News AMD 3Q23 Results

[amrnuke]

You will agree that it cost the same RD for AMD and Intel to release a server CPU, so how is it that AMD has better margin out of barely 0.35x Intel s revenue..?..

Beside AMD has to pay for manufacturing costs at TSMC while manufacturing profit is internal for Intel, and yet they havemuch lower overall margin.

So it s you who are sticking your head in the sand, numbers are clear about this matter, if Intel made a 4.3bn revenue in DC for Q2 and a 500M loss it mean that they sold their product at 75% of their cost since they should also cash the manufacturing profit.

It may be difficult to compare Intel's DCAI to AMD's DC because the revenues and expenses each company lumps into those categories is dissimilar. Is there a place we can look to break down the financials of these segments into even more detail? If so, would be interesting.

Doubt Intel have a narrow focus on profiting from their DC/server chips specifically. AMD and Intel are very different companies and Intel is more likely to adopt loss-leader strategies because it can bolster their overall portfolio better. (cf. Starbucks, which will saturate markets and put a store up as a loss-leader, in order to keep or gain market share in the long-run -- net revenue $6.7 bn in Q4 2019 -> $9.4 bn in Q4 2023; net earnings $802 mn in Q4 2019 -> $1,219 mn in Q4 2023).

That being said, when looking at their 23Q3 reports, it's remarkable how similar the two companies are (financially) from a 10,000 ft vantage point:

Intel's gross margin is $6 bn on $14.2 bn in revenue (42%), and they dumped $3.9 bn of the margin (65%) into R&D
AMD's gross margin is $2.7 bn on $5.8 bn in revenue (47%), and they dumped $1.5 bn of the margin (56%) into R&D
Intel's EPS came out to $0.07 per share, plus $0.125 dividend ($0.195 per share)
AMD's EPS came out to $0.18 per share

I'm just happy there's competition. If Intel is willing to eat a loss on each chip they sell in order to keep market share, but are able to make that up on the back-end and generate net earnings, more power to them. Especially if it pushes AMD's prices down too.

 

[adroc_thurston]

Especially if it pushes AMD's prices down too.

it really doesn't, unfortunately

 

[jpiniero]

It may be difficult to compare Intel's DCAI to AMD's DC because the revenues and expenses each company lumps into those categories is dissimilar. Is there a place we can look to break down the financials of these segments into even more detail? If so, would be interesting.

Doubt Intel have a narrow focus on profiting from their DC/server chips specifically. AMD and Intel are very different companies and Intel is more likely to adopt loss-leader strategies because it can bolster their overall portfolio better.

Doesn't work that way. Intel is bleeding cash like mad and needs big Data Center profits to fund the fabs. Even with the Gov Money.

 

[myl]

Intel's EPS came out to $0.07 per share, plus $0.125 dividend ($0.195 per share)
AMD's EPS came out to $0.18 per share

Why do you combine EPS and divident? Intel earned $0.07 and paid $0.125 to the shareholders. So $0.118 is taken from the cash assets.

Or are dividents subtracted from EPS?

 

[controlflow]

One chart on revenue I have seen (from Dylan) has AMD at ~36%

View attachment 88283

AMD MI300 Ramp, GPT-4 Performance, ASP & Volumes

Order Volumes From Microsoft, Meta, Oracle, Google, Supermicro/Quanta direct, Amazon

www.semianalysis.com

BTW, looking at Intel datacenter revenue, is it conceivable that Intel could have, in this quarter, record Xeon revenue? As Intel claimed during the conference call?

Can you show where Intel claimed record Xeon revenue this quarter?

I looked at the earnings transcript and found:
"DCAI revenue was $3.8 billion, ahead of our internal forecast. Despite continued unit TAM softness, the Xeon business was up sequentially, with MNC customers showing a better than seasonal recovery in the quarter. Favorable customer mix, along with strong adoption of newer products with higher core density, led to record Xeon ASPs in Q3."

They claimed record ASPs. There is no claim of any record revenue that I can find. You can have record ASPs and not have record revenue or even be profitable. Given that Intel is selling a larger mix of high core count parts now, it isn't surprising that he ASP is higher than it used to be in the past but if the total units shipped are still down, you may not have record revenue. If the cost of the parts are high, the margins will be bad too.

You are acting quite outraged and making claims that Intel is lying or misrepresenting the truth here but nothing here seems particularly shocking or surprising.

 

[amrnuke]

Why do you combine EPS and divident? Intel earned $0.07 and paid $0.125 to the shareholders. So $0.118 is taken from the cash assets.

Or are dividents subtracted from EPS?

Dividends aren't considered in the earnings / EPS, they are accounted as part of the cash position. From the standpoint of an investor, I consider them separately and additively, as both contribute to realization of gains from investment in a company.

 

[amrnuke]

Doesn't work that way. Intel is bleeding cash like mad and needs big Data Center profits to fund the fabs. Even with the Gov Money.

Intel had $11.1 bn in cash to start 2023 and have bled $3.5 bn Q1-Q3 (31.5%)
AMD had $4.8 bn in cash to start 2023 and have bled $1.3 bn Q1-Q3 (27.1%)
The gap is negligible, both companies are dealing with record inventory and Intel not only has similar R&D expenditures as % of revenue, but also is funding a supercycle of investment expected to produce increased profitability in 2025 and beyond, at the expense of the near-term books looking bad

 

[myl]

Dividends aren't considered in the earnings / EPS, they are accounted as part of the cash position. From the standpoint of an investor, I consider them separately and additively, as both contribute to realization of gains from investment in a company.

But still I don't understand why you sum them up. If company earns $1 and gives $1 divident, that`s 100% payout, and not $2 value for the shareholder. I would rather take stock buyback with increased stock valuation.

 

[controlflow]

Doesn't work that way. Intel is bleeding cash like mad and needs big Data Center profits to fund the fabs. Even with the Gov Money.

FWIW, the US Chips Act money hasn't been paid out to anyone yet. State govts may be paying them smaller amounts in incentives though.

 

[Joe NYC]

Can you show where Intel claimed record Xeon revenue this quarter?

Sorry, that was a typo (I edited my post).

Intel said they had record ASPs. Which is just not believable by any stretch of the imagination. Here is the quote:

"Favorable customer mix, along with strong adoption of newer products with higher core density, led to record Xeon ASPs in Q3."

I looked at the earnings transcript and found:
"DCAI revenue was $3.8 billion, ahead of our internal forecast. Despite continued unit TAM softness, the Xeon business was up sequentially, with MNC customers showing a better than seasonal recovery in the quarter. Favorable customer mix, along with strong adoption of newer products with higher core density, led to record Xeon ASPs in Q3."

They claimed record ASPs. There is no claim of any record revenue that I can find. You can have record ASPs and not have record revenue or even be profitable. Given that Intel is selling a larger mix of high core count parts now, it isn't surprising that he ASP is higher than it used to be in the past but if the total units shipped are still down, you may not have record revenue. If the cost of the parts are high, the margins will be bad too.

The definition of "record" means best or highest, not "higher than it used to be".

It does not seem like you are buying the "record" ASP either after you gave it some thought.

You are acting quite outraged and making claims that Intel is lying or misrepresenting the truth here but nothing here seems particularly shocking or surprising.

A typo, and I referenced the same fantastical claim about ASPs in another post prior to that here:

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About the "record" ASPs, I stand behind the claim that it was not record ASP for Intel.

The only way Intel can have record high ASP while at the same time having record low revenue is that the unit shipments would have to have collapsed completely. And AMD unit shipments would need to skyrocket. Neither of which happened.

It may be a "record" during the tenure of Gelsinger as CEO or Zinsner as CFO, or some such ridiculous qualification of what they meant by "record" ASP.

Or just plain BSing, embellishment, double speak...

 

[H433x0n]

You will agree that it cost the same RD for AMD and Intel to release a server CPU, so how is it that AMD has better margin out of barely 0.35x Intel s revenue..?..

It’s not even close. To AMD’s credit - Intel probably spends twice as much in R&D (if not more) to develop a server CPU. AMD fundamentally sells a single product (their 8 core CCX) and with that initial investment they spread it across every Epyc SKU as well as desktop,

Compare that to SPR that had 2 full tape outs (XCC, MCC) as well as auxiliary IP (AI accelerators) and the associated software that goes with it. Just the single tile die from the XCC SKU has more than double the cores and components as the Zen 4 CCX.

 

[Mopetar]

The problem AMD is facing is bad advice. They think maintaining margins is better than reducing margins to increase sales and profits.

I think this is pretty far off the mark. AMD is ultimately supply constrained by what TSMC can produce. Using other nodes available to them would only be for products in overseas markets where the margins are nowhere near as good.

If they had unlimited wafers what you propose might make sense, but they can't increase market share everywhere all at once. Better to do so in the markets where they make the most money. Investors won't be disappointed with that at all.

When a company GIVES away products in order to keep the competition from making sales, is that not anti-competitive behavior ? AMD won this suit before when Intel did something similar.

It's not that cut and dry. Intel isn't in a position to do that even if they wanted to. Sometimes you're in a bad position and have to take the hit. Intel isn't dumping and their past transgressions were a different batch of shady tricks.

Some economists have even argued that dumping is never a good idea even to try to destroy a competitor. You might break one owner, but someone else will be there to invest at pennies in the dollar when the previous owner goes out of business and you'll have completely eroded your own earnings in the meanwhile.

Sorry, that was a typo (I edited my post).

Intel said they had record ASPs. Which is just not believable by any stretch of the imagination. Here is the quote:

"Favorable customer mix, along with strong adoption of newer products with higher core density, led to record Xeon ASPs in Q3."

I could believe Intel having record ASP results given AMD eats their lunch for 1P and 2P servers. Who is going to buy Intel there? If you need to scale beyond that, AMD isn't offering any kind of 8 socket solutions so you have to go with Intel. Those parts cost more.

There's also inflation as explanation. It's similar to how Hollywood is always proclaiming a new biggest movie of all time based on box office. None of it is inflation adjusted, because if it were I'm pretty sure Gone with the Wind would still top anything released since.

Finally, Intel is doing a bit better than they have in a while. They still can't really compete head to head with AMD, but they're probably more competitive head to head right now than they have been in years. They might be seeing customers that are locked into Intel starting to upgrade older hardware and spending some of the money saved from not upgrading previously.

It's probably not so simple as any one of those or even some explanation I haven't considered. There's probably a mix of all of those and others I haven't thought of.

 

[adroc_thurston]

I think this is pretty far off the mark. AMD is ultimately supply constrained by what TSMC can produce

TSM has a lot of capacity to spare for anything not bottlenecked by CoWoS.
Thing is, the usual set of AMD server customers (all manners of big hyperscale boys) loaded their 2023 capex into GPUs and not CPUs.
Better luck next time!

 

[Abwx]

I could believe Intel having record ASP results given AMD eats their lunch for 1P and 2P servers. Who is going to buy Intel there? If you need to scale beyond that, AMD isn't offering any kind of 8 socket solutions so you have to go with Intel. Those parts cost more.

It would be relevant if Intel was on par on cores per socket and perf/watt but that s actually 8 sockets that are equivalent to a an AMD 4S, so that s just wasted money.

They might be seeing customers that are locked into Intel starting to upgrade older hardware and spending some of the money saved from not upgrading previously.

Upgrade to a product that is one gen late compred to the competition.?
They saved money by not upgrading just to "upgrade" by buying outdated perfs, on the long run they ll be ironed out by their competitors, quite a suicidal money management.

 

[VirtualLarry]

I will say in closing a RX 7600 with 16GB of Vram for $199 would be a huge shot across the bow at Nvidia. A 6800xt refresh on 5nm would be impressive.

I will still buy AMD hardware. But the affection I had for AMD has diminished over the last few years.

RX 7600 XT???

 

[Hans Gruber]

RX 7600 XT???

Yes, that's is what I want to see from AMD. Even a 12GB 7600xt would be fine. I think a lot of people are hung up on more vram is better but they stop at 16GB of vram. Instead of demanding 24GB-32GB vram cards as standard for mid/high end graphics cards. 16GB should have been the base standard by 2023. What's more, vram prices are in the toilet. That is good for GPU makers but has not been passed down to consumers.

 

[amrnuke]

But still I don't understand why you sum them up. If company earns $1 and gives $1 divident, that`s 100% payout, and not $2 value for the shareholder. I would rather take stock buyback with increased stock valuation.

Because I get the $0.125 per share now, and if earnings are good, when I sell the stock, the price will be higher, so I get more money then as well
And if earnings are good, dividends also go up, meaning along the way, my "now" benefit increases
So they're both important, to disregard one or the other when considering the value to an investor seems imprudent (IMO)
It's of course not "clean" to just add them, but I'd argue such a thing as "clean" accounting is a pipe dream anyway
Agree stock buybacks can be fantastic (for the investor short-term), but stock price goes up when dividend payout goes up, as well as when earnings are good, so there are many ways to skin a cat there

 

[jpiniero]

IMO, stock buybacks are terrible outside of proping up a stock temporarily. The bots eat up any real benefit to shareholders otherwise.

And Tech Stocks prices are all about hype more than substance. It'd be better in AMD's part to spend $$$ to try to convince Wall Street that they are in with the Cool AI crowd than say buybacks. Even if the AI products don't really end up making that much. Then when AI hype dries up and something else takes it's place, do that too.

 

[Joe NYC]

Forest Norrod, in a presentation at an investor conference mentioned that AMD now has 50% of US Cloud datacenter market, 30% overall and only about 15% in enterprise (in dollar terms)

Interesting anecdote there about how Intel maintains that 85% of enterprise market share. Actually, Forest may know exactly what he is talking about, coming to AMD from Dell...

UBS Annual Technology Conference

View AMD’s past and upcoming events.

ir.amd.com

 

[Hitman928]

Forest Norrod, in a presentation at an investor conference mentioned that AMD now has 50% of US Cloud datacenter market, 30% overall and only about 15% in enterprise (in dollar terms)

Interesting anecdote there about how Intel maintains that 85% of enterprise market share. Actually, Forest may know exactly what he is talking about, coming to AMD from Dell...

UBS Annual Technology Conference

View AMD’s past and upcoming events.

ir.amd.com

Link to transcript:

Advanced Micro Devices, Inc. (AMD) Presents at UBS Annual Tech Conference (Transcript)

This article discusses the UBS Annual Technology Conference transcript featuring Forrest

seekingalpha.com

 

[Joe NYC]

Link to transcript:

Advanced Micro Devices, Inc. (AMD) Presents at UBS Annual Tech Conference (Transcript)

This article discusses the UBS Annual Technology Conference transcript featuring Forrest

seekingalpha.com

Thanks. I was looking for that.