AMD lowers full-year sales forecast on coronavirus hit, shares slip

(Reuters) - Advanced Micro Devices Inc AMD.O forecast current-quarter revenue largely below estimates and lowered its annual sales outlook on Tuesday, as lockdown measures globally choke demand and supply chains, sending the chipmaker's shares down 4%.

From chip equipment maker Lam Research Corp LRCX.O to AMD's larger rival, Intel Corp INTC.O, semiconductor firms have adjusted their forecasts as the coronavirus pandemic has effectively shut down large swaths of the global economy and fueled uncertainty over when supply chains will return to normalcy.

Last week, rival Intel forecast second-quarter earnings below expectations, citing the cost of readying a new PC chip, and said it could not provide an outlook for the full year due to economic uncertainty.

AMD forecast 2020 revenue to grow by about 25%, plus or minus 5 percentage points, as it expects weaker demand in the second half of the year. The previous forecast was of 28% to 30% growth.

“Results and outlook were a bit uninspiring ... while we continue to see good progress in server/data center market, performance in this segment is still not meaningful enough to drive significant earnings upside,” Summit Insights Group analyst Kinngai Chan said.

Demand for data center chips has been a bright spot for chipmakers as companies that were forced to let employees work remotely due to lockdowns globally invested to fortify their IT infrastructure.

AMD Chief Executive Officer Lisa Su confirmed the trend on a call with analysts. “We’ve seen some of our largest (cloud) customers ask us to accelerate some of our deployments,” Su said.

Revenue from AMD’s computing and graphics segment, which includes graphic chip sales to data centers, jumped 73% to $1.44 billion, while sales in enterprise, embedded and semi-custom segment, which also houses chips used in consoles, fell about 21%.

The console business has been under pressure as inventory is drawn down ahead of Microsoft Corp MSFT.O and Sony Corp 6758.T launching their new gaming consoles in the second half of this year.

AMD expects second-quarter revenue to be about $1.85 billion plus or minus $100 million, compared to analysts’ average estimate of $1.92 billion, according to IBES data from Refinitiv.

Net income rose to $162 million, or 14 cents per share, in the first quarter ended March 28, from $16 million, or 1 cent per share, a year earlier.

Revenue rose about 40% to $1.79 billion during the quarter. Analysts had expected revenue of $1.78 billion.

Reporting by Akanksha Rana in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta