AMD’s Profit Margins Expected to Increase for Third Consecutive Quarter as Ryzen CPUs Get Pricier

AMD is all set to announce its Q2 2021 earnings report in a week (27th July), with analysts expecting another spectacular quarter for the chipmaker. In the first quarter of 2021, AMD reported revenue of $3,445 million or $3.445 billion, an increase of 93% YoY and 6% QoQ, despite the season known for falling PC demand. The semiconductor shortages have all but nullified the seasonality factor, with most chipmakers reporting continued growth across the first half of 2021.

AMD has been the fastest-growing semiconductor company over the last two quarters, beating rivals NVIDIA and Intel by a notable margin. At the same time, its profit margins have also been growing consistently due to increasing ASPs (average selling prices) of its CPUs and GPUs. In this third quarter of 2020, AMD reported a gross profit margin of 44% which grew to 45% in Q4. The first quarter of 2021 pushed this figure up to 46%, and analysts expect it to further increase to 47-48% in the second quarter.

A higher gross margin simply means that AMD is getting more money for its products by increasing the profit margin. This is due to two reasons. Firstly, now that the Zen 3 processors are faster than rival Intel parts both in the gaming and content creation space, the company can charge more for them. As such, you can see that the Ryzen 5000 chips are priced on par or more than the rival Rocket Lake-S parts.

Secondly, the limited supply means that AMD is focusing more on the higher-end parts such as the Ryzen 5 5600X, Ryzen 7 5800X, and Ryzen 9 5900X instead of the 5600 and 5700X. These SKUs come with higher profit margins and make up for the relatively lesser sales which is why AMD’s revenue has continued to grow even through the worst part of the shortages.

On the downside, this means that Intel is starting to gain ground in the budget market. The Ryzen 5 2600/3600 was the most popular processor from AMD over the last two generations. By delaying the launch of a $200 Zen 3 successor, the chipmaker has basically passed the torch to Intel in this segment. The results are quite apparent across multiple markets.

At the same time, it’s worth noting that AMD’s profit margins are a fair bit lower than both NVIDIA and Intel. While NVIDIA has a gross margin of 65%, Intel has a margin of 58%, although it has continued to drop in recent quarters and the trend is expected to continue as the company continues its price war with AMD.

Via: FastTechnology

Areej Syed

Processors, PC gaming, and the past. I have written about computer hardware for over seven years with over 5000 published articles. I started during engineering college and haven't stopped since. On the side, I play RPGs like Baldur's Gate, Dragon Age, Mass Effect, Divinity, and Fallout. Contact: areejs12@hardwaretimes.com.
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