What Are The Factors Behind A 50% Growth In AMD’s Revenue Over The Past 2 Years?

by Trefis Team
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Advanced Micro Device’s (NASDAQ: AMD) total revenue has grown from $4.32 billion in 2016 to $6.47 billion in 2018, led primarily by the success of AMD’s Ryzen processors and Radeon graphics cards. These products have helped AMD make a dent in the market share of Intel and Nvidia, and have helped drive revenue growth of around 50% over the past 2 years.
This growth primarily came from the computing and graphics segment, which has grown by $2.14 billion over this period, with enterprise, embedded, and semi-custom bringing in just $20 million.
Going forward, we expect computing and graphics revenue to increase sharply in 2020, led by both Ryzen and Radeon products with AMD’s new 7nm chips.

Takeaway

  • AMD’s Computing and Graphics division, which sells microprocessors and graphics processors for notebooks and desktops, is expected to contribute $4.33 billion to total revenue in 2019, making up 63% of AMD’s total revenue estimate.
  • The Enterprise, Embedded, and Semi-custom division is expected to bring in $2.54 billion in 2019, to make up 37% of the total revenue estimate.
  • The Computing and Graphics division has been the sole driver of revenue growth, and is expected to add $3.21 billion between 2016 and 2020, which is 83% of the additional $3.87 billion that the company is expected to bring in over this period.
  • This strong revenue growth, combined with growing margins and an expanding PE multiple, has been key to AMD’s stock growing 4x since December 2016.
  • In our interactive dashboard AMD Revenue: How Does AMD Make Money?, we discuss AMD’s business model, followed by sections that review past performance and 2020 expectations for AMD’s revenue, including comparisons with close competitors, Intel and Nvidia.

A look at AMD’s segments and their contribution to total revenue

(A) Computing and graphics revenue to grow by $1.07 billion over the next 2 years, to make up 63.5% of total revenue in 2020

  • This segment includes revenue from sales of AMD’s microprocessors and graphics processors, used in both desktops and notebooks.
  • Revenue from this segment has grown from $1.99 billion in 2016 to $4.13 billion in 2018, on the back of strong demand for AMD’s Ryzen processors and Radeon graphics cards.
  • We expect this growth to continue, driving this metric past $5 billion by 2020.

(B) Enterprise, embedded and semi-custom revenue to grow by $650 million by 2020, to make up 36.5% of the total revenue estimate

  • This includes revenue from the sale of embedded processors, semi-custom System-on-Chip (SoC) products, technology for game consoles, and server microprocessors.
  • Revenue from this segment has remained roughly flat over the past 2 years, as AMD has struggled to make a mark in the server and cloud computing segment.
  • However, amidst AMD’s continued acceptance in gaming consoles and efforts to revive its data center business, we expect revenue from this segment to rise to $3 billion by 2020.

 

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