AMD vs Intel — Profit Margin Comparison

Computer chips. Pexels Images.

This article presents the financial performance of Advanced Micro Devices (AMD) and Intel Corporation by comparing their profitability and profit margins.

It provides an in-depth analysis of key metrics such as gross profit, operating profit, pre-tax profit, and net profit, offering a well-rounded view of how each company performs financially

Let’s look at the numbers!

For other statistics of AMD, Inc. and Intel Corporation, you may find more information on this page: AMD key stats and Intel key stats.

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Definitions

To help readers understand the content better, the following terms and glossaries have been provided.

Gross Profit: Gross profit is the amount a company earns after subtracting the costs associated with producing and selling its products or providing its services. It’s a key indicator of a company’s financial health and efficiency in managing production costs.

Here’s the formula:

\[\text{Gross Profit} = \text{Revenue – Cost of Goods Sold (COGS)} \]

Gross profit helps to measure a company’s ability to generate profit from its core business operations, excluding indirect costs like administration and marketing expenses.

Operating Profit: Operating profit, also known as operating income or operating earnings, represents the profit a company makes from its core business operations, excluding any income from investments, interest, and taxes.

It’s a crucial measure of a company’s operational efficiency and profitability. Here’s the formula for calculating operating profit:

\[\text{Operating Profit} = \text{Gross Profit – Operating Expenses} \]

Operating expenses include costs such as salaries, rent, utilities, and depreciation. Operating profit provides insight into how well a company is managing its core business activities and controlling its operating costs.

Pre-Tax Profit: Pre-tax profit, also known as pre-tax income or earnings before tax (EBT), represents the profit a company makes before accounting for income taxes.

It’s a measure of a company’s profitability that excludes tax expenses, providing insight into the company’s financial performance before tax obligations are considered.

Here’s the formula for calculating pre-tax profit:

\[\text{Pre-tax Profit} = \text{Operating Profit + Other Income – Other Expenses} \]

Other income may include items like interest earnings, and other expenses might include interest expenses or non-operating costs.

Net Profit: Net profit, also known as net income or net earnings, is the amount of profit a company has left after all expenses have been deducted from total revenue.

These expenses include the cost of goods sold (COGS), operating expenses, interest, taxes, and any other expenses. Net profit is a key indicator of a company’s overall profitability.

Here’s the formula for calculating net profit:

\[\text{Net Profit} = \text{Total Revenue – Total Expenses} \]

Net profit provides a clear picture of a company’s financial health, showing how much profit it actually retains after covering all its costs. It’s often used by investors and analysts to assess a company’s performance and profitability.

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Why was Intel’s profit margin deteriorating?

Intel’s profit margin has faced challenges due to several factors:

• Declining PC Sales: A historic slump in global PC demand has significantly impacted Intel’s revenue, as its personal computing segment is a major contributor to its income.

• Manufacturing Issues: Intel has struggled with longstanding manufacturing inefficiencies, which have hindered its ability to compete effectively with rivals like AMD and TSMC.




• Increased Competition: Competitors such as AMD and Nvidia have gained market share, particularly in data centers and high-performance computing, further pressuring Intel’s margins.

• Economic Headwinds: Broader macroeconomic uncertainties, including inflation and reduced IT spending, have also contributed to weaker profitability.

• Restructuring Costs: Intel has incurred significant expenses related to restructuring efforts aimed at improving operational efficiency.

Despite these challenges, Intel has been working on strategic pivots, such as focusing on AI-driven computing and leveraging government support like the CHIPS Act, to stabilize and improve its financial performance.

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Insight & Summary of AMD and Intel’s Profitability and Margins Comparison

The table below combines all AMD and Intel’s key profitability metrics into a single view for the latest three fiscal years.

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AMD vs Intel: Gross, Operating, Pre-Tax, and Net Profit Numbers

You can find the definitions of all profitability metrics here: gross profit, operating profit, pre-tax profit, and net profit.

The accompanying graph highlights that Intel consistently achieves a much higher gross profit compared to AMD. Similarly, Intel’s operating profit has historically outperformed AMD’s.

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AMD vs Intel: Gross, Operating, Pre-Tax, and Net Profit Margins

You can find the definitions of all profitability metrics here: gross profit, operating profit, pre-tax profit, and net profit.

Intel has historically maintained a strong lead over AMD in terms of gross and operating profit margins, as illustrated in the chart above. However, this advantage has eroded significantly in recent years.

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References and Credits

1. All financial figures presented were obtained and referenced from AMD’s and Intel’s annual reports published on the respective company’s investor relations page: AMD Investor Relations and Intel Investor Relations.

2. Pexels Images.

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Disclosure

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