AMD Beats Wall Street Estimates As It Posts Second All Time High Revenue

Ramish Zafar

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Following a crucial earnings release by its competitor Intel Corporation, semiconductor designer Advanced Micro Devices Inc (NASDAQ:AMD) posted results for a crucial quarter that witnessed severe disruption ushered in by the coronavirus. In the second quarter of fiscal and calendar year 2020, AMD earned $1.9 billion in revenue and $157 million in net income. Wall Street analysts had pegged the company to earn $1.86 billion in revenue and $0.17 in earnings per share, showing sequential growth at a time when demand for work from home and other tech products continues to remain stable coupled with increased spending on the enterprise front.

At the end of its first 2020 quarter, AMD had projected revenue for the second quarter to stand in at $1.85 billion (a hairline's margin higher than the analyst estimate above) and Earnings Per Share (EPS) of $0.17. Taking a look at today's results, it's clear that AMD has beaten and met these estimates, respectively.

 Q2 FY2020Q1 FY2020Q2 FY2019YoYSequential
Revenue: 1,9301,7901,53026%8%
Gross Profit:84982362735%3%
Operating Income:17317759193%-2%
Net Income:15716235349%-3%

The results show that in its second-quarter AMD's revenue grew by 26% over the year and 8% sequentially. During the second quarter of the fiscal year 2020, AMD reports that product gross margin was 44%, aided by Ryzen and EPYC sales. Overall gross margin for the company dropped sequentially due to higher costs for semi-custom products.

AMD's largest operating segment, computing and graphics, brought in $1.37 billion in revenue as it posted another sequential drop. The division had suffered due to dropping graphics processing unit (GPU) sales in the previous quarter, and in its earnings presentation today, AMD revealed that these continue to hurt the company in the second quarter. However, in a positive note, Computing and Graphics revenue grew 37% year-over-year in Q2 FY2020, with operating income and average selling price exhibiting similar trends.

Additionally, AMD also revealed that it has more than 50 Ryzen 4000 notebooks in the market, and both HP and Lenovo will speed up the production of their notebooks based on the processor lineup during the second half of this year. On the topic of Zen 3, AMD promises that the lineup will launch later this year as well.

AMD Quarterly Revenue
Quarterly revenue in billions
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020

AMD's Second Quarter 2020 Revenue Growth Powered By Enterprise, Embedded and Semi-Custom Products

As revenue for its largest segment dropped once again, AMD's second-largest segment, Enterprise, Embedded and Semi-Custom Products exhibited impressive growth during the quarter. This growth not only reversed the drop in Computing, but it also managed to push AMD's revenue to what is now a second all-time high.

The company's Enterprise revenue stood at $565 million during the second quarter of 2020, as it dropped 4% over last year's second quarter. Yet at the same time, the segment witnessed a strong 62% sequential growth, and it also reversed the net loss of $26 million in the previous quarter to a net income of $33 million. Enterprise, Embedded and Semi-Custom products include non-consumer silicon products that cater to datacenter and other cloud computing needs in addition to powering up gaming consoles.

Upgrades to Microsoft Corporation's Xbox and Sony Interactive's PlayStation lineup are expected to play a strong role for AMD as we head into the company's near term future. AMD confirmed that it has commenced mass production of processors for the PlayStation 5 and Xbox Series X, with next-generation Milan Zen 3 data center CPUs also expected to start shipping later this year.

Gazing into its crystal ball, the company expects to earn $2.55 billion in revenue during its current quarter in what will be an all-time record for AMD. This estimate comes with a margin of error equalling $100 million, and AMD also expects to grow its revenue by 32% year-over-year for the full fiscal year 2020.

As it beat Wall Street revenue estimates and posted revenue growth, AMD's shares jumped by 9% during aftermarket trading, with the stock trading at a per-share price of $73.74 at 16:40 ET. AMD is slated to benefit from Intel Corporation delaying its 7nm silicon products, with the change expected to improve the fundamentals for Team Red's share price.

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