Image Source: AMD
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The direction of server, semi-custom and embedded products brought AMD $ 465 million in revenue in the fourth quarter. This is 7% more than a year earlier, but only EPYC server processors provided positive dynamics, since components for existing game consoles were predictably sold worse. In general, in the segment of semi-custom components, about 80% of revenue this year will be received in the second half of the year, when preparations for the launch of the new generation of game consoles will begin. If we exclude this type of components from the statistics of last year, then in other areas of activity AMD’s revenue grew by all 20%, and not by 4%. The AMD head predicts about the same dynamics this year, explaining that the first quarters of the presence of new game consoles in the market will not be peak in terms of revenue. In the past six months, revenue from the implementation of semi-custom solutions decreased by 30–50% due to the completion of the life cycle of products of the current generation. This year, maximum revenue in this area will be observed in the third quarter.
In 2020, AMD enters with confidence in its ability to continue to strengthen its position in the client, server and graphic segments of the market. As explained by Lisa Su, now more than twenty 7-nm products are under development. During this year, the company expects to transfer the entire current range of mobile processors to 7-nm technology. In the fourth quarter of last year, the company received about half of the revenue from the sale of 7-nm products in all market segments. She acknowledged that TSMC has some limitations on the number of wafers with 7-nm products, but expressed the hope that competent order planning would not allow AMD to let its customers down from this point of view.
In the current quarter, the company plans to make approximately $ 1.8 billion. This is 42% more than a year earlier, but 15% less than last quarter. Seasonal factors are complemented by declining demand for existing-generation game consoles. Surprisingly, investors quickly seized on this negative trend, and AMD shares lost about 4% after the publication of the quarterly report.
The forecast for 2020 turned out to be more rosy – the company expects revenue to increase by 28-30% and maintain a profit margin of 45%. Operating expenses should not exceed 28% of revenue, although in absolute terms they will increase. Money is required not only to develop new products, but also to market existing ones. Last year, operating expenses accounted for 31% of revenue. Reducing this share helps outstripping revenue growth, even if the costs themselves increase in absolute terms.
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