How Far Can AMD Rally?

AMD (AMD) has struggled for quite some time but the company’s shares broke out when the company reported its latest earnings. AMD reported top-line of $832 million for Q1FY16, down approximately 20 percent y-o-y, but surpassed the analyst estimate by $14 million. The main reason behind the company’s top-line drop was its focus on sales of client netbook processors and semi-custom SoCs.

On the other hand, sales from graphics and computing division plummeted 14 percent on a yearly basis to $460 million. According to a report from IDC, PC shipments dropped 11.5 percent year over year through the first quarter mainly due to poor demand in the entire PC market.
In spite of lower revenue, the segment operating loss was $70 million, down $5 million compared to a year ago period.

Apart from this, the company’s semi-custom, enterprise, and embedded division grieved a sharper drop, with revenue declining by 25 percent year over year to $372 million. The foremost gaming consoles linger as the greatest source of top-line in this division. However, the other half of the year is predicted to convey additional revenue during the three additional semi-custom designs achievement AMD has formerly publicized.

Furthermore, the company’s operating profit for the division dropped from $45 million to only $16 million throughout the previous year interval. The company also detailed a non-GAAP-loss of $0.12 per share, $0.01 greater than the consensus estimate of $0.11 per share.

However, investors should keep in mind that NVIDIA and Intel still dominate the GPU and CPU market respectively. AMD proclaimed that its upcoming Zen architecture will propose more than 40 percent enhancement in IPC, compared to its existing Bulldozer architecture. But it is still a question that how Zen architecture will compete in contradiction of Intel’s 14nm Skylake chips.

Moreover, NVIDIA’s introduction of its new Pascal architecture is likely to snatch additional market share from AMD. NVIDIA has also grasped a robust position in the autonomous car segment, by integrating its mobile Tegra CPUs in its Drive PX2 platform.


AMD may have delivered a stunning quarter, but the chip maker still faces many difficulties, the foremost being stiff competition from more efficient peers like NVIDIA. Although having a new CEO at the helm will help AMD vastly, the company has probably lost a lot of ground to NVIDIA and it is nearly impossible for it to regain it. That being said, the company only needs minor advancements for the share price to head higher. Thus, I am currently neutral on the stock.
Published on Apr 29, 2016
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

Posted in ...