The verdict is in: A business turnaround strategy first developed years ago is working for Advanced Micro Devices.
AMD on Tuesday reported that thanks to healthy sales of its new graphics and computer processors, its for the second quarter sales grew to $1.2 billion, a 19 percent increase from the same quarter a year ago.
The company also said it now projects that its sales will grow at a faster rate than previously thought the rest of the year.
After AMD released its financial results on Tuesday, its stock soared over 7 percent in after-market trading, an indication that investors believe the future is bright for AMD.
“We are very pleased with the trend of our quarterly results and how our products are positioned heading into the back half of the year,” CEO Lisa Su said in a conference call with analysts.
AMD has released a slew of new computer and graphics processors this year as part of the rollout of its much-praised new chip architecture.
AMD’s second quarter results include a full quarter of sales from its new graphics and computer processors, and that business unit reported a sales increase of 51 percent from the year-ago quarter.
Sales in its server and video game console business, however, fell 5 percent from a year ago.
Advanced Micro Devices primarily makes computing and graphics processors that are used in computers, video game consoles and servers.
The chipmaker hasn’t had a profitable year since 2011 as it battles a decline in the PC market and robust competition from its main competitors, Intel and Nvidia. The company’s executives have been plotting a turnaround for years.
AMD is officially based in California, but it employs 1,500 people at its campus in Southwest Austin and most of its senior executives work and live in Austin.
The company also recently released a new family of microprocessor for severs in June, an ambitious undertaking given that Intel has a near-monopoly on this market. But this type of processor is highly profitable and could be an important revenue stream for AMD.
The company beat the expectation of analysts on revenue and profit in its second quarter.
AMD lost $16 million, or two cents a share, from the year-ago quarter. This same quarter a year ago AMD had a profit of $69 million, but that was largely because of the sale of the company’s assembly and test facilities in Asia.
When earnings are adjusted for one-time costs and gains, AMD had a profit of $19 million, or 2 cents a share.
In addition to beating analysts’ expectations, there are a couple of other reasons investors were happy with AMD’s financial results. Analysts often look closely at gross margins, which is sales minus the cost of goods sold.
AMD’s gross margins were 33 percent, which is up 2 percentage points from the year before.
AMD’s guidance for its revenue in the third quarter and the rest of the year were significantly higher than analysts were expecting.
Industry analyst Patrick Moorhead, whose clients include AMD, said the company has “raised expectations for the future.” He noted that AMD could report more financial good news because the company still has more new products to roll out during the rest of the year.
AMD’s stock closed at $14.11 on Tuesday. The stock is up 23 percent from the start of the year, and up a remarkable 744 percent over the last two years.