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Advanced Micro Devices and Intel Showing Signs of Stabilization

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AMD’s business segments at a glance

In the previous part of the series, we saw that in fiscal 2Q16, Advanced Micro Devices (AMD) returned to profits and reported revenue growth. The company expects this momentum to continue in fiscal 3Q16, driven by strong demand for GPUs (graphics processing units) and APUs (application processing units).

The company earns revenues from two business segments: CG (Computing and Graphics) and EESC (Embedded, Enterprise, and Semi-Custom). Losses from the first segment were more than offset by profits from the second segment. Let’s look at these segments in detail.

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Financial performance of Computing and Graphics segment

AMD’s CG segment is comprised of the company’s GPUs and CPUs (central processing units) for PCs (personal computers) and notebooks. This segment has been posting losses since Intel (INTC) and Nvidia (NVDA) took the market for high-margin products, leaving the low-margin product market for AMD. However, the second half of the year is seasonally strong, and revenue increases sequentially.

In fiscal 2Q16, AMD reported its first revenue growth from CG in more than a year. The segment’s revenue rose 15% YoY (year-over-year) to $435 million, driven by strong demand for notebook processors and GPUs. On a sequential basis, CG revenue fell 5% as strong GPU sales were offset by weak desktop processor sales.

The segment’s operating loss narrowed from $147 million in fiscal 2Q15 to $81 million in fiscal 2Q16. This was despite a decline in the ASP (average selling price) of notebook APUs and GPUs. The losses narrowed as the company’s restructuring efforts led to cost savings.

Computing at AMD

Fiscal 2Q16 was the third consecutive quarter that AMD reported revenue growth in mobile APUs used in notebooks. Even Intel reported only a 3% YoY decline in client computing revenue. These are signs of stabilization in the PC market. It’s evident from IDC’s (International Data Corporation) 2Q16 data.

According to the data, PC shipments fell 4.5% YoY in 2Q16 compared to the expected decline of 7.4%. It was far less than the 11.5% YoY decline in 1Q16.

AMD expects new products to drive revenue growth in fiscal 3Q16. Recently, the company launched its seventh-generation mobile APUs: Bristol Ridge and Stony Ridge. It has already secured 25 design wins for these APUs from Acer, Dell, Hewlett-Packard (HPQ), Asus, Lenovo, and more. It has also been releasing APUs and CPUs on its Carrizo architecture.

Next, we’ll see what’s happening in AMD’s graphics business.

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