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AMD stocks go to record highs after a earnings decline, boosting the annual forecast

The shares of Advanced Micro Devices Inc. reached record highs in off-hours trading on Tuesday, after the chip company reported second-quarter earnings that exceeded expectations and raised the full-year forecast despite the COVID-19 pandemic.

AMD AMD,
-1.97%
announced that it now expects revenues for 2020 to increase by approximately 32% from 2019, representing annual revenues of approximately $ 8.88 billion, compared to previous projections from $ 8.08 billion to $ 8.75 billion, according to FactSet. Analysts had expected $ 2020 revenue of around $ 8.4 billion on average, FactSet reported.

When asked why the outlook was buoyed, AMD President and CEO Lisa Su said that “demand has risen from our initial expectations” and the company sees better-than-expected PC sales in the second half of the year, along with continued data center growth and an increase in game console sales.

For the third quarter, AMD forecast revenues of $ 2.45 billion to $ 2.65 billion, while analysts had expected an average revenue of $ 2.31 billion. The company and analysts expect AMD’s embedded and semi-custom business to accelerate in the second half of the year as new game consoles from Sony Corp. SNE,
-1.15%
and Microsoft Corp. MSFT,
-0.89%
rolling out AMD chips.

“We believe the market is a little bit better than we thought 90 days ago, but we also believe our product traction is strong, and we see that with our customers’ demand, so those are the reasons for the guidance,” said Su during a conference call.

Patrick Moorhead, chief analyst at Moor Insights & Strategy, who earlier this year thought AMD was conservative, thinks sales have even more room to turn.

“I think this new forecast is conservative because I think Epyc’s revenues will be even higher,” said Moorhead.

AMD reported a net result of $ 157 million in the second quarter, or 13 cents per share, compared to $ 35 million, or 3 cents per share, in the prior year period. After adjusting for share-based fees and other factors, the chip company reported earnings of 18 cents per share, compared to 8 cents per share in the prior year period. Revenue increased to $ 1.93 billion from $ 1.93 billion in the prior year quarter.

Analysts surveyed by FactSet had forecast adjusted earnings of 16 cents per share on revenues of $ 1.85 billion.

Shares rose more than 10% after hours, after a 2% decline in the regular session to close at $ 67.61, and were ahead of AMD’s intraday record of $ 71.63, set late last week. After leading the S&P 500 index SPX,
-0.64%
in annual percentage gains in both 2018 and 2019, the AMD share has soared by more than 47% in 2020 as the S&P fell 0.4%.

AMD’s results follow last week’s surprising announcement that Intel Corp. INTC,
-0.66%
delayed the release of its 7-nanometer chips until at least the end of 2022 due to manufacturing issues. AMD has already rolled out 7nm chips for servers and PCs and has found a larger market share with those products and achieved more turnover and profit. At the end of Tuesday, Intel shares closed 0.7% at $ 49.24 and fell another 0.8% after hours.

Read:AMD acquires the corona virus as its main rivals struggle

AMD reported second-quarter revenues of $ 1.37 billion for computer and graphics chips, up 45% from $ 940 million last year, in line with analyst expectations of a 45% increase to 1 , $ 36 billion. Sales of embedded and semi-custom chips for businesses – the unit that includes data center and game console revenues – were $ 565 million, down 4% from $ 591 million a year ago, but well above average projections of analysts down 18% to $ 485.5 million.

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