Advanced Micro Devices Inc AMD is set to report fourth-quarter 2017 results on Jan 30. The company is expected to benefit from robust demand of graphic processor units (GPUs), product portfolio strength and expanding partner base.
However, stiff competition from NVIDIA Corporation NVDA and Intel is a concern.
Earnings Trend Impressive
Notably, AMD has a positive record of earnings surprises in the trailing four quarters, the average surprise being 31.67%.
In third-quarter 2017, earnings of 10 cents per share and revenues of $1.64 billion beat the Zacks Consensus Estimate of 8 cents and $1.51 billion, respectively.
Advanced Micro Devices, Inc. Price and EPS Surprise
Advanced Micro Devices, Inc. Price and EPS Surprise | Advanced Micro Devices, Inc. Quote
Moreover, revenues increased 26% year over year and 34% sequentially, driven by robust performance of the company’s product portfolio comprising Ryzen, EPYC and Radeon Vega.
AMD expects fourth-quarter 2017 revenues to decline approximately 15% sequentially. At the mid-point, revenues are expected to grow 26% on a year-over-year basis.
The Zacks Consensus Estimate for fourth-quarter revenues is currently pegged at $1.40 billion, which reflects year-over-year growth of almost 27%. Moreover, consensus estimate for earnings has been steady at 5 cents over the last 30 days.
Portfolio Strength, GPU Demand Hold Key
Strong demand for GPUs in industries like gaming and blockchain is likely to drive the top-line growth. Growing adoption of Vega-based GPUs, Radeon E9170 Series GPUs and Polaris products is a key catalyst
AMD’s strong product portfolio is also a major growth driver. Solid demand for the expanded Ryzen processor family in the desktop market is a tailwind.
Notably, the company’s Ryzen PRO-based offerings have already been adopted by prominent commercial PC providers including Dell, Lenovo and HP. The availability of Ryzen Threadripper processors has enabled AMD to re-enter the high-end desktop market.
During the fourth quarter, the company launched Ryzen mobile processors. The company is working with Qualcomm to integrate its Snapdragon LTE modem solution in Ryzen mobile processors. The partnership will help AMD address the needs of high performance consumers as well as enterprise notebook platforms.
The Zacks Consensus Estimate for Computing and Graphics segment revenue is currently pegged at $839 million for the fourth-quarter.
EPYC Adoption to Drive Growth
Moreover, strong adoption of EPYC server processors is a growth driver.
Microsoft MSFT was the first global cloud provider to use the EPYC processors in its Project Olympus hardware design that was deployed in Azure. HP’s new ProLiant DL385 Gen10 server, which is powered by AMD’s EPYC processor, set new records across SPECrate2017_fp_base and SPECfp_rate2006.
Chinese search-giant Baidu BIDU is offering AI, big data and cloud computing (ABC) services to customers with the support of EPYC processors. Further, the company expects to expand use of the processor across its global datacenters beginning first quarter of 2018.
The Zacks Consensus Estimate for Embedded and Semi-Custom segment revenue is currently pegged at $562 million for the fourth-quarter.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates along with a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
AMD has a Zacks Rank #3 and an Earnings ESP of -2.78%, which indicates an unlikely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stock to Consider
Here is a stock you may consider as our proven model shows that it has the right combination of elements to deliver an earnings beat this quarter.
NVIDIA has an Earnings ESP of +4.71% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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