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AMD's Q3 Earnings to Benefit from Strong Demand for GPUs

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Advanced Micro Devices (AMD - Free Report) is set to report third-quarter 2018 results on Oct 24.

The company is expected to gain from robust demand of graphic processor units (GPUs), which are now profusely used in industries like gaming, automotive and blockchain.

Increasing adoption of artificial intelligence (AI) techniques, and machine learning (ML) and deep learning (DL) tools in these industries are primarily responsible for driving GPU demand. AMD along with NVIDIA (NVDA - Free Report) is benefiting from this demand trend.

AMD reports GPU sales under Computing and Graphics segment, which delivered revenues of $1.09 billion, up 64% year over year in the last reported quarter (second-quarter 2018). The increase can be attributed to accelerated sales of Radeon graphics and Ryzen desktop processors.

Click here to know how AMD’s overall Q3 performance is likely to be.

Strong GPU Demand to Drive Growth

Rapid adoption of Radeon GPUs and impressive shipment of Ryzen mobile processors (more than doubled sequentially) drove Computing and Graphics segment revenues in the second quarter. The momentum is expected to continue in the to-be-reported quarter.
 

 

Strong data center demand for GPUs is expected to drive average selling price (ASP) as well as top-line growth. In the second quarter, data center GPU revenues increased significantly, driven by higher shipments of Vega-based Radeon Instinct MI25.

At Computex 2018, AMD unveiled its next generation 7-nanometer Radeon Vega GPU, which includes new features optimized for the AI and ML markets.

Moreover, solid demand from the gaming market is a key catalyst. The company’s partnerships with major game developers like Ubisoft, Capcom and Rebellion to optimize their next generation of games on Radeon graphics are a major driver.

The Zacks Consensus Estimate for Computing and Graphics segment revenues is currently pegged at $1.09 million for the third quarter.

Zacks Rank & Stocks to Consider

Currently, AMD has a Zacks Rank #3 (Hold).

Himax Technologies (HIMX - Free Report) and Impinj (PI - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), are stocks worth considering in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Himax and Impinj is currently pegged at 25% and 17.5%, respectively.

 

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