The first quarter of every year marks a seasonal downturn for computer and console sales, but you wouldn’t know that to look at AMD’s financials. For weeks, we’ve been waiting to see what Ryzen would do for the company’s bottom line, and the results, given that they apply to just one month out of the quarter, do not disappoint. While AMD hasn’t quite charted its way back to profitability, it’s on the road to doing so.
Q1 2017 revenue was $984 million, up from $832 million for the same period in 2016. The company’s operating loss of $29 million was significantly lower than last year, when it reported a $68 million operating loss. Net loss was $73 million and $109 million in Q1 2017 versus Q1 206. Overall revenue was up 1.18x across both of AMD’s business segments: Compute Graphics (that’s CPU GPU) and Enterprise, Embedded, and Semicustom (everything else, including Xbox One and PS4). Gross margins improved by two percentage points, up two points year-over-year, and AMD’s revenue from its CPU GPU segment grew by a whopping 1.29x.
These are remarkably good results considering Ryzen 7 only began shipping in early March. Ryzen 5, which wasn’t available until April, isn’t included in these figures — Q2 2017 will be the first period in which AMD had its midrange and high-end CPUs in market for the entire three-month quarter. PC market revenue typically decline significantly (7-13 percent) in Q1, though the fact that the PC market as a whole is in overall decline has made it more difficult to estimate how much of the Q1 drop is strictly seasonal and how much of it is related to the generally shrinking PC market. The decline in the EESC (Enterprise, Embedded and Semicustom) market was seasonal, though overall sales were still higher than in Q1 2016 thanks to increased revenue (likely driven by higher royalty rates on the PS4 Pro as compared with the original PS4). The decline in operating profit was due to RD costs related to AMD’s upcoming server processor launch.
We can’t intuit market share from overall revenue, not when the price gap between AMD’s old CPU cores and its newer Ryzen processors is as large as it is. According to the WayBack Machine, AMD had four CPUs in Amazon’s Top 20 back on October 11, 2016, with a maximum CPU price of $188.98 (#17, the FX-8370). As of this writing, AMD has seven CPUs in the Top 20 (it’s been as high as 9, with 6-7 being fairly common) with a maximum CPU price of $464.99 (#14, the 1800X). Now that we have the company’s Q1 2017 results, we can confirm our earlier general estimates were correct — AMD’s average selling price (ASP) has definitely improved, as have its margins. If you haven’t had a chance to read through our Ryzen 7 or Ryzen 5 reviews, our Ryzen 7 benchmark results are also shown below (all slides can be clicked on to open them in a new window).
What we don’t know, and can’t know yet, is whether these improvements are being primarily driven by long-suffering AMD fans who waited in the wilderness for half a decade for a high-performing CPU core, or if some percentage of the total represents former Intel users who leapt for Ryzen and its promise of six-and-eight-core processors for a fraction of what Intel sells them for. The Steam Hardware Survey shows AMD having slipped slightly, from 21.89% in February to 20.28% in April, but I wouldn’t put too much stock in those figures when the gap is this small — much was made of Steam showing a slight decline in Windows 10 usage earlier this year, but that proved to be little more than some noise in the data.
Naples, Raven Ridge, and Vega in 2017
AMD’s busy year is only just beginning. The company will launch its Naples server CPUs this quarter, with up to 32 cores per CPU. The company also affirmed its next-generation GPU architecture, codenamed Vega, will debut in Q2 2017 as well.
Later this year, AMD will also unveil Raven Ridge, its new APU solution with a Ryzen CPU core and an on-die GPU. These chips — which are also more-or-less to correspond to the introduction of any kind of mobile Ryzen platform — will be critical to AMD’s market position and long-term market success. The bulk of the PC market these days is laptops, not desktops (DIY enthusiasts notwithstanding), and if AMD wants to recover the market share it enjoyed 5-6 years ago, it’ll need laptop chips to do it.
The good news, based on what we’ve seen from Ryzen to-date, fielding those cores shouldn’t be a problem. A Polaris-derived GPU with DDR4-3200 or higher should be a significant update from Kaveri / Carrizo, and the Ryzen CPU core offers vastly higher performance and better performance per watt than anything AMD fielded from the Bulldozer era.
AMD is forecasting a further Q2 2017 revenue increase of 17 percent, plus or minus 3 percent. The midpoint of this guidance would be a 12% increase from AMD’s financial performance in Q2 2016. AMD expects to increase total 2017 revenue by a low double-digit percentage increase, and to achieve non-GAAP net income. Inventory levels for the full year are also expected to be down relative to 2016.