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AMD product sales likely to drive Q3 earnings growth

Advanced Micro Devices (NASDAQ: AMD) is set to release its third-quarter earnings results on Tuesday after the market close. The results will be benefited by Ryzen, EPYC, and Radeon product sales as well as graphics channel sales in the Computing and Graphics segment.

AMD is likely to turn beneficial as PC makers could be shifting manufacturers at any time due to the ongoing chip shortage misfortune faced by Intel Corporation (NASDAQ: INTC). The revamped product portfolio and favorable pricing are likely to aid in the outperformance for AMD.

Read: Intel Q3 earnings review

The company’s new 7-nanometer Ryzen and EYPC margins could overshadow the loss achieved due to tariff cost. However, concerns have been mounting on the slow demand in the server space due to the possible absorption of the excessive channel inventory that was built up amid the trade war.

The results will be driven by average selling prices and shipment volumes. In the 7-nanometer based products segment, AMD remains one step ahead of Intel, which is still on track to launch in 2021. AMD’s remarkable performance has been credited to higher market share, trade tariffs resolution uncertainty, and the US tariff cost.

Analysts expect the company’s earnings to jump by 38.50% to $0.18 per share and revenue will increase by 9.40% to $1.81 billion for the third quarter. The company has surprised investors by beating analysts’ expectations twice in the past four quarters. The majority of analysts recommended a “hold” rating with an average price target of $33.54.

Read: Texas Instruments Q3 earnings review

For the second quarter, AMD posted a 70% dip in earnings due to lower revenue and higher operating expenses. For the third quarter, the company expects revenue in the range of $1.75 billion to $1.85 billion, which is a 9% growth over last year, and adjusted gross margin to be about 43%.

For the full year 2019, AMD expects revenue growth in the range of a mid-single-digit percent over 2018, driven by significant sales growth of its new Ryzen, EPYC, and Radeon processors, partially offset by lower than expected semi-custom revenue. Revenue excluding semi-custom is expected to grow about 20% year-over-year. AMD expects non-GAAP gross margin to be about 42% for 2019.

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