Key Points
- Revenue of $5.835 billion surpasses management’s midpoint expectation of $5.7 billion ± $300 million.
- Data Center revenue skyrocketed by 115% year-over-year to $2.8 billion.
- Gaming and Embedded segments faced significant year-over-year revenue declines, aligning with expectations.
Advanced Micro Devices (AMD 1.12%), a semiconductor company known for its high-performance computing products, released its Q2 2024 results on July 30, 2024.
Key highlights include revenue of $5.835 billion, which exceeded management’s midpoint expectation of $5.7 billion by 2.4%. This also marked a 9% increase year-over-year. The company reported (GAAP) diluted earnings per share (EPS) of $0.16 and non-GAAP EPS of $0.69, both surpassing management's expectations. Despite gains in the Data Center and Client segments, there were setbacks in the Gaming and Embedded segments.
| Metric | Q2 2024 Result | Management's Expectation | Q2 2023 Result | Y/Y Change |
|---|---|---|---|---|
| Revenue (Billion) | $5.835 | $5.7 ± 0.3 | $5.359 | 9% |
| GAAP Diluted EPS | $0.16 | N/A | $0.02 | 700% |
| Non-GAAP Diluted EPS | $0.69 | N/A | $0.58 | 19% |
| GAAP Gross Margin | 49% | N/A | 46% | 3 PP |
| Non-GAAP Gross Margin | 53% | 53% | 50% | 3 PP |
Source: Expectations based on management's guidance, as provided in 2024-04-30 earnings report. PP = percentage points.
AMD's Business Overview
Advanced Micro Devices, commonly known as AMD, is a semiconductor company focusing on high-performance computing and graphics solutions. It caters to multiple segments, primarily Data Center, Client, Gaming, and Embedded. The company’s recent earnings release highlighted impressive growth in the Data Center and Client segments, driven by strong sales of its Ryzen processors and EPYC server .
In recent years, AMD has emphasized innovation and product leadership, particularly in artificial intelligence (AI) and high-performance computing. Key to its strategy is market diversification, which helps reduce risks associated with reliance on a single segment. This approach has recently ensured robust gains in its Data Center segment, while challenges persist in Gaming and Embedded segments.
Q2 2024 Performance Details
During Q2 2024, AMD reported revenue of $5.835 billion, up 9% from $5.359 billion in Q2 2023. The Data Center segment recorded a staggering 115% year-over-year increase in revenue, reaching $2.8 billion. This growth was primarily fueled by AMD Instinct and 4th Gen AMD EPYC CPUs. Similarly, the Client segment generated sales of $1.5 billion, marking a 49% rise from the previous year, thanks to strong sales of Ryzen processors.
Conversely, the Gaming segment saw a significant 59% decline in revenue, dropping to $648 million. This downfall was expected and attributed to a reduced semi-custom revenue. The Embedded segment also fell 41% year-over-year, posting $861 million due to inventory normalization among AMD's embedded chip customers.
AMD’s GAAP gross profit was $2.864 billion, while the non-GAAP gross margin remained steady at 53%. Operating income on a GAAP basis was $269 million, alongside a GAAP net income of $265 million. Non-GAAP income stood at $1.126 billion, with a non-GAAP operating income of $1.264 billion.
Notable Events and Achievements
AMD has made notable advancements in product leadership and innovation. It recently announced the Ryzen AI 300 Series processors and the AMD Instinct MI325X accelerator, enhancing its AI offerings. Dr. Lisa Su, AMD’s CEO, remarked on the AI business saying, “Our AI business continued accelerating... creating significant growth opportunities as we deliver leadership AI solutions.”
Moreover, AMD maintained its resilience by diversifying across various segments. Despite downturns in Gaming and Embedded segments, the growth in Data Center and Client segments was remarkable. The company projected further demand for AI-related products, which could continue driving its revenue higher.
Strategically, AMD made headlines by forming partnerships such as the Ultra Accelerator Link promoter group and collaborations with Microsoft on Azure ND MI300X V5 instances. These alliances are expected to bolster AMD’s market position further.
Importantly, AMD has ramped up investments in research and development (R&D), showcasing its commitment to technological advancements. These investments are crucial for the company to stay ahead in a competitive industry and maintain its leadership in high-performance computing.
Looking Ahead
AMD provided an optimistic outlook for Q3 2024, with revenue expected to be around $6.7 billion, give or take $300 million. The non-GAAP gross margin is anticipated to increase slightly to approximately 53.5%. Management is banking on strong demand for AI-related products, particularly the Instinct, EPYC, and Ryzen processors.
Investors should keep a close watch on the performance of the Gaming and Embedded segments, which have shown vulnerability. Forward guidance reflects confidence in continued growth, especially in AI-driven product lines, highlighting the importance of AMD's strategic investments in R&D and market diversification.
