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Advanced Micro Devices (AMD) Q2 profit dips 70% but meets estimates

Advanced Micro Devices (NASDAQ: AMD) reported a 70% dip in earnings for the second quarter of 2019 due to lower revenue and higher operating expenses. The bottom line came in line with the analysts’ expectations while the top line exceeded consensus estimates.

Net income for the quarter plunged by 70% to $35 million or $0.03 per share. Adjusted earnings decreased by 43% to $0.08 per share.

Revenue dropped by 23% to $1.53 billion. The results were hurt by lower graphics channel sales in the Computing and Graphics segment and lower semi-custom product revenue in Enterprise, Embedded, and Semi-Custom segment.

Advanced Micro Devices (AMD) Q2 profit dips 70% but meets estimates

Looking ahead into the third quarter of 2019, AMD expects revenue to be about $1.8 billion, plus or minus $50 million, an increase of about 9% year-over-year. The increase in revenue is expected to be primarily driven by Ryzen, EPYC, and Radeon product sales. AMD expects non-GAAP gross margin to be about 43% in the third quarter.

For the full year 2019, AMD now expects revenue to increase 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.

For the second quarter, Computing and Graphics segment revenue decreased by 13% year-over-year due to lower graphics channel sales, partially offset by increased client processor and datacenter GPU sales. Enterprise, Embedded and Semi-Custom segment revenue declined by 12% primarily due to lower semi-custom product revenue, partially offset by higher EPYC processor sales.

Also read: Shopify Q2 earnings preview

AMD has a total debt of $1.24 billion with $211 million remained the long-term operating lease liabilities and the long-term debt stood at $1.03 billion. The company has repaid all of the short-term debt that it incurred as of December 29, 2018. Accumulated deficit narrowed to $7.39 billion as of June 29, 2019 from $7.44 billion as of December 29, 2018.

In contrast, the company has sufficient cash and marketable securities in the hand of $1.13 billion. The current assets showed an increase helped by higher accounts receivable and inventories, while current liabilities declined on lower accounts payable and a decline in accrued liabilities.

As a market share leader in microprocessors, Intel (NASDAQ: INTC) remained as the main hurdle for AMD, which has been facing aggressive pricing from its competitors. Intel, which has substantially greater financial resources, spends more on marketing and research and development than AMD. This has hurt AMD’s prices and margins. During last week, Intel reported better-than-expected earnings and revenue for the second quarter.

Also read: Corning Q2 earnings report

However, during the second quarter, AMD launched its highly anticipated client and graphics processors based on advanced new architectures and leading-edge 7nm process technology. Apart from this, Microsoft (NASDAQ: MSFT) announced that AMD will power its upcoming next generation game console, codenamed Project Scarlett. Also, Apple (NASDAQ: AAPL) announced an all-new Mac Pro featuring AMD Radeon Pro Vega II GPUs.

Shares of AMD ended Tuesday’s regular session up 1.16% at $33.87 on the Nasdaq. Following the earnings release, the stock declined over 4% in the after-market session.

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