AMD Rallies To Record High As Chipmaker Reports Q2 Beat On Ryzen, EPYC Strength

Advanced Micro Devices, Inc. AMD shares are advancing to record highs after the company reported stellar quarterly results, thanks to strong uptake of Ryzen and EPYC processors. Despite the ongoing macro uncertainty, the company boosted its full-year revenue guidance.

AMD's Key Metrics: The Sunnyvale, California-based chipmaker reported non-GAAP earnings of $216 million, or 18 cents per share for the second quarter. This compares to the 16-cent per-share consensus estimate.

A year ago, the chipmaker earned $92 million, or 8 cents per share

Revenues were up 26% year-over-year to $1.93 billion, ahead of the consensus estimate of $1.86 billion. On a quarter-over-quarter basis, top-line increased 8%. In April, the company had guided to second-quarter revenues of about $1.85 billion, plus or minus $100 million.

"We delivered strong second quarter results, led by record notebook and server processor sales as Ryzen and EPYC revenue more than doubled from a year ago," said CEO Lisa Su.

Segment wise, the Computing and Graphics segment contributed $1.37 billion to the top line, and $200 million to operating income. Strong Ryzen processor sales were attributed to the 45% year-over-year growth reported by the segment.

The Enterprise, Embedded and Semi-Custom unit accounted for $565 million of the total revenues and generated an operating income of $33 million, with solid EPYC server processor sales boosting the performance of the segment.

Gross margin expanded 3 percentage points to 44%.

AMD's Forward Outlook: For the third quarter, AMD expects revenue to be about $2.55 billion, plus or minus $100 million. The company expects non-GAAP gross margin to be approximately 44%.

Analysts currently estimate revenues of $2.32 billion for the quarter.

AMD increased its 2020 revenue growth forecast from 25%, plus or minus 5 percentage points, to 32%, premised on strength in PC, gaming and data center products. The consensus estimate calls for revenue growth of 25.30% for the year.

Non-GAAP gross margin is expected to be about 45%.

See Also: Intel Analysts See End Of 'Computing Dominance' Amid 7nm Node Delay, Competitive Threat

Why It's Important: With rival Intel Corporation INTC delaying its 7nm products by at least six months, analysts are positive on AMD gaining further share in the PC and server market.

Among the optimists is BofA Securities' Vivek Arya, who expects AMD's market share to climb back toward its peak.

Deutsche Bank analyst Ross Seymore recently said, "Given INTC's earnings report, we believe the near-term fundamentals may matter less after INTC's 7nm delays as AMD's LT share gain potential now becomes more open-ended."

The analyst is impressed with AMD's new product execution and he expects resulting share gain benefits to be sustained over the next few years.

AMD Stock: AMD shares have run up about 50% in the year-to-date period; in the June quarter, the stock added about 16%.

Reacting to the results, AMD shares are rallying 10% to $74.43 in after-hours trading.