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GPU and APU Sales Drove AMD’s Computing and Graphics Revenue

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Jan. 20 2016, Updated 4:00 p.m. ET

Revenue by segment

In the last part of the series, we saw that the revenue fell for Advanced Micro Devices (AMD). It fell 23% YoY (year-over-year) in fiscal 4Q15. Strong sales in the PC processor market were offset by weakness in semi-custom chips. Now, we’ll look at the segment-wise performance and understand the factors that impacted their earnings during the quarter.

AMD operates through two segments—CG (computing and graphics) and EESC (enterprise, embedded and semi-custom).

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CG segment

The CG segment designs CPUs (central processing units), GPUs (graphic processing units), APUs (accelerated processing units), and other chipsets for personal and commercial desktops, notebooks, tablets, and smartphones. The company competes with Intel (INTC) in the CPU space and NVIDIA (NVDA) in the GPU space.

Fiscal 4Q15 performance

The CG segment’s revenue fell 29% YoY to $470 million in fiscal 4Q15. The operating loss widened to $99 million from $56 million in fiscal 4Q14. On a quarterly basis, the segment improved the loss from $181 million in fiscal 3Q15 largely due to a seasonal sales increase and the absence of inventory write-downs. This impacted the segment’s margins in fiscal 3Q15.

The segment reported double-digit sequential revenue growth of 12% and 11% in fiscal 3Q15 and 4Q15. The company expects a slow start in fiscal 2016. It expects growth to increase in fiscal 2H16 when the PC and gaming market is at a seasonal peak.

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APUs

Mobile APU sales rose by double-digits from the previous quarter. Commercial PC APU sales in 2H15 rose by 15% from 1H15. The average selling prices declined. The major decline was in notebook processor prices.

GPUs

The GPU revenue rose sequentially. There was strong demand for its Radeon R9 series among PC gamers. Rival NVIDIA earns more than 80% of its revenue from GPUs. It reported strong growth in fiscal 3Q15 driven by the gaming market. AMD expects the “buzz and interest” trend in virtual reality to drive the future growth of GPUs. As a result, it created the Radeon Technology Group to develop GPUs that compete with NVIDIA.

The company is transitioning its GPU production to Samsung (SSNLF) and GlobalFoundries’ 14-nanometer FinFET process. This would make it competitive with NVIDIA’s GPUs.

In the next part of the series, we’ll look at the performance of the EESC segment in fiscal 4Q15. You can gain exposure in AMD’s competitors through the PowerShares QQQ ETF (QQQ). It has 2.9% exposure in Intel and 0.31% in NVIDIA.

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