AMD shares fall hard on revenue miss, weaker guidance

Advanced Micro Devices saw its share price decline more than 20 percent in after-hours trading Wednesday after its third-quarter revenue missed Wall Street projections and the chipmaker lowered its fourth-quarter guidance.

The chipmaker -- which is headquartered in California but runs most of its operations out of Austin -- reported revenue of $1.65 billion, up 4 percent year-over-year, and net income of $102 million, or 9 cents per share. The company reported non-GAAP earnings per share of 13 cents, beating Wall Street estimates by 1 cent.

But the company's revenue of $1.65  billion was short of Wall Street's target of $1.7 billion, and the company issued lower guidance for the current quarter, estimating revenue of $1.45 billion, below the $1.6 billion expected by analysts.

Despite the plunging shares, AMD president and CEO Lisa Su pointed out that company has notched five straight quarters of year-over-year revenue and net income growth.

“Client and server processor sales increased significantly although graphics channel sales were lower in the quarter,” Su said in a written statement. “Looking forward, we believe we are well positioned for further market share gains as we continue making significant progress towards our long-term financial targets.”

Most of AMD’s senior management team is based in Austin and the company employs about 1,500 people in Central Texas.

Higher client revenue in AMD’s computing and graphics business segment drove the year-over-year increase, according to the company. The segment revenue was $938 million, up 12 percent year-over-year and down 16 percent quarter-over-quarter.

Su told investors Wednesday that the company underperformed more than expected in its computer and graphics segment.

Sales of the company’s Ryzen desktop and mobile products continued to drive year-over-year growth and partially offset lower graphics revenue.

The company has made significant gains in the past year after years of underperforming — sending the stock soaring nearly 130 percent this year. Industry analysts say AMD benefited from demand in its graphics processor unit, which has widespread use now in the gaming, automotive and blockchain industries.

In its quarterly report, the company called blockchain-related graphics processing unit sales “negligible.” The company said the quarter-over-quarter decline was due to significantly lower graphics revenue driven by high channel inventory.

Ahead of earnings, AMD on Tuesday also announced the availability of the first AMD EPYC processor-based instance on Oracle Cloud infrastructure.

The California-based company made the announcement at Oracle OpenWorld 2018, making Oracle the largest public cloud provider to have a bare metal version on AMD EPYC processors, according to AMD.

“At greater than 269 GB/Sec, the AMD EPYC platform3, offers the highest memory bandwidth of any public cloud instance,” Clay Magouyrk, senior vice president of software development at Oracle cloud infrastructure, said. “Combined with increased performance, these cost advantages help customers maximize their IT dollars as they make the move to the cloud.”