AMD’s revenue seasonality
So far, we’ve discussed how Advanced Micro Devices’ (AMD) strong CPU[1.central processing unit] sales are mitigating excess GPU[2.graphics processing unit] inventory in the channel. NVIDIA (NVDA) expects the excess GPU inventory to clear in the first half of 2019, and demand to pick up in the second half.
While the fourth quarter is seasonally strong for AMD, the first quarter is seasonally weak as holiday sales fade. However, the company’s earnings deviated last year, with windfall GPU sales to crypto miners in the first quarter boosting its revenue by 23% sequentially.
AMD could report weak first-quarter guidance
AMD expects its revenue to return to normal in 2019, with the first half being weaker than the second half. Generally, AMD’s revenue falls sequentially by a percentage in the low-teens in the first quarter. However, this fall could be larger than normal this year as CPU sales fall due to the holiday season ending, failing to mitigate the excess GPU inventory.
AMD might also report its first YoY (year-over-year) revenue decline in 12 quarters in the first quarter, as AMD’s revenue for the first quarter of 2018 included crypto-related GPU sales and this quarter will not.
AMD’s attempt to improve its first-quarter revenue
AMD has realized that midrange GPU sales could slow in the next few quarters as crypto-related sales fade. To mitigate the crypto bubble burst, the company aims to boost its high-end GPU sales from gamers, where demand is still strong.
AMD is set to launch the world’s first high-end 7nm[3.nanometer] Radeon VII desktop GPU on February 7. If this GPU is widely adopted, it could mitigate the crypto bubble burst in the first and second quarters. AMD is also looking to boost its CPU sales in the first quarter by launching 12nm Ryzen mobile CPUs this month. New products may not only improve AMD’s revenue but also its profits, which we’ll look into next.
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