Ryzen chip line makes first mark on AMD earnings

Posted May 1st, 2017

Chipmaker Advanced Micro Devices on Monday reported first-quarter earnings that were largely in line with analyst expectations, but the company's shares dropped amid signs it will need at least another quarter to reach profitability

The semiconductor company -- which employs about 1,500 people in Austin -- said it had a net loss of $38 million for the quarter or 4 cents a share, close to the average analyst estimate. That’s an improvement from its $96 million loss for same quarter in 2016, but still down from its $8 million net loss in the fourth quarter. Taking out stock compensation and accounting charges for the quarter, AMD net loss was $73 million for the quarter, or eight cents a share. The company touted revenue growth of 18 percent to $984 million in sales for its first quarter.

AMD’s fortunes are expected to rise on sales of its new Ryzen line of processorswhich have been well received. The current quarter only includes about a month of Ryzen sales, as the product line launched in early March.

“We achieved 18 percent year-over-year revenue growth driven by strong demand for our high performance Ryzen CPUs as well as graphics processors," AMD president and CEO Lisa Su said in a written statement. "We are positioned for solid revenue growth and margin expansion opportunities across the business in the year ahead as we bring innovation, performance and choice to an expanding set of markets.”

Patrick Moorhead, an analyst with Moor Insights & Strategy who follows AMD, said the new line of desktop processors and graphics processors from the company are making it more competitive with chief rival Intel.

“AMD showed what a difference a year makes,” he said in a written statement. “Considering Ryzen was only in the market a month in (the first quarter) and with Ryzen 5 ramping hard, I'm expecting an even bigger desktop ASP and revenue improvement (in the second quarter).”

In a call with analysts, Su said that AMD’s high-end Ryzen desktop processors are driving the company’s highest sales growth in two years. She said renewed interest from video-game enthusiasts is buoying AMD’s desktop and graphics businesses. New gaming PCs equipped with AMD chips will continue to roll out in the next few months from hardware partners, she said, and additional chip products will debut through the year.

AMD is also expecting a win when Microsoft launches its “Scorpio” Xbox game console for the holidays. The console includes an AMD system on a chip. 

Saying that 2017 "is an important year for AMD," Su told analysts that AMD is "well positioned for solid revenue growth and margin expansion based on bringing performance, choice and innovation to an expanding set of markets. We’re very pleased with how the (Ryzen) launch went.”

AMD’s shares rose about 2.4 percent for the day to close at $13.62, but dropped about 8 percent in after-hours trading.

Bill Maurer, who writes for Seeking Alpha, called the results “so-so,” but said that AMD’s drop in share price is an indication that the company’s spending could be hurting AMD and making it difficult to justify its stock rise over the past year.

“While guidance was nice, it's also scary to blow through 25 percent of its cash in one quarter. That's why in the after-hours, shares are trading down a little more than a dollar, almost down 20 percent from their 52-week high,” Maurer wrote.