On Further Thought: Key Takeaways From AMD’s Q3 Earnings

AMD (NYSE:AMD) announced its Q3 2016 earnings after market close on Thursday, October 20th 2016. We published our earnings review on the following day.  Given the company’s position at this junction, we believe there is more to say.  In this analysis we discuss three key takeaways from the company’s Q3’16 earnings:

Strong Polaris GPU Sales Driving AMD’s Top-Line: AMD launched its GPUs based on the 14 nanometer Polaris architecture towards the end of the second quarter this year. Hence, Q3 was the first quarter, in which we could actually witness the impact of the Polaris GPUs on AMD’s top-line. It is worth noting that the company’s revenue from its computing and graphics segment increased by 9% sequentially and 11% on a year-over-year basis, clearly showing that the company’s newly launched Polaris GPUs are gaining traction in the market.

Less Interest Burden For AMD Going Ahead: AMD’s debt declined by $606 million and cash position improved by $101 million in Q3, as the company executed concurrent public offerings of its common stock and convertible senior notes during the quarter. Going forward, this should help the company reduce interest expense payments, and support the investments required for growing its business.

R&D Spend Likely To Increase Going Forward: With a strong product pipeline and significant design wins for its existing products, AMD’s top-line should expand going forward. The company is likely to increase its R&D spending along with the revenue growth. AMD’s management indicated in the Q3 earnings call that they can foresee several opportunities where they can expand their R&D spend.

We are in the process of updating our model for AMD

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