AMD expected to report weak fourth-quarter earnings
This year started off strongly for Advanced Micro Devices (AMD) stock, which rose 8% in the first 11 days of January. The stock rose following its 7nm[1.nanometer] product announcements at CES[2.Consumer Electronics Show] 2019. However, this rise could be reversed when the company releases its fourth-quarter results on January 29.
Crypto miners used AMD’s and NVIDIA’s (NVDA) GPUs[3.graphics processing units] to mine currency during the crypto boom, bringing windfall gains to both companies. In the third quarter (ended in September), AMD’s two-year double-digit revenue growth trend came to a halt as the crypto boom ended, thereby reducing its GPU revenue.
AMD guided for even weaker fourth-quarter revenue, of $1.45 billion, down 12% sequentially but up 8.2% YoY (year-over-year). The company did not discuss its excess GPU inventory due to the crypto bubble burst.
NVIDIA’s revenue guidance hints at disappointment for AMD’s investors
A month later, NVIDIA released its fiscal 2019 third-quarter (ended in October) results, wherein it reported revenue of $3.18 billion and missed analysts’ estimate of $3.24 billion. With the release, CEO Jensen Huang stated that the company’s gaming revenue was impacted by a sudden increase in midrange GPU channel inventory. The company’s fiscal 2019 fourth-quarter revenue guidance of $2.7 billion missed analysts’ estimate by $700 million.
AMD’s and NVIDIA’s revenue guidance and the one-month gap between the companies’ quarters suggest that AMD’s fourth-quarter revenue might fall below its guidance of $1.45 billion due to the sudden surge in GPU inventory. Strong demand in the PC CPU[4.central processing unit] space could mitigate weakness in the GPU market, but not completely. Next, we’ll look at the GPU market in the December quarter and its effects on AMD’s graphics business.
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