North America Equity Research

29 January 2020

Neutral
Advanced Micro Devices AMD, AMD US
Price (28 Jan 20): $50.53
Solid Results and Full Year Guide With Strong
▲ Price Target (Dec-20): $45.00
Broad-Based Growth Across Business Segments Prior (Dec-20): $34.00

AMD reported 4Q19 revenue/non-GAAP EPS of $2.13B/$0.32 above Semiconductors,Semiconductor

consensus/JPMe. Computing & Graphics (C&G) revenue increased 30% Q/Q (up Cap Equipment & Tech Hardware
69% Y/Y) and Enterprise, Embedded and Semi-Custom (EESC) revenues Harlan Sur AC
decreased 11% Q/Q (up 7% Y/Y). AMD’s 1Q20 revenue guidance of $1.80B was (1-415) 315-6700
harlan.sur@jpmorgan.com
below consensus/JPMe on weak semi-custom sales to start the year, though GM
Bloomberg JPMA SUR <GO>
guidance of 46% was better than expectations (on weaker semi-custom sales).
Bill Peterson
AMD’s 2020 revenue and GM guidance was above consensus/JPMe reflecting
(1-415) 315-6766
broad-based revenue growth and strong 2H20 ramp of semi-custom products. bill.peterson@jpmchase.com
AMD anticipates strong growth trends across its business segments with the Andrew Nguyen
highest growth expected in server CPU. In terms of server CPU market share, (1-415) 315-5611
AMD management maintains its expectation of double-digit % unit share by mid- andrew.nguyen@jpmchase.com
2020, but did not provide a view on market share exiting 2020 (we expect AMD to Alexander Kim
discuss market share aspirations at its Analyst Day scheduled for March 5th). (1-415) 315-8828
Nevertheless, we expect AMD to gain client and server CPU market share this alexander.kim@jpmchase.com
year as the team has been executing well on its product roadmap. However, with J.P. Morgan Securities LLC

Intel’s advanced 14nm and 10nm products coming to market this year, we would
Key Changes (FYE Dec)
expect AMD’s share gains to begin to moderate later in the year. We raise our
Prev Cur
estimates and Dec-20 price target for Neutral-rated AMD. Adj. EPS - 20E ($) 0.98 1.16

 Full year guidance above expectations and weighted to the back half of the Quarterly Forecasts (FYE Dec)
year on semi-custom (game console) ramps. AMD expects to achieve ~28%- Adj. EPS ($)
30% revenue growth for full year 2020, slightly ahead of consensus and above 2019A 2020E 2021E
JPMe of 28% and 21%, respectively) with March as the trough quarter. The Q1 0.05 0.19
Q2 0.08 0.22
team expects to achieve ~45% gross margin for the full year (vs.
Q3 0.18 0.35
consensus/JPMe of ~44%) with opex as a percentage of revenue at ~28%. Q4 0.32 0.40
Within AMD’s full year guidance, the semi-custom business is expected to FY 0.63 1.16
remain weak in 1H20 before inflecting in the back half as Sony’s and
Style Exposure
Microsoft’s game consoles are launched in time for the holiday buying season.
Also embedded in AMD’s guidance is the expectation of CPU share gains. Quant Current Hist %Rank (1=Top)
Factors %Rank 6M 1Y 3Y 5Y
 Solid 4Q19 results driven by strong CPU growth offsetting continued Value 81 77 76 87 14
weakness in semi-custom. AMD reported 4Q19 revenues of $2.13B (up 18% Growth 82 89 36 70 77
Q/Q and up 50% Y/Y) above the midpoint guidance and consensus/JPMe of Momentum 5 11 20 3 98
$2.11B/$2.10B. C&G revenue increased 30% Q/Q (up 69% Y/Y) on higher Quality 36 31 30 82 83
client CPU sales. EESC revenues decreased 11% Q/Q (up 7% Y/Y) with lower Low Vol 89 92 88 96 74
semi-custom sales partially offset by double-digit Q/Q growth in server CPU ESGQ 32 20 11 77 86
sales. Datacenter products (CPU/GPU) accounted for ~mid-teens % of revenue
again in 4Q ($320M+/-) again weighted toward CPU though datacenter GPU
sales increased Q/Q. Non-GAAP GM of 44.7% was above guidance/consensus
(44.0%) on product mix (higher Ryzen and EPYC sales / lower semi-custom
sales). Non-GAAP EPS (ex. SBC) of $0.32 was above consensus/JPMe ($0.30).

Sources for: Style Exposure – J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.

See page 9 for analyst certification and important disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.

www.jpmorganmarkets.com
This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

Price Performance Summary Investment Thesis and Valuation

 AMD is improving its competitiveness across CPU and
GPU products with Ryzen, EPYC, and Radeon Vega
platforms and is on track to improve its market share and
drive meaningful revenue growth in the near term. Long
term, we believe share gains are less certain.
 AMD will have to invest heavily in operating expense
(especially R&D) in order to keep pace with the market
leaders, potentially limiting operating leverage.

YTD 1m 3m 12m
 AMD executing well toward its target financial model, but
Abs 10.2% 9.4% 50.0% 150.4% we remain Neutral as shares appear to be fully valued.
Rel 10.8% 10.0% 44.5% 137.9%
 Our Dec 2020 price target of $45 is based on a ~28x
Company Data multiple applied to earnings power exiting 2020E of $0.40
Shares O/S (mn) 272 on an annualized basis ($1.60). We believe AMD’s EPS
52-week range ($) 52.81-19.05 can grow ~25-30% per year over the next few years, and
Market cap ($ mn) 13,752.45 our 28x multiple is in line with projected earnings growth.
Exchange rate 1.00
Free float(%) 99.3% Performance Drivers
3M - Avg daily vol (mn) 54.76
3M - Avg daily val ($ mn) 2,301.0
Volatility (90 Day) 33
Index RUSSELL 2000
BBG BUY|HOLD|SELL 16|22|4

Key Metrics (FYE Dec)

$ in millions FY19A FY20E
Financial Estimates
Revenue 6,731 8,685
Adj. EBIT 571 1,270
Adj. EBITDA 789 1,510
Adj. net income 758 1,420
Adj. EPS 0.63 1.16
BBG EPS 0.62 1.10
Cashflow from operations 493 1,780
FCFF 349 1,660
Margins and Growth
Revenue growth 4.0% 29.0%
EBIT margin 8.5% 14.6%
EBIT growth 26.6% 122.5%
EBITDA margin 11.7% 17.4%
EBITDA growth 27.1% 91.4%
Net margin 11.3% 16.4%
Adj. EPS growth 40.3% 85.4%
Ratios
Adj. tax rate 8.3% 3.0%
Interest cover - -
Net debt/Equity NM NM
Net debt/EBITDA NM NM
ROE 37.0% 40.2%
Valuation
FCFF yield 0.6% 2.7%
Dividend yield - -
EV/EBITDA 16.1 7.3
Adj. P/E 80.5 43.4

Sources for: Performance Drivers – Bloomberg, J.P. Morgan Quantitative and Derivatives Strategy; all other tables are company data and J.P. Morgan estimates.
2

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

 1Q20 revenue guidance below expectations on lower semi-custom sales. AMD

guided 1Q20 revenue down 15% Q/Q (and up 42% Y/Y) to ~$1.80B at the midpoint
vs. consensus/JPMe of $1.87B/$1.85B). AMD expects sequential growth in server
CPUs while client CPUs, GPUs and semi-custom are expected to decline Q/Q. AMD’s
non-GAAP GM guidance of 46.0% was above consensus/JPMe (44.1%/43.5%) and up
130 bps sequentially on product mix (lower semi-custom). AMD’s non-GAAP opex is
expected to be ~$580M (~32% of revenue). AMD expects non-GAAP interest expense,
taxes and other to be ~$18M.

 AMD remains on-track for double-digit % server CPU unit share by mid-2020 as
2nd generation EPYC (Rome) continues ramping. 2nd generation ‘Rome’ platform
continues to ramp across cloud, HPC and enterprise customers helping to drive a
‘strong-double-digit %’ Q/Q increase in shipments and revenue in 4Q19 (we estimate
exceeding $250M in the quarter) with further sequential growth expected in 1Q20.
Based on solid customer momentum, AMD maintains its expectation of double-digit %
share of its served available market (SAM) by mid-year 2020. However, the team did
not provide market share expectations exiting 2020. We remind investors that, with
Intel’s Cascade Lake continuing to ramp, Cooper Lake ramping in 1H20 and 10nm Ice
Lake toward the end of 2020, AMD will be facing stronger competition in this
segment. Thus, as we look into the back half of this year and beyond, we expect
AMD’s share gains in server CPU to moderate.

 Solid execution on client PC CPU roadmap. Following 2019 when AMD launched
3rd generation Ryzen desktop processors on 7nm, AMD will ship 3rd generation Ryzen
Threadripper 3990X (64-core, 7nm) on February 7th. In addition, AMD has begun
shipping Ryzen 4000 series mobile processors with additional systems shipping later in
1Q20. AMD expects 100 Ryzen-based notebooks to be shipped in 2020. Based on
AMD’s outlook and taking into account Intel’s supply shortages, we believe AMD will
likely gain share in 1H20 ahead of broader Intel 10nm product launches.

 Semi-custom to ramp in 2H20 on next-generation console launches. We estimate

semi-custom declined in the mid-30% range Y/Y overall in 2019, or worse than
previously expected (with 2H19 even weaker than expected). And, while console
demand remains weak in the near-term (AMD expects negligible semi-custom sales in
1Q20), we expect demand to meaningfully improve ahead of console refreshes by
Microsoft and Sony in 2H20 (AMD expects semi-custom revenue in 2020 to be 80+%
weighted to 2H20). Moreover, on a full-year view, AMD anticipates double-digit
semi-custom growth in 2020.

 Raising Dec-20 price target for Neutral-rated AMD. We expect AMD to drive solid
top-line growth and margin expansion over the next few years as its product portfolio
has become more competitive. We raise our estimates and Dec-20 price target for
Neutral-rated AMD.

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

AMD 4Q19 Earnings Summary and 1Q20 Guidance

Table 1 illustrates AMD’s 4Q19 earnings summary and 1Q20 guidance. Table 2
illustrates AMD’s market segment performance.
Table 1: AMD 4Q19 Earnings Summary and 1Q20 Outlook
$ in billions, %, except per share data
4Q19 1Q20E
Consensus JPM Est Actual Δ Consensus Guidance
Revenue ($B) $2.11 $2.10 $2.13 $0.03 $1.87 $1.80 +/- $0.05
Q/Q Change 16.6% 18.1% 1.5% down ~15.4%
Gross Margin 44.0% 44.0% 44.7% 0.7% 44.1% ~46%
Op Margin 18.5% 19.0% 0.5%
EPS (ex. SBC) $0.30 $0.30 $0.32 $0.02 $0.21
Source: Company reports, Bloomberg and J.P. Morgan estimates, * Non-GAAP

Table 2: AMD Market Segment Summary - 4Q19

$ in millions, %
4Q19
Revenue % of Total Q/Q Growth Op Margin
Computing & Graphics $1,662 78.1% 30.3% 21.7%
Enterprise, Embedded & Semi-Custom $465 21.9% -11.4% 9.7%
Other $0 0.0% NM
TOTAL $2,127 100.0% 18.1% 16.4%
Source: Company reports and J.P. Morgan calculations.

Computing and Graphics’ sequential revenue increase of 30% was driven primarily
by higher client CPU (desktop and notebook) sales. Enterprise, Embedded and Semi-
Custom sequential revenue decrease of 11% was primarily driven by lower semi-
custom sales partially offset by higher EPYC server processor sales.

Balance Sheet and Cash Flow Items

Cash and short term investments increased by $294M Q/Q to $1.50B in 4Q19.
AMD’s inventory decreased by $58M Q/Q from $1.04B in 3Q19 to $0.98B in 4Q19.
DSOs increased by 9 days to 80 days in 4Q19, vs. the 5-year average of 59 days.
AMD paid down further debt in the quarter and as of 4Q19 has gross leverage of
0.5x.

Raising Estimates
Our CY20 revenue / non-GAAP EPS estimates move to $8.69 / $1.16 from our prior
estimates of $8.13 / $0.98.

Investment Thesis, Valuation and Risks

Advanced Micro Devices (Neutral; Price Target: $45.00)
Investment Thesis
Although AMD has improved its competitiveness across CPU and GPU products
with Ryzen, EPYC, and Radeon platforms and is on track to improve its market
share and drive meaningful revenue growth in the near term, we believe long-term
share gains are less certain. In addition, AMD will have to invest heavily in operating
expense (especially R&D) in order to keep pace with the market leaders. While we

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

are encouraged by AMD’s execution, we remain Neutral as shares appear to be fully

valued.

Valuation
Our December 2020 price target of $45 is based on a ~28x multiple applied to
earnings power exiting 2020E of $0.40 on an annualized basis ($1.60). We believe
AMD’s EPS can grow ~25-30% per year over the next few years, and our 28x
multiple is in line with projected earnings growth.

Risks to Rating and Price Target

AMD typically derives ~50% of its revenue from the core PC end market, which is
highly correlated with macroeconomic conditions. If the PC end market is
weaker/stronger than expected, this could lead to a decrease/increase in
microprocessor and GPU shipments, which could result in a downward/upward
revision of our revenue and EPS estimates for AMD.

AMD competes with Intel and NVIDIA in the microprocessor and graphics markets,
respectively. Therefore, any material share gains/losses could result in upside /
downside to our revenue and EPS estimates, which could cause us to reassess our
Neutral rating on AMD.

Appendix I: Valuation and Comp Table

Table 3: Semiconductor Comp and Group Valuation Table
1/28/2020 Consensus Consensus Consensus Consensus
JPM Market 1/28/20 Non-GAAP EPS P/E Revenue P/S EV/Sales Non-GAAP EPS Sales P/E P/S
Rating Cap Price C19E C20E C19E C20E C19E C20E C19E C20E C19E C20E C19E C20E C19E C20E C19E C20E C19E C20E
Harlan Sur, Lead Coverage
phone: 415-315-6700, email: harlan.sur@jpmchase.com
PC Semiconductors
INTC OW $294,347 $67.31 $4.87 $5.05 13.8 13.3 $71,965 $74,000 4.1 4.0 4.2 4.1 $4.87 $4.97 $72,000 $73,602 13.8 13.5 4.1 4.0
NVDA OW $153,245 $247.97 $5.56 $7.50 44.6 33.0 $10,762 $12,875 14.2 11.9 13.4 11.2 $5.28 $7.10 $10,520 $12,683 47.0 34.9 14.6 12.1
AMD N $60,030 $50.53 $0.63 $1.16 80.2 43.6 $6,731 $8,685 8.9 6.9 8.3 6.5 $0.64 $1.10 $6,731 $8,566 79.0 45.9 8.9 7.0
Memory
MU OW $63,755 $56.47 $3.82 $3.02 14.8 18.7 $20,637 $22,002 3.1 2.9 2.9 2.8 $3.35 $3.08 $20,256 $21,584 16.9 18.3 3.1 3.0
WDC N $20,249 $68.41 $1.21 $3.92 56.5 17.5 $15,509 $17,302 1.3 1.2 1.8 1.6 $1.26 $4.86 $15,571 $17,346 54.5 14.1 1.3 1.2
Enterprise/Networking/Datacenter Semiconductors
XLNX UW $24,929 $98.61 $3.90 $3.31 25.3 29.8 $3,237 $3,371 7.7 7.4 7.2 6.9 $3.82 $3.65 $3,235 $3,433 25.8 27.1 7.7 7.3
MRVL OW $17,593 $26.33 $0.65 $0.93 40.8 28.5 $2,666 $3,031 6.6 5.8 7.3 6.4 $0.68 $0.87 $2,703 $3,014 38.7 30.2 6.5 5.8
AVGO OW $132,417 $318.31 $20.92 $23.99 15.2 13.3 $22,892 $25,265 5.8 5.2 6.9 6.3 $21.17 $23.72 $22,749 $25,356 15.0 13.4 5.8 5.2
MLNX NR $6,731 $118.64 $6.48 N/A 18.3 N/A $1,286 N/A 5.2 N/A 4.6 N/A $6.50 $7.20 $1,285 $1,405 18.3 16.5 5.2 4.8
IPHI OW $3,655 $80.29 $1.58 $2.10 50.7 38.3 $363 $445 10.1 8.2 10.3 8.4 $1.58 $2.12 $363 $463 50.8 37.9 10.1 7.9
Mobile Devices
SWKS N $20,556 $119.79 $6.02 $6.99 19.9 17.1 $3,301 $3,629 6.2 5.7 5.9 5.3 $6.02 $6.91 $3,301 $3,622 19.9 17.3 6.2 5.7
QRVO OW $13,562 $113.56 $5.77 $6.69 19.7 17.0 $3,113 $3,409 4.4 4.0 4.4 4.0 $5.77 $6.29 $3,113 $3,333 19.7 18.0 4.4 4.1
KN UW $1,926 $20.52 $1.12 $1.26 18.3 16.3 $858 $909 2.2 2.1 2.3 2.2 $1.12 $1.29 $858 $906 18.3 15.9 2.2 2.1
Analog/Microcontrollers
TXN OW $121,382 $128.04 $5.24 $5.15 24.4 24.9 $14,383 $14,255 8.4 8.5 8.4 8.4 $5.47 $5.16 $14,383 $14,326 23.4 24.8 8.4 8.5
ADI N $42,590 $114.31 $4.81 $4.85 23.8 23.6 $5,750 $5,756 7.4 7.4 8.2 8.2 $4.92 $5.02 $5,832 $5,783 23.2 22.8 7.3 7.4
NXPI N $37,617 $132.68 $7.58 $8.60 17.5 15.4 $8,846 $9,370 4.3 4.0 4.8 4.5 $7.60 $8.46 $8,856 $9,367 17.5 15.7 4.2 4.0
MCHP OW $26,602 $104.20 $5.54 $6.10 18.8 17.1 $5,248 $5,416 5.1 4.9 6.6 6.4 $5.59 $6.12 $5,268 $5,532 18.7 17.0 5.0 4.8
MXIM OW $16,967 $62.09 $2.16 $2.73 28.7 22.7 $2,183 $2,388 7.8 7.1 7.4 6.7 $2.17 $2.42 $2,183 $2,298 28.6 25.7 7.8 7.4
MXL N $1,513 $21.20 $0.79 $0.82 26.7 25.8 $317 $321 4.8 4.7 5.3 5.2 $0.79 $0.82 $317 $319 26.8 25.9 4.8 4.7
Diversified/Consumer/Standard Components/Other
ON N $9,919 $24.17 $1.50 $1.60 16.1 15.1 $5,491 $5,675 1.8 1.7 2.3 2.2 $1.51 $1.60 $5,491 $5,711 16.0 15.1 1.8 1.7
MTSI UW $1,740 $26.27 N/A $0.46 N/A 57.0 $464 $491 3.8 3.5 4.9 4.6 ($0.52) $0.38 $461 $485 (50.5) 69.0 3.8 3.6
VSH N $3,106 $21.42 $1.32 $1.15 16.2 18.6 $2,659 $2,610 1.2 1.2 1.1 1.1 $1.31 $1.10 $2,659 $2,554 16.3 19.4 1.2 1.2
CY NR $9,077 $23.38 $1.11 N/A 21.0 N/A $2,216 N/A 4.1 N/A 4.1 N/A $1.11 $1.25 $2,210 $2,349 21.1 18.7 4.1 3.9
Semiconductor Capital Equipment
AMAT OW $56,037 $60.19 $3.16 $4.18 19.1 14.4 $14,955 $17,275 3.7 3.2 3.8 3.3 $3.12 $3.81 $14,842 $16,560 19.3 15.8 3.8 3.4
LRCX OW $45,459 $301.69 $14.30 $17.96 21.1 16.8 $9,466 $10,748 4.8 4.2 4.5 4.0 $14.35 $14.35 $9,476 $10,562 21.0 21.0 4.8 4.3
KLAC OW $28,172 $175.93 $8.60 $10.30 20.4 17.1 $5,244 $5,725 5.4 4.9 5.6 5.2 $8.65 $8.65 $5,255 $5,724 20.3 20.3 5.4 4.9
Large Cap Semi Average 28.4 21.0 7.1 6.6 20.7 19.7 7.1 6.6
Small-Mid Cap Semi Average 25.1 27.2 4.4 3.8 16.5 26.8 4.4 3.9
Semi Group Average (ex-outliers) 22.9 23.6 5.3 5.1 18.6 23.2 5.3 5.0
SOX Index 1,893 89 109 21.2 17.4 $404 5.2 4.7 21.2 17.4 5.2 4.7
S&P500 3,276 174 193 18.8 17.0 $1,513 2.3 2.2 18.8 17.0 2.3 2.2

Source: Company reports, Bloomberg and J.P. Morgan estimates. Prices are as of market close 1/28/20.

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

Appendix II: Financial Tables

Table 4: AMD Income Statement
$ in millions, except per share data
FY end: Dec. F17 1Q18 2Q18 3Q18 4Q18 F18 1Q19 2Q19 3Q19 4Q19 F19 1Q20E 2Q20E 3Q20E 4Q20E F20E
Total revenue 5,253 1,647 1,756 1,653 1,419 6,475 1,272 1,531 1,801 2,127 6,731 1,800 1,962 2,413 2,510 8,685
% Change Y/Y 23.0% 39.8% 52.6% 4.4% 5.9% 23.3% -22.8% -12.8% 9.0% 49.9% 4.0% 41.5% 28.2% 34.0% 18.0% 29.0%
% Change Q/Q 22.9% 6.6% -5.9% -14.2% -10.4% 20.4% 17.6% 18.1% -15.4% 9.0% 23.0% 4.0%
Cost of goods s old (Non-GAAP) 3,464 1,049 1,103 991 836 3,979 750 908 1,022 1,177 3,857 972 1,079 1,340 1,386 4,777
Gross margin (Non-GAAP) 1,789 598 653 662 583 2,496 522 623 779 950 2,874 828 883 1,073 1,124 3,908
Gros s margin (Non-GAAP) - % 34.1% 36.3% 37.2% 40.0% 41.1% 38.5% 41.0% 40.7% 43.3% 44.7% 42.7% 46.0% 45.0% 44.5% 44.8% 45.0%
SG&A (GAAP) 516 134 142 148 138 562 170 189 185 206 750 200 200 200 200 800
% Total revenue 9.8% 8.1% 8.1% 9.0% 9.7% 8.7% 13.4% 12.3% 10.3% 9.7% 11.1% 11.1% 10.2% 8.3% 8.0% 9.2%
R&D (GAAP) 1,196 343 357 363 371 1,434 373 373 406 395 1,547 430 450 475 475 1,830
% Total revenue 22.8% 20.8% 20.3% 22.0% 26.1% 22.1% 29.3% 24.4% 22.5% 18.6% 23.0% 23.9% 22.9% 19.7% 18.9% 21.1%
Other Op Incom e/Loss (Including licensing) (52) 0 0 0 0 0 (60) 0 0 0 (60) 0 0 0 0 0

Operating Expens e (GAAP) 1,660 477 499 511 509 1,996 483 562 591 601 2,237 630 650 675 675 2,630
% Total revenue 31.6% 29.0% 28.4% 30.9% 35.9% 30.8% 38.0% 36.7% 32.8% 28.3% 33.2% 35.0% 33.1% 28.0% 26.9% 30.3%
Operating income (GAAP) 127 120 153 150 28 451 38 59 186 348 631 196 231 396 447 1,270
% Total revenue 2.4% 7.3% 8.7% 9.1% 2.0% 7.0% 3.0% 3.9% 10.3% 16.4% 9.4% 10.9% 11.8% 16.4% 17.8% 14.6%
Operating Expens e (Non-GAAP) 1,565 446 467 476 474 1,863 438 512 539 545 2,034 580 600 625 625 2,430
% Total revenue 29.8% 27.1% 26.6% 28.8% 33.4% 28.8% 34.4% 33.4% 29.9% 25.6% 30.2% 32.2% 30.6% 25.9% 24.9% 28.0%
Operating income (Non-GAAP) 224 152 186 186 109 633 84 111 240 405 840 248 283 448 499 1,478
% Total revenue 4.3% 9.2% 10.6% 11.3% 7.7% 9.8% 6.6% 7.3% 13.3% 19.0% 12.5% 13.8% 14.4% 18.6% 19.9% 17.0%
Other income (expense) - GAAP (135) (30) (19) (36) (25) (110) (34) (22) (60) (143) (259) (13) (14) (11) (8) (46)

Pretax income (GAAP) (8) 90 134 114 3 341 4 37 126 205 372 183 217 385 439 1,224
Income Tax (GAAP) 18 8 6 12 (35) (9) (13) 2 7 35 31 5 7 12 13 36
Tax rate -225.0% 8.9% 4.5% 10.5% -1167% -2.6% -325.0% 5.4% 5.6% 17% 8.3% 2.7% 3.0% 3.0% 3.0% 3.0%
Net income before JV income (GAAP) (26) 82 128 102 38 350 17 35 119 170 341 178 210 374 426 1,188
Non-controlling interest + Class B preferred accretion (starting
(7) 1Q09)
(1) (1) 0 0 (2) (1) 0 1 0 0 0 0 0 0 0
Net income (GAAP) (33) 81 127 102 38 348 16 35 120 170 341 178 210 374 426 1,188
% Total revenue -0.5% 5.0% 7.3% 6.2% 2.7% 5.4% 1.3% 2.3% 6.6% 8.0% 5.1% 9.9% 10.7% 15.5% 17.0% 13.7%

Shares (diluted - GAAP) 973 1,039 1,147 1,076 1,079 1,085 1,094 1,109 1,117 1,188 1,127 1,187 1,189 1,191 1,193 1,190

EPS (GAAP) ($0.03) $0.08 $0.11 $0.09 $0.04 $0.32 $0.01 $0.03 $0.11 $0.14 $0.30 $0.15 $0.18 $0.31 $0.36 $1.00
% Change Y/Y NM NM NM 50.0% NM NM -87.5% -72.7% 22.2% 257.5% -6.3% 1400.0% 500.0% 181.8% 151.7% 233.3%
% Change Q/Q NM 37.5% -18.2% -55.6% -75.0% 200.0% 266.7% 30.0% 4.9% 20.0% 72.2% 16.1%

Shares (fully diluted - Non-GAAP) 1,039 1,140 1,147 1,177 1,180 1,161 1,195 1,210 1,212 1,216 1,208 1,218 1,220 1,222 1,224 1,221

EPS (Non-GAAP) $0.10 $0.11 $0.14 $0.13 $0.08 $0.45 $0.05 $0.08 $0.18 $0.32 $0.63 $0.19 $0.22 $0.35 $0.40 $1.16
% Change Y/Y NM 5570.5% NM 48.6% 937.0% 350.0% -54.5% -42.9% 38.5% 293.8% 40.0% 280.0% 175.0% 94.4% 27.0% 84.1%
% Change Q/Q 1325.9% 27.3% -7.1% -38.5% -37.5% 60.0% 125.0% 75.0% -39.7% 15.8% 59.1% 14.3%

Source: Company reports and J.P. Morgan estimates.

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
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Table 5: AMD Balance Sheet

$ in millions
Assets
Cash and equivalent & ST Investm ent 1,045 983 1,056 1,156 1,194 1,128 1,209 1,503 2,227 2,230 2,548 3,163
Accounts receivable 738 1,118 1,207 1,235 1,241 1,333 1,393 1,859 1,484 1,682 1,724 1,655
Inventories 715 750 738 845 955 1,015 1,040 982 876 973 1,073 1,041
Deferred tax assets and other 0 0 0 0 0 0 0 0 0 0 0 0
Other current assets 253 248 313 304 287 278 270 253 275 275 275 275
Total current assets 2,751 3,099 3,314 3,540 3,677 3,754 3,912 4,597 4,862 5,160 5,621 6,133
PP&E, net 290 295 318 348 377 458 453 500 473 446 419 392
Joint venture investments 57 57 58 58 57 58 59 58 58 58 58 58
Goodwill/intangibles 289 289 289 289 289 289 289 289 289 289 289 289
Other assets 376 363 368 321 531 543 540 584 575 575 575 575
Total assets 3,763 4,103 4,347 4,556 4,931 5,102 5,253 6,028 6,257 6,528 6,962 7,447

Liabilities
Short-term Debt 223 223 136 136 70 0 0 0 0 0 0 0
Accounts payable 456 520 508 528 484 828 763 988 988 988 988 988
Accrued com pensation & benefits 374 475 533 533 446 201 215 213 213 213 213 213
Accrued liabilities 485 577 688 763 719 727 837 1,084 1,084 1,084 1,084 1,084
Deferred incom e on shipments to disti 0 0 0 0 0 0 0 0 0 0 0 0
Current portion of LT liabilities 0 0 0 0 0 0 0 0 0 0 0 0
Income tax payable 0 0 0 0 0 0 0 0 0 0 0 0
Other Current Liabilities 159 73 13 24 45 48 49 74 74 74 74 74
Total current liabilities 1,697 1,868 1,878 1,984 1,764 1,804 1,864 2,359 2,359 2,359 2,359 2,359
Long-term debt 1,165 1,170 1,167 1,114 1,024 1,031 934 486 486 486 486 486
Deferred tax liabilities 0 0 0 0 0 0 0 0 0 0 0 0
Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0
Other long term liabilities 186 186 177 192 355 366 366 356 356 356 356 356
Total long term liabilities 1,351 1,356 1,344 1,306 1,379 1,397 1,300 842 842 842 842 842
Total liabilities 3,048 3,224 3,222 3,290 3,143 3,201 3,164 3,201 3,201 3,201 3,201 3,201
Total shareholders' equities 715 879 1,125 1,266 1,788 1,901 2,089 2,827 3,056 3,327 3,761 4,246
Total liability and stockholders' equity 3,763 4,103 4,347 4,556 4,931 5,102 5,253 6,028 6,257 6,528 6,962 7,447

Source: Company reports and J.P. Morgan estimates.

Table 6: AMD Cash Flow Statement

$ in millions
FY End: Dec. 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20E 2Q20E 3Q20E 4Q20E
Net Income 81.0 127.0 102.0 38.0 16.0 35.0 120.0 170.0 178.2 210.4 373.9 425.7
Depreciation 41.0 39.0 38.0 39.0 43.0 49.0 57.0 57.0 57.0 57.0 57.0 57.0
Amortization 3.0 3.0 3.0 4.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0
Equity in loss of Spansion/ATMP
Stock based compensation expense 32.0 33.0 36.0 36.0 41.0 45.0 54.0 57.0 52.0 52.0 52.0 52.0
Others 12.0 -3.0 18.0 79.0 22.0 26.0 73.0 76.0 5.0 5.0 5.0 5.0
Adjustments to Operating Assets
Change in Receivables (284.0) (380.0) (89.0) (53.0) (5.0) (93.0) (60.0) (466.0) 375.5 (198.2) (42.0) 69.0
Changes in Inventory (21.0) (35.0) 12.0 (107.0) (110.0) (60.0) (25.0) 58.0 105.6 (96.5) (100.5) 32.5
Changes in Other Assets 49.0 0.0 (69.0) (78.0) (9.0) 4.0 22.0 17.0 (22.0) 0.0 0.0 0.0
Adjustments to Operating Liabilities
Changes in ST Debt
Changes in Account Payables (38.0) 147.0 12.0 0.0 (87.0) (100.0) 8.0 225.0 0.0 0.0 0.0 0.0
Changes in Other Liabilities 39.0 24.0 32.0 112.0 (127.0) 121.0 (18.0) 245.0 0.0 0.0 0.0 0.0
Net Cash Provided by Operating Activities (86.0) (45.0) 95.0 70.0 (213.0) 30.0 234.0 442.0 754.3 32.7 348.4 644.1

Change in ST Investments
Capital Equipment Acquisitions - net (46.0) (43.0) (33.0) (41.0) (62.0) (58.0) (55.0) (42.0) (30.0) (30.0) (30.0) (30.0)
Acquisitions
Other investing activities (35.0) 25.0 3.0 (111.0) 51.0 112.0 16.0
Net Cash Provided by Investing Activities (46.0) (78.0) (8.0) (38.0) (173.0) (7.0) 57.0 (26.0) (30.0) (30.0) (30.0) (30.0)

Net Sales of Common, Preferred Stock 6.0 0.0 0.0 64.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Proceeds from borrowing, net 0.0 0.0 (15.0) (26.0) (164.0) (70.0) (97.0) (107.0) 0.0 0.0 0.0 0.0
Other Financing Activities (14.0) 28.0 23.0 (38.0) 449.0 32.0 (1.0) 0.0 0.0 0.0 0.0 0.0
Net Cash Provided by Financing Activities (8.0) 28.0 8.0 0.0 286.0 (38.0) (98.0) (107.0) 0.0 0.0 0.0 0.0
Effect of exchange rate changes on cash

Cash and Equivalents at Beginning 1,209.0 1,069.0 974.0 1,069.0 1,101.0 1,001.0 986.0 1,179.0 1,488.0 2,212.3 2,215.0 2,533.4
Net Change in Cash (140.0) (95.0) 95.0 32.0 (100.0) (15.0) 193.0 309.0 724.3 2.7 318.4 614.1
Cash and Equivalents at End of Period 1,069.0 974.0 1,069.0 1,101.0 1,001.0 986.0 1,179.0 1,488.0 2,212.3 2,215.0 2,533.4 3,147.5
Source: Company reports and J.P. Morgan estimates.

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
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Advanced Micro Devices: Summary of Financials

Income Statement - Annual FY18A FY19A FY20E FY21E FY22E Income Statement - Quarterly 1Q20E 2Q20E 3Q20E 4Q20E
Revenue 6,475 6,731 8,685 - - Revenue 1,800 1,962 2,413 2,510
COGS (4,028) (3,863) (4,785) - - COGS (974) (1,081) (1,342) (1,388)
Gross profit 2,447 2,868 3,900 - - Gross profit 826 881 1,071 1,122
SG&A (562) (750) (800) - - SG&A (200) (200) (200) (200)
Adj. EBITDA 621 789 1,510 - - Adj. EBITDA 256 291 456 507
D&A (170) (218) (240) - - D&A (60) (60) (60) (60)
Adj. EBIT 451 571 1,270 - - Adj. EBIT 196 231 396 447
Net Interest - - - - - Net Interest - - - -
Adj. PBT 341 372 1,224 - - Adj. PBT 183 217 385 439
Tax 9 (31) (36) - - Tax (5) (7) (12) (13)
Minority Interest (2) 0 0 - - Minority Interest 0 0 0 0
Adj. Net Income 519 758 1,420 - - Adj. Net Income 236 268 432 484
Reported EPS 0.30 0.28 0.97 - - Reported EPS 0.15 0.17 0.31 0.35
Adj. EPS 0.45 0.63 1.16 - - Adj. EPS 0.19 0.22 0.35 0.40
DPS - - - - - DPS - - - -
Payout ratio - - - - - Payout ratio - - - -
Shares outstanding 1,161 1,208 1,221 - - Shares outstanding 1,218 1,220 1,222 1,224
Balance Sheet & Cash Flow Statement FY18A FY19A FY20E FY21E FY22E Ratio Analysis FY18A FY19A FY20E FY21E FY22E
Cash and cash equivalents 1,156 1,503 3,163 - - Gross margin 37.8% 42.6% 44.9% - -
Accounts receivable 1,235 1,859 1,655 - - EBITDA margin 9.6% 11.7% 17.4% - -
Inventories 845 982 1,041 - - EBIT margin 7.0% 8.5% 14.6% - -
Other current assets 304 253 275 - - Net profit margin 8.0% 11.3% 16.4% - -
Current assets 3,540 4,597 6,133 - -
PP&E 348 500 392 - - ROE 55.7% 37.0% 40.2% - -
LT investments 58 58 58 - - ROA 12.8% 14.3% 21.1% - -
Other non current assets 610 873 864 - - ROCE 19.5% 18.0% 30.6% - -
Total assets 4,556 6,028 7,447 - - SG&A/Sales 8.7% 11.1% 9.2% - -
Net debt/equity 0.1 NM NM - -
Short term borrowings 136 0 0 - -
Payables 528 988 988 - - P/E (x) 113.0 80.5 43.4 - -
Other short term liabilities 1,320 1,371 1,371 - - P/BV (x) 46.3 21.6 14.5 - -
Current liabilities 1,984 2,359 2,359 - - EV/EBITDA (x) 22.3 16.1 7.3 - -
Long-term debt 1,114 486 486 - - Dividend Yield - - - - -
Other long term liabilities 192 356 356 - -
Total liabilities 3,290 3,201 3,201 - - Sales/Assets (x) 1.6 1.3 1.3 - -
Shareholders' equity 1,266 2,827 4,246 - - Interest cover (x) - - - - -
Minority interests 0 0 0 - - Operating leverage 2155.1% 673.0% 422.0% - -
Total liabilities & equity 4,556 6,028 7,447 - -
BVPS 1.09 2.34 3.48 - - Revenue y/y Growth 23.3% 4.0% 29.0% - -
y/y Growth 90.1% 114.6% 48.6% - - EBITDA y/y Growth 183.6% 27.1% 91.4% - -
Net debt/(cash) 94 (1,017) (2,677) - - Tax rate 2.6% 8.3% 3.0% - -
Adj. Net Income y/y Growth 403.9% 46.1% 87.4% - -
Cash flow from operating activities 34 493 1,780 - - EPS y/y Growth 350.9% 40.3% 85.4% - -
o/w Depreciation & amortization 170 218 240 - - DPS y/y Growth - - - - -
o/w Changes in working capital (727) (460) 123 - -
Cash flow from investing activities (170) (149) (120) - -
o/w Capital expenditure (163) (144) (120) - -
as % of sales 2.5% 2.1% 1.4% - -
Cash flow from financing activities 28 43 0 - -
o/w Dividends paid - - - - -
o/w Net debt issued/(repaid) (41) (438) 0 - -
Net change in cash (108) 387 1,660 - -
Adj. Free cash flow to firm (129) 349 1,660 - -
y/y Growth 514.3% (370.5%) 375.5% - -
Source: Company reports and J.P. Morgan estimates.
Note: $ in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

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Advanced Micro Devices (AMD, AMD US) Price Chart Date Rating Price ($) Price Target
($)
01-Feb-17 N 10.37 10
85 N $16 N $18 N $33 02-May-17 N 13.62 11.5
26-Jul-17 N 14.11 16
N $11.5 N $15.5 N $25 26-Apr-18 N 9.71 13
68
26-Jul-18 N 16.05 15.5
N $10 N $13 N $20 N $34 25-Oct-18 N 22.79 18
51 30-Jan-19 N 19.25 20
Price($)
01-May-19 N 27.63 25
34 31-Jul-19 N 33.87 33
30-Oct-19 N 33.03 34

17

0
Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan
17 17 17 17 18 18 18 18 19 19 19 19 20

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Sep 12, 2002. All share prices are as of market close on the previous business day.

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10

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11

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

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12

This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.
 Harlan Sur North America Equity Research
(1-415) 315-6700 29 January 2020
harlan.sur@jpmorgan.com

"Other Disclosures" last revised January 01, 2020.

Copyright 2020 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$J&098$#*P

13
Completed 29 Jan 2020 01:12 AM EST Disseminated 29 Jan 2020 01:25 AM EST
This document is being provided for the exclusive use of CHRISTOPHER Olson at JPMorgan Chase & Co. and clients of J.P. Morgan.