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AMD Q4 Earnings to Gain from Computing & Graphics Segment

Zacks Equity Research

Advanced Micro Devices AMD is set to report fourth-quarter 2018 results on Jan 29. The company is expected to gain from robust demand of graphic processor units (GPUs), which are now widely utilized in industries like gaming, automotive and blockchain.

Increasing adoption of artificial intelligence (AI) techniques, machine learning (ML) and deep learning (DL) tools in these industries are primarily responsible for driving GPU demand.

AMD’s computing and graphics segment (56.7% of total revenues) revenues increased 12.3% year over year to $938 million in the third quarter. The increase can be attributed to accelerated sales of Ryzen desktop and mobile processors. The Zacks consensus Estimate for computing and graphics segment is currently pegged at $940 million.

Click here to know how AMD’s overall Q4 performance is likely to be.

Advanced Micro Devices, Inc. Price and EPS Surprise


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

Portfolio Strength & GPU Demand Hold Key

AMD’s portfolio strength is a key catalyst. Management expects client compute business to perform better, due to strong adoption of new products.

Moreover, graphics business is anticipated to grow sequentially, on the back of product portfolio strength that includes new datacenter GPU products.

At CES 2019, AMD showcased its initiatives in computing, gaming and visualization technologies through product rollouts. AMD launched the much-awaited next generation 7-nanometer (nm) Radeon Vega GPU, AMD Radeon VII.

The company also announced availability of second generation AMD Ryzen 3000 series mobile processors featuring 12nm technology for ultrathin laptops and notebooks.

Further, it announced that AMD Athlon 300 series mobile processors, which are developed on Zen 3 core architecture. The company also announced 8th GenAMD A-Series processors tailor-made for Chromebooks.

The company’s move to ramp up its CPU & GPU portfolio, reinforces its competitive position against the likes of NVIDIA NVDA and Intel INTC.

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.

Ryzen processor sales contribution to total client revenues increased more than 70% in the last reported quarter. Client processor average selling price (ASP) increased on a year-over-year and quarter-over-quarter basis driven by higher desktop and mobile processor ASP. This was primarily driven by strong demand for higher end Ryzen 7, Ryzen 5 and Ryzen Threadripper processors.

The momentum is expected to continue in the to-be-reported quarter.

Zacks Rank & Stocks to Consider

Currently, AMD has a Zacks Rank #3 (Hold).

Pure Storage, Inc. PSTG, sporting a Zacks Rank #1 (Strong Buy), is a stock worth considering in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Pure Storage is currently pegged at 17.5%.

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