AMD reported its second-quarter results today and they came in extremely well, relative to the general state of the PC market. Revenue was $ 1.027 billion, up 23% from Q1 and 9% compared to the same period in 2015. The company’s non-GAAP (Generally Accepted Accounting Principles) operating income was $ 3 million, while it recorded an $ 8 million loss by GAAP standards. Net income was $ 69 million this quarter.
The company’s overall financial position improved thanks to a number of factors. First, it recognized pre-tax gain of $ 150 million related to the sales of its test and packaging facilities to its new Chinese joint venture (JV). The total value of that deal was $ 351 million; AMD has recognized the revenue over multiple quarters.
This chart shows AMD’s segment information and overall breakdown. APU sales slipped slightly from Q1, falling to $ 435 million from $ 460 million, but were still up significantly from last year’s low of $ 379 million. Meanwhile, sales in AMD’s other segment — that’s basically the PS4 and Xbox One at the moment — grew 60% compared to Q1 and 5% compared to last year. Q1 tends to be the weakest quarter for console sales, but both Microsoft and Sony are going to be gearing up for the launch of the Xbox One S and (possibly) the PlayStation Neo. Equally importantly, AMD’s operating income was a much higher percentage of its revenue this quarter than a year ago — $ 84 million on $ 592 million in sales is a much better position than $ 27 million on $ 562 million in sales.
In her prepared remarks, CEO Lisa Su reported that AMD’s GPU sales increased by double-digit percentages in the first half, while Polaris’ launch late in Q2 pushed AMD desktop GPU shipments to their highest level in two years. The company believes its 7th generation APUs are also ramping well with 25 new design wins expected to be available “in the coming months.” Bristol Ridge actually seems to be running behind schedule — we expected systems to be in-market already. It’s possible AMD held the launch for the back-to-school season, however, which means we should see the first rigs in the very near future.
Su also gave a Zen update (Zupdate?), noting that priority sampling began this quarter and dual-socket validation is now underway. She did, however, say that “We remain on track for volume shipments of our “Zen” server CPU in the first half of 2017.”
There are a few things to note regarding AMD’s timing. First, it matches what Su said earlier this year, when she noted that AMD intended to begin sampling its priority customers in the second quarter. Q2 rolled around, priority customers got sampled. So far, so good.
The “first half 2017” statement is a specific reference to the server platform, not Zen itself. In the Q&A sessions, Su elaborated:
“We have been very focused on the server launch for first half of 2017. Desktop should launch before that. In terms of true volume ability, I believe it will be the first quarter of 2017. We may ship some limited volume towards the end of the fourth quarter, based on how bring up goes and the customer readiness.”
So what does this mean for Zen’s launch timing? It’s genuinely hard to say. We’ve previously speculated that the chip could appear as early as CES 2017, and that’s still possible, but it would be unusual for AMD to launch Zen’s desktop version in January but delay the server part until late Q2. Unusual, however, isn’t the same thing as “unheard of,” — and AMD could be finalizing other aspects of the server design. It’s possible that any difference between Zen’s desktop and server launch windows is related to additional validation and bring-up for the server chipset and platform rather than the CPU architecture itself. For now, we’ll have to wait and see.
Console sales remain AMD’s major strong suit and the primary driver of much of its positive news. A strong Zen launch 5-6 months from now could change that, but Bristol Ridge’s modest performance improvements aren’t going to dramatically reverse AMD’s fortunes in the CPU and APU market. AMD has had a strong 2016 thus far with the RX 480’s launch, its new Chinese joint venture, and new console refreshes from Sony and Microsoft, but it needs to demonstrate that it can bring its new CPU to market if it wants to reverse years of market share losses. The company did confirm that it expects to roll Zen-based APUs in 2017 — presumably based around a Polaris or Vega-derived graphics core and DDR4 memory. Based on current trends, it seems unlikely that we’ll see HBM2 in desktop APU price points in 2017.