AMD Reports Fourth Quarter and Annual 2016 Financial Results

Non-GAAP Financial Results(1)
				Q3-16		Q4-15		2016		2015
Revenue		$1.11B		$1.31B		$958M		$4.27B		$3.99B
Operating income (loss)		$26M		$70M		$(39)M		$44M		$(253)M
Net income (loss)		$(8)M		$27M		$(79)M		$(117)M		$(419)M
Earnings (loss) per share		$(0.01)		$0.03		$(0.10)		$(0.14)		$(0.54)

“We met our strategic objectives in 2016, successfully executing our product roadmaps, regaining share in key markets, strengthening our financial foundation, and delivering annual revenue growth,” said Dr. Lisa Su, AMD president and CEO. “As we enter 2017, we are well positioned and on-track to deliver our strongest set of high-performance computing and graphics products in more than a decade.”

• Q4 2016 Results
  • Q4 2016 was a 14-week fiscal quarter compared to 13-week fiscal quarters for Q3 2016 and Q4 2015.
  • Revenue of $1.11 billion was up 15 percent year-over-year, primarily due to higher GPU sales. Revenue was down 15 percent sequentially, primarily driven by seasonally lower sales of semi-custom SoCs.
  • On a GAAP basis, gross margin was 32 percent, up 2 percentage points year-over-year and up 27 percentage points sequentially as Q3 2016 gross margin was negatively impacted by a $340 million charge (WSA charge) related to the sixth amendment of the wafer supply agreement with GLOBALFOUNDRIES. Operating loss was $3 million compared to an operating loss of $49 million a year ago and an operating loss of $293 million in the prior quarter. The year-over-year improvement was primarily due to higher revenue and IP monetization licensing gain while the sequential improvement is primarily due to the absence of the WSA charge offset by lower fourth quarter revenue. Net loss was $51 million compared to a net loss of $102 million a year ago and net loss of $406 million in the prior quarter. Loss per share was $0.06 compared to a loss per share of $0.13 a year ago and loss per share of $0.50 in the prior quarter.
  • On a non-GAAP⁽¹⁾ basis, gross margin was 32 percent, up 2 percentage points year-over-year and up 1 percentage point sequentially primarily due to higher Computing and Graphics segment revenue. Operating income was $26 million compared to an operating loss of $39 million a year ago and operating income of $70 million in the prior quarter. Operating income was lower in the current quarter due to lower revenue. Net loss was $8 million compared to net loss of $79 million a year ago and net income of $27 million in the prior quarter. Loss per share was $0.01 compared to a loss per share of $0.10 a year ago and earnings per share of $0.03 in the prior quarter.
  • Cash and cash equivalents were $1.26 billion at the end of the quarter, up $6 million from the end of the prior quarter.
• Q4 2016 was a 14-week fiscal quarter compared to 13-week fiscal quarters for Q3 2016 and Q4 2015.
• Revenue of $1.11 billion was up 15 percent year-over-year, primarily due to higher GPU sales. Revenue was down 15 percent sequentially, primarily driven by seasonally lower sales of semi-custom SoCs.
• On a GAAP basis, gross margin was 32 percent, up 2 percentage points year-over-year and up 27 percentage points sequentially as Q3 2016 gross margin was negatively impacted by a $340 million charge (WSA charge) related to the sixth amendment of the wafer supply agreement with GLOBALFOUNDRIES. Operating loss was $3 million compared to an operating loss of $49 million a year ago and an operating loss of $293 million in the prior quarter. The year-over-year improvement was primarily due to higher revenue and IP monetization licensing gain while the sequential improvement is primarily due to the absence of the WSA charge offset by lower fourth quarter revenue. Net loss was $51 million compared to a net loss of $102 million a year ago and net loss of $406 million in the prior quarter. Loss per share was $0.06 compared to a loss per share of $0.13 a year ago and loss per share of $0.50 in the prior quarter.
• On a non-GAAP⁽¹⁾ basis, gross margin was 32 percent, up 2 percentage points year-over-year and up 1 percentage point sequentially primarily due to higher Computing and Graphics segment revenue. Operating income was $26 million compared to an operating loss of $39 million a year ago and operating income of $70 million in the prior quarter. Operating income was lower in the current quarter due to lower revenue. Net loss was $8 million compared to net loss of $79 million a year ago and net income of $27 million in the prior quarter. Loss per share was $0.01 compared to a loss per share of $0.10 a year ago and earnings per share of $0.03 in the prior quarter.
• Cash and cash equivalents were $1.26 billion at the end of the quarter, up $6 million from the end of the prior quarter.

• 2016 Annual Results
  • Revenue of $4.27 billion, up 7 percent on an annual basis, increased in both reportable segments.
  • On a GAAP basis, gross margin was 23 percent, down 4 percentage points from the prior year primarily due to the WSA charge. Operating loss was $372 million compared to an operating loss of $481 million in the prior year. Operating loss improvement was due to higher revenue, lower restructuring charges, and an IP monetization licensing gain, offset by the WSA charge. Net loss was $497 million compared to a net loss of $660 million in the prior year. Loss per share was $0.60 compared to a loss per share of $0.84 in 2015.
  • On a non-GAAP⁽¹⁾ basis, gross margin was 31 percent, up 3 percentage points year-over-year primarily due to improved product mix and an inventory write-down recorded in Q3 2015. Operating income was $44 million compared to an operating loss of $253 million in the prior year. Operating income improvement was primarily related to higher revenue and the IP monetization licensing gain. Net loss was $117 million compared to a net loss of $419 million in the prior year. Loss per share was $0.14 compared to a loss per share of $0.54 in 2015.
  • Cash and cash equivalents were $1.26 billion at the end of the year, up from $785 million at the end of the prior year.
• Revenue of $4.27 billion, up 7 percent on an annual basis, increased in both reportable segments.
• On a GAAP basis, gross margin was 23 percent, down 4 percentage points from the prior year primarily due to the WSA charge. Operating loss was $372 million compared to an operating loss of $481 million in the prior year. Operating loss improvement was due to higher revenue, lower restructuring charges, and an IP monetization licensing gain, offset by the WSA charge. Net loss was $497 million compared to a net loss of $660 million in the prior year. Loss per share was $0.60 compared to a loss per share of $0.84 in 2015.
• On a non-GAAP⁽¹⁾ basis, gross margin was 31 percent, up 3 percentage points year-over-year primarily due to improved product mix and an inventory write-down recorded in Q3 2015. Operating income was $44 million compared to an operating loss of $253 million in the prior year. Operating income improvement was primarily related to higher revenue and the IP monetization licensing gain. Net loss was $117 million compared to a net loss of $419 million in the prior year. Loss per share was $0.14 compared to a loss per share of $0.54 in 2015.
• Cash and cash equivalents were $1.26 billion at the end of the year, up from $785 million at the end of the prior year.

Quarterly Financial Segment Summary

• Computing and Graphics segment revenue was $600 million, up 28 percent year-over-year and 27 percent sequentially. The year-over-year increase was primarily driven by higher GPU sales. The sequential increase was primarily due to higher GPU and client processor sales.
  • Operating loss was $21 million, compared to an operating loss of $99 million in Q4 2015 and an operating loss of $66 million in Q3 2016. The year-over-year and sequential improvements were driven primarily by higher revenue.
  • Client average selling price (ASP) was down year-over-year driven by desktop processors, and down sequentially driven by desktop and mobile processors.
  • GPU ASP increased year-over-year due to higher desktop and professional graphics ASPs. GPU ASP increased sequentially due to higher mobile and professional graphics ASPs.
• Operating loss was $21 million, compared to an operating loss of $99 million in Q4 2015 and an operating loss of $66 million in Q3 2016. The year-over-year and sequential improvements were driven primarily by higher revenue.
• Client average selling price (ASP) was down year-over-year driven by desktop processors, and down sequentially driven by desktop and mobile processors.
• GPU ASP increased year-over-year due to higher desktop and professional graphics ASPs. GPU ASP increased sequentially due to higher mobile and professional graphics ASPs.
• Enterprise, Embedded and Semi-Custom segment revenue was $506 million, up 4 percent year-over-year primarily driven by higher embedded and semi-custom SoC revenue. Sequentially, revenue decreased 39 percent due to seasonally lower sales of semi-custom SoCs.
  • Operating income was $47 million compared to $59 million in Q4 2015 and $136 million in Q3 2016. The year-over-year decrease was primarily driven by higher R&D investments in Q4 2016, partially offset by an IP monetization licensing gain. The sequential decrease was primarily due to seasonally lower sales of semi-custom SoCs.
• Operating income was $47 million compared to $59 million in Q4 2015 and $136 million in Q3 2016. The year-over-year decrease was primarily driven by higher R&D investments in Q4 2016, partially offset by an IP monetization licensing gain. The sequential decrease was primarily due to seasonally lower sales of semi-custom SoCs.
• All Other operating loss was $29 million compared with an operating loss of $9 million in Q4 2015 and an operating loss of $363 million in Q3 2016. The year-over-year operating loss increase was primarily related to higher stock-based compensation charges in Q4 2016. The sequential improvement was primarily due to the absence of the WSA charge.

Q4 2016 Highlights

• AMD disclosed new details on its upcoming CPU and GPU architectures and offerings:
  • AMD delivered new details on the architecture, go-to-market plans, and performance of upcoming “Zen”-based processors:
    • Revealed Ryzen, the brand that will span “Zen”-based desktop (codenamed “Summit Ridge”) and notebook (codenamed “Raven Ridge”) products.
    • Introduced AMD SenseMI technology, a set of sensing, adapting, and learning features built into AMD Ryzen processors. AMD SenseMI technology is a key enabler of AMD’s landmark generational increase of greater than 40 percent in instructions per clock with its “Zen” core architecture.
    • Delivered a first look at the impressive gaming capabilities of an AMD Ryzen CPU and Vega GPU-based desktop system running Star Wars: Battlefront – Rogue One in 4K at more than 60 frames per second.
    • Showcased ecosystem readiness and the breadth of partner support for forthcoming Ryzen desktop processors with new AM4 motherboards and ‘Dream PCs’ from global system integrators (SIs), as well as upcoming third-party AM4 thermal solutions.
• AMD delivered new details on the architecture, go-to-market plans, and performance of upcoming “Zen”-based processors:
  • Revealed Ryzen, the brand that will span “Zen”-based desktop (codenamed “Summit Ridge”) and notebook (codenamed “Raven Ridge”) products.
  • Introduced AMD SenseMI technology, a set of sensing, adapting, and learning features built into AMD Ryzen processors. AMD SenseMI technology is a key enabler of AMD’s landmark generational increase of greater than 40 percent in instructions per clock with its “Zen” core architecture.
  • Delivered a first look at the impressive gaming capabilities of an AMD Ryzen CPU and Vega GPU-based desktop system running Star Wars: Battlefront – Rogue One in 4K at more than 60 frames per second.
  • Showcased ecosystem readiness and the breadth of partner support for forthcoming Ryzen desktop processors with new AM4 motherboards and ‘Dream PCs’ from global system integrators (SIs), as well as upcoming third-party AM4 thermal solutions.
• Revealed Ryzen, the brand that will span “Zen”-based desktop (codenamed “Summit Ridge”) and notebook (codenamed “Raven Ridge”) products.
• Introduced AMD SenseMI technology, a set of sensing, adapting, and learning features built into AMD Ryzen processors. AMD SenseMI technology is a key enabler of AMD’s landmark generational increase of greater than 40 percent in instructions per clock with its “Zen” core architecture.
• Delivered a first look at the impressive gaming capabilities of an AMD Ryzen CPU and Vega GPU-based desktop system running Star Wars: Battlefront – Rogue One in 4K at more than 60 frames per second.
• Showcased ecosystem readiness and the breadth of partner support for forthcoming Ryzen desktop processors with new AM4 motherboards and ‘Dream PCs’ from global system integrators (SIs), as well as upcoming third-party AM4 thermal solutions.
• AMD introduced preliminary details of its forthcoming Vega GPU architecture designed to address the most data- and visually-intensive next-generation workloads. Key architecture advancements include a differentiated memory subsystem, next-generation geometry pipeline, new compute engine, and a new pixel engine. GPU products based on the Vega architecture are expected to ship in the second quarter of 2017.
• AMD announced a new collaboration with Google, making Radeon GPU technology available to Google Cloud Platform users worldwide starting in 2017 to help accelerate Google Compute Engine and Google Cloud Machine Learning services.
• To accelerate the machine intelligence era in server computing, AMD unveiled the Radeon Instinct initiative, a new suite of GPU hardware and open-source software offerings designed to dramatically increase performance, efficiency, and ease of implementation of deep learning and high-performance compute (HPC) workloads. Radeon Instinct products are expected to ship in 1H 2017.
• AMD introduced several new products and technologies in the quarter, including:
  • New 7th Generation AMD PRO Processor-based commercial desktops and notebooks from Lenovo.
• New 7th Generation AMD PRO Processor-based commercial desktops and notebooks from Lenovo.
• Radeon Pro WX Series of professional graphics cards based on the Polaris architecture, featuring fourth-generation Graphics Core Next (GCN) technology, and engineered on the 14nm FinFET process.
• A new family of power-efficient graphics processors, the Radeon Pro 400 Series, first available in the all-new 15-inch Apple MacBook Pro.
• Radeon FreeSync 2 technology, the next major milestone in delivering smooth gameplay and advanced pixel integrity to gamers, with planned availability to consumers in 1H 2017, adding to the 100+ FreeSync monitors already available today.
• Radeon Pro Software Enterprise, Radeon Software Crimson ReLive Edition, and updates to the Radeon Open Compute Platform (ROCm) software solutions.

Current Outlook
AMD’s outlook statements are based on current expectations. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under “Cautionary Statement” below.

For Q1 2017, AMD expects revenue to decrease 11 percent sequentially, plus or minus 3 percent. The midpoint of guidance would result in Q1 2017 revenue increasing approximately 18 percent year-over-year. For additional details regarding AMD’s results and outlook please see the CFO commentary posted at quarterlyearnings.amd.com.

AMD Teleconference
AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) today to discuss its fourth quarter and fiscal year 2016 financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at www.amd.com. The webcast will be available for 12 months after the conference call.