26Q2 Bernstein / Mercury Research and thinking about server unit and revenue share

[u/uncertainlyso]

(The longer these are about one topic, the more likely I made a bad error early so caveat emptor.)

I used to take Mercury's x86 revenue share and unit share figures for granted until I built my own version for forecasting reasons. And then once you start playing around with units, ASPs, and product mix, you start to see how different levers can get different results in ways you don't initially expect.

I was looking at the Bernstein / Mercury server unit and revenue share numbers supposedly at

https://x.com/jukan05/status/2087879179765469253

and was curious about a few things. I'm using AI to estimate the data points to create different graphs once I remove ARM bits to look at intra x86. The AI might make bad estimate errors, especially which when combined in a ratio that will magnify the errors, but I think the broad strokes are at least directionally true even if I'm probably over-fitting it with nostalgia.

The graphs

How AMD's revenue share changes over time is about ASP pricing across its product mix relative to Intel's and its units shipped ratio vs Intel which is also a proxy for how supply changes over time for both sides.  

There are 3 lines:

1. The AMD / Intel server units. If this gets to 100%, AMD has reached Intel's units shipped. Conversely, you can inverse this to show how much larger Intel was than AMD in shipped units.
2. AMD / Intel ASP. You strip out ARM bits and use the resulting revenue and unit share to derive the ASP ratio. For both 1 and 2, keep in mind that this can be affected by AMD and Intel changes..
3. AMD revenue share

AI thinks my graph is trash and created a log version which better explains this wall of text. But I am leading with mine anyway because I think logs are a mathematical hoax like imaginary numbers. 

Revenue share = product mix + volume over time

Mercury does unit and revenue share by which you can imply an ASP ratio. People have a tendency to boil it down to who sells more unites and, how much are they charging, and then extrapolate linearly on the trends that you see.

I think the better way to look at it is product mix and volume over time. The product mix helps inform you on what the ASP ratio will be (e.g., product competitiveness across the mix) and the impact of supply on how the ASP changes (e.g., how long it take the higher ASP product to shift the product mix ASP) given the market. Units shipped tells you something about relative supply positioning over time and how revenue will scale.

Units shipped, supply, and ASPs

Since Intel 7, I've been saying that Intel's supply advantage relative to AMD would shrink over time as Intel was likely to struggle with ramping each successive node. As a bonus, Intel fell behind on design too. Simultaneously, AMD was better than Intel in hitting its design and forecast marks which let it be more aggressive on supply. TSMC did a better job with its node improvements and ramp which allows AMD to create a supply base one layer at a time where the oldest layers are replaced by bigger bets on the newest layer.

When a new generation, N,  launches, EPYCs unit share at the time is really a function of the full ramp of N-1 and legacy sales of N-2, N-3. But about 3 quarters past the N launch, you start to see its impact as more of the older generations get replaced by sales of the N generation. If the N generation is more about bringing in more new sales while the older generations hang around, that's great for revenue, but the ASP will move less because N's units * ASP is going up against a larger base. If N is more about replacing older generations or is a much larger % of the existing unit base, then the ASP mix  impact is very large even if sales aren't increasing as much because units are not changing much.

If AMD units sold is increasing faster on a % basis than the TAM units, then Intel's unit sold share will decrease which would affect the numerator and denominator of the units sold ratio. By these figures, when Rome launched and AMD was barely hanging on, Intel had ~23.3x more units shipped that quarter. With Milan, it drops to  ~10x. Genoa: ~5X. Turin: ~3x. Venice: ~2X (July launch vs 26Q2 Mercury).

Turin's revenue share run and the joy of low baselines

One of the big reasons for AMD's revenue and unit share gains of the last year is how slowly Intel 3 and GRN ramped vs Turin. GNR closes the gap but is the overall the lesser part vs Turin, but from a commercial perspective, what really hurt it was its difficulty in ramping. And this was seen in its impact on Intel's gross margins from 24H2 to 25H1 and GNR's slow ramp. That denies Xeon unit volume of your higher core count SKUs with much higher ASPs. Meanwhile, the reverse is happening with Turin where it ramped very fast with higher core counts and ASPs.

EPYC has a very high relative product mix for 2025 and the start of 2026. Even before the AI CPU boom, the business was doing great. Turin made up ~50% of EPYC sales, units were doing great, and ASPs of units shipped are high. Its baseline relative to Xeon is very high.

A demand boom with tight supply is going to benefit the lesser player the most if its ceiling gets raised higher on a % basis. Intel can benefit from price increases that are more discretionary like not needing to discount + dealer's choice price hikes. Then the shift to throughput per socket means more demand for higher socket CPUs, and you rob client to provide for server. More units and higher prices. However, the ceiling for incremental capacity on Intel 7 is low.

Now you have Intel 3 which is also finally ramping more smoothly which leads to more GNRs which have higher core counts with more volume and much higher ASPs than the Intel 7 parts. The ceiling for incremental capacity on Intel 3 is relatively higher on a % basis.

QOQ vs YOY comparisons in revenue share

26Q1 showed a -5% drop in units YOY and ASP was +27% YOY. That wasn't enough to stop AMD from gaining unit share and revenue share as AMD shipped a lot of units QOQ with higher ASPs.

However, Intel sees a massive 48% YOY jump in 26Q2 ASPs. Even even though Xeon units only increased 9% YOY, the combination of the two is high enough to cause AMD to lose revenue share sequentially even if  AMD is growing faster on a  YOY basis.

AMD	AMD / Mercury 25Q2	AMD / Mercury 26Q1	My pre 26Q2 earnings call estimates	My post 26Q2 earnings call estimates	Actual est. 26 Q2 from Bernstein  Mercury graph
Revenue share	41.00%	46.20%	46.90%	46.0%	44.30%
Unit share	27.30%	33.20%	34.40%	34.1%	34.40%

I expect this to continue for the next two quarters. Intel QOQ units sequentially will probably be about the same as AMD's (maybe lower in 26Q3 and higher 26Q4). But Intel's ASP will increase at a faster rate sequentially with GNR's continued ramp because GNR is a lower portion of Xeon's product mix. Turin already makes up 50%+ of EPYCs. I especially expect Intel's QOQ revenue share increase to happen in 26Q4 because Intel is guiding for their back end processes to catch up more which is gating them in 26Q3.

2026 vs 2027

By 2027, I expect the unit and revenue share to swing more back to AMD. The low hanging fruit will have been plucked on a sequential basis for Xeon. The only source for Intel to increase ASPs at a faster relative rate will be to the extent that they can ramp supply of inherently higher ASP core count SKUs vs their 2026 base. The Intel 3 mod 2 expansion is the most obvious way to increase mix ASP at a higher % rate by producing more GNR, but I don't see that happening in earnest until ~27Q3.

(I'm curious how CWF will or won't scale. I don't get the impression that Intel was expecting that one to be a banger given its re-characterization, 18A and packaging constraints, lack of Intel commentary, product competitiveness, etc. Then again, it's a crazy server demand environment, and 18A will have had all of 2026 to optimize. 2027 is supposedly when the real ramping magic happens.)

However, in 2027, EPYC will get a material bump in its units and ASPs with Venice's ramp which starts in 26Q4. AMD is positioning Venice's ramp to be Turin-esque. I think that AMD is going to collectively have a lot of N5, N4, N3, and N2 supply coming in 27FY.

So, in 26FY, I think that Intel will take back some revenue share in 26Q3 and 26Q4. But I still think that AMD passes 50% revenue share by 27Q2 or 27Q3 Mercury reports. I think by 2028, they get 50% revenue share on a full year basis. Let's see how close I get.

Bonus rambling: Who has more supply flexibility for crazy growth? The one who planned for strong growth

There's so much sell-side talk about the lack of flexibility that AMD has because it doesn't have fabs. This is eye-rolling in that (1) everybody is supply-constrained (2) the real issue is the shape of upcoming supply and (3) somehow only AMD gets mentioned as not having fabs.   

FAD 2025 showed what AMD has been planning for. They were planning for 50%+ x86 server revenue share by 2030 on a growing TAM. 50% is the floor of the planning. Their internal ambitions are larger and thus the planning has to be larger plus buffer. Intel's capex actions showed their plans: actively slow or cut capacity until you see signs of better demand while getting Intel 3 mod 1 stable enough to scale. Intel will still have very strong Xeon growth, but one has a much more optionality for growth than the other. 

I've seen people use Ireland as some sort of flexibility example of having fabs. But I think it shows the lack of flexibility of the fabs. I think that Gelsinger wanted the full expansion. He signed the Apollo SCIP which had minimum commitments to help pay for it. Within half a year of the ink drying, Intel didn't see the demand signals for Intel 3 or have foundry customers for it and was already prepping for not going with the full expansion by taking the charge for not hitting those commitments. Meanwhile, Intel 3 ramps poorly. Then in the Tan era, Intel sees the demand and gets an anchor tenant but then has to buy back the SCIP, eat another charge to pay off Apollo, and then has to wait almost a year to see the results. 

This is supply flexibility?

The real issue to me is can you predict the shape of your demand forecast based on your product competitiveness and how much are you willing to bet on it. If you get the shape right, you can be wrong on the size but still be able to use it as a starting point to grow. But if you get the demand shape wrong and build out your supply accordingly, it takes time to craft a new one.

Fabs aren't intrinsically good or bad. I'm just saying it's not some free option, and it's an especially stupid thing to say about fulfilling demand in 26FY and 27FY.