AMD Predicts Double-Digit Revenue Growth In 2018, Ramps Up GPU Production

As it made clear in its earnings call, AMD capped off a turnaround year, in every sense of the word, as it raked in a $204 million in profit. That's a stark improvement over its $372 million loss in 2016.

AMD CEO Dr. Lisa Su mentioned the company's commitment to its continuing work on the Spectre and Meltdown mitigations. Su said the company doesn't expect any undue financial impacts from those efforts and will bake in silicon-based mitigations for Spectre in its forthcoming Zen 2 design. This is similar to Intel's announcement that it would have silicon-based mitigations out this year.

Su also noted that GPU supply in the channel is low, which isn't a surprise to anyone who has shopped for a graphics card lately, but the company is ramping up GPU production. Su specified that the company has plenty of silicon supply from its foundry partners, meaning GPUs aren't the limiting factor--instead, it's the ongoing GDDR5 and HBM shortages that are primarily to blame. Su expects graphics demand to be strong throughout the first half of 2018, with blockchain (mining) continuing to play a big role. Su also noted that although it's hard to quantify accurately, crypto mining contributed roughly 10% (or possibly more) of the company's annual revenue and a third of the company's $140 million in sequential growth.

AMD's $1.48 billion in Q417 revenue was up 24% YoY but down 10% quarter-over-quarter. That was expected due to the normal seasonal downturn in its semi-custom business. Overall, the company increased its 2017 revenue by more than a billion dollars compared to 2016.

AMD lumps its computing and graphics segments together in its financial reporting. The $985 million in revenue for these segments was up 60% YoY and 17% quarter-over-quarter.

ADM's graphics ASP (Average Selling Price) increased YoY and on the quarter due to strong sales in both desktop GPUs and the professional segment. Its Q4 professional graphics revenue was the best in the company's history. This comes partly due to growing data center sales and a sales win with Radeon Instinct GPUs to a large unnamed cloud provider. AMD also recently appointed two industry veterans to head up RTG, which should further improve the outlook in the future. AMD is also on track to deliver a 7nm GPU designed for machine learning before the end of the year.

As expected, the processor segment performed well. ASPs increased YoY but were flat sequentially. Su explained the flat ASPs were partially due to sales from the newly-introduced Ryzen 3 processors, which retail for much less than the Ryzen 5 and 7 models. Su also highlighted strong holiday sales, which we recently covered in depth. (We'll have updated Q4 desktop market share numbers in the coming days.)

AMD said the Zen 2 design phase is complete and that the processors will ship to partners this year. The company is also actively working on 7nm CPUs.

AMD's Enterprise, Embedded, and Semi-Custom division grew 3% YoY, which was an improvement over the flat trend in Q3. The improvement was due to increased enterprise sales that offset the expected seasonal decline in the Semi-Custom division. AMD noted that it continues to make significant headway into the enterprise market, including a recent win with Baidu for single-socket servers. Su also mentioned an upcoming server OEM announcement from Dell.

AMD's 34% gross margin in 2017 (up 3% YoY) was driven largely by Ryzen ASPs. The company projects a 36% gross margin in Q1 as it continues towards its goal of 45%.

AMD received a one-time credit of $18 million due to the recently passed U.S. tax reform. The company predicts it will pay a tax rate of 10% in 2018. Like Intel, AMD also updated its risk factors to reflect potential financial impacts of Meltdown and Spectre:

AMD's efforts to prevent and address security vulnerabilities can be costly and may be partially effective or not successful at all. For instance, AMD's mitigation efforts, including the deployment of software or firmware updates to address security vulnerabilities, could result in unintended consequences such as adverse performance system operation issues and reboots. AMD may also depend on third parties, such as customers, vendors and end users to deploy AMD's mitigations or create their own, and they may delay, decline or modify the implementation of such mitigations. AMD's relationships with its customers could be adversely affected as some of its customers may stop purchasing AMD products, reduce or delay future purchases of AMD products, or use competing products. Any of these actions by AMD's customers could adversely affect its revenue. AMD is also subject to claims related to the recently disclosed side-channel exploits, such as "Spectre" and "Meltdown," and may face claims or litigation for future vulnerabilities. Actual or perceived security vulnerabilities of AMD products may subject AMD to adverse publicity, damage to its brand and reputation, and could materially harm AMD's business or financial results.

Aside from those potential pitfalls, which could also impact every other major processor vendor, AMD had a great year that marked its return to growth and profitability. AMD also made a strong projection of $1.5 billion in revenue for Q118. Su further predicted double-digit revenue growth in 2018.

The increased revenue will help the company to further invest in R&D as it continues to improve upon its existing architectures. AMD's OEM partners will roll out over 60 OEM desktop platforms this year, which will expand the company's reach into a much larger market segment. AMD also has a string of OEM server rollouts and a strong roadmap for the remainder of the year.

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