Factors Likely to Decide AMD's Fate This Earnings Season

Advanced Micro Devices AMD is set to report first-quarter 2019 results on Apr 30.

The company’s first-quarter results are likely to benefit from robust demand of graphic processor units (GPUs), which are now widely utilized in industries like gaming, automotive and blockchain.

Moreover, accelerated sales of Ryzen desktop and mobile processors, partially offset by lower GPU sales is likely to benefit AMD’s computing and Graphics segment revenues. Notably, the segmental revenues increased 9% year over year and came in at $986 million in the last reported quarter.

Click here to know how the company’s overall Q1 performance is expected to be.

Portfolio Strength & GPU Demand: Key Catalysts

Management expects client compute business to perform better, due to strong adoption of new products. AMD Ryzen, EPYC and Radeon datacenter GPU sales are expected to increase, which in turn will aid the first-quarter results.

In the quarter under review, AMD introduced 8th GenAMD A-Series processors tailor-made for Chromebooks. Further, the company unveiled its new Radeon RX 590 graphics card. With these cards, AMD is foraying into the high-end graphics card market. Consequently, AMD’s revenues are poised to benefit significantly if the latest GPU can cater to the rising demand of the users.

Advanced Micro Devices, Inc. Price and EPS Surprise

Advanced Micro Devices, Inc. Price and EPS Surprise | Advanced Micro Devices, Inc. Quote


Non-GAAP gross margin is anticipated to be 41%, driven by higher sales from Ryzen, EPYC and datacenter GPU processor sales.

The Zacks Consensus Estimate for computing and graphics segment for the first quarter is pegged at $805 million. Management expects weakness in graphics channel, which is likely to face seasonality in the first quarter. Moreover, management expects lower graphics sales in the forthcoming quarter owing to absence of blockchain related GPU revenue and lower memory sales. This is likely to impact to-be-reported quarter’s results.

Coming to Enterprise, Embedded and Semi-Custom segment, revenues are projected to decline in the first quarter, primarily owing to lower semi-custom product, partially offset by higher EPYC datacenter processor sales.

During the quarter under review, AMD added dozens of new end customers and HPC wins across oil & gas, healthcare, aerospace, banking and other industries, driven by superior performance of EPYC processors in both data analytics and general purpose virtualized workloads. The momentum is expected to continue in the to-be-reported quarter.

The Zacks Consensus Estimate for Enterprise, Embedded and Semi-Custom segment for the first quarter is pegged at $443 million.

Zacks Rank & Key Picks

AMD currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same industry are Synopsys, Inc. SNPS, Fortinet, Inc. FTNT and Intuit INTU, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Synopsys, Fortinet and Intuit is projected at 10%, 15.5% and 16.2%, respectively.

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

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