How AMD Has Overcome Its Previous Issues

by Trefis Team
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The last two years have been fantastic for AMD (NYSE:AMD) investors. The stock has jumped nearly 6-fold since the beginning of 2016 as AMD has shown that it is still capable of regaining some market share from Intel and Nvidia. The company has launched very competitive CPUs and GPUs in the last few quarters. For instance, its Ryzen desktop CPU has helped it gain market share this year and has led to a nearly 30% jump in its average prices. However, prior to 2016, AMD was struggling. It was consistently losing share to competitors and grappling with losses. Despite the recent turnaround, there is still some risk with the company. For instance, AMD has barely managed to remain profitable and lowered its Q4 2017 outlook during the last earnings announcement. In this note we take a look at the company’s previous struggles, how it overcame them, and the risks it faces going forward. For more details, seeĀ our interactive breakdown of AMD’s growth history.

Our price estimate for AMD stands at $10, implying a slight discount to the market price.

AMD’s Revenue and EBITDA Declined Sharply Between 2012 and 2016

Between 2012 and 2016, AMD’s revenue fell more than 20%, while its adjusted EBITDA declined nearly 45%. The company lost market share across key segments including CPUs and GPUs. Its PC CPU market share fell from 27.4% to 18.7%, while its server microprocessor share shrank to just 1%. In addition, the company lost GPU market share to Nvidia in both notebooks and desktops.

Computing and Graphics Division Suffered the Most

Between 2012 and 2016, AMD’s Computing and Graphics segment revenue fell 59% and the division went into the red. AMD lost significant share in the CPU and GPU markets to Intel and Nvidia, respectively. In particular, it fell significantly behind Intel in process technology, andĀ faced numerous product delays which led to customers switching to newer and advanced Intel CPUs.

However, Embedded & Semi-Custom Revenue Grew Sharply

Amid this trouble, the silver lining was that AMD continued to expand fast in the Enterprise, Embedded and Semi-Custom segment, where it saw its revenue jump from $700 million to $2.7 billion. The company benefited from growth in the number of connected devices and gaming console shipments.

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