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The Basis of AMD’s 3Q17 Guidance

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Revenue forecast to increase 23%

Advanced Micro Devices (AMD) raised its forecast for 2017, and issued a strong outlook for 3Q17. For revenue in 2017, AMD now expects percentage growth in the mid-to-high teens. Its prior forecast was low-double-digit percentage growth.

In 3Q17, AMD expects revenue to grow 23% sequentially, give or take 3.0%. AMD’s revenue guidance implies a midpoint of about $1.5 billion. If this revenue is attained, it would imply growth of about 15% year-over-year and a top consensus revenue estimate of $1.4 billion. AMD expects its growth in 2017 to be supported by a mix of favorable factors—let’s take a look at a few of them.

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Product strength

AMD has recently launched several new products, ranging from the Ryzen chip for desktop computers to the Epyc chip for servers, thereby escalating its competition with Intel (INTC) and NVIDIA (NVDA). The company is seeing robust demand for its new chips and expects that to continue. The Ryzen chip was a major growth driver in 2Q17, leading to profitability in AMD’s computing and graphics division after nearly three years of losses.

Low inventory in the channel

AMD’s chips are flying off the shelves, resulting in low inventories in the distribution channel. The company expects this situation to lead to more sales in the coming quarters. AMD supplies semi-custom graphic chips to console makers Microsoft (MSFT) and Sony (SNE).

Cryptocurrency phenomenon

AMD’s powerful graphics chips are finding use in the cryptocurrency mining business, which has boosted overall demand for the company’s chips.

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