“Q2 is actually our strongest backlog quarter that we’ve seen”
AMD reported a 40 percent increase in revenues to $1.79 billion in Q1 despite a turbulent market backdrop, with CEO Lisa Su telling investors late Tuesday that the company had “quickly adopted our global operations to navigate pockets of supply chain disruption”.
The resurgent semiconductor company was one of the few not to pull guidance amid a contracting global economy, saying, perhaps startlingly, that it expects 2020 revenue to grow by approximately 25 percent; plus or minus five percentage points, compared to 2019’s earnings.
(The IMF expects the global economy to contract by three percent in 2020; “much worse than during the 2008–09 financial crisis”).
The strong AMD outlook comes after a quarter marked by a flurry of cloud wins — Google Cloud, IBM Cloud and Microsoft Azure all recently announced AMD EPYC-powered virtual machine and bare metal offerings — but the year-on-year improvement masked a 16 percent revenue fall on-quarter.
(AMD told analysts on an earnings call that one unnamed cloud customer had added 10,000 AMD chip-powered servers in 10 days as workloads soared following a wholesale global shift to working from home).
AMD’s CEO Lisa Su reiterated guidance suggesting the company is on track to grab 10 percent of server CPU share this year, saying “we expect about 20 million units a year in terms of single socket and dual socket servers. That’s about 5 million units a quarter” and adding on an earnings call that “Q2 is actually our strongest backlog quarter that we’ve seen.”
With the company having secure big wins with both Microsoft and Sony for major console launches at the close of 2020 “the signals continued to be positive in those areas”. Acer, ASUS, Dell, HP, Lenovo and other OEMs meanwhile are expected to launch more than 135 new Ryzen-powered consumer and commercial notebooks over the coming quarters.
The robust cross-sector demand pushed AMD to record first quarter revenue and its highest gross margin in eight years. A warning sign — a 21 percent year-on-year revenue fall across its Enterprise, Embedded and Semi-Custom segment — was blamed on Sony and Microsoft reducing inventory in advance of next-generation console launches.
In the data center, Microsoft Azure is partitioning the company’s GPUs for the first time in the same way that it partitions multi-core CPUs, letting users tailor GPU capability to meet specific workload, AMD added.
CEO Lisa Su told investors: “The biggest question mark in my mind is the shape of the PC market this year. As I mentioned earlier, the first-half actually looks a little bit stronger than expected, particularly on the notebook side. We are potentially expecting some weakness in the second-half due to consumer spending. You have two forces [at work]: one is a pull with the strong work from home trends. But then there’s also the view that from a macro standpoint, will be weaker in the second-half of the year. So that’s the primary variance in our model is what happens to the PC market…”
The company reiterated plans to launch its latest “Milan” line of CPUs by the end of calendar 2020.