Advanced Micro Devices (AMD) 1st Earnings: What to Expect

Semiconductors have gone through a slowdown cycle that has caused investors to rethink the long-term prospects of the entire sector. Intel’s (INTC) weaker-than-expected Q2 guidance, which sent its shares plunging 10%, was a warning of how unpredictable chips can be.

Shares of Advanced Micro Devices (AMD), meanwhile, went the opposite direction, suggesting AMD investors believe Intel’s problems are its own to deal. There’s a lot of merit to this reaction. AMD is set to report first quarter fiscal 2019 earnings results after the closing bell Tuesday. And ahead of Tuesday’s numbers AMD stock has returned almost 160% in the past one year, crushing the industry’s 27% gain.

AMD’s popularity has been driven by several factors, namely the improving business conditions and its diverse range of products for growing markets such as client CPUs, server CPUs and GPUs for data centers and gamers. The recent entry in the realm of gaming by Apple and Google have magnified this potential. And this is despite intense competition from Nvidia (NVDA) and the aforementioned Intel. Can AMD’s earnings and guidance Tuesday keep the momentum going?

For the three months that ended March, Wall Street expects the California-based company to earn 5 cents per share on revenue of $1.26 billion. This compares to the year-ago quarter when earning were 11 cents per share on $1.65 billion in revenue. For the full year, earnings are expected to surge 39% year over year to 64 cents per share, while full-year revenue of $6.8 billion would rise 5.10% year over year.

In the fourth quarter, AMD delivered adjusted earnings of 8 cents per share which topped Street estimates by a penny, while revenues increased 6% year over year to $1.42 billion, but consensus estimates. The company is recovering from the challenges caused by waning GPU (graphic processing units) demand — those used in cryptocurrency mining, which has resulted in excess inventory. AMD is not leaving it up to chance, however, and continues to build out its GPU portfolio with new capabilities to combat rival Nvidia in their quest to secure the market for gamers.

AMD’s improved graphic performance within its chips contributed to its placement win within Google’s (GOOG , GOOGL) Stadia gaming platform. This deal with Google could potentially position AMD at the forefront of the budding cloud gaming realm, enabling AMD to secure wins with the likes of Microsoft (MSFT) and Amazon (AMZN). CEO Lisa Su last quarter expressed optimism that GPU sales would soon rebound, saying she expected a “meaningful contribution” from GPU sales in the soon-to-be reported quarter.

Investors will look to see whether the management reveals any details on Tuesday. Whether in its client CPUs, server CPUs, and GPUs for data centers and gamers, the company has delivered and continues to gain market share. All told, ahead of Tuesday’s report, AMD shares remain attractive, despite their recent rise. And assuming at top and bottom line beat, along with confident guidance, I wouldn’t be shocked to see AMD make a new 52-week high, which translates to 22% gain.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

Read Richard's Bio