AMD revenue shrinks to lowest since 2003 and losses are climbing

AMD announced a second-quarter revenue of $942 million, the lowest sales level the company reported since 2003 as revenue collapsed 34.6 percent year-over-year. Losses seem to be climbing as well, on a GAAP basis the loss came in at $181 million, which is roughly the same as the previous quarter, but the non-GAAP loss, which exclude all "one-time" items, soared from minus $73 million in Q1 2015 to minus $131 million in Q2 2015.

Overall the figures were in-line with expectations, which isn't really a surprise as the firm issued a revenue warning last week. AMD CEO blames the poor figures on poorer than expected consumer demand for the firm's processors. Since a couple of quarters ago, AMD is no longer reporting segment revenue for client processors and video cards separately so we can only guess how big the carnage in AMD's processor unit is. The Computing and Graphics segment revenue declined 29 percent quarter-over-quarter and collapsed 54 percent from Q2 2014. Enterprise, Embedded and Semi-Custom revenue on the other hand rose 13 percent versus the previous quarter, but declined 8 percent year-over-year due to decreased server sales and lower non-recurring engineering (NRE) revenue.

For the current quarter, AMD expects revenue to increase 6 percent, plus or minus 3 percent, sequentially. After dropping 4.59 percent during regular trading hours, AMD shares gained 2.67 percent in after-hours trading as the figures were somewhat better than the market feared.

?AMD (NASDAQ:AMD) today announced revenue for the second quarter of 2015 of $942 million, operating loss of $137 million, and net loss of $181 million, or $0.23 per share. Non-GAAP1 operating loss was $87 million and non-GAAP1 net loss was $131 million, or $0.17 per share.

“Strong sequential revenue growth in our EESC segment and channel business was not enough to offset near-term challenges in our PC processor business due to lower than expected consumer demand that impacted sales to OEMs,” said Dr. Lisa Su, AMD president and CEO. “We continue to execute our long-term strategy while we navigate the current market environment. Our focus is on developing leadership computing and graphics products capable of driving profitable share growth across our target markets.”

Q2 2015 Results

Revenue of $942 million, down 8 percent sequentially and 35 percent year-over-year. The sequential decrease was primarily due to weaker than expected consumer PC demand impacting the company’s Original Equipment Manufacturer (OEM) APU sales. The year-over-year decline was primarily due to decreased sales across client and graphics product lines.

Gross margin of 25 percent, down 7 percentage points sequentially, primarily due to a higher mix of Enterprise, Embedded and Semi-Custom segment sales, lower than anticipated Computing and Graphics segment APU unit volumes, and a charge of approximately $33 million associated with a technology node transition from 20 nanometer (nm) to FinFET. Non-GAAP1 gross margin, excluding the impact of the $33 million charge was 28 percent.

Operating loss of $137 million, compared to an operating loss of $137 million for the prior quarter. Non-GAAP1 operating loss of $87 million, compared to non-GAAP1 operating loss of $30 million in Q1 2015, primarily due to lower revenue and gross margin driven by lower sales to OEMs attributable to a weak consumer PC market.

Net loss of $181 million, loss per share of $0.23, and non-GAAP1 net loss of $131 million, non-GAAP1 loss per share of $0.17, compared to a net loss of $180 million, loss per share of $0.23 and non-GAAP1 net loss of $73 million, non-GAAP1 loss per share of $0.09 in Q1 2015.

Cash, cash equivalents, and marketable securities were $829 million at the end of the quarter, down $77 million from the end of the prior quarter.

Total debt at the end of the quarter was $2.27 billion, flat from the prior quarter.

Financial Segment Summary

Computing and Graphics segment revenue decreased 29 percent sequentially and 54 percent from Q2 2014. The sequential decrease was primarily due to decreased sales to OEMs of client notebook processors and the annual decrease was driven by decreased sales across client and graphics product lines.

Operating loss was $147 million, compared with an operating loss of $75 million in Q1 2015 and an operating loss of $6 million in Q2 2014. The sequential decrease was primarily driven by lower notebook processor sales. The year-over-year decrease was primarily driven by lower sales partially offset by lower operating expenses.

Client average selling price (ASP) increased sequentially and year-over-year primarily driven by product mix.

GPU ASP increased sequentially and year-over-year primarily due to higher channel and desktop GPU ASPs.

Enterprise, Embedded and Semi-Custom segment revenue increased 13 percent sequentially, primarily driven by higher sales of semi-custom SoCs. The year-over-year decrease of 8 percent was primarily driven by decreased server sales and lower non-recurring engineering (NRE) revenue.

Operating income was $27 million compared with $45 million in Q1 2015 and $97 million in Q2 2014. The sequential decrease was primarily driven by the technology node transition charge of $33 million. The year-over-year decrease was primarily driven by lower revenue and the technology node transition charge.

All Other category operating loss was $17 million compared with operating losses of $107 million in Q1 2015 and $28 million in Q2 2014. The sequential improvement was primarily due to charges in Q1 2015 associated with exiting the dense server systems business. The year-over-year change was primarily due to lower stock-based compensation expense and the absence of amortization of acquired intangible assets.