AMD, one of the world’s leading chip companies, has reported a 49% YoY growth in its Q4 2021 revenue to $4.8 billion while increasing its gross margin by 560 basis points from the same period in 2020. For 2021, its revenue grew 68% YoY to $16.4 billion and the gross margin increased by 370 basis points due to strong data center revenues and high-end processor sales. Data center business contributed to ~25% of AMD’s overall revenues for 2021.

Company Strategy for 2021
The revenues reflect the company’s strategy to focus on high-margin data center products and high-end Ryzen processors for 2021 as semiconductor shortages persisted throughout the year along with supply chain hiccups.

Source: Company Earnings, Counterpoint Estimates

Annual Segment Updates:

Computing and graphics

The segment’s revenues grew 45% YoY to $9.3 billion in 2021. A 57% increase in the average selling price (ASP) and a higher mix of the latest Ryzen processors along with high-end GPU cards drove the segment’s revenues and profitability to record levels since 2011.

Client launches in 2021

AMD launched the Ryzen 5000 series and Ryzen PRO 5000 series mobile processors powered by the Zen 3 core architecture for business laptops built on 7 nm.

AMD expanded its graphic cards portfolio by launching the Radeon RX 6700 XT built on 7 nm process technology and AMD RDNA 2 gaming architecture, as well as the Radeon RX 6600 XT graphics card that delivers a high frame rate, high fidelity and highly responsive 1080p gaming experience. In mobile graphics, Radeon RX 6000M series was launched for high-performance gaming laptops.

Enterprise, Embedded and Semi-Custom

The revenue grew 113% YoY to $7.1 billion due to EPYC processor and MI200 accelerator sales in HPC (high performance computing), and Cloud and Supercomputer wins. Besides, demand from gaming consoles, automotive and IoT contributed to the segment's growth.

Data center launches in 2021

AMD launched the Instinct MI200 series accelerators based on the 2nd Gen AMD CDNA architecture, optimized for HPC and AI/ML (artificial intelligence/machine learning) workloads. Next-generation AMD EPYC processors – AMD EPYC 7003 series CPUs boasting 64 Zen 3 cores per processor for HPC, cloud and enterprise customers, were also launched.

Analyst takeaways and company outlook for 2022

• AMD estimates a 31% YoY annual revenue growth for 2022 to ~$21.5 billion.
• Data center revenues to be ~30% of overall revenues.
• Xilinx acquisition creates synergies for its embedded portfolio for other industry segments including IoT, automotive and networking.

AMD will gain market share in the server segment due to the launch of Genoa, its next-generation EPYC processors that feature 96 Zen 4 cores and next-generation memory and I/O technologies. Besides, the ‘Infinity Fabric’, which provides greater efficiencies by connecting CPU and GPU, will play a pivotal role in AMD’s market share considering the accelerator portfolio has established itself as a catalyst in AMD’s data center segment.

The diversification through the successful acquisition of Xilinx has unlocked opportunities for AMD to capture the demand from the networking industry and create an end-to-end solution portfolio for specialized workloads.

For the client side, we see demand correction as the COVID-19 pandemic-led demand subsides in the PC market. However, the compute refresh cycles in enterprise and increased demand from premium ultrathin/thin laptops will offset some of the demand correction, as indicated by the launch of its processors and SKUs at CES 2022.