Shares of AMD (NASDAQ: AMD) fell about 6% after hours on Thursday, although the chipmaker posted better-than-expected third quarter numbers. Revenue rose 23% annually to $1.3 billion, beating estimates by $90 million. On the bottom line, it posted non-GAAP earnings of $0.03 per share, beating expectations by $0.04 a share, and marking its first quarter of non-GAAP profitability after five straight quarters of losses. And trading on Friday didn’t alter the market’s view much; AMD stock ended the day about where it started.
The key facts
AMD’s computing and graphics revenue rose 9% sequentially and 11% year over year to $472 million. It attributed that sequential growth to robust sales of GPUs, which were partially offset by lower sales of client desktop processors and chipsets. The year-over-year growth was fueled by higher sales of client mobile processors.
That growth was impressive considering the fierce competition from NVIDIA in GPUs and Intel in CPUs. NVIDIA, in particular, has been trying to undercut AMD’s lower-priced GPUs with new cards like the $200 GTX 1060 and $109 GTX 1050. However, the impact of those might not be fully felt until the next quarter. The computing and graphics unit’s loss also narrowed year-over-year from $181 million to $66 million.
The company’s EESC (enterprise, embedded, and semi-custom) revenue rose 41% sequentially and 31% annually to $835 million. That growth was mainly fueled by higher sales of semi-custom SoCs, particularly for gaming consoles. Operating income rose from $84 million in the prior year quarter to $136 million. These top- and bottom-line improvements enabled AMD to lower its debt by $606 million sequentially to $1.63 billion.
So what went wrong?
Those numbers looked solid, but AMD stock sank after management projected an 18% sequential revenue decrease (at the midpoint) for the fourth quarter, due to tough quarter-over-quarter comparisons. Analysts had been expecting a more moderate 12% decline.
However, AMD’s guidance still indicates that fourth-quarter sales will rise 12% annually, and that it would finish the year with 6% growth, compared to its 28% decline last year. While AMD’s turnaround is far from complete, these estimates indicate that sales of its new GPUs and semi-custom SoCs for consoles are getting its growth back on track.
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Leo Sun has no position in any stocks mentioned.
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