AMD’s Computing business
One company that is handling the market downturn well is Advanced Micro Devices (AMD), as it mitigated the impact of significant declines in consumer graphics with growth in PC CPUs (central processing units). AMD does not state its PC CPU and GPU revenue separately making it difficult to compare it with rivals.
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The PC market has been weak with global PC shipments falling 4.6% YoY in the first quarter, according to Gartner. Despite PC declines, AMD doubled its revenue from Ryzen CPUs by growing its CPU shipments and ASP (average selling price) on a YoY basis in the first quarter. As Intel (INTC) and AMD are the only players in the PC CPU market, it means the decline in shipments was because of Intel, which reported a high-single-digit decline in desktop and notebook platform volumes.
Intel has been suffering from CPU supply shortage, which largely impacted the lower-end CPU market. At the first-quarter earnings call, AMD’s CEO Lisa Su stated that Intel’s supply shortage was “not a huge contributor” to its Computing business, as the shortage was mostly on the lower range.
The first quarter is seasonally weak for the PC market as holiday season sales fade. AMD’s Computing revenue fell 16% sequentially, whereas Intel’s PC CPU revenue fell 8% sequentially in the first quarter.
AMD’s desktop sales outperformed seasonality and grew sequentially driven by strong demand for its high-end Ryzen 7 and Ryzen 5 CPUs. However, strength in desktop was offset by declining ASP of mobile CPU. Intel’s desktop and notebook volumes fell in the mid-teens percentage, but its ASP rose 3% and 9% on a sequential basis.
Lisa Su believes that AMD gained PC CPU unit market share for the sixth straight quarter. According to data from Mercury Research, AMD’s PC CPU market share increased from 20.2% in the first quarter of 2018 to 30.2% in the first quarter of 2019.
Ryzen’s 2019 outlook
AMD expects growth to pick up in the second half and it aims to tap this growth with its third-generation Ryzen desktop CPUs. However, this outlook excludes the impact of the renewed US-China tariff war, under which both countries have raised the tariff to as high as 25%. The new tariffs have created uncertainty around future demand. It remains to be seen how AMD fares in a weak macro environment.
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