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Will GPU Adoption & EPYC Deal Wins Aid AMD's Q4 Earnings?

Zacks Equity Research

Advanced Micro Devices AMD fourth-quarter 2019 results, set to be released on Jan 28, are likely to reflect robust demand for graphic processor units (GPUs), which are now widely utilized in industries like gaming, automotive and blockchain.

Moreover, seasonal uptick in holiday season and robust sales of Ryzen, Radeon and EPYC products are expected to have driven the top line in the to-be-reported quarter.

Notably, strength in Computing and Graphics segment drove year-over-year improvement in the third quarter, amid softness in Enterprise, Embedded and Semi-Custom vertical, a trend that is likely to have continued in the fourth quarter.

Notably, the Zacks Consensus Estimate for computing and graphics segment for the fourth quarter is pegged at $1.536 billion, indicating an increase of 63.5% from the year-ago quarter reported figure.

Moreover, the consensus mark for Enterprise, Embedded and Semi-Custom segment for the fourth quarter is pegged at $566 million, indicating an upside of 8.6% from the year-ago quarter reported figure.

Click here to know how the company’s overall Q4 performance is expected to be.

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

Efforts to Boost GPU Market Presence

Strong adoption of new products is likely to have led to improvement in overall GPU revenues.

During the quarter, AMD rolled out Radeon RX 5500 Series designed to deliver smooth gameplay in 1080p and launched its AMD Radeon RX 5500 XT graphics card, powered by the AMD RDNA gaming architecture.

Additionally, AMD unveiled flagship AMD Ryzen 9 3950X processor, available since Nov 25, 2019. The latest energy efficient processor based on Zen 2 architecture, featuring 16-cores and 32 threads, accelerates 1080P gaming.

Markedly, the company’s Radeon RX 5700 graphics card and third generation AMD Ryzen desktop processors deliver superior features in gaming and visualization technologies.

With these cards, AMD has forayed into the high-end graphics card market, currently dominated by NVIDIA NVDA.

Notably, the company’s Radeon Pro 5300M and 5500M mobile GPUs features in Apple’s AAPL latest MacBook Pro. Moreover, AMD unveiled Radeon Pro W5700X GPU in the fourth quarter with an aim to help Mac Pro users to easily cut through different types of professional visual content creation workloads.

EPYC Deal Wins Deserve a Special Mention

Server revenues are anticipated to have improved sequentially in the fourth quarter, owing to ongoing momentum witnessed by second-generation EPYC processors. The company has garnered new deal wins from major enterprise, cloud, and HPC companies.

Notable EPYC deal wins in supercomputing domain included Atos’ BullSequana XH2000 supercomputers, ETH Zurich’s Euler VI system and NEC’s Deutscher Wetterdienst.

Moreover, Microsoft’s MSFT Azure HBv2 virtual machines leverage AMD’s EPYC 7742 processor for HPC applications.

Further, AMD’s Radeon Instinct GPU accelerators and 2nd Gen EPYC processors support partners including Broadcom, Mellanox and Samsung to deliver PCIe 4.0 enabled devices.

These deals wins are expected to have contributed to the Enterprise, Embedded and Semi-Custom segment’s fourth-quarter revenues.

However, management expects fourth-quarter segmental revenues to remain sluggish as Sony and Microsoft are yet to roll out their AMD-powered consoles.

Nevertheless, higher EPYC datacenter processor sales are likely to have acted as an offsetting factor.

Zacks Rank

AMD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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