AMD Says Epyc Server Chip Sales Up 50 Percent, Gives In-Line Revenue Forecast

Ian King (Bloomberg) -- Advanced Micro Devices Inc. gave a quarterly sales forecast that was in line with analysts’ estimates, suggesting the No. 2 maker of computer processors is gaining ground on Intel Corp.

Revenue in the current period will be about $2.1 billion, plus or minus $50 million, Santa Clara, California-based AMD said Tuesday in a statement. That compares with an average analyst projection of $2.15 billion, according to data compiled by Bloomberg.

Under Chief Executive Officer Lisa Su, AMD has introduced a raft of new products that reviewers and some customers say are competitive or better than those from Intel. That’s sparked a surge in AMD stock. Now investors want to see evidence that the new offerings are generating more orders.

AMD took share in desktop computer chips and will continue to make gains in the market for chips that power the servers that are the backbone of corporate networks and the internet, Su said on a conference call with analysts.

AMD has been trying to get back into the lucrative business of server chips. While it’s a lower-volume sector, server chips command much higher prices. AMD has about 3% of this market. The last time it was truly competitive with Intel, more than a decade ago, it had a quarter of that business.

Related:AMD Unleashes Its Second Epyc Assault on Intel’s Data Center Reign

Sales of AMD’s new Epyc server chip are reported as part of a unit that includes other chips used by Sony Corp. and Microsoft Corp. in their game consoles. Demand for those processors slumped, dragging down the division’s sales by 27% from a year earlier. AMD said Epyc sales and shipments jumped more than 50% compared with the prior period.

“We remain on track to achieve our near-term goal of double-digit server CPU share by mid-next year,” she said. Su also rejected Intel’s assertion that it’s only giving up market share in chips for cheap PCs.

Intel, which has about 90% of the processor market, gave an upbeat sales forecast last week and executives said they hadn’t seen increasing competition. The company’s profit is about three times the size of AMD’s revenue.

On Tuesday, AMD said third-quarter net income rose to $120 million, or 11 cents a share, compared with $102 million, or 9 cents, a year earlier. Excluding certain items, profit in the recent period was 18 cents a share, meeting analysts’ projections. Revenue in the period was $1.8 billion, up 9% from the same period a year earlier. That was in line with Wall Street estimates.

AMD’s gross margin, or the percentage of sales remaining after deducting the cost of production, widened to 43% in the third quarter. A year earlier, that measure of profitability came in at 40%. Minus certain items, the margin will be 44% in the fourth quarter, widening the annual number for 2019 to 43%, AMD said.

The company’s shares were little changed in extended trading following the report, after ending at $33.03 at the close in New York. The stock has gained 79% this year.

In personal computer processors and graphics, AMD’s sales increased 36% year over year. That performance was helped by the higher average selling prices of its newer products, AMD said.

AMD is also trying to exploit Intel’s delays in shifting production to more advanced technology. AMD now outsources manufacturing of its best chips to Taiwan Semiconductor Manufacturing Co., which analysts calculate is more than a year ahead of Intel in implementing new processes.