Advanced Micro Devices Inc. shares rose in the extended session Wednesday after the chip maker’s quarterly results topped Wall Street estimates on strong revenue gains and its best earnings in seven years.
AMD AMD, -0.86% shares advanced 4.9% after hours, after closing down 0.9% at $16.05 in the regular session. In comparison, the S&P 500 index SPX, +0.91% gained 0.9% and the tech-heavy Nasdaq Composite Index COMP, +1.17% rose 1.2% in Wednesday’s regular session. AMD shares closed up 56% for the year on Wednesday, while the S&P 500 is up 6.5% and the Nasdaq has gained nearly 15%.
“We had an outstanding second quarter with strong revenue growth, margin expansion and our highest quarterly net income in seven years,” President and Chief Executive Lisa Su said in a statement.
One area of quick growth has been with the company’s Epyc data-center graphics processing unit (GPU), which has been out for a year. On a conference call, Su said there was no question that data-center sales of Epyc were growing very quickly even though the size of the business now is still small. The CEO said AMD plans to re-invest “heavily” in the business to grow it out over the next four to eight quarters.
“There’s no question that the demand for GPUs in the data center is growing quickly,” Su said on the call. “Our focus on the GPU side is very cloud centric.”
Recently, AMD’s Epyc chip was adopted by Cisco Systems Inc. CSCO, +1.82% and Hewlett Packard Enterprise Co. HPE, +1.18% for their makes of servers.
The Santa Clara, Calif.-based chip maker reported second-quarter net income of $116 million, or 11 cents a share, compared with a loss of $42 million, or 4 cents a share, in the year-ago period. Adjusted earnings were 14 cents a share. Of the 26 analysts surveyed by FactSet, AMD on average was expected to post adjusted earnings of 12 cents a share, while Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, called for earnings of 14 cents a share.
Revenue rose to $1.76 billion from $1.15 billion in the year-ago period. Wall Street expected revenue of $1.72 billion, according to 25 analysts polled by FactSet. AMD had predicted revenue of $1.68 billion to $1.78 billion. Estimize expected revenue of $1.76 billion.
Sales of computing and graphics chips surged 64% from a year ago to $1.09 billion, driven by strong sales of Radeon and Ryzen chips, AMD said. Analysts had expected computing and graphics revenue of $1.06 billion.
Sales of enterprise, embedded and semi-custom chips segment revenue rose 37% from a year ago to $670 million. Analysts had forecast enterprise, embedded and semi-custom sales of $661 million.
For the third quarter, AMD said it estimates revenue of $1.65 billion to $1.75 billion, “driven by the sales growth of Ryzen and Epyc products, partially offset by lower sales of GPU products in the blockchain market.” Analysts had forecast revenue of $1.76 billion.
While AMD shares jumped in after-hours activity, relatively speaking they were less volatile than usual. In the previous 12 quarters, pricing in AMD shares have swung by double-digit percentages six times in the day following earnings, with the direction not always corresponding to whether results beat Street estimates or not.
Of the 33 analysts who cover AMD, 13 have buy or overweight ratings, 14 have hold ratings and six have sell or underweight ratings, with an average price target of $14.88.
