AMD’s CEO Commentary and Upcoming Earnings


Jul. 30 2019, Updated 10:21 a.m. ET

The semiconductor earnings season is ongoing. Advanced Micro Devices’ (AMD) earnings are highly anticipated this earnings season. The earnings will likely be released on Wednesday after the market close. Advanced Micro Devices was the best-performing semiconductor stock of 2018 with a rise of 80%. So far, the company is the best-performing stock in 2019 YTD (year-to-date) with a rise of 80.7%. We’ll discuss what to expect from AMD’s CEO and its upcoming earnings.

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AMD’s CEO and upcoming earnings

AMD’s CEO, Lisa Su, is responsible for the company’s turnaround from near bankruptcy to profits. Her strategy is to regain lost market share by delivering a better price-to-performance ratio.

Last week, Advanced Micro Devices stock rose 3.8%, which is near its 52-week high of above $34 after Texas Instruments and Intel (INTC) reported an earnings beat. However, the rally reversed. Advanced Micro Devices stock fell 2.75% on Monday before its earnings. The company’s earnings are interesting due to some company-specific tailwinds. However, the macro and industry headwinds mitigate the impact of these tailwinds.

Advanced Micro Devices is the only player with both CPU (central processing unit) and discrete GPU (graphics processing unit) technology. The company competes with industry leaders Intel and NVIDIA (NVDA) in the CPU and GPU space.

In the first quarter, Advanced Micro Devices’ revenues fell 22.8% YoY (year-over-year) to $1.27 billion. Weakness in consumer graphics and semi-custom chips more than offset the strength in PC and data center CPUs and server GPUs. The company expects its second-quarter revenues to fall 13% YoY as consumer graphics and semi-custom weakness continues. Investors should look out for Su’s earnings commentary. She will provide some key updates. The updates will show the company’s future earnings potential.

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AMD’s consumer GPU demand

Advanced Micro Devices and NVIDIA were hit by the crypto bubble burst in the fourth quarter of 2018. At that time, a decline in cryptocurrency prices vanished the GPU demand from crypto miners. The miners dumped their used GPUs in the second-hand market and piled up the channel inventory. Since then, Advanced Micro Devices and NVIDIA’s consumer GPU sales have been falling. The trend will likely continue in the second quarter. Overall, the GPU shipments have fallen 10.7% YoY.

In the first-quarter earnings, Su stated that she saw an improvement in the channel inventory. In the upcoming earnings, investors should look at her commentary on the consumer GPU market.

Update on Navi’s initial sales

Investors should also focus on Su’s update on the initial sales of Advanced Micro Devices’ 7nm (nanometer) Navi GPU, which launched on July 7. Navi is significant to investors because it was the first time NVIDIA and Advanced Micro Devices entered into a price war. Until now, NVIDIA’s GPUs weren’t beatable in terms of technology. However, NVIDIA launched the Super version of GeForce GPUs at the same price points as Advanced Micro Devices’ Navi to protect its market share. Advanced Micro Devices responded by announcing last-minute price cuts for its Navi GPU before the launch. According to data from Jon Peddie Research, Advanced Micro Devices gained a 3.9% share from the add-in-board market in the first quarter.

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Why are the initial sales of a next-generation product important? In September 2018, NVIDIA launched its next-generation Turing-based GeForce GPUs. However, in the fourth-quarter earnings, NVIDIA’s CEO, Jensen Huang, stated that Turing’s initial uptick was slow. Since then, the gaming revenues fell 45% and 39% YoY in the last two quarters. If Advanced Micro Devices’ Navi GPU is a success, the company will gain AIB market share from NVIDIA. Market share gain would help Advanced Micro Devices increase its revenues even though the overall GPU demand is weak.

Consumer CPU demand

The next important thing to look for in Advanced Micro Devices’ earnings is its computing performance, which includes PC CPU sales. Advanced Micro Devices has gained share from Intel in the PC CPU market. In Intel’s recent earnings, CEO Bob Swan stated that the company lost some share in the PC CPU market during the second quarter due to the CPU supply shortage.

Analysts expect Intel’s desktop CPU market share to fall to 81%—a level it saw in 2015. Since Advanced Micro Devices and Intel are the only two major players in the PC CPU market, Intel’s loss is Advanced Micro Devices’ gain. Investors should look for Su’s commentary on the company’s PC CPU market share in the upcoming earnings.

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According to Gartner and IDC, global PC shipments rose 1.5% and 4.7%, respectively, YoY in the second quarter. While the overall PC shipments rose, Intel’s PC CPU volumes fell. However, Intel’s computing revenues rose 1% YoY due to higher ASP (average selling prices). Advanced Micro Devices will likely benefit from higher volumes of lower margins CPUs.

So far, 2019 has been an important year for Advanced Micro Devices. The company overtook Intel in the manufacturing node technology with its 7nm Ryzen CPUs. Investors should look for Su’s comments on initial sales of 7nm Ryzen CPUs and its computing guidance for the third quarter.

AMD CEO might give a hint on Rome server CPU launch date 

Investors are more excited about Advanced Micro Devices’ enterprise segment than its consumer segment. The segment’s 80% YTD growth in the stock price is mainly because investors expect Advanced Micro Devices to win double-digit server CPU market share from Intel by mid-2020. Advanced Micro Devices aims to achieve the target with the help of its next-generation 7nm Rome server CPU. The company plans to launch Rome in the third quarter. AMD’s CEO might provide some color on the Rome server CPU’s possible launch date.

Impact of US-China trade war 

Despite strong product launches and market share gains, Advanced Micro Devices’ revenues will likely fall due to macro demand weakness. Advanced Micro Devices, like all semiconductor companies, could be impacted by the US-China trade war. The company might report a YoY decline in data center revenues just like Intel. Intel’s data center revenues fell 10% YoY in the second quarter. The US government banned technology transfer to Huawei and five Chinese supercomputing companies.

The supercomputing ban brought Advanced Micro Devices’ Tianjin Haiguang Advanced Technology Investment Company joint venture into the limelight. AMD’s CEO will provide clarity on how the ban impacted the company’s Chinese joint venture.

All of the above updates make Advanced Micro Devices’ earnings one of the most anticipated earnings this season. The stock could move by the mid-to-high single digits on Thursday. AMD CEO’s commentary will likely determine the stock price direction.


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