Today AMD announced their third quarter earnings for the fiscal year 2016. Revenue was up to $1.307 billion, up 23% from a year ago.  However their operating income and net income were not quite so lucky, with AMD showing an operating loss of $293 million for the quarter, compared to a $158 million operating loss a year ago, and net AMD showed a loss of $406 million, or $0.50 per share, compared to a net loss of $197 million, or $0.25 per share, a year ago.

AMD Q3 2016 Financial Results (GAAP)
 Q3'2016Q2'2016Q3'2015
Revenue$1307M$1027M$1061M
Gross Margin5%31%23%
Operating Income-$293M-$8M-$158M
Net Income-$406M+$69M-$197M
Earnings Per Share-$0.50$0.08-$0.25

AMD took a charge of $340 million this quarter for their sixth amendment to the wafer supply agreement with GlobalFoundries. This has been excluded in their Non-GAAP measures to show the core business, where they had the same $1.307 billion revenue, but showed an operating income of $70 million for the quarter, compared to an operating loss of $97 million a year ago. Non-GAAP net income for the quarter was $27 million, compared to a $136 million loss in Q3 2015.

AMD Q3 2016 Financial Results (Non-GAAP)
 Q3'2016Q2'2016Q3'2015
Revenue$1307M$1027M$1061M
Gross Margin31%31%23%
Operating Income$70M$3M-$97M
Net Income$27M-$40M-$136M
Earnings Per Share$0.03-$0.05-$0.17

Thanks to the charge, gross margin in GAAP terms was an abysmal 5% for the quarter, but Non-GAAP was 31%.

AMD’s Computing and Graphics segment had revenue of $472 million this quarter, which is up 11% from Q3 2015. Increased sales of GPUs are attributed to the gain, but the gain was offset by a drop in desktop processor sales, though they have seen an increase in sales of notebook processors. This segment continues to be unprofitable, having an operating loss of $66 million this quarter, but that is much better than the $181 million operating loss a year ago. Once again, GPU revenue has helped here tremendously. GPU average selling price (ASP) increased with higher channel and professional graphics ASPs. CPU ASP was flat year-over-year.

AMD Q3 2016 Computing and Graphics
 Q3'2016Q2'2016Q3'2015
Revenue$472M$435M$424M
Operating Income-$66M-$81M-$181M

Enterprise, Embedded, and Semi-Custom continues to grow, and has easily surpassed the Computing and Graphics division, with revenues of $835 million, which is up 31% year-over-year. Semi-custom SoC sales continue to be the bright spot for AMD, with AMD have locked up both current generation consoles in the Xbox One, and PlayStation 4, and their refreshes in the Xbox One S and PlayStation 4 Pro, as well as the upcoming Xbox Project Scorpio. Best of all for AMD, this segment continues to be profitable, with an operating income of $136 million this quarter, up from $84 million a year ago.

AMD Q3 2016 Enterprise, Embedded, and Semi-Custom
 Q3'2016Q2'2016Q3'2015
Revenue$835M$592M$637M
Operating Income$136M$84M$84M

AMD plunked the wafer agreement charge right into their All Other category, which had an operating loss of $363 million this quarter, compared to an $11 million loss last quarter, and a $61 million loss in Q3 2015.

AMD has seen success with its Polaris architecture in the GPU space, and they hope to see some success with their upcoming Zen CPU architecture, with their Summit Ridge desktop processor and a 32-core, 64-thread server product code named Naples.

Looking forward to next quarter, AMD expects revenues to decrease 18%, plus or minus 3%.

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