Advanced Micro Devices (AMD) recently revealed it made significant year-over-year gains in both revenue and income in the first quarter. Like many semiconductor manufacturers, the firm benefited from a COVID-19 related bump in processor sales. However, the company’s second-quarter outlook prompted a 4 percent dip in its stock price because it fell below analyst estimates.
AMD’s Impressive First-Quarter Results
In the first three months of 2020, AMD generated $1.79 billion in revenue, up 40 percent from Q1 2019. The firm also made $222 million in adjusted income, an increase of 258 percent year-over-year, and raised its earnings per share by $0.08.
In a statement, AMD attributed the company’s revenue upswing to a 73 percent annual increase in PC and enterprise processor sales. Like Intel and Nvidia, the firm saw surging demand for its chipsets because of COVID-19 prompted remote work transitions and online service usage spikes. However, the company recorded a 16 percent decline in revenue and a 42 percent drop in income from Q4 2019 due to falling GPU and customs semiconductor purchases.
Notably, AMD CEO Dr. Lisa Su called the current market environment “challenging,” but did not mention any supply chain issues related to the coronavirus pandemic.
AMD’s Disappointing Q2 Outlook
For Q2 2020, AMD offered guidance it will bring in $1.85 billion in revenue, plus or minus $100 million. If the firm delivers on its forecast, it will experience a 21 percent year-over-year jump in sales. The chipmaker expects its Ryzen, EPYC, and custom chipsets will play a key role in its second-quarter growth.
After posting its financial results and earnings estimates, the company’s stock tumbled by 4 percent, which Investor’s Business Daily blamed on its lower-than-expected Q2 guidance. The publication noted Wall Street analysts pegged AMD’s second-quarter sales at $1.93 billion.
The firm also stated it expects 25 percent annual revenue growth from 2019 despite coronavirus dampened demand. As such, AMD seemingly believes its sales will remain consistent throughout the year, but the COVID-19 demand boost will evaporate. The corporation also faces a potentially serious problem heading into the holiday quarter because of unstable market conditions.
The manufacturer is supplying bespoke chips for Microsoft and Sony’s new video game consoles, which are expected to launch in Q4. However, the PlayStation maker is reportedly considering limiting production on its new console due to the coronavirus’s economic impact. If Microsoft shares its rival’s outlook, the semiconductor company could experience a sales shortfall in the second half.
AMD’s robust portfolio will ensure its long-term success, but its 2020 profitability is dependent on the world’s ability to recover from COVID-19.