 11 percent in after-hours trading as the Sunnyvale, California-based chip design company warned that it would have lower revenues in the fourth quarter. Still, the operating profit was the first in three years for AMD.
AMD reported an adjusted 10 cents a share on revenue of $1.64 billion (with revenue up 26 percent from a year ago). Analysts were expected 8 cents a share on revenue of $1.51 billion in the quarter.
“We made significant progress in Q3” as the Ryzen processors hit as much as 40 percent to 50 percent market share in strategic etailer channels, said Lisa Su, CEO of AMD, in a conference call with analysts.
AMD has refreshed its processors this year with a new architecture dubbed Zen, which can generate 52 percent more performance per clock cycle than its previous generation. It has resulted in the most competitive chips in a decade for AMD as it competes with arch rival Intel. AMD’s Threadripper series of Rzyen chips are contenders for the performance crown with Intel’s fastest chips, and AMD is selling those Threadripper chips at a considerable discount to Intel’s high-end processors.
Dell, Lenovo, HP — and all major commercial PC makers — have adopted the Ryzen processors, Su said. AMD’s computing and graphics revenue was up 74 percent from a year ago.
AMD also introduced its Radeon RX Vega series of graphics processing units (GPUs), in competition with Nvidia’s GPUs. Su said AMD saw strong performance in both gaming and blockchain markets. The latter means that the popularity of cryptocurrency mining is driving graphics chip demand.
AMD’s revenue was up 34 percent from the previous second quarter, driven by enterprise embedded and semi-custom chips (which means video game processors for the most part). A year ago, AMD lost $406 million, or 50 cents a share, in the third quarter of 2016.
Average selling prices per chip were up significantly, thanks to sales this year of Ryzen processors. GPU ASPs were also up significantly. Threadripper processors are now available from more than 90 retailers, with marquee PC makers such as Alienware.
But AMD said it expects sequential revenues to decline 15 percent in the fourth quarter from the previous third quarter. But that would still result in revenues that are up 26 percent from the fourth quarter of 2016. Su said she expect to see some leveling off of cryptocurrency demand for GPUs, and she also said that Q4 is also seasonally weaker for the semi-custom business.
Su said that semi-custom chips would remain seasonally strong as Sony sells its PlayStation 4 Pro and Microsoft launches its Xbox One X game console. Big cloud providers like Tencent and Baidu are adopting AMD’s Epyc-based data center products. AMD said it also closed a patent-licensing agreement in the third quarter.
Su said the company’s goal is to become one of the premier long-term growth companies in the tech industry. Su said Atari is adopting an AMD chip for its upcoming Ataribox game console. She also said there is a new large original equipment maker (OEM) ramping up in Q4.
She said that Ryzen should continue to ramp in the first half of 2018.