Strong AMD Q2 Earnings Came With a Forecast for a Stronger Q3

Advanced Micro Devices Inc. (NASDAQ: AMD) reported second-quarter fiscal 2020 earnings after markets closed Tuesday. The chipmaker posted adjusted diluted earnings per share (EPS) of $0.18 on revenues of $1.93 billion. In the same period a year ago, the company reported EPS of $0.08 on revenues of $1.53 billion. Second-quarter results compare to the consensus estimate for EPS of $0.16 on $1.86 billion in revenues.

AMD stock rose by 155% in 2019 and at today’s closing price has added another 48% so far in 2020. Although second-quarter results were not exceptional, a beat on top- and bottom-line estimates and better on both metrics compared to year-ago results is music to investors’ ears.

In its computing and graphics segment, AMD reported revenue of $1.37 billion, up 45% year over year but down 5% sequentially, driven primarily by strong sales of Ryzen processors. The sequential decline was due to lower sales of graphics processors. Operating income rose from $59 million in the year-ago quarter to $173 million. Sequentially, operating income dipped by $4 million.

In the enterprise, embedded, and semi-custom segment revenue totaled $565 million, down 4% year over year but up 62% sequentially. The annual decrease was driven by lower semi-custom sales. The sequential jump was attributed to strong EPYC processor and semi-custom sales.

For the third quarter, AMD expects revenue of around $2.55 billion, plus or minus $100 million, an increase of approximately 32% sequentially and about 42% year over year. The increases are expected to be driven primarily by Ryzen and EPYC sales and next-generation semi-custom sales.

For the fiscal year, AMD expects revenue to come in about 32% higher than last year’s total, driven by PC, gaming, and data center products. Non-GAAP gross margin is forecast to be approximately 45% for fiscal 2020.

The company’s CEO, Dr. Lisa Su, noted that quarterly sales were led by record notebook and server processor sales with Ryzen and EPYC revenue more than doubling year over year.

Analysts’ current forecast for third-quarter earnings calls for $0.31 per share and revenues at $2.32 billion. For the full year, revenues are seen at $8.44 billion and EPS is forecast at $1.03.

As strong as the second quarter turned out to be, the third-quarter outlook from the company is even better. Shares traded up nearly 10%, at around $74.40 in the after-hours session Tuesday after closing at $67.61, down nearly 2.0% for the day. The stock’s 52-week range is $27.43 to $71.63. The consensus price target for the shares was $56.35 before the report.

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