What to look for when AMD reports Q2 earnings

Advanced Micro Devices (NASDAQ: AMD) is scheduled to report its earnings results for the second quarter of 2019 on July 30 after the market close. The top line is likely to be hurt by average selling prices and shipment volumes, while the bottom line will be impacted by higher costs and expenses.

In past few quarters, AMD has been experiencing a mix of escalating trade tensions between US and China, expected new stock keeping units, macroeconomic slowdown in China, and a decline in blockchain-related demand. These hurdles are likely to hurt the company’s performance during the second quarter.

Intel Corp. (NASDAQ: INTC) has been the market share leader for microprocessors for many years. Intel has substantially greater financial resources than AMD and accordingly spends substantially greater amounts on marketing and research and development than AMD. The company expects Intel to maintain its market position and to continue to invest heavily in marketing, research and development, new manufacturing facilities and other technology companies.

AMD could also face aggressive pricing by competitors, especially during challenging economic times. The company believes that its competitors have significant marketing and sales resources which could increase the competitive environment in such a declining market, leading to lower prices and margins.

Analysts expect the company’s earnings to plunge by 42.90% to $0.08 per share and revenue will decrease by 12.70% to $1.53 billion for the second quarter. In comparison, during the previous year quarter, AMD posted a profit of $0.14 per share on revenue of $1.76 billion. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters.

Also read: Intel Q2 earnings

For the first quarter, Advanced Micro Devices reported a 80% plunge in earnings due to a 23% drop in total revenue. Computing and Graphics segment revenue dropped by 26% primarily due to lower graphics channel sales, partially offset by increased client processor and datacenter GPU sales. Enterprise, Embedded and Semi-Custom segment revenue fell by 17% due to lower semi-custom product revenue, partially offset by higher server sales.

For the second quarter, AMD expects revenue to be about $1.52 billion, plus or minus $50 million, a decrease of about 13% year-over-year. The decrease in revenue is expected to be primarily driven by lower graphics channel sales, negligible blockchain-related GPU revenue and lower semi-custom revenue. AMD expects non-GAAP gross margin to be about 41% in the second quarter of 2019.

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