AMD Is Firing On All Cylinders But Its Profitability Depends On Lean Operations

On April 27th after market close, Advanced Micro Devices AMD posted a strong earnings report giving Intel INTC at least three reasons to worry.

It managed to beat earnings and revenue while meeting gross margin expectations, its key metric. AMD's numerous product launches over the last several months are now paying major dividends for the company that is enjoying high demand, being a poster child for the current chip shortage. However, even after selling over 3.4 billion dollars' worth of chips during the first quarter, it's still not enough.

Q1 Figures

For the first quarter of 2021, AMD reported $3.45 billion in revenue, topping analyst estimates and rising 93% YoYcompared to last year's quarter where revenue amounted to only $1.79 billion and it was the company's best first quarter in a decade.

The stunning jump was made thanks in large part to standout performance by the company's Enterprise, Embedded and Semi-Custom segment that includes server and embedded processor, semi-custom System-on-Chip (SoC), and game console technology development businesses. The big jump in revenue translates to the fact that the segment is well into the black on an operating income basis, which is a major improvement over last year's quarter when it made a loss.

AMD's big run-up in revenue is also reflected in the company's other metrics; along with that revenue AMD's net income has grown by 243% YoY, amounting to $555 million. And if not for an unusual, one-off tax benefit during the previous quarter, this quarter would be AMD's most profitable quarter ever– and it is on a non-GAAP basis.

Along with the EPS that nearly tripled YoY, beating analysts' expectations, AMD's gross margin is holding at 46%, steady versus the previous quarter, the fourth quarter of 2020. If there's a metric that shows clearly just how much things have turned around for a company that nearly went bankrupt five years ago, it's the company's cash balance or more precisely $3.1 billion in cash, cash equivalents and short-term investments with long-term debt down to $313million. From this perspective, AMD is in a stronger financial position than it ever has been.

Well Ahead Of Intel

One week before, Intel reported a slowdown in revenue from its data center group. AMD revealed its data center revenue doubled with six straight quarters of record mobile processor revenue that was generated due to an increasing number of customers. Compared to Intel, AMD is more competitive by being more innovative, it performs better, it has a better price point and although its most important business is the data center, its portfolio even gains in diversification with the acquisition of Xilinx.

Outlook

AMD's expectations for both the quarter and for the rest of the year are just as resilient as during previous quarters.For FY 2021, AMD guided revenue growth of 50% YoY whereas Intel expects a revenue decline of 1% YoY.

Demand for its.chips still outpaces supply in most segments, so AMD has yet to fully tap the current market and find ways to meet demand.  As its computer processor chip products are commodity goods, the differentiation in quality between competing manufacturers is minimal, which means that the company's profitability depends on maintaining its operations as lean as possible. To enhance its profitability when demand is high, AMD can boost its gross margin either by increasing sales, cutting costs, or both.

High Demand Alone Is Not Enough

With CPU, GPU, and semi-custom, AMD's numerous product launches are now paying major dividends. But since AMD is a fabless chipmaker that uses semiconductors made by Taiwan Semiconductor Manufacturing TSM for assemble its chips, the current semiconductor shortage and supply issues could pose problems. To reassure investors, management stated that the company has "good visibility" on potential supply concerns and it increased its forecast through the end of 2021.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com

The post AMD Is Firing On All Cylinders But Its Profitability Depends on Lean Operations appeared first on IAM Newswire.

Posted In: AMDIAM NewswireQ1 earningsEarningsNewsMarketsTechGeneral

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.