AMD’s fiscal 4Q16 revenue
In the previous part of the series, we discussed how Advanced Micro Devices’ (AMD) stock price is increasing more on the hope of future growth opportunities than on its current fundamentals. The company’s current revenue is largely driven by its semi-custom business, where demand is seasonally strong in 2Q and 3Q.
AMD’s revenue fell 15% sequentially to $1.1 billion in fiscal 4Q16 as strong demand from the Compute and Graphics segment was more than offset by declines in the Enterprise, Embedded, and Semi-Custom segment. However, AMD’s fiscal 2016 revenue rose 7% YoY (year-over-year) to nearly $4.3 billion, reflecting the growth from Polaris GPU (graphics processing unit) and Sony’s (SNE) new PlayStation 4Pro launched in November 2016.
AMD’s revenue estimates
Deutsche Bank stated that AMD’s fiscal 4Q16 and 1Q17 sales are likely to be low as customers delay their purchases over the anticipation of the new processors Ryzen and Vega. AMD expects fiscal 1Q17 revenue to fall 11% sequentially to $989 million, which is higher than the analyst estimate of $964 million. This represents a YoY growth of 18%.
AMD’s better-than-expected guidance shows that the launch of new products did not stop customers from buying existing ones. The company is set to launch its Ryzen desktop CPUs in March 2017, Vega GPUs in June 2017, Naples server CPUs in 2Q17, and notebook CPUs in 2H17.
Determine the success of AMD’s new products
Fiscal 3Q17 earnings will thus be crucial for AMD’s investors as all the new products’ full quarter sales would reflect in the earnings—except for Naples CPUs, as its design win process is lengthy. But it’s not just the new products that would push growth. Microsoft (MSFT) will launch its console upgrade Scorpio and AMD will report sales from its third non-gaming console, the details of which have not yet been revealed.
In fiscal 3Q16, AMD’s revenue rose 23% YoY as it reported the first full quarter of sales from Polaris GPU and APUs supplied for Sony’s new game console. This growth is expected to double to 50% YoY to around $2 billion in fiscal 3Q17 as it would include sales of all high-end products: Vega GPUs, Ryzen CPUs, and APUs for Sony and Microsoft’s new game consoles. This could boost AMD’s stock price to $20 or above.
Now let’s examine the possibility of AMD returning to positive EPS (earnings per share) in fiscal 2017.