Chip Maker AMD Raises Sales Outlook as Intel Battle Heats Up -- Update

By Asa Fitch 

Chip maker Advanced Micro Devices Inc. reported higher second-quarter earnings and lifted its full-year sales forecast, driven by growing demand for a new generation of high-performing processors that are helping the company take market share from rival Intel Corp.

Santa Clara, Calif.-based AMD on Tuesday posted a $157 million profit for the quarter, up from $35 million a year earlier. It generated $1.93 billion in revenue, the company said, up 26% from a year earlier and above what AMD had projected in April. Sales also topped Wall Street's forecast.

Like many of its chip-industry peers, AMD's business has held up relatively well during the coronavirus pandemic amid strong demand for computers and internet services as millions of people work from home.

Despite some lingering uncertainty, the company raised its full-year revenue-growth outlook to 32%. Chief Executive Lisa Su said the company was entering its "next phase of growth." The company had previously forecast sales would rise 20% to 30% this year.

"While there continues to be some macroeconomic uncertainty and pockets of demand softness, our product portfolio is very strong, and our markets are resilient," Ms. Su said during a call with analysts. The company, she said, expects to gain further market share in the second half of the year and see strong growth in that division that supplies chips to new versions of Microsoft Corp.'s Xbox and Sony Corp.'s PlayStation gaming consoles. Those are slated to launch over the coming holiday season.

AMD's latest central processing units, or CPUs, have enjoyed strong demand, with their performance equaling or beating that of rival offerings from Intel -- by far the market leader -- in widely tracked benchmarks.

AMD also has benefited from recent engineering struggles at Intel, which on Monday announced a shake-up of its development team. Days earlier, Intel said its development of cutting-edge 7-nanometer chip technology was delayed by a year from its initial schedule, sending its shares plummeting and AMD's climbing.

AMD's shares rose more than 9% in after-hours trading, after rising 14% since Intel's announcement.

Unlike Intel, AMD doesn't have its own factories. Instead, it outsources manufacturing to companies such as Globalfoundries and Taiwan Semiconductor Manufacturing Co., the world's largest and most advanced contract chip maker.

Ms. Su said she felt confident in the company's road map of future products and its partnership with TSMC. It is not only mass-producing AMD's version of 7-nanometer chip but already moving toward making the more advanced 5-nanometer design. "You have to get the process technology and manufacturing right," she said.

AMD's market share in personal-computer central processing units was 17.5% in the first quarter, according to Mercury Research, more than doubling in about five years. The company has also made inroads, albeit smaller ones, in the market for CPUs that go into the servers used in big data centers powering most internet services.

AMD said revenue for its computing and graphics segment rose 45% to $1.37 billion in the second quarter, driven largely by sales of its Ryzen processors that go into personal computers and other devices. Sales for the segment that includes its server chips and semi-custom chips for gaming consoles fell 4% to $565 million. Lower sales in the semi-custom products were offset partially by a rise in its Epyc server processors.

In the current quarter that ends Sept. 30, AMD expects to generate around $2.55 billion in sales, above what Wall Street had expected.

Write to Asa Fitch at [e-mail]

(END) Dow Jones Newswires

July 28, 2020 18:12 ET (22:12 GMT)

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