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AMD Gears Up to Report Q3 Earnings: What's in the Offing?

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Advanced Micro Devices (AMD - Free Report) is set to release third-quarter 2020 results on Oct 27.

The company projects third-quarter 2020 revenues to be around $2.55 billion (+/-$100 million). Management expects continued strength in demand for Ryzen and EPYC processors to drive revenues.

Further AMD expects Semi-custom revenues to benefit owing to production increases to support the launch of the latest Xbox Series X and PlayStation 5 gaming consoles scheduled for launch on Nov 10 and Nov 12, respectively.

The Zacks Consensus Estimate for revenues is pegged at $2.56 billion, suggesting growth of 42% from the year-ago reported figure. On a sequential basis, revenues are expected to register an increase of 32.3%.

Advanced Micro Devices, Inc. Price and EPS Surprise


Advanced Micro Devices, Inc. Price and EPS Surprise

Advanced Micro Devices, Inc. price-eps-surprise | Advanced Micro Devices, Inc. Quote

Meanwhile, the Zacks Consensus Estimate for third-quarter earnings is pegged at 36 cents per share, unchanged over the last 30 days. The figure indicates an improvement of 100% on a year-over-year basis.

Factors Likely to Have Influenced Q3

AMD’s third quarter 2020 performance is likely to have been positively impacted by the ongoing robust adoption of Ryzen, Radeon and EPYC server processors in the cloud, gaming, HPC, PC, and data center verticals, triggered by coronavirus-led work-from-home and online schooling wave.

Markedly, encouraging trend in PC shipments in the third quarter, driven by increased demand and improvement in the supply chain is expected to have favored third-quarter performance.

Consistent strength in demand for Ryzen 4000 processors in the mobile domain is expected to have contributed to top line growth of Computing and Graphics division. Ryzen PRO 4000 Series Mobile family is also anticipated to have witnessed incremental adoption across leading OEMs in the third quarter.

Particularly, AMD’s second generation EPYC processors, which are built on its Zen 2 microarchitecture, have been witnessing adoption among the cloud computing and data center providers.

In July 2020, Alphabet’s Google Cloud division expanded use of second-gen EPYC processors to provide enhanced security features to customers. Google Cloud’s latest Confidential Virtual Machines (“VMs”) leveraged second-gen EPYC processors’ Secure Encrypted Virtualization feature to help customers encrypt sensitive data not only when it is at rest, but also while it is being processed.

Also, the second-gen EPYC processors along with Radeon Instinct GPUs were utilized by several research facilities including Stanford School of Medicine, University of Toronto, and University of Texas, which are engaged in finding coronavirus vaccine to speed up research work.

This momentum in latest EPYC processors might have contributed to server revenue growth in the to be reported quarter.

Increasing demand for company's products bodes well for top-line growth and instills investors’ confidence in the stock. Notably, shares of AMD have returned 72.7% year to date, compared with the industry’s rally of 30.7%. The company currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nevertheless, increasing expenses on product development amid stiff competition from Intel (INTC - Free Report) and NVIDIA (NVDA - Free Report) is likely to have exerted pressure on margins in the to-be-reported quarter.

Key Developments in Q3

During the third quarter, AMD launched new 3000 C-Series Ryzen and Athlon mobile processors for Chromebooks, designed in collaboration with Google. The new processors are embedded with AMD Radeon Graphics, that will enable users to browse web relatively faster (178%) compared to that of the previous generation. With the new processors, AMD rolled out the first-ever “Zen” architecture-powered Chromebooks.

AMD also unveiled Radeon Pro 5000 series GPUs for Apple’s (AAPL - Free Report) 27-inch iMac device in August 2020. These new GPU processors feature RDNA graphics architecture and are based on 7 nanometer (nm) process technology.

Further, the company introduced Radeon RX 5300 GPU, designed primarily to enhance video gaming experience. The graphics card will support AAA, eSports and Virtual Reality (VR) titles, giving it the desired speed for optimal graphics solutions required for desktops.

Moreover, AMD unveiled 7 nm based x86 Ryzen 4000 Series Desktop Processors and Athlon 3000 Series Desktop Processors, which are embedded with advanced Radeon graphics for commercial and consumer PC markets. The company also expanded Ryzen Threadripper PRO Processor family of processors with up to 64 cores and enhanced bandwidth performance integrated with enterprise-grade AMD PRO technologies.

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