AMD Posts Transitional First Quarter Ahead of Rome Launch

By Tiffany Trader

May 2, 2019

On the eve of its 50th anniversary, Advanced Micro Devices (AMD) reported sales of $1.27 billion for Q1 2019, down 10 percent quarter-over-quarter and 23 percent year-over-year. Despite the drop, revenue came in above Wall Street’s expectations, and AMD is continuing its push to win back datacenter market share ceded to Intel over the last decade.

This was something of a transitional quarter for the company as it prepares to launch its 7-nanometer products, the next-gen Rome Epyc processor and the Navi GPU, in the second half of 2019. [Note, AMD’s Vega-based GPUs, including the MI50 and M60 Instinct cards, are already on 7nm]. Rome is set to begin production shipments in the second quarter, followed by a third quarter launch. Thus AMD is in position to offer 7nm processors ahead of Intel’s 10nm Xeons, which aren’t expected until 2020.

“When we developed our plan, our datacenter business was always more second half weighted and continues to be so because much of that is dependent on platforms that are launching around our Rome product portfolio,” said CEO Lisa Su during Tuesday’s earnings call.

CEO Lisa Su presents AMD’s datacenter roadmap at Next Horizon event in November 2018

“We made excellent progress in the quarter achieving key production milestones [for Rome] with our largest OEM and cloud customers,” said Su. “We’re very excited about the performance of Rome, which is on track to deliver four times the floating point performance and double the compute performance per socket compared to our current generation Eypc processors.”

Su was non-specific about the market share percentages for the Epyc line at the end of Q1, but said AMD remains on-track for “double digits” by end of this year. In its heyday in the mid-2000s, AMD’s datacenter share peaked at about 30 percent before the company backed out of the market. Since launching Epyc in mid-2017, AMD says it has gone from 0.2 percent market share to 5 percent by the end of 2018.

“Epyc processor channel sales [are] increasing sequentially,” Su shared, citing growing HPC and regional cloud service provider deployments. “In the enterprise, we added dozens of new customers across the aerospace, health care, automotive and telecom industries based on the superior performance of Epyc processors in big data and general-purpose virtualized workloads.”

Su also highlighted the company’s work with Amazon, which this year rolled out AMD-based offerings to additional regions and launched three new Epyc-backed EC2 instance families, including the first T3 series instance.

As we’ve covered previously, AMD has racked up a number of recent wins in HPC, with Lawrence Livermore National Lab (Penguin Computing), NERSC (Cray), and the High-Performance Computing Center of the University of Stuttgart (HPE), and the Finnish IT Center for Science Ltd (Atos) having all contracted for Epyc-based systems. A number of F1 racing teams have also deployed Eypc-powered servers.

The server market is the strongest driver of growth for the company. Overall, in the datacenter, Su said CPU and GPU sales accounted for a mid-teens percentage of quarterly revenue. Ryzen, Epyc and datacenter GPU revenue more than doubled year-over-year, said the CEO, helping expand the gross margin by 5 percentage points. AMD also gained $60 million from its licensing deal with Thatic.

Su said she expects that first-gen Epyc Naples will continue to be important as Rome ramps up. “We would expect that there will be a good amount of time where we will have both Naples and Rome in the market at the same point in time,” she said. “And that just depends on qualification cycles, platform needs and some platforms are being refreshed right away. Some platforms are going to take a little bit longer to be refreshed.”

One topic missing from the earnings call – surprisingly, given its importance to AMD – was the single-socket market. AMD’s first-mover play here recently got the attention of Intel, which reportedly has launched its own single-socket compatible processors. AMD believes up to 80 percent of the dual-socket market today can be serviced through single-socket. The assertion is backed up by a recent white paper from Gartner and Dell. “By 2021, dedicated x86 single-socket servers will be able to address 80 percent of the workloads in use in enterprise datacenters, up from 20 percent in 2018,” the report stated.

AMD’s guidance for Q2, at $1.52 billion, is up 19 percent sequentially but down 13 percent year over year. The YoY decline, attributed to lower semi-custom revenue and the falloff of blockchain-related GPU revenue, is partially offset by expected increased server revenue – some of it tied to early shipments for Rome in play for Q2.

The market responded chaotically to Tuesday’s earnings results. Shares climbed more than 6 percent in after-hours trading, but the gain was short-lived. On Wednesday shares closed at $26.81, 2.8 percent below Tuesday’s opening price of $27.59. AMD stock is up 50 percent since the beginning of the year.

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