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AMD beats Wall Street estimates as it records high earnings the second time ever

After a critical profit release by competitor Intel Corporation, semiconductor designer Advanced Micro Devices Inc (NASDAQ: AMD) posted results for a critical quarter that witnessed a major disruption ushered in by the coronavirus. In the second quarter of fiscal and calendar year 2020, AMD earned $ 1.9 billion in revenue and $ 157 million in net income. Wall Street analysts had pegged the company to $ 1.86 billion in revenue and $ 0.17 in earnings per share, demonstrating sequential growth at a time when demand for work from home and other tech products remains stable, in combined with higher spending on the corporate front.

At the end of the first quarter of 2020, AMD had Q2 forecast revenue of $ 1.85 billion (a hairline margin higher than the analyst estimate above) and earnings per share (EPS) of $ 0.17. Looking at today’s results, it’s clear that AMD has that beaten and Met these estimates.

Q2 FY2020Q1 FY2020Q2 FY2019YoYSequential
Revenue:1,9301,7901,53026%8%
Gross profit:84982362735%3%
Operational income:17317759193%-2%
Net income:15716235349%-3%

The results show that AMD’s revenue grew by 26% and consecutively 8% in the second quarter of the year. In the second quarter of fiscal year 2020, AMD reports that the gross margin of the product was 44%, helped by sales of Ryzen and EPYC. The total gross margin for the company has decreased sequentially due to higher costs for semi-custom products.

AMD’s largest operating segment, computers and graphics, generated revenue of $ 1.37 billion as it continued to decline consecutively. The division had suffered from declining graphics processing unit (GPU) sales in the previous quarter, and in today’s earnings presentation, AMD revealed that they were still harming the company in the second quarter. On a positive note, however, Q2 FY2020 Computing and Graphics revenues were up 37% year over year, with operating profit and average selling price showing similar trends.

In addition, AMD also revealed that it has more than 50 Ryzen 4000 notebooks on the market, and both HP and Lenovo will accelerate the production of their notebooks based on the processor range in the second half of this year. As for Zen 3, AMD promises that the lineup will launch later this year.

AMD’s Q2 2020 Sales Growth Powered by Enterprise, Embedded and Semi-Custom Products

As sales for the largest segment fell again, the second largest segment of AMD, Enterprise, Embedded and Semi-Custom Products showed impressive growth during the quarter. This growth not only reversed the decline in computing, but also managed to increase AMD’s revenue to what is now a second all-time record.

Company sales were $ 565 million in the second quarter of 2020, down 4% from the second quarter of last year. But at the same time, the segment experienced strong sequential growth of 62% and also reversed the previous quarter’s net loss of $ 26 million to a net result of $ 33 million. Enterprise, Embedded, and Semi-Custom products include non-consumer silicon products that meet the needs of data centers and other cloud computers, in addition to enabling game consoles.

Upgrades to Microsoft Corporation’s Xbox and Sony Interactive’s PlayStation lineup are expected to play a strong role for AMD as we look forward to the company’s near future. AMD confirmed that it has begun to mass-produce processors for the PlayStation 5 and Xbox Series X, with the next generation of Milan Zen 3 data center CPUs expected to ship later this year.

Looking at its crystal ball, the company expects to earn $ 2.55 billion in revenue during the current quarter in what will become a record for AMD. This estimate comes with a margin of error of $ 100 million, and AMD also expects revenue for the full fiscal year 2020 to grow 32% year over year.

As it exceeded Wall Street’s revenue estimates and showed revenue growth, AMD shares rose 9% during aftermarket trading, with stock trading at a price per share of $ 73.74 at 4:40 PM ET. AMD is expected to take advantage of Intel Corporation to postpone its 7nm silicon products with the change expected to improve the basis for Team Red’s share price.

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