They marked a big operating loss that eat most of the operating income, dunno what it is exactly, either it s an accountatility trick to reduce taxes,
After Intel's disastrous results I thought AMD might be negatively affected as well. But holy sh**, didn't expect that. +70% y/y, impressive numbers!
After Intel's disastrous results I thought AMD might be negatively affected as well. But holy sh**, didn't expect that. +70% y/y, impressive numbers!
Indeed, really underlines how badly Intel has messed up. Failing to deliver on both the server part and gpu had really really hurt them. Seeing the state of Arc is a shock. I expected much, much better execution. Pat needs to get his company in order or he’s done.
Impressive. Some were speculating that AMD would have seen negative results????????
They marked a big operating loss that eat most of the operating income, dunno what it is exactly, either it s an accountatility trick to reduce taxes, or eventually payements that were sent to TSMC for future waffers since this firm asked for payements in advance.
So that s it, the worse way..
Okay, but where have the hidden the console revenue then?I love the new segment reporting — so much so I have made a spreadsheet/slide to graphically show in a single glance the contribution from each of the business segments now reported. I note that Data Centre isn't significantly more profitable compared to Client (as many seem to think). The margins are almost exactly the same. The profitability of the Xilinx business, now largely making up the Embedded segment, is remarkable in comparison. It is great to have Victor Peng and his team aboard the AMD ship!
Overall the growth is strong enough that they can eat the cost without hurting themselves too much. But you have to think they'll need that cash to stay competitive.
Turning to the balance sheet. Cash, cash equivalents and short-term investments was $6 billion at the end of the second quarter. During the quarter, we deployed $920 million to repurchase common stock and have $7.4 billion in remaining authorization. Cash from operations was a record $1 billion. Quarterly free cash flow was $906 million compared to $888 million in the same quarter last year.
Okay, but where have the hidden the console revenue then?
Okay, found this:
Gaming segment includes discrete graphics processors and semi-custom game console products.
So that might explain the 11%. Somehow even though GPUs prices are heading down, I some how doubt that gaming dGPUs only had 11% margins the last few years - even assuming AIBs, distributors, retailers made most of the extra profit.
I love the new segment reporting — so much so I have made a spreadsheet/slide to graphically show in a single glance the contribution from each of the business segments now reported. I note that Data Centre isn't significantly more profitable compared to Client (as many seem to think). The margins are almost exactly the same. The profitability of the Xilinx business, now largely making up the Embedded segment, is remarkable in comparison. It is great to have Victor Peng and his team aboard the AMD ship!
So imagine that in terms of revenue the consoles were 80% and dGPUs was 20%.Yes, semi-custom is now mixed with client gaming (dGPUs). The console contracts are notoriously low margin and are significantly higher volume for AMD than dGPUs.
How much does it cost to get game studios to optimize for your architecture? This seems like an intrinsic part of owning the console market.So imagine that in terms of revenue the consoles were 80% and dGPUs was 20%.
Further imagine dGPU had 25% margins, so 1,655 * 0.2 = 331 * 0.25 = 82 profit from dGPU.
That would mean consoles had an 8% overall margin (1,655 * 0.8 = 1,324. 105 (187 - 82) = 1,324 = 8%).
Now Sony and Microsoft did pay for some R&D up-front (but pity neither was wiling to pay for more RT performance this gen), but those kind of margins were barely viable when AMD was nearly bankrupt. Maybe this gen will be last console generation?
sure, that's a given. But is it worth that much?How much does it cost to get game studios to optimize for your architecture? This seems like an intrinsic part of owning the console market.
sure, that's a given. But is it worth that much?
How about when TSMC 7nm wafers were super scarce?Given that there's really no downside because the console maker agreed to pay for everything, it's a pretty good business. Don't forget this also includes the Steam Deck I presume.
Even if AMD wanted to shift the wafer allocation from consoles to GPUs, they would not be able to due to contractual obligations. Console contracts are signed way out in advance, and while it does suck for AMD to lose out on potential profit, consoles give a steady supply of revenue in addition to providing secondary benefits with respect to game development for your hardware.How about when TSMC 7nm wafers were super scarce?
During the shortage, Radeon were far harder to find GeForce (and RDNA 2.0 mined worse than Ampere), so selling tons of consoles at 10% margin rather than tons of Radeons at 30% or more doesn't sound very wise - at least with hindsight.
While only superficially, consoles do also compete with PC CPUs and GPUs. So not only do consoles use 360mm² (Xbox's "Scarlet") or 308mm² (PS's Oberon), for those low margins Microsoft and Sony get an advanced RDNA 2.0 GPU and a Zen2 CPU.
How about when TSMC 7nm wafers were super scarce?
During the shortage, Radeon were far harder to find GeForce (and RDNA 2.0 mined worse than Ampere), so selling tons of consoles at 10% margin rather than tons of Radeons at 30% or more doesn't sound very wise - at least with hindsight.
While only superficially, consoles do also compete with PC CPUs and GPUs. So not only do consoles use 360mm² (Xbox's "Scarlet") or 308mm² (PS's Oberon), for those low margins Microsoft and Sony get an advanced RDNA 2.0 GPU and a Zen2 CPU.
The console contracts actually made more sense during AMD's rough years, despite being very low margin, and actually was AMD's life blood for a little bit. The reason is that AMD had no money to continue the R&D for graphics on their own and so MS and Sony basically bankrolled their GPU R&D and then gave them a consistent revenue stream beyond that. Now that AMD is making enough money to fund their own GPU R&D, they don't need the console contracts nearly as much though I think there is still value there for AMD. It gives them good relationships with both, working relationships many times are very underrated and MS is probably much more important here than Sony, as well as the opportunity to work with MS/Sony to kind of shape/predict the future of how graphics processing will be handled into the future.
The pandemic shortage I would argue made the console contracts more important during this time for AMD because it gave them more leverage as a higher volume customer. Those console chips would have been made, no matter who the design house was, so it still would have been a limiting factor for AMD but with AMD being the design house, they have more control over wafer allocation and more influence with the foundry to help secure more wafers overall.
Yeah, profit is profit, but not everything can be or should be quantifiable in profit numbers alone. The partnership of AMD-MS-Sony is powerful enough to drive the future direction of game development because it gives a direct line of communication from game developers to the hardware manufacturers. AMD has reiterated so many times over the last 2 years that their success is driven by listening to their customers and making sure it is the customer's needs which drives what they include in future hardware generations. This statement is typically said with respect to the server business, but it is applicable to everything they make, especially in their semi-custom division. Wasn't there a patent that Sony filed which describes a new ray tracing method? It would not surprise me if the PS5 Pro includes hardware to feature that patent, and it would not surprise me if it filtered its way into a future RDNA chip. Similarly, MS owns DirectX and by leveraging that relationship, AMD should be able to cater their GPU architectures to take advantage of any new DX features sooner rather than later.It would be a mistake to give up Consoles. That contributes to AMDs' Gaming Cred/Mindshare and having a Software Development culture around their Products.
But is [the console business] worth that much?
Here.
There's your answer for the GAAP numbers.
That's completely backward. When one is close to bankruptcy it's not margins that keep the company afloat (even high margins of nothing are still nothing after all), it's the steady payments for day to day business that does that. Semi custom business did just that in the time AMD essentially had no competitive products for sale. Its semi custom business as a service was the only business actually working, without it AMD really could have shut down.but those kind of margins were barely viable when AMD was nearly bankrupt.
Due to its steady volume the semi custom business ensured that AMD had a long time business relation with TSMC going already way before Zen 2 was moved to N7. AMD's closeness to TSMC likely is only comparable to Apple's and MediaTek's. If that didn't exist Zen 2 likely would have been delayed with GloFo 7nm and much later on N7, and the steady volume ramp on TSMC nodes since would be much smaller and slower as AMD wouldn't be a proven customer yet.How about when TSMC 7nm wafers were super scarce?
Because of the continuity of console business, it is guaranteed that next gen consoles will go AMD. There is no way any other architecture can run those PS5 and XBOX games out of the box, perhaps only for the ones where installation is online,Due to its steady volume the semi custom business ensured that AMD had a long time business relation with TSMC going already way before Zen 2 was moved to N7. AMD's closeness to TSMC likely is only comparable to Apple's and MediaTek's. If that didn't exist Zen 2 likely would have been delayed with GloFo 7nm and much later on N7, and the steady volume ramp on TSMC nodes since would be much smaller and slower as AMD wouldn't be a proven customer yet.