Earnings

AMD falls after soft revenue projection

Key Points
  • AMD's revenue was somewhat below consensus.
  • Microsoft revealed a laptop containing an AMD chip in the quarter.
Lisa T. Su, CEO of Advance Micro Devices.
Adam Jeffery | CNBC

AMD shares fell as much as 4% after the company reported fiscal fourth-quarter earnings that slightly beat analysts' estimates on Tuesday, but offered a light revenue forecast for the current quarter.

Here's how the company did:

  • Earnings: Excluding certain items, 32 cents per share, vs. 31 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $2.13 billion, vs. $2.11 billion as expected by analysts, according to Refinitiv.

AMD's revenue grew 50% on an annualized basis in the quarter that ended on December 28, according to a statement. Revenue growth for the 2019 fiscal year, at $6.73 billion, was up 4%.

Revenue from AMD's Computing and Graphics segment, including graphics cards and PC chips, totaled $1.66 billion, up almost 69% year over year and over the $1.50 billion consensus among analysts surveyed by FactSet.

The Enterprise, Embedded and Semi-Custom segment, including chips for servers and customized chips, contributed $465 million in revenue, up 7% and below than the FactSet consensus estimate of $604 million.

In the quarter AMD released new Ryzen PC chips featuring tiny 7-nanometer transistors and Radeon gaming graphics cards. Also in the quarter Microsoft unveiled a 15-inch Surface Laptop 3 featuring a custom AMD chip.

Mizuho analysts Vijay Rakesh and Jason Getz raised their rating on AMD stock to buy from neutral on January 8. They said they think in 2020 and 2021 capital expenditures will pick up at companies that run large data centers in the U.S. and China, which could help AMD and to some extent Intel, which leads the server chip market. They believe AMD could take share from Intel in the second half of 2020.

"We've been on the steady increase in market share now for the last eight quarters, and we believe we gained share in Q4 as well," AMD CEO Lisa Su said regarding the PC chip business on a conference call with analysts on Tuesday.

With respect to guidance, AMD is calling for quarterly revenue of $1.8 billion, plus or minus $50 million, implying roughly 42% annualized growth, and a gross margin of 46%, excluding certain items. In giving the guidance AMD pointed to growth from its Ryzen, Epyc and Radeon product lines. The revenue forecast was below the $1.86 billion Refinitiv revenue consensus.

For the 2020 fiscal year AMD sees 28% to 30% revenue growth and a 45% gross margin, excluding certain items. Analysts polled by Refinitiv had expected $8.59 billion in full-year revenue, which implies about 24% growth.

Su said supplies of silicon wafers are tight. It's important that AMD stay in communication with its customers, and that's what the company is trying to do, she said.

AMD shares are up 10% since the start of 2020.

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