It’s been a moment that Lisa Su, the CEO who led the team that brought AMD back to the data center with the vigor the market needs, has been waiting six years for. In the third quarter ended September, AMD’s data center CPU and GPU business crossed the billion dollar sales mark for the first time in a long, long time.
Based on AMD’s statements and our own model, we believe that AMD’s data center CPU and GPU activity increased 38% sequentially from the second quarter of this year and more than doubled. year over year, reaching $ 1.08 billion. From this, we estimate, again based on hints from Su during a call with Wall Street analysts that data center GPU sales have more than doubled from Q3 2020, that Instinct GPU sales rose 110% to $ 263 million, which means Epyc processor sales increased. 24.2% sequentially and 83.4% year-on-year to reach $ 816 million.
The big jump in CPU and GPU sales is due in part to the widespread adoption of AMD’s CPUs and now GPUs among hyperscalers and cloud builders, but the big push came from the early installations of Epyc CPUs. ” Custom Trento ”and Instinct MI200 GPUs from the accelerators that are the core of the“ Frontier ”supercomputer being built by Hewlett Packard Enterprise with help from its Cray division and AMD for Oak Ridge National Laboratory. Earlier this month, we compared and contrasted the Frontier system with the exascale “Aurora” system built by HPE with Intel CPU and GPU engines entering the Argonne National Laboratory. To achieve its performance above 1.5 exaflops, the Frontier system will have over 9,000 Trento Epyc processors and over 36,000 Instinct MI200 accelerators, and as we have been saying for some time, we believe AMD will shoot a “K80 maneuver” and that put two Instinct MI100 GPUs in a single card with doubled memory to make the Instinct MI200. (We’ll see soon enough). So it’s really like having over 72,000 GPUs mated to 72,000 CPUs, since each of the Rome, Naples, and Trento Epyc CPUs all have eight independent CPU chiplets in each socket. This balance might be a coincidence, but we believe it is not.
AMD’s data center business resurrection has come about through courage, determination, contrition, great engineering, and flawless execution, often in the face of adversity (such as when GlobalFoundries increased its efforts to make 10 and 7 nanometer chips one after the other). And now, over the next couple of years, especially in the HPC and AI areas, we’re going to see the work of Su’s team start to pay off, especially with Intel still not pulling it all in. thoroughly.
In the graph above, the rows are not cumulative, so do not add them up. Epyc processors are reserved in the Enterprise, Embedded and Semi-Custom group and GPUs are reserved in the Computing and Graphics group. Over the past two quarters, AMD has been more or less explicit about its combined sales of data center processors and data center GPUs, and this time it said it was in the “mid-1920s. »As a percentage of overall sales.
In the first quarter of 2015, AMD started talking about the “Naples” Epyc 7001 processors and had put a stake in the ground for future GPU accelerators which would become the Radeon Instinct line, then the Instinct line, we think AMD had maybe. be $ 2 million in sales of its Opteron processors and maybe $ 24 million in data center GPU sales for some HPC and AI workloads, and maybe for VDI and crypto mining. cash. Maybe this company had operating income of about $ 8 million. It was basically zero against an Intel with a monopoly on datacenter CPU computing and Nvidia with a monopoly on datacenter GPU computing.
Fast forward to Q3 2021, and processor sales were up 528 times and GPU sales were up 10.8 times. percent of revenue, compared to overall sales of $ 4.31 billion for all products in the third quarter of 2021 and operating profit of $ 948 million (net of operating losses on investments outside of the two groups in the graph above), which represents 22 percent of earnings. AMD has built a profitable data center business that helps fund its future development, which was Su’s goal from the start.
To be frank, AMD is now doing better than we thought it would in 2021, but it didn’t do as well as we thought it would in 2019 and 2020.
We love spreadsheet templates, and in March 2020 we created one for AMD’s data center and PC and game sales, which you can see here in a story titled AMD Determined To Get Its Rightful Share Of Data Center. We thought AMD would have $ 1.01 billion in revenue in 2019 (fourth quarter numbers were not yet known when we built this model), and that turned out to be around $ 986 million. In 2020, we expected AMD data center activity to grow 25% to $ 2.32 billion, but our improved model (based on these Su indexes) shows that it only recorded that about $ 1.85 billion in sales for processors and GPUs for the data center. But, alas, here in 2021, if AMD only does a little better sequentially in Q4 2021, then it will have $ 3.64 billion in data center sales in 2021, which is considerably better than the $ 2.9 billion. of dollars than we expected in 2021. Call it the COVID -19 slide plus a lot more cloud and hyperscaler in reverse. We need to think about what the shape of the curve might look like in 2022, but clearly in 2021, Intel’s delays in fielding its “Ice Lake” and “Sapphire Lake” processors and “Ponte Vecchio” GPUs. . hurt Intel and helped AMD. Nvidia is also resting on its “Ampere” A100 laurels in the data center, but will have to counter with something as Instinct MI200s hit the market.
Add in the PC and gaming parts of the company, and as we said, AMD had third quarter 2021 revenue of $ 4.31 billion, up 54%, and net profit s ‘is established at $ 923 billion, multiplied by 2.4. AMD has eaten up some of its cash, which has fallen to $ 3.61 billion, and says it is still on track to complete its $ 40 billion acquisition of FPGA maker Xilinx by the next month. end of the year. This acquisition is not in any of our models, but a good chunk of Xilinx’s revenue will be in the data center, although there is a lot more sales for use cases integrated with FPGAs. We believe that ADM will separate its data center business from its integrated business once the deal with Xilinx is done, and if AMD doesn’t, well, it should. Xilinx will add around $ 3.2 billion in revenue and around $ 700 million in net income in the year 2022 of AMD, which will add slightly to profits and certainly to revenue. More importantly, this will give AMD access to FPGA compute engines, high-speed interconnect expertise, and the Vitis software stack that can merge fairly well with its ROCm CPU and GPU compute environment. (At least that’s the idea.)
But back to the third quarter of this year. During the period, the Computer and Graphics group grew 43.9% to $ 2.4 billion and posted operating income of $ 513 million, up 33.6%. The Enterprise, Embedded and Semi-Custom group achieved revenue of $ 1.92 billion, up 68.9%, and operating profit increased 3.8-fold to $ 542 million. dollars. The “Milan” Epyc 7003 processors announced in March of this year are hitting their stride.
“We feel very, very good about the server industry and the data center market,” Su said during the call with Wall Street analysts. “I think from a market perspective, we’ve seen a strong market here in 2021 both in the cloud and the enterprise, and we see that continuing through 2022. I think from a competitive position, Milan is extremely well positioned, so we were very happy with Milan’s adoption rate. We said we expected it to grow faster than Rome, and it does. And so, the crossover with Milan in the third quarter is an important measure for that. As we enter the fourth quarter, we continue to see a strong environment. And then, as the competitive environment enters 2022, we still expect the competition to be strong, but we are focused on consistently executing our roadmap and we feel great with Zen 4 in general. . In 2022, I think we are very happy with the competitive positioning there and we continue to believe that data centers are the most strategic part of our business, and we are making good progress with our customers and partners.
The cloud and HPC sold processors from Rome and then Milan, and now that we get to Zen 4 cores and “Genoa” Epyc 7004 processors, companies will finally feel that AMD is a safe bet and that Intel is going to have to keep any activity. this is possible with the SP Sapphire Rapids Xeon. It will be a bloody price war, and Intel will be the one covered in red ink, not AMD. We will see.